ATKINS v. FISCHER, et al

Filing 277

MEMORANDUM OPINION. Signed by Judge Colleen Kollar-Kotelly on August 29, 2005. (lcckk2)

ATKINS v. FISCHER, et al

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA LESLIE ATKINS, individually and d/b/a LESLIE ATKINS COMMUNICATIONS, Plaintiff, v. BENSON J. FISCHER, et al., Defendants. Civil Action No. 98-800 (CKK)

MEMORANDUM OPINION (August 29, 2005) Plaintiff Leslie Atkins, d/b/a Leslie Atkins Communications, Inc., brought this action against Defendants Benson J. Fischer, the Fischer Organization, Inc., and the Fischer Brewing Company, Inc. (collectively, "Defendants"), alleging copyright infringement in the commercial use of six-pack carrier and bottle designs for a product called "Redneck Beer" in violation of the Copyright Act of 1973, 17 U.S.C. § 102, and Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Currently before the Court is Plaintiff's Motion for Finding that Defendants and Their Prior Counsel, Stanley Goldschmidt, Esquire, Attempted to Perpetrate a Fraud Against This Court and For an Award of Appropriate Sanctions, the separate Oppositions filed by Defendants and Mr. Goldschmidt, and Plaintiff's Combined Reply. Also pending before the Court is Mr. Goldschmidt's Motion for Sanctions Against Plaintiff for Violation of Federal Rule of Civil Procedure 11, and Plaintiff's subsequent Opposition. Upon a searching examination of the parties' respective filings, all attached exhibits, the relevant case law, and the entire record herein, the Court shall grant-in-party and deny-in-part

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Plaintiff's motion and shall deny Mr. Goldschmidt's motion for sanctions.1 Given the present posture of the case, the Court shall set a status conference in order to set out the scheduling groundwork for the upcoming trial on the merits in the above-captioned action. I: BACKGROUND A. Procedural History

Plaintiff Leslie Atkins, d/b/a Leslie Atkins Communications, Inc., has for over twenty years, offered clients a wide range of public relations, advertising, and marketing services. Defendant Benson J. Fischer, an entrepreneur planning to produce a novelty beer,2 dubbed "Redneck Beer," hired Plaintiff during September of 1993 to design a bottle label and a six-pack carrier for his anticipated beer. Under the first stage of the relevant agreement, Plaintiff delivered to Defendant Fischer a preliminary illustration of a beer bottle label featuring a blue jean pocket and a red bandana. The second phase of the agreement, which required Plaintiff to produce the same label and carrier in "camera-ready" final form, was never completed, and the agreement was terminated. Between August 1995 and June 1996, Redneck Beer was proudly

After briefing was completed vis-á-vis Plaintiff's Motion for Sanctions, Defendants then filed a Motion for Leave to File Affidavit in Support of Opposition to Motion for Sanctions, which Plaintiff opposed and filed a subsequent Motion to Strike. Defendants then filed a combined Reply, and Plaintiff subsequently entered a Reply to Defendants' Opposition to her Motion to Strike. Given the Court's decision on Plaintiff's underlying Motion for Sanctions, the Court shall deny Defendants' Motion for Leave to File Affidavit and Plaintiff's Motion to Strike as moot. The other Defendants identified in Plaintiff's Complaint are the Fischer Organization, which Defendant Fischer previously identified as his "real estate brokerage firm," and the Fischer Brewing Company, Inc., which was created in conjunction with the Redneck Beer product. Defendant Fischer explained that the Fischer Organization was "acting on behalf of the yet-to-be formed Fischer Brewing Company early in the relationship between the parties." See Atkins v. Fischer, Civ. No. 98-800, at 1-2, n.1 (D.D.C. Nov. 30, 2001). 2
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sold in fine stores in thirty-four (34) states across the United States using a bottle label and carrier designed by a third-party which also featured a denim pocket and a red bandana. Contending that the subsequent design infringed upon her copyrighted work, Plaintiff filed her Complaint in this action in March 1998. After the close of discovery, pursuant to a Memorandum Opinion and Order dated November 30, 2001, this Court denied Plaintiff's motion for summary judgment and sua sponte granted summary judgment for Defendants. See Atkins v. Fischer, Civ. No. 98-800, at 33-34 (D.D.C. Nov. 30, 2001) (order granting summary judgment to Defendants). The Court concluded that (1) Defendants had an implied nonexclusive license to use Plaintiff's work in the commercial production of Redneck Beer; and (2) the six-pack carrier design actually used by Defendants in the sale of Redneck Beer was not substantially similar to Plaintiff's preliminary designs. Id. In addition, the Court dismissed Plaintiff's Lanham Act claim. Id. Upon appeal, the D.C. Circuit determined that (1) an issue of material fact existed as to whether Defendants had an implied license to use Plaintiff's marketing design for production, and (2) an issue of material fact also existed as to whether Plaintiff's marketing copy and the actual production copy of the six-pack carrier were "substantially similar." See Atkins v. Fischer, 331 F.3d 988, 993-995 (D.C. Cir. 2003). Given these substantial issues of material fact, the D.C. Circuit reversed this Court's November 30, 2001 ruling and remanded the case to this Court for further consideration. Id. at 995. While trial in this case appeared imminent after the decision by the Court of Appeals, Defendants immediately filed a motion to stay litigation pending resolution of bankruptcy proceedings. On November 18, 2003, this Court granted Defendants' motion to stay as it related to Defendant Benson Fischer. On April 19, 2004, Defendants informed the Court that Defendant 3

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Fischer had consented to relief from the automatic bankruptcy stay and that this case would now move forward. On June 18, 2004, Plaintiff filed her current Motion for Sanctions. The Court then held a status conference with the parties on June 30, 2004, wherein the Court was informed that this case could not proceed to trial until the Motion for Sanctions was resolved. However, an expedient resolution of Plaintiff's motion was thwarted by Defendants' Motion for an Order Directing Plaintiff's Counsel to Allow Access to Discovery Documents -- a motion filed by Defendants' new counsel, who had determined that a "substantial amount of discovery related materials" were missing from the files handed over to them by Defendants' previous attorneys. See Defs.' Mot. for Order to Allow Access at 2. Defendants sought to have Plaintiff provide them with access to her copies of the missing documents, which Defendants would then copy at their own expense; however, these requests were rebuffed by Plaintiff's counsel. Id. at 3. Importantly, while Defendants acknowledged that the missing documents "are not of plaintiff's making," they stressed that they could not mount a proper defense of Plaintiff's Motion for Sanctions without the documents -- many of which could only be obtained from Plaintiff. Id. at 4. In order to resolve this dilemma, the Court issued a Memorandum Opinion and Order on August 17, 2004, which focused on the fact that "Defendants cannot respond to Plaintiff's motion, or defend themselves in a potential future trial, without the full record in this case." Atkins v. Fischer, Civ. No. 98-800, at 3 (D.D.C. Aug. 17, 2004) (order requiring Plaintiff's counsel to provide Defendants access to those documents Defendants could not obtain through any other source). Noting the burden on Plaintiff -- whose "attorney works in a small office with few resources to handle Defendants' request" -- the Court ordered that "Defendants shall be 4

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permitted access to Plaintiff's files to obtain only those documents that they do not have in their own files and that cannot be obtained from other sources." Id. In return for this privilege, the Court ordered "that Defendants be required to compensate Plaintiff's counsel not only for the costs of copying documents, but also for the time that Plaintiff's counsel's representatives must expend in order to locate and prepare the documents for Defendants." Id. at 4. Finally, the Court directed that "Plaintiff shall estimate how much it will cost to complete this project and provide this estimate to Defendant[s] prior to beginning work on the project. Plaintiff shall endeavor to minimize the expense of this undertaking by utilizing low-level staff where possible." Id. Despite the Court's even-handed, clear bargain, progress in this process immediately broke down. Plaintiff filed a Motion for Clarification of the Court's Order on September 7, 2004, in which she announced that her counsel would copy all identified documents "except for documents produced by the Fischer defendants themselves in this case -- almost all of which Defendants now claim are `missing,'" Pl.'s Mem. in Support of Her Mot. for Clarification at 2. Plaintiff further asserted that Mr. Fischer (on behalf of Defendants), Mr. Stanley Goldschmit, Esq., former counsel to Defendants, and Mr. Richard Schimel, Esq., successor counsel, must each "file affidavits attesting that they do not have the Fischer and Fischer Companies' documents that were supplied in discovery and after conducting a diligent search to include agents and their representatives, they have been unable to locate the same." Id. at 1. Asserting that Plaintiff was unilaterally altering this Court's August 17, 2004 Order and imposing additional requirements, Defendants immediately objected to Plaintiff's actions and threatened a motion for sanctions on their own. The Court was then forced to resolve this dispute through another Memorandum Opinion and Order, dated December 1, 2004. In this Order, the Court 5

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required that Plaintiff provide Defendants access to or copies of all materials requested by Defendants which are outlined in the Status Report filed on September 15, 2004. No affidavits are required from Defendant[s], though Defendant[s] [are] under a continuing ethical obligation to inform Plaintiff if any of these materials requested are actually within their possession. Plaintiff must give Defendants access to or copies of these materials by no later than Thursday, December 23, 2004, or [her] pending Motion for Finding that Defendants and Their Prior Counsel, Stanley Goldschmidt, Esquire, Attempted to Perpetrate a Fraud Against this Court and for Appropriate Sanctions will be denied by the Court. The previous scheme created by the Court's August 17, 2004, Opinion and Order, which provided compensation for Plaintiff's counsel and staff for preparing the documents and copying them, will remain in place. Atkins v. Fischer, Civ. No. 98-800, at 13-14 (D.D.C. Dec. 1, 2004) (order denying Plaintiff's Motion for Clarification) (emphasis in original). The Court's December 1, 2004 Opinion and Order, which constituted a global resolution of all pending production-related disputes, apparently had the intended impact, as separate Status Reports filed by both Plaintiff and Defendants on January 6th and 7th, 2005, indicated that Defendants were ultimately provided the necessary requested materials. The Court then entered a briefing schedule to complete the briefing of Plaintiff's Motion for Sanctions; Defendants filed their Opposition on February 7, 2005, while Plaintiff filed her Reply on February 21, 2005. At the same time that the production-related disputes were reaching a simmering point in this case, Defendants former counsel, Mr. Stanley H. Goldschmidt, Esq., filed a cross-motion for sanctions against Plaintiff on August 31, 2004, and Plaintiff filed an Opposition to that motion on September 13, 2004. The Court stayed consideration of that motion until it could resolve Plaintiff's Motion for Sanctions concurrently. Given that Plaintiff's Motion for Sanctions is now fully briefed, nearly one (1) year after it was initially filed, the Court can resolve both fully

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briefed sanctions-related motions. B. Factual Context of the Sanctions-Based Motions

Plaintiff's Motion for Sanctions, now fully ripe, asserts that "there is compelling reason to believe that Plaintiff Benson Fischer ("Fischer") and his former attorney, Stanley Goldschmidt, Esq., attempted to perpetrate a fraud upon this Court by fabricating evidence and hiding material evidence during discovery which, among other things, would have precluded this Court's grant of summary judgment." Pl.'s Mot. for Sanctions at 1. According to Plaintiff, absent Defendants' fraud, "Plaintiff's appeal would have been unnecessary." Id. As such, Plaintiff contends that "[a]n award of appropriate sanctions to include entry of default judgment, an award of substantial attorneys' fees, and referral of Mr. Fischer's conduct to the United States Attorney's Office is in order." Id. Plaintiff's argument for the draconian sanction of default judgment rests upon four (4) major contentions. 1. History of Misconduct in Contemporaneous, Related Litigations

First, Plaintiff cites to the "history of misconduct" by Mr. Fischer and his former attorney, Mr. Goldschmidt, "in other contemporaneous litigation." Id. at 4. Plaintiff points to two different cases, coetaneous to this case, in which Messrs. Fischer and Goldschmidt were sanctioned for misconduct: (1) Fischer Brewing Co. v. Flax, Superior Court of the District of Columbia, Civ. No. 678-97, aff'd, Fischer v. Estate of Howard L. Flax, 816 A.2d 1 (2003); and (2) In re Fischer, United States Bankruptcy Court of the District of Maryland, Case No. 0313704-DK. Id. at 4, 9. The Fischer v. Flax litigation dealt with a breach of contract lawsuit by Mr. Fischer against (1) Mr. Howard Flax, who signed an agreement with Mr. Fischer providing 7

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for a substantial finder's fee if Mr. Flax was able to locate financing for the Fischer Brewing Company and Redneck Beer, and (2) the law firm representing Mr. Flax, Paley Rothman. Id. at 4-5. During the Fischer v. Flax litigation, Superior Court Judge Steffen W. Graae, after a bench trial on the "bad faith litigation" counterclaim, sanctioned Mr. Fischer for almost $930,000.00 in attorney's fees and costs for bad faith litigation and $40,000.00 in punitive damages. Pl.'s Reply at 1-2. Judge Graae concluded that Mr. Fischer's suit "rests on false allegations, fraudulent documentation, and a stubborn refusal to acknowledge wrongdoing, the suit represents the grossest kind of abuse of the legal process." Id. at 2; Pl.'s Mot. for Sanctions, Ex. 3 (May 3, 2000 Opinion and Order) at 23. Specifically, Judge Graae found that "the evidence is clear and convincing that Mr. Fischer knowingly constructed a fraudulent suit against Flax and [his] lawyers," Pl.'s Mot. for Sanctions, Ex. 3 (May 3, 2000 Opinion and Order) at 21. Judge Graae also focused on the fact that Mr. Fischer's actions "raise[d] questions about efforts he may have made to manipulate witnesses and lawyers in this case," id. at 19-20. Finally, in his separate award of punitive damages against Mr. Fischer, Judge Graae found that "[i]t is obvious that an oath to tell the truth means little or nothing to Mr. Fischer and that he is still intent on manipulating the legal process." Pl.'s Mot. for Sanctions, Ex. 5 (Dec. 18, 2000 Order and Judgment). Judge Graae also awarded Rule 11 sanctions against Mr. Goldschmidt, who represented Mr. Fischer in Fischer v. Flax, and his co-counsel, Mr. Arthur Kahn, Esq., in the sum of $50,000.00. Pl.'s Mot. for Sanctions, Ex. 6 (Dec. 2, 2003 Opinion and Order). Judge Graae concluded that Mr. "Goldschmidt and Mr. Kahn served as nothing more than mouthpieces for the threats Mr. Fischer made . . . . Goldschmidt's and Mr. Kahn's pleadings may have satisfied Mr. 8

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Fischer's thirst for vengeance, but they did not meet the legal or factual standards contemplated by Rule 11." Id. at 11. Judge Graae went on to find that "the Court considers the professional conduct of Goldschmidt and Mr. Kahn to be well beyond the pale. These two experienced lawyers knew, or had to know, they did not have sufficient evidence to make a case for tortious interference by Mr. Mark and his law firm, Paley Rothman. . . . The Court can only characterize their conduct as willful and badly motivated." Id. at 13-14. Plaintiff, in addition to focusing on Judge Graae's sanctioning of Mr. Goldschmidt in Fischer v. Flax, also focuses on the fact that Mr. Goldschmidt -- in attempting to defend himself in that action -- claimed that he suffered from "a state of mental intoxication and loss of impulse control and judgment," Pl.'s Mot. for Sanctions, Ex. 7 (Statement from Mr. Goldschmidt's medical doctor), due to "clinical depression and drug induced intoxication," Pl.'s Mot. for Sanctions at 7. Plaintiff emphasizes that "[i]t is of interest that Goldschmidt claims that he suffered from clinical depression and drug induced intoxication through the Fischer litigation--which was also the period of time that the instant litigation was pending before this Court." Id. at 8. Plaintiff further stresses that Mr. Goldschmidt, along with Mr. Fischer, was sanctioned once again for another $30,000.00 after being found in contempt by the Circuit Court for Montgomery County, Maryland, for stonewalling collection-related discovery during post-judgment collection efforts instigated by Paley Rothman. Pl.'s Mot. for Sanctions at 11-12; Pl.'s Reply at 3. Following collection efforts, Mr. Fischer filed for personal bankruptcy pursuant to Chapter 7 of the Bankruptcy Code. See In re Fischer, United States Bankruptcy Court for the District of Maryland, Case No. 03-13704-DK. Plaintiff contends that in his bankruptcy case, Mr. "Fischer has engaged in the same pattern of behavior that he displayed in the Fischer v. Flax 9

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litigation" by refusing "to appear for depositions when ordered" and presenting "evidence in the Bankruptcy Court which he likely fabricated after the fact." Pl.'s Mot. for Sanctions at 9. For instance, in an Order dated March 12, 2004, Bankruptcy Judge Keir granted sanctions to Plaintiff, a creditor in Mr. Fischer's bankruptcy case, for Mr. Fischer's refusal to comply with a Court order directing a FRBP 2004 examination; Judge Keir's Order also provided for sanctions against Mr. Fischer's bankruptcy attorney, Mr. Richard Rosenblatt. See Pl.'s Mot. for Sanctions, Ex. 12 (3/10/04 Tr. of Bankruptcy Court Hearing). Plaintiff contends that the conduct of Messrs. Fischer and Goldschmidt in litigation contemporaneous to this case must be considered relevant by this Court in the resolution of Plaintiff's present Motion for Sanctions. Essentially, Plaintiff argues that Mr. Fischer and his lawyers, including former counsel Mr. Goldschmidt, have exhibited a pattern of misconduct that "constitutes chronic abuse of the legal standard." Pl.'s Reply at 10. Plaintiff describes the behavior by Defendants and their counsel as "extraordinary by any standard" wherein "fabricating documents, lying under oath, and using the legal system to further personal vendettas is Fischer['s] modus operandi." Pl.'s Mot. for Sanctions at 12. Plaintiff posits that it would "blink[] reality for this Court to ignore the extreme misconduct," Pl.'s Reply at 8, as it is quite likely that Mr. Fischer and Mr. Goldschmidt exhibited a similar pattern of behavior in this case. 2. Withholding of Discovery in This Case

Second, Plaintiff cites to the alleged discovery abuses by Defendants and their former counsel, Mr. Goldschmidt, in suppressing material evidence in this case. Pl.'s Mot. for Sanctions at 13; Pl.'s Reply at 11. Plaintiff focuses on three (3) alleged instances of suppression of key evidence: (1) the production of false gross revenues incurred during the sale of Redneck Beer, 10

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which significantly underestimate the total sales of Redneck Beer, Pl.'s Mot. for Sanctions at 13 & n.10; (2) the apparent withholding by Mr. Fischer and Mr. Goldschmidt of documents showing that the Atkins' Logo was used in t-shirts produced and sold under license and the actual samples of the t-shirts themselves, id. at 13-20; and (3) the intentional suppression of the "missing" documents in this case, subject to this Court's discovery-related production orders requiring Plaintiff to share certain documents with Defendants' new counsel, Pl.'s Reply at 11-13. Plaintiff alleges that income tax-related documents produced by Defendants in this case stated that from 1995 through 1996 (the period during which the Fischer Brewing Company sold Redneck Beer), total sales amounted to roughly $1.5 million. Pl.'s Mot. for Sanctions at 13. However, Plaintiff points to two different Washington Post articles which apparently contradict this figure. Id. at 13, n.10. In the first article, Plaintiff asserts that Mr. Fischer claims that over 375,000 cases of Redneck Beer were sold; at $9.05 per case, Plaintiff estimates that such sales would have produced revenues of $3.4 million. In the second article, it is reported that Fischer Brewing "sold almost 15 million bottles" of Redneck Beer; Plaintiff estimates that at $9.05 per case, gross revenues would have been approximately $5.7 million. Id. As such, Plaintiff implies that Mr. Fischer and his former counsel, Mr. Goldschmidt, must be hiding the true revenues related to Redneck Beer. Id. However, Plaintiff spends most of her argument on the allegation that Mr. Fischer and Mr. Goldschmidt withheld key evidence that Atkins' Logo was used in t-shirts produced and sold under license pursuant to a November 15, 1995 agreement between the Fischer Brewing Company and Cambridge Sportswear, Inc. Id. at 13-20. In this agreement, Cambridge Sportswear provided the Fischer Brewing Company a $100,000.00 initial royalty fee in order to 11

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possess the exclusive license to produce Redneck Beer-branded clothing and wearing apparel. Id. at 14. According to Plaintiff, during Plaintiff's examination of Mr. Fischer in the In re Fischer bankruptcy case, Mr. Fischer maintained that this contract was "to license the name Redneck beer. Specifically the name, nothing else." Id. at 14 (citing 1/19/04 Fischer Dep. at 41). Indeed, Plaintiff contends that "[a]t no time did Fischer or Goldschmidt ever produce T-shirts or other clothing made by Cambridge under license in discovery in this case." Id. However, in the Fischer v. Flax litigation, Mr. Fischer produced a copy of a business plan which had been Bates stamped LFB000369-LFB000579. Id. at 16. Unlike the business plan produced in Flax, the business plan produced by Defendants in this case "lacked the Cambridge T-shirt photographs confirming Cambridge's reproduction on the T-shirts of the Atkins logo. Also lacking were photos of a model with Redneck beer, a promotional photo which included and made use of the Atkins Logos." Id. at 17. Plaintiff contends the omissions from the business plan were deliberate, despite the protestations of Mr. Fischer and Mr. Goldschmidt, because such information would have precluded this Court's November 30, 2001 grant of summary judgment under an implied non-exclusive license theory. Id. at 17-18. Specifically, according to Plaintiff, Fischer's licensing to Cambridge Sportswear of Redneck Beer trademarked goods, including the Atkins Logos for use on wearing apparel would not be within any implied nonexclusive license to use the Atkins Logos for commercial production and distribution of beer. And, under no circumstances could Fischer grant an exclusive license to Cambridge. An implied license (which is all that Fischer could have had), at best, is nonexclusive. Fischer could not grant an exclusive license that he himself did not have. Id. at 18 (emphasis in original). As such, given the importance of this complete business plan and "the remarkable history of prevarication" laid out by Plaintiff, Plaintiff asserts that "Fischer and Goldschmidt cannot be heard to say that the failure to produce key documents (and apparel 12

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samples) that were clearly in their possession was a simple oversight." Id. at 20. Finally, Plaintiff argues that Mr. Fischer and Mr. Goldschmidt are continuing to hide documents related to this litigation. Pl.'s Reply at 11-13. Specifically, Plaintiff contends that it is the practice of Messrs. Fischer and Goldschmidt "to claim that they do not have documents and to not produce documents," id. at 11, and that practice has exhibited itself with respect to the very documents subject to this Court's production-related orders of August 17, 2004 and December 1, 2004. According to Plaintiff, in a hearing held before the Bankruptcy Court on October 20, 2004, Mr. Fischer stated to the court that Mr. Goldschmidt retains one hundred (100) to two hundred (200) boxes of his business files, and indicated through counsel that he has tried unsuccessfully to obtain the documents from Mr. Goldschmidt. Id. at 12 (citing Pl.'s Reply, Ex. B (Oct. 20, 2004 Bankruptcy Court Tr. at 70-71). Plaintiff speculates that these boxes contain even more material than was copied by Defendants' successor counsel in this case from Plaintiff's files pursuant to the Court's Orders, and suggests that Mr. Goldschmidt -- who has been held in contempt in Montgomery County, Maryland, for failing to produce documents -- has failed to produce these documents in order to cover up his own misconduct. Id. at 11-12 & n.15. Plaintiff concludes by stating that "[w]e have absolutely no doubt that the allegedly missing Fischer documents can be found (or recreated from) the 200 boxes and that Messrs. Fischer and Goldschmidt have, yet again, played games with this Court and with everyone else in this case." Id. at 13. 3. Fischer's Alleged Fabrication of a Fake Mock-Up Bottle

Third, Plaintiff asserts that evidence has come to light that indicates Mr. Fischer fabricated a mock-up, or prototype, bottle of Redneck Beer featuring the original concept of a red 13

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bandana and denim pocket in an attempt to support his claims that he -- and not Plaintiff -- is entitled to the copyright of the relevant design. Pl.'s Mot. for Sanctions at 20. During the earlier round of dispositive motions, Defendants had alleged that Mr. Fischer, prior to meeting Plaintiff, had constructed a mock-up Redneck Beer bottle, using a Budweiser beer bottle, in order to demonstrate his concept of how the ultimate design should look; Defendants also argued that Mr. Fischer had also created some preliminary sketches highlighting his design ideas. See Atkins v. Fischer, Civ. No. 98-800, at 11-12 (D.D.C. Nov. 30, 2001). The Court rejected Defendants' argument, given Mr. Fischer's vague and inconclusive testimony regarding whether he actually showed Plaintiff the alleged mock-up bottle and sketches, and given the unequivocal testimony by both Plaintiff and Mr. Thomas Gaadt (the artist hired by Plaintiff to sketch the Atkins designs) that they never saw the mock-up bottle. Id. Despite the fact that the Court rejected Defendants' mock-up bottle claim as a matter of law, Plaintiff continues to focus on the importance of the mock-up bottle -- which has long been the subject of major discovery disputes. Essentially, Plaintiff maintains that the mock-up bottle was created after the fact by Mr. Fischer in order to evade Plaintiff's claims. To support this argument, Plaintiff contends: (1) contrary to Mr. Fischer's deposition testimony, see 4/3/00 Fischer Dep. at 388, the mock-up bottle -- as confirmed by Anheuser Busch Company through an analysis of a picture of the mock-up bottle -- was not a Budweiser beer bottle at all, as the mockup bottle was of a clear color, see Pl.'s Mot. for Sanctions at 23-24 (citing 7/28/00 Dep. of Mark Elliott, Senior Manager in the Packaging Technology Group for Anheuser Busch); (2) the refusal by Plaintiff's former counsel, Mr. Goldschmidt, to hand over the actual bottle for further testing leads to an inference that Defendants were aware that the bottle was created ex post facto, and 14

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sought to hide that fact, id. at 24-25; (3) virtually all testimony in this case indicates that no one was shown the mock-up bottle by Mr. Fischer, contrary to his assertions, id. at 22 (citing to the fact that only Mr. Harvey Berkman and Mr. Steve Solomon testfied that they ever saw the mockup bottle, and arguing that their testimony was vague), Pl.'s Reply at 25-28; and (4) Plaintiff's review of standard bottle markings in the United States, assisted by an expert witness with experience in the glass industry (Mr. C. Phillip Ross), indicates that the numbers engrossed on the mock-up bottle -- "96 and a symbol that looks like a B and then the number 9934 and then the number 2," Pl.'s Reply at 29 -- has led her to "believe that the symbol `96' on the mock-up bottle refers to the year of manufacture of that bottle," id., ensuring that the mock-up was created long after Mr. Fischer held discussions with Plaintiff regarding design plans. Plaintiff contends that the "fabricated" mock-up bottle had a significant impact on this litigation. According to Plaintiff, "[t]he vast majority of discovery conducted by the Plaintiff from 1999 until 2001 was the result of the concocted Mock-up Bottle defense." Pl.'s Mot. for Sanctions at 26. Moreover, Mr. "Fischer's lies and fabrication converted a straightforward copyright infringement case into a case where a major issue in discovery was whose copyright it is." Id. Plaintiff avers that this kind of behavior by Mr. Fischer is similar to his actions taken in the Fischer v. Flax litigation, and that default judgment is the required sanction for such malfeasance. Id.; Pl.'s Reply at 30. 4. Defendants' Counterclaims Were Filed in Bad Faith and Without a Legal or Factual Basis

Fourth, and finally, similar to the Fischer v. Flax litigation, wherein Judge Graae expressly found that Mr. Fischer's claims against Mr. Flax were without legal or factual basis or

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proper investigation, Plaintiff contends that Defendants' counterclaims in this case were filed without legal or factual basis. See Pl.'s Mot. for Sanctions at 26-27. Defendants filed four (4) counterclaims in this case: (1) breach of contract; (2) tortious interference with business relations; (3) infringement of trademark; and (4) infringement of the trademark. See generally Defs.' Ans. Defendants' counterclaims were filed over seven years ago and Plaintiff's previous counsel never filed a Motion for Rule 11 Sanctions at that time. After Defendants' filed their counterclaims, Plaintiff brought a Motion to Dismiss those claims; this Court granted Plaintiff's motion as to Counterclaim I (breach of contract), but denied the motion as to the remaining counterclaims. The remaining three (3) counterclaims were ultimately dismissed by Defendants' stipulation on September 26, 2000. Despite these facts, Plaintiff maintains that "[t]he counterclaims were utterly lacking in specific detail," Pl.'s Mot. for Sanctions at 27, that they were without any factual basis, id. at 29, and that they were filed simply to "prolong[] the litigation and mak[e] it much more costly than it needed to be," id. at 31. In sum, Plaintiff notes that "[t]he point of all of this is to demonstrate to the Court that Fischer (and his former counsel, Goldschmidt), on an ongoing basis made false and fraudulent assertions, have acted in reckless disregard of the truth and/or have used litigation as a weapon." Id. at 33. According to Plaintiff, "[c]ourts need to take firm action with litigants such as this. Our rule of law cannot function if the Fischers and Goldschmidts of this world are permitted to do whatever they want." Id. As such, Plaintiff argues that Defendants' misconduct calls for default judgment, as well as "an appropriate award of actual and punitive damages in an amount sufficient to deter [Mr. Fischer] and others similarly situated from attempt[ing] to perpetrate this kind of fraud." Id. at 39. Moreover, Plaintiff suggests that a referral of this matter to the United 16

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States Attorney's Office for review and/or initiation of criminal contempt proceedings is appropriate. Id. at 39-40. In response, Defendants' former counsel, Mr. Stanley H. Goldschmidt, Esq., has brought a Motion for Rule 11 Sanctions against Plaintiff and her counsel. See Goldschmidt's Mot. for Sanctions at 1-2. Mr. Goldschmidt's curt motion simply refers to the applicable Rule 11 standards and then references his Opposition to Plaintiff's Motion for Sanctions. Id. Mr. Goldschmidt's Opposition essentially accuses Plaintiff's counsel, Mr. Carlos M. Recio, of filing Plaintiff's Motion for Sanctions with distortions, half-truths, and outright lies to such an extent that "Mr. Recio has overstepped the boundaries of his immunity." Goldschmidt's Opp'n at 13. According to Mr. Goldschmidt, "[t]he Motion filed by Mr. Recio represents lawyering at its worst. Not only is there not an ounce of substance, civility or refinement contained in the Motion, but Mr. Recio totally misleads this Court, by failing to include appropriate exhibits and withholding other information, which would have mandated against his filing of the Motion." Id. at 12. Mr. Goldschmidt further objects to Plaintiff's use of Goldschmidt's "encountered difficulties in another case" and Plaintiff's use of his recent medical troubles to portray him "as a psychotic basket case with a drug addiction." Id. As such, Mr. Goldschmidt requests that this Court not only reject Plaintiff's motion, but impose the requisite sanctions to thwart the "prevarications" of Plaintiff's counsel. Id. II: LEGAL STANDARDS Plaintiff requests that the Court sanction Defendants and their former counsel, Mr. Stanley H. Goldschmidt, Esq., pursuant to the "numerous overlapping sources of this Court's sanction's authority: the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and this Court's 17

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inherent authority." Pl.'s Mot. for Sanctions at 33. Plaintiff contends that "because of the attempted perpetration of fraud on this Court," "judgment by default should be entered" in favor of Plaintiff "and attorney's fees awarded." Id. at 34. While Defendants simply attempt to refute Plaintiff's allegations in their filing, Mr. Goldschmidt has brought his own Motion for Sanctions against Plaintiff pursuant to Federal Rule of Civil Procedure 11(b). See Goldschmidt's Mot. for Sanctions at 1-2; Goldschmidt's Opp'n at 12-13. As such, before the Court can discuss the content of the cross-motions for sanctions, the Court first must set out the relevant legal standards underlying the Court's ability to sanction a litigant or counsel in an action. A. Rule 11

Rule 11 of the Federal Rules of Civil Procedure provides that all pleadings, motions or other papers filed with the Court shall be signed by an attorney. Fed. R. Civ. P. 11. The signature affixed pursuant to Rule 11 certifies that the pleading or motion "is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation," that "the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law," and that "the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery." Id. Where a pleading or motion is signed in violation of the Rule, the court may sanction the party or signatory attorney appropriately. Id. The "central purpose of Rule 11 is to deter baseless filings in district court and thus . . . streamline the administration and procedure of the federal courts." Cooter & Gell v. Hartmarx 18

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Corp., 496 U.S. 384, 393, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). Since the 1993 amendments, the language of Rule 11 indicates that the imposition of sanctions is left to the discretion of the district court judge. See Rafferty v. Nynex Corp., 60 F.3d 844, 852 n.12 (D.C. Cir. 1995); Fed. R. Civ. P. 11(c) (noting that when the rule has been violated, a court may impose an appropriate sanction); see also 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1336 (2d ed. Supp. 2000) (commenting that the scope of the Advisory Committee's list of factors to consider when deciding whether or not to impose a sanction suggests that "the district court is given the widest possible latitude under the new" version of Rule 11). As possible sanctions pursuant to Rule 11, the court has an arsenal of options at its disposal, "such as striking the offending paper; issuing an admonition, reprimand, or censure; requiring participation in seminars or other educational programs; ordering a fine payable to the court; [or] referring the matter to disciplinary authorities." See Fed. R. Civ. P. 11 advisory committee's note (1993). B. Rule 37(b)(2)

Rule 37(b)(2) of the Federal Rules of Civil Procedure permits a court to issue such orders "as are just" to sanction a party who fails to obey an order to provide or permit discovery, including a discovery order under Rule 26, governing discovery generally, and Rule 35, governing orders for independent physical or mental examinations. See Fed. R. Civ. P. 37(b)(1). Such sanctions may include taking certain facts as established, prohibiting the introduction of certain evidence, striking pleadings or parts thereof, staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof and/or rendering a judgment by default against the disobedient party. See Fed. R. Civ. P. 37(b)(2); Bonds v. Dist. of Columbia, 93 F.3d 801, 807-08 (D.C. Cir. 1996), cert. denied, 520 U.S. 1274, 117 S.Ct. 2453, 19

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138 L.Ed.2d 211 (1997); Shepherd v. Am. Broadcasting Cos., 62 F.3d 1469, 1474 (D.C. Cir. 1995). The possible sanctions set out in Rule 37(b)(2) are not mutually exclusive; the court may impose several of the specified sanctions at the same time. See 8A Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus, Federal Practice and Procedure §§ 2284, 2289 (2d. ed. 1994). The imposition of the number and type of sanctions employed under Rule 37(b)(2) is left to the discretion of the trial judge. See id. § 2284 ("With a rule as flexible as Rule 37, inevitably a broad discretion must be given the trial judge with regard to sanctions."). However, the Court is limited in its ability to sanction parties pursuant to Federal Rule of Civil Procedure 37(b)(2). The D.C. Circuit has held that "`[a] production order is generally needed to trigger Rule 37(b).'" Shepherd, 62 F.3d at 147 (quoting Attn'y Gen. v. The Irish People, Inc., 684 F.2d 928, 951 n.129 (D.C. Cir. 1982), cert. denied, 459 U.S. 1172, 103 S.Ct. 817, 74 L.Ed.2d 1015 (1983)); see also Jamie S. Gorelick, Stephen Marzen & Lawrence Solum, Destruction of Evidence § 3.4, at 74 & n.23 (1989 & Supp. 1995) ("[f]ederal court decisions . . . unanimously agree that sanctions pursuant to Rule 37 may not be awarded absent violation of a court order"). As such, in order to sanction a party pursuant to Rule 37(b)(2), the Court must identify a specific discovery order that was actually violated. C. 28 U.S.C. § 1927

The court may also impose sanctions pursuant to 28 U.S.C. § 1927. The statute provides that: [a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct. 20

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28 U.S.C. § 1927. The purpose of Section 1927 is to allow the Court "to assess attorney's fees against an attorney who frustrates the progress of judicial proceedings." United States v. Wallace, 964 F.2d 1214, 1218 (D.C. Cir. 1992). Before imposing sanctions on an attorney, the court must evaluate whether the attorney's conduct was "at least reckless[.]" Id. at 1217. "[U]nintended, inadvertent, and negligent acts[, however] will not support an imposition of sanctions under section 1927." Id. at 1219 (quoting Cruz v. Savage, 896 F.2d 626, 631 (1st Cir. 1990)). For an action to be considered reckless misconduct, there must be a "`conscious choice of a course of action, either with knowledge of the serious danger to others involved in it or with knowledge of facts which would disclose this danger to any reasonable man.'" Id. at 1220 (quoting Restatement (Second) of Torts § 500 cmt. g (1964)). A showing by the moving party that the counsel in question acted recklessly or deliberately "in the face of a known risk" is required. Healey v. Labgold, 231 F. Supp. 2d 64, 68 (D.D.C. 2002) (citing Wallace, 964 F.2d at 1219). Once the moving party has met its burden, the court may then award sanctions under 28 U.S.C. § 1927. A variety of courts have noted, however, that "[t]he power to assess costs against an attorney under § 1927 . . . is a power that must strictly be construed and utilized only in instances evidencing a `serious and standard disregard for the orderly process of justice.'" Dreiling v. Peugeot Motors of Am., Inc., 768 F.2d 1159, 1165 (10th Cir. 1985) (quoting Keitel v. Las Vegas Hacienda, Inc., 404 F.2d 1163, 1167 (7th Cir. 1968) and citing United States v. Ross, 535 F.2d 346, 349 (6th Cir. 1976)). D. The Court's Inherent Power

When the Federal Rules of Civil Procedure do not provide courts with sufficient authority 21

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to protect the integrity of the judicial system and prevent abuses of the judicial process, courts have the inherent power to impose sanctions for abusive litigation practices undertaken in bad faith. See Shepherd, 62 F.3d at 1472; Young v. Office of the U.S. Senate Sergeant at Arms, 217 F.R.D. 61, 65 (D.D.C. 2003). "These powers are `governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.'" Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (quoting Link v. Wabash R.R. Co., 370 U.S. 626, 630-31, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962)). However, "[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion." Id. at 44, 111 S.Ct. 2123 (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980)). "The inherent power encompasses the power to sanction attorney or party misconduct, and includes the power to enter a default judgment." Shepherd, 62 F.3d at 1475 (citations omitted). Pursuant to the Court's inherent power, the Court may also enter a variety of sanctions, including fines, awards of attorneys' fees and expenses, contempt citations, disqualifications or suspensions of counsel, and drawing adverse evidentiary inferences or precluding the admission of evidence. Id. (citing Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse § 28(A) (2d ed. 1994)). E. Imposition of a Default or Dismissal as a Sanction for Misconduct

While the Court does possess the power to dismiss a plaintiff's complaint or enter default judgment against a defendant as a sanction for previous malfeasance, default judgment -- the central request of Plaintiff's present motion -- is a very severe sanction that is contrary to the "judicial system's strong presumption in favor of adjudications on the merits." Shepherd, 62 22

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F.3d at 1475. Default judgment is a "drastic step, normally to be taken only after unfruitful resort to lesser sanctions." Id. at 1478 (citations omitted). Moreover, the sins of an attorney should not be visited upon an innocent client. See Shea v. Donohoe Constr. Co., 795 F.2d 1071, 1077-78 (D.C. Cir. 1986). Indeed, where "the client's only fault is his poor choice of counsel," default judgment is a "disproportionate sanction" and an attempt should first be made to sanction the attorney. Id. at 1077. Importantly, a district court may use its power to enter a sanction as severe as dismissal or default judgment only if it finds, first, that there is clear and convincing evidence that the fraudulent or bad faith misconduct actually occurred, and second, that a lesser sanction "would not sufficiently punish and deter the abusive conduct while allowing a full and fair trial on the merits." Shepherd, 62 F.3d at 1472 (default judgment reversed because the district court failed to make these two findings); Young, 217 F.R.D. at 65. Moreover, a "district court must not only find the misconduct by clear and convincing evidence, but must also provide a specific, reasoned explanation for rejecting lesser sanctions." Id. at 1480; cf. Outley v. City of New York, 837 F.2d 587, 591 (2d Cir. 1988) ("Before the extreme sanction of preclusion may be used by the district court, a judge should inquire more fully into the actual difficulties which the violation causes, and must consider less drastic responses."). The D.C. Circuit has provided further guidance on the limits of the sanction of dismissal or default judgment by articulating three (3) possible -- although not mandatory -- justifications for dismissal as a sanction for misconduct, regardless of whether the court bases its decision on the Federal Rules of Civil Procedure or its inherent power. See Webb v. Dist. of Columbia, 146 F.3d 964, 971 (D.C. Cir. 1998). Under Webb, such sanctions are justified when: (1) the other 23

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party has been "so prejudiced by the misconduct that it would be unfair to require [the party] to proceed further in the case"; (2) the party's misconduct has put "an intolerable burden" on the court by requiring the court to modify its own docket and operations in order to accommodate the delay; or (3) the court finds it necessary "to sanction conduct that is disrespectful to the court and to deter similar misconduct in the future." Id.; see also Butera v. Dist. of Columbia, 235 F.3d 637, 661 (D.C. Cir. 2001). "A sanction pursuant to any of these considerations must be based upon findings supported by the record." Id. (citing Bonds, 93 F.3d at 809). Given these stringent standards, it is clear that "default judgment must be a `sanction of last resort.'" Id. (quoting Shea, 795 F.2d at 1075). III: DISCUSSION The Court shall begin its examination of the pending motions by first analyzing Plaintiff's Motion for Sanctions against Defendants and their former attorney, Mr. Stanley H. Goldschmidt, Esq.; the Court will then scrutinize the contentions in Mr. Goldschmidt's Rule 11 Motion for Sanctions against Plaintiff. A. Plaintiff's Motion for Sanctions Against Defendants and Mr. Goldschmidt

As noted previously, supra Section I(B)(1)-(4), Plaintiff asserts that default judgment against Defendants, and additional sanctions against Defendants and their former attorney in this litigation, Mr. Goldschmidt, are warranted due to four (4) important considerations: (1) the history of misconduct exhibited by Defendants and Mr. Goldschmidt as their counsel in separate litigations contemporaneous to this case; (2) the illegitimate withholding of discovery in the present case by Defendants and their counsel; (3) Defendant Fischer's alleged fabrication of the mock-up bottle of Redneck Beer, which constituted a fraud on this court, delayed discovery, and 24

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compelled this Court to erroneously grant Defendants' motion for summary judgment under an implied license theory; and (4) the fact that Defendants' counterclaims filed in this case were without legal or factual basis. The Court shall review each of Plaintiff's contentions in turn. 1. History of Misconduct in Separate, Contemporaneous Litigations

As detailed by the Court in the Background section of this Memorandum Opinion, Plaintiff's Motion for Sanctions and Plaintiff's Reply are replete with references to the misconduct -- both proven and alleged -- of Defendants and their former counsel, Mr. Goldschmidt, in two separate litigations that occurred contemporaneous with the first phase of this action: (1) Fischer Brewing Co. v. Flax, Superior Court of the District of Columbia, Civ. No. 678-97, aff'd, Fischer v. Estate of Howard L. Flax, 816 A.2d 1 (2003); and (2) In re Fischer, United States Bankruptcy Court of the District of Maryland, Case No. 03-13704-DK. See Pl.'s Mot. for Sanctions at 4, 9. Essentially, Plaintiff contends that the misconduct by Defendants and their counsel in previous litigations is particularly relevant to the present Motion for Sanctions, as it highlights the pattern and practice -- or modus operandi -- of Defendants and Mr. Goldschmidt in that they intentionally raise groundless claims, stonewall legitimate discovery requests, evade court orders, harass their opponents, and exhibit no regard for honest practice under the Federal Rules. See, e.g., id. at 4-12; Pl.'s Reply at 1-10. It has long been held that in considering the implementation of sanctions against a party or a counsel to a litigation, a district court may consider all the circumstances surrounding the alleged violation. See Link, 370 U.S. at 635, 82 S.Ct. 1386. "The totality of circumstances can include events which did not occur in the case proper but occurred in other cases and are, by their nature, relevant to the pending controversy." Thibeault v. Square D Co., 960 F.2d 239, 246 (1st 25

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Cir. 1992) (citing Moody v. Miller, 864 F.2d 1178, 1181 (5th Cir. 1989) (per curium) (in imposing sanctions, district court could properly consider plaintiff's "past history with the federal courts")); see also Johnson v. Comm'r of Internal Revenue, 289 F.3d 452, 456-57 (7th Cir. 2002) (Posner, J.) ("The Tax Court was not required to ignore [the attorney's] bad conduct in other cases; indeed, it would have been remiss not to consider it.") (citing cases); Hissom v. New York City Dep't of Housing, Civ. No. 86-2340, 1987 WL 45807, at *7 (S.D.N.Y. Dec. 22, 1987) ("in order to further the purpose of deterrence, the court should take into account whether the persons subject to sanctions have abused the judicial system in the past"). In making a sanctions determination, "a court should consider whether the attorney's conduct was repetitious as opposed to isolated, willful as opposed to negligent, and whether the attorney has a history of similar conduct in other cases." MAI Photo News Agency, Inc. v. Am. Broadcasting Co., Civ. No. 97-8908, 2001 U.S. Dist. LEXIS 1680, at *19-*20 (S.D.N.Y. Feb. 22, 2001). Importantly, even "dogged good-faith persistence in bad conduct becomes sanctionable once an attorney learns or should have learned that it is sanctionable." Johnson, 289 F.3d at 457 (citations omitted). Defendants and their former counsel, Mr. Goldschmidt, attempt to convince the Court to ignore Plaintiff's recitations of their prior misdeeds for two (2) key reasons. First, they claim that Plaintiff's "recital of these matters contains a myriad of inaccuracies, misrepresentations and half truths and misuses discrete facts out of context." Defs.' Opp'n at 2; see also Goldschmidt Opp'n at 12 (contending that Plaintiff's citations "were obviously interposed by Mr. Recio in an attempt to `poison the well' with the Court since . . . his arguments with respect to the `substance' of his Motion are replete with falsehoods, and Mr. Recio apparently believed these issues could provide 26

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him with `cover' to camouflage his prevarications"). However, neither Defendants nor Mr. Goldschmidt detail precisely which of Plaintiff's laundry list of past violations in other cases are "unsubstantiated accusations," and neither party offers any explanation for the findings of previous courts in regard to their behavior. See Defs.' Opp'n at 1-2; Goldschmidt Opp'n at 1112. Second, Defendants and Mr. Goldschmidt both claim that the matters raised by Plaintiff "are extraneous and irrelevant to the issues at hand." Goldschmidt Opp'n at 12; see also Defs.' Opp'n at 2 ("More important, the Flax and Fischer bankruptcy cases are unrelated to the instant litigation, have no bearing on the instant case and would be inadmissible as evidence." (citing Lanham v. Whitfield, 805 F.2d 970, 972 (11th Cir. 1986) (affirming trial court's barring of evidence of other litigation involving defendant on grounds that it would cause substantial prejudice))). However, the assertion by Defendants and Mr. Goldschmidt that previous sanctions and misconduct in related cases are entirely irrelevant is not only undermined by the great weight of case law, but also by the Federal Rules of Civil Procedure themselves. For instance, the 1993 Advisory Committee Notes to Rule 11 provide that: Whether the improper conduct was willful, or negligent; whether it was part of a pattern of activity, or an isolated event; whether it infected the entire pleading, or only one particular count or defense; whether the person has engaged in similar conduct in other litigation; whether it was intended to injure; what effect it had on the litigation process in time or expense; whether the responsible party is trained in the law; what amount, given the financial resources of the responsible person, is needed to deter that person from repetition in the same case; what amount is needed to deter similar activity by other litigants: all of these may in a particular case be proper considerations. Fed. R. Civ. P. 11 advisory committee's note (1993) (emphasis added). Accordingly, a court is certainly free to consider the conduct of a party or counsel in another litigation when examining 27

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possible sanctionable activity in the instant action. However, contrary to the extraordinary emphasis placed on the prior misconduct of Defendants' and Mr. Goldschmidt in other contemporaneous cases by Plaintiff, the usefulness of prior misconduct outside the present litigation is limited. As the First Circuit noted: We emphasize that this is but one of many factors to be considered in passing upon the question of sanctions. We also note that, in the case at hand, there is nothing to indicate that the judge's decision to preclude the evidence turned on this point. Indeed, wholly apart from counsel's track record, preclusion was a supportable remedy for late supplementation on the record before the district court. Thibeault, 960 F.2d at 246 n.6. As such, the Court shall not consider Defendants' and Mr. Goldschmidt's history of misconduct, borne out in numerous sanctions-related decisions across many courts, as solely determinative of its decision in this case. Simply, Plaintiff must prove that Defendants and Mr. Goldschmidt contravened this Court's Orders, the Federal Rules, and acknowledged standards of practice in this case in order to support her Motion for Sanctions. The established history of misconduct in contemporaneous litigation shall influence the Court in two respects, however: (1) the Court shall analyze the conduct of Defendants and Mr. Goldschmidt with additional, more searching scrutiny, and compare their explanations against the evidence in this fulsome record; and (2) should the Court conclude that Defendants and Mr. Goldschmidt have violated established norms of practice to a sanctionable degree, their past pattern of misconduct shall influence the type and extent of sanctions ordered. 2. Alleged Withholding of Discovery in the Present Case

Plaintiff's Motion for Sanctions focuses next on three (3) alleged instances of suppression of key evidence by Defendants and their former counsel, Mr. Goldschmidt, in this case: (1) the

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production of false gross revenues incurred during the sale of Redneck Beer, which significantly underestimated the total sales of Redneck Beer, Pl.'s Mot. for Sanctions at 13 & n.10; (2) the apparent withholding by Mr. Fischer and Mr. Goldschmidt of the fact that the Atkins' Logo was used in t-shirts produced and sold under license, id. at 13-20; and (3) the "missing" documents in this case, subject to this Court's discovery-related production orders requiring Plaintiff to share certain documents with Defendants' new counsel, Pl.'s Reply at 11-13. The Court shall review each allegation regarding the illegitimate suppression of evidence in turn. i. Production of False Gross Revenues

In Plaintiff's Motion for Sanctions, Plaintiff, in a lengthy footnote, implies that the income tax returns filed by Defendants as part of discovery in this case -- relevant for purposes of damages -- significantly understate the total gross revenues garnered by the Fischer Brewing Company through the sale of Redneck Beer. See Pl.'s Mot. for Sanctions at 13 & n.10. In support of this inference, Plaintiff relies on two separate Washington Post articles, from 1997 and 2000, respectively, in which she claims that "Fischer reported to the Washington Post that he had sales of well over 375,000 cases of Red Neck beer between March 1995 and March 1996" and that Defendants ultimately "sold almost 15 million bottles of Red Neck Beer." Id. at n.10. Using these figures, Plaintiff estimates that sales of Redneck Beer should have earned Defendants between $3.4 ­ 5.7 million in gross revenues. Id. Linking this disparity to the past conduct of Defendants in other litigations, Plaintiff suggests that Defendants falsified their federal income tax returns. Id.3
3

It is worth noting that Plaintiff, perhaps convinced by the strength of Defendants' response to this implication, completely dropped these insinuations in her Reply, and failed to reassert her theory of income tax evasion and discovery suppression. 29

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Three central problems exist with Plaintiff's insinuations, each of which decisively undermines her assertion of falsification. First, Plaintiff distorts the true content and context of the two aforementioned Washington Post articles. In a January 23, 1997 article, the Washington Post reported that Mr. Fischer "created and began bottling Redneck Beer -- an American-style brew of which he has sold almost 15 million bottles"; however, the article was primarily concerned with Mr. Fischer's failed acquisition of the national Palm Restaurant chain -- the article made no further mention of Redneck Beer, and provided no source for its figures. See Margaret Webb Pressler, Palms Down on $70 Million; Offer to Buy Falls "Significantly" Short of Tempting Pricey Chain, WASH. POST, Jan. 23, 1997, at E1. The second article cited to by Plaintiff, published on January 17, 2000, is an extensive discussion of the downfall of the Fischer Brewing Company and Redneck Beer. See Margaret Webb Pressler, The Beer Baron Signs Off On a Dream, WASH. POST, Jan. 17, 2000, ("The Beer Baron") at F10. However, rather than noting that Fischer Brewing Company "had sales of well over 375,000 cases of Red Neck Beer," as Plaintiff claims, see Pl.'s Mot. for Sanctions at 13 n.10, the article simply reports that "Redneck sold extremely well, and by March, Fischer had sent 375,000 cases of beer to distributors in 34 states," The Beer Baron at F10 (emphasis added). There is certainly an important distinction between goods shipped to vendors and goods ultimately sold. Plaintiff's conflation of these two very different concepts, and her failure to recognize that one cannot infer gross revenues from items shipped, undermines her claim based on these news articles that Defendants falsified their income for the purposes of their federal income taxes and discovery in this case.

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Second, during discovery in this case, Defendants produced over nine hundred (900) pages of financial statements and tax documents pertaining to the Fischer Brewing Company. These documents include complete federal tax returns for the years 1995 and 1996, year-to-date general ledgers, accountants' compilation reports of revenues, expenses, assets, and liabilities, as well as supporting documentation for these reports. See Defs.' Opp'n, Ex. A (Aff. of Pete V. Albanis, counsel for Mr. Fischer) at 1-2. These federal tax returns and year-to-date general ledgers were audited by the accounting firm of Reiberger, Pollekoff & Kozak. See Defs.' Opp'n, Ex. B (Aff. of Bruce Pollekoff) at 1. In response to Magistrate Judge Kay's May 1, 2000 Order in this case, Mr. Fischer even produced an affidavit from the Fischer Brewing Company's accountant, Mr. Bruce Pollekoff, stating that there was no commingling of funds between the Fischer Organization, Inc., and the Fischer Brewing Company. Id. at 1-2. Plaintiff's motion finds no fault with any of this substantial documentation; indeed, instead of showing internal conflicts within Defendants' financial disclosures, Plaintiff relies solely upon a misreading of an unreliable, outside source to impugn Defendants' tax returns. Given the efforts of Defendants in producing detailed financial information and providing evidence supporting the veracity of that production, Plaintiff's baseless assertions cannot be sustained. Third, Plaintiff fails to recognize that newspaper articles constitute inadmissible hearsay, and cannot be admitted into evidence to support the truth of the matter asserted. "Evidence constituting hearsay is normally inadmissible because it lacks sufficient guarantees of reliability." Hutira v. Islamic Republic of Iran, 211 F. Supp. 2d 115, 123 (D.D.C. 2002) (citing Arthur Best, Evidence: Examples and Explanations at 61 (2d Ed.) (noting that "the reliability problems of outof-court statements are thought to be so great that common law decisions and the Federal Rules 31

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of Evidence take the position that a rule of exclusion will produce the fairest results overall")). Courts have routinely concluded that "`[u]nsupported newspaper articles usually provide no evidence of the reporter's perception, memory or sincerity and, therefore, lack circumstantial guarantees of trustworthiness.'" Id. (quoting Eisenstadt v. Allen, 113 F.3d 120, 1997 WL 211313 (9th Cir. 1997) ("newspaper articles clearly fall within the definition of hearsay . . . and, thus, are inadmissible") and citing United States v. Harris, 271 F.3d 690, 696 (7th Cir. 2001) (noting that "daily newspapers are not reliable evidentiary sources")). As such, courts within this Circuit have consistently barred newspaper articles from introduction as evidence due to the fact that they constitute inadmissible hearsay. See, e.g., Metro. Council of NAACP Branches v. Fed. Communications Comm'n, 46 F.3d 1154, 1165 (D.C. Cir. 1995) ("We seriously question whether a New York Times article is admissible evidence of the truthfulness of its contents."); United States v. Pollard, 161 F. Supp. 2d 1, 6 (D.D.C. 2001) (barring admission of newspaper articles as insufficient proof of a party's claim). Given that Plaintiff's accusation of tax fraud rests solely upon inadmissible hearsay that cannot stand as evidence of the truth of the matter asserted, Plaintiff's argument is without foundation and does not warrant the Court's further consideration. ii. Alleged Withholding of Cambridge Apparel Material

Plaintiff's Motion for Sanctions next accuses Mr. Fischer and Mr. Goldschmidt of intentionally withholding the most complete iteration of the Fischer Brewing Company Business Plan, which would have revealed the fact that Defendants licensed the exclusive right to manufacture Redneck Beer apparel containing the Atkins