BPI Sports, LLC v. ThermoLife International LLC et al

Filing 252

ORDER AFFIRMING AND ADOPTING REPORT AND RECOMMENDATION TO DISTRICT JUDGE re 226 Report and Recommendations, ; Adopting 226 Report and Recommendations on 226 Report and Recommendations, Signed by Judge Rodney Smith on 7/14/2021. See attached document for full details. (drz)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 19-60505-CIV-SMITH
BPI SPORTS, LLC,
Plaintiff,
v.
THERMOLIFE
INTERNATIONAL, LLC, et al.,
Defendants.
______________________________________/
ORDER AFFIRMING AND ADOPTING
REPORT AND RECOMMENDATION TO DISTRICT JUDGE
This matter is before the Court on the United States Magistrate Judge’s Report and
Recommendation to District Judge [DE 226], in which the Magistrate Judge recommends that the
Court grant in part Plaintiff’s Motion for Terminating and Monetary Sanctions [DE 143] (the
“Motion”). Defendants filed Objections [DE 229], and Plaintiff filed a Response to Defendants’
Objections [DE 238]. For the reasons that follow, the United States Magistrate Judge’s Report
and Recommendation is AFFIRMED and ADOPTED.
I.

PROCEDURAL BACKGROUND
On September 24, 2020, Plaintiff filed its Motion under seal, seeking sanctions against

Defendants and their attorney Gregory Collins based on: (i) Defendant Ronald Kramer’s creation
of a License Agreement for use in litigation; (ii) Defendants’ production of inaccurate financial
records that under-report Defendant Muscle Beach Nutrition’s profits; (iii) attorney Collins’
allegedly perjured statements in two declarations filed with the Court; (iv) attorney Collins’ overall
conduct during the proceedings; (v) Defendants’ overall litigation conduct; and (vi) Defendant
Kramer’s conduct at an unrelated patent hearing. On October 15, 2020, Defendants filed their

Response in Opposition [DE 151]. Plaintiff filed its Reply [DE 159] on October 26, 2020. The
Court referred this matter to the United States Magistrate Judge for a report and recommendation
[DE 152]. In addition to the parties’ filings, on November 18, 2020, the Magistrate Judge held a
hearing, at which the parties had the opportunity to present their respective arguments. 1 On
February 25, 2021, the Magistrate Judge issued her Report and Recommendation. The Magistrate
Judge concluded that the record supports a finding that sanctions are warranted against Defendants
but not against attorney Collins. The Magistrate Judge recommends that (i) Defendants be
precluded from introducing into evidence or otherwise using the License Agreement in their casein-chief; (ii) the jury be advised of Defendant Kramer’s attempt to manufacture favorable
evidence, and its effect on his overall credibility; and (iii) Plaintiff be awarded reasonable fees and
costs incurred in connection with the Motion and the two prior motions to compel discovery
regarding the License Agreement
II.

STANDARD OF REVIEW
The district court must make a de novo determination of the portions of the report and

recommendation to which a specific objection is made. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P.
72(b)(3).
III.

DISCUSSION
Defendants argue that the Report and Recommendation applies the incorrect standard for

the Court’s inherent power and that the Report and Recommendation incorrectly assumes that
ThermoLife and Muscle Beach Nutrition did not have an oral license agreement prior to the
creation of the License Agreement at issue. Defendants also argue that the Magistrate Judge did
not identify facts sufficient to unlock the Court’s inherent powers, the Magistrate Judge assessed

1

The transcript for the November 18, 2020 hearing is available at [DE 192].
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credibility without hearing live testimony, 2 and the sanctions recommended are inappropriate and
unrecognized in the Eleventh Circuit. Defendants therefore request that the Court reject the
Magistrate Judge’s Report and Recommendation. In response, Plaintiff requests that the Report
and Recommendation be adopted in full.
1. The Report and Recommendation Applies the Correct Legal Standard for the
Court’s Inherent Powers
“It has long been understood that ‘certain implied powers must necessarily result to our
Courts of justice from the nature of their institution,’ powers ‘which cannot be dispensed with in
a Court, because they are necessary to the exercise of all others.’” Chambers v. NASCO, Inc., 501
U.S. 32, 43 (1991) (quoting United States v. Hudson, 11 U.S. 32, 7 (1812)). “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, 501 U.S. at
43 (quoting Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). The Court’s inherent powers
include the authority to regulate litigation and impose “reasonable and appropriate” sanctions on
the parties, as well as their counsel, for abusive practices. See Martin v. Automobile Lamborghini
Exclusive, Inc., 307 F.3d 1332, 1335 (11th Cir. 2002). This authority includes the inherent power
to sanction the parties for a fraud upon the Court. See id. (citing Chambers, 501 U.S. at 44; In re
E.I. DuPont De Nemours & Company-Benlate Litigation, 99 F.3d 363, 367 (11th Cir. 1996)
(“[e]very district court ‘has the power to conduct an independent investigation in order to
determine whether it has been the victim of fraud.’”)). In order to “exercise its inherent power a

Defendants argued that the Magistrate Judge assessed credibility without hearing live witness testimony
and therefore asserts that the Court must assess witness credibility de novo. The Court will not address this
issue because Defendants’ objection is deficient, in that they failed to specifically identify any credibility
determinations purported made in error by the Magistrate Judge. See 28 U.S.C. § 636(b)(1); Fed. R. Civ.
P. 72(b)(3); S.D. Fla. Loc. Mag. R. 4(a)(1). Moreover, to the extent that Defendants seek to object to the
Court’s use of deposition testimony in lieu of live testimony, Defendants expressly agreed to forgo live
testimony at the November 18, 2020 hearing and rely instead on the deposition transcript of Defendant
Kramer. (See DE 179.)
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court must find that the party acted in bad faith.” Martin, 307 F.3d at 1335; see JTR Enterprises,
LLC v. Columbian Emeralds, 697 F. App’x 976, 986 (11th Cir. 2017) (“[t]he key to invoking a
court’s inherent power to sanction is a finding of bad faith.”). Bad faith may be found when a
party commits a fraud on the court. Barash v. Kates, 585 F. Supp. 2d 1347, 1362 (S.D. Fla. 2006)
(citing Chambers, 501 U.S. at 46). In the Eleventh Circuit, a fraud on the court must be established
by clear and convincing evidence. Gupta v. United States AG, 556 F. App’x 838, 840 (11th Cir.
2014) (citing Booker v. Dugger, 825 F.2d 281, 283 (11th Cir. 1987)).
In their Objections, Defendants argue that the Magistrate Judge applied the incorrect legal
standard for unlocking the Court’s inherent power to sanction Defendants. In support of their
argument, Defendants cite to Purchasing Power, LLC v. Bluestem Brands, Inc., 851 F.3d 1218
(11th Cir. 2017) 3 and Meunier Carlin & Curfman, LLC v. Scidera, Inc., 813 F. App’x 368 (11th
Cir. 2020) for the position that “recklessness” or “reckless misstatements” alone do not amount to
bad faith and are insufficient to satisfy the court’s inherent power standard. Notably, each case
involves a finding of bad faith with respect to counsel, not a named party.
In her Report and Recommendation, the Magistrate Judge applied the correct legal standard
for unlocking the Court’s inherent power. The Magistrate Judge applied the clear and convincing
evidence standard and concluded that “Plaintiff has shown by clear and convincing evidence that
Defendant Kramer knowingly created a document for use in this litigation to advance his case and
impede the efficient presentation of Plaintiff’s case.” (Report and Recommendation [DE 226] (the

To the extent that Defendants attempt to compare the present situation to that in Purchasing Power, the
present situation is clearly distinguishable. In Purchasing Power, the Eleventh Circuit reversed a district
court’s imposition of sanctions on plaintiff’s counsel. 851 F.3d at 1228. The district court had expressly
applied a recklessness standard and found that the plaintiff’s counsel acted recklessly when he failed to
adequately investigate the plaintiff’s citizenship before representing to the court that diversity jurisdiction
existed. Id. at 1223. Accordingly, the Eleventh Circuit reversed, finding that the district court applied the
incorrect legal standard for unlocking the court’s inherent power to sanction counsel because “recklessness
alone does not constitute conduct tantamount to bad faith.” Id. at 1223.
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“R&R”) at 11.) The Magistrate Judge concluded further that “Defendant Kramer fabricated a
written agreement that did not exist prior to this lawsuit, and initially tried to pass it [] off as
legitimate.” (R&R at 15.) Finally, the Magistrate Judge found that “the circumstances surrounding
the creation of the License Agreement, coupled with its seemingly innocuous production during
discovery and Defendants’ subsequent tactical attempts to [stymie] discovery on this issue, provide
clear and conceiving evidence of Defendants’ bad faith . . . .” (R&R at 3.) Thus, in contrast to
Defendants’ argument, the Magistrate Judge’s finding of bad faith was not based on “reckless
misstatement” alone, but rather based on her findings that Defendants had committed a fraud upon
the Court when Defendant Kramer knowingly fabricated evidence to advance his case and
repeatedly attempted to obstruct discovery of their fraud. A fraud committed on the Court is
sufficient to find that a party has acted in bad faith, and thus warrants imposition of sanctions. See
Barash, 585 F. Supp. 2d at 1362 (citing Chambers, 501 U.S. at 46) (“bad faith may be found where
the court finds that a ‘. . . fraud has been practiced upon it, or that the very temple of justice has
been defiled.’”).
2. The Report and Recommendation Clearly Indicates that the Magistrate Judge
Considered Defendants’ Argument Regarding an Oral Agreement and
Subsequently Discounted the Argument
Defendants argue that the Report and Recommendation does not consider their arguments
regarding a purported oral license agreement that existed between Defendants ThermoLife and
Muscle Beach Nutrition. Defendants also assert that the License Agreement is irrelevant, and
Defendant Kramer created the document to memorialize a prior existing oral agreement. The
record clearly shows that the Magistrate Judge considered Defendants’ arguments and found not
only that the arguments were unconvincing, but also disingenuous. (R&R at 12-13 (“it is
disingenuous for Defendants to argue that the License Agreement was irrelevant when the parties
disputed the relationship between the corporate entities.”)) The Court has repeatedly instructed
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Defendants that the License Agreement is relevant to the discovery on the claims and defenses at
issue in this case. (R&R at 12 (citing to the record).) The Magistrate Judge notes that, at the time
Defendants disclosed the License Agreement to Plaintiff, there was a dispute regarding the
relationship between Defendant ThermoLife and Muscle Beach, and Defendants’ main defense in
the case was that Plaintiff incorrectly sued ThermoLife instead of the correct party, Muscle Beach.
(R&R at 12 (citing DE 16 at 3,4, 8; DE 89 at 5, 8).) Likewise, the Magistrate Judge considered,
and subsequently dismissed, Defendants’ argument that the License Agreement was simply a
“memorialized” pre-existing oral or implied agreement. (See R&R at 13.)
3. The Magistrate Identified Sufficient Facts to Warrant Unlocking the Court’s
Inherent Powers
Defendants argue that the Magistrate Judge did not identify facts sufficient to unlock the
Court’s inherent powers. Defendants assert that the present circumstances are similar to those at
issue in Purchasing Power.
First, the circumstances at issue in Purchasing Power are clearly distinguishable from the
circumstances at issue in this case. As discussed above, in Purchasing Power, the Eleventh Circuit
reversed a district court’s imposition of sanctions on the plaintiff’s counsel because the district
court applied the incorrect legal standard for assessing bad faith. 851 F.3d at 1228. Here, the
Magistrate Judge applied the correct legal standard. The Eleventh Circuit also found that the
district court’s conclusion — that “there is no evidence [plaintiff’s counsel] investigated
[defendant’s] citizenship — was not supported by the record evidence. Purchasing Power, 851
F.3d at 1225. Here, the Magistrate Judge’s conclusions are supported by the record.
Second, the Court finds that the Magistrate Judge identified sufficient facts to warrant
unlocking the Court’s inherent power, and the Magistrate Judge’s conclusion is supported by the
record evidence. The Magistrate Judge concluded that Defendant Kramer knowingly fabricated a
written document for use in litigation, initially tried to pass it off as legitimate to advance his case,
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and impeded the presentation of Plaintiff’s case. (R&R at 11, 15.) In reaching her conclusion, the
Magistrate Judge considered not only the License Agreement itself, but also “the circumstances
surrounding the creation of the License Agreement, . . . its seemingly innocuous production during
discovery[,] and Defendants’ subsequent tactical attempts to [stymie] discovery on the issue.”
(R&R at 3.) In addition to the written briefs submitted by the parties, the Magistrate Judge also
held a hearing, during which the parties presented argument and responded to the Magistrate
Judge’s inquiries. (R&R at 1, n.1.)
The record reflects that Defendants disclosed the License Agreement in March 2020. (DE
143-1, 181-1.) The License Agreement purports to have an effective date of March 16, 2017. (DE
143-1.) During discovery, after compelled to do so by the Court, Defendants disclosed the
metadata associated with the License Agreement, which indicated that the document had been
created by Defendant Kramer on March 9, 2020. (DE 143-3, 143-4, 181-1.) Moreover, the terms
of the License Agreement did not reflect the actual terms purportedly governing the relationship
between ThermoLife and Muscle Beach. (See DE 143-1; R&R at 13 (citing Sanctions Hr’g Tr.
[DE 192] 132:15-16).) The Magistrate Judge also considered the circumstances surrounding the
parties’ contentious discovery.

Despite disclosing the License Agreement in March 2020,

Defendants did not claim that the License Agreement represented a purported oral agreement until
after Plaintiff suspected irregularities surrounding the document. The Magistrate Judge found that
the Defendants then tried to prevent discovery of the circumstances surrounding the License
Agreement by (i) filing an Expedited Request before the District Judge and offering to indemnify
and hold Muscle Beach harmless if the Judge maintained the existing pretrial deadlines; (ii)
admitting alter ego liability for Muscle Beach; (iii) arguing before the Magistrate Judge that
admission of alter ego liability foreclosed Plaintiff’s right to discovery. (R&R at 14 (citing
Discovery Hr’g Tr. 88:19-22; Sanctions Hr’g Tr. 46:10-49:21).) In effect, the record evidence
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leads to a conclusion that, after Plaintiff identified suspicious circumstances relating to the
fabricated document, Defendants sought to prevent discovery of their fraud.
4. The Sanctions Recommended by the Magistrate Judge are Appropriate and
Warranted
In her Report and Recommendation, the Magistrate Judge recommends, in part, that
Defendants be precluded from introducing into evidence or otherwise using the License
Agreement in their case-in-chief and the jury be advised of Defendant Kramer’s attempt to
manufacture favorable evidence and its effect on his overall credibility. (R&R at 18.) Defendants
argue that the Magistrate Judge’s recommendation that “the jury be advised of Defendant Kramer’s
attempt to manufacture favorable evidence and its effect on his overall credibility” is a novel
sanction created by the Magistrate Judge and unrecognized in the Eleventh Circuit. Defendants
claim that an adverse jury instruction is not warranted. Defendants have not cited to any authority
that would indicate the proposed sanctions are inappropriate or excessive under these
circumstances.
The Court finds the proposed jury instruction appropriate for the circumstances in this case.
“[W]hen determining an appropriate sanction pursuant to the court’s inherent power, a court must
balance the interest in sufficiently punishing and deterring the abusive conduct with the interest of
allowing a full and fair trial on the merits.” Qantum Communs. Corp. v. Star Broad., Inc., 473 F.
Supp. 2d 1249, 1251, 1268-70 (S.D. Fla. 2007) (entering default judgment and imposing attorneys’
fees against the defendant after finding that the defendant lied under oath, failed to produce
documents during discovery, and filed a bad-faith bankruptcy petition to avoid litigation); see
Bashir v. AMTRAK, 119 F.3d 929, 931 (11th Cir. 1997) (“an adverse inference is drawn from a
party’s failure to preserve evidence only when the absence of that evidence is predicated on bad
faith.”); Vargas v. Peltz, 901 F. Supp. 1572, 1580 (S.D. Fla. 1995) (dismissing case when
“[p]laintiff . . . attempted, by fraudulent means, to ‘enhance’ her case through the introduction of
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fabricated [evidence] and through fictionalized testimony concerning how she supposedly received
the [evidence].”). “Litigants must know that the courts are not open to persons who would see
justice by fraudulent means.” Id. at 1582.
Accordingly, it is
ORDERED that the Magistrate Judge’s Report and Recommendation [DE 226] is
AFFIRMED and ADOPTED.
1. Plaintiff’s Motion for Terminating and Monetary Sanctions [DE 143] is GRANTED
IN PART.
2. Defendants are hereby precluded from introducing into evidence or otherwise using the
License Agreement in their case-in-chief.
3. The jury will be advised of Defendant Kramer’s attempt to manufacture favorable
evidence and its effect on his overall credibility.
4. Plaintiffs are hereby entitled to reasonable attorneys’ fees and costs incurred in
connection with the Motion and the two prior motions to compel discovery regarding
the License Agreement. Plaintiffs are directed to file a supplement, including billing
records, to support any request for attorneys’ fees and costs incurred.
DONE AND ORDERED in Fort Lauderdale, Florida on this 14th day of July, 2021.

cc:

Counsel of record

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