ImpactOffice LLC v. Hard et al
MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 11/8/2016. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Civil Action No. DKC 16-1675
JAMES HARD, et al.
Presently pending and ready for resolution in this case is
Melissa Edwards (“Defendants”).
(ECF No. 31).
The issues have
been fully briefed, and the court now rules, no hearing being
Local Rule 105.6.
For the following reasons,
the motion for sanctions will be denied.
On May 26, 2016, Plaintiff ImpactOffice LLC (“Plaintiff” or
“Impact”) filed this breach of contract case in state court,
alleging that Defendants, Plaintiff’s former employees, breached
(ECF No. 2).
Defendants removed the
case to the United States District Court for the District of
Maryland the following day.
(ECF No. 1).
This case was litigated for approximately two months before
it was voluntarily dismissed.
After its motion for a temporary
restraining order or preliminary injunction was denied (ECF Nos.
16; 23), Plaintiff filed an amended complaint on June 27 (ECF
On June 28, Defendants filed a motion to dismiss the
amended complaint pursuant to Fed.R.Civ.P. 12(b)(6).
Defendants replied on July 29 (ECF No. 28).
On August 2, 2016,
As no answer to the original or amended complaint or
(ECF No. 30).
approved, and Plaintiff’s case was closed.1
sanctions, seeking costs and fees pursuant to 28 U.S.C. § 1927
or the inherent power of the court to impose sanctions.
The court invited Plaintiff to respond to Defendants’
motion, see Local Rule 105.8, and Plaintiff filed a response in
opposition (ECF No. 33).
(ECF No. 35).
Although Plaintiff has voluntarily dismissed this case
without prejudice, the court retains jurisdiction to resolve the
issue of sanctions.
See, e.g., Cooter & Gell. v. Hartmarx
Corp., 496 U.S. 384, 395 (1990).
ImpactOffice LLC et al. v. W.B. Mason Co., Inc., et al., No.
DKC-16-1814 (D.Md.), and Chapman et al. v. ImpactOffice LLC, No.
Motion to Consolidate Cases, W.B. Mason,
No. DKC-16-1814 (D.Md. June 10, 2016), ECF No. 17.
voluntarily dismissed W.B. Mason on August 2, before the motion
to consolidate was decided.
Notice of Voluntary Dismissal, W.B.
Mason, No. DKC-16-1814 (D.Md. Aug. 2, 2016), ECF No. 47.
(D.Md.), Paul v. ImpactOffice, LLC, No. DKC-16-2686 (D.Md.), and
Plaintiff’s counsel also represented Impact in W.B. Mason, and
represented by the same attorneys.
Although the cases were not
consolidated, Defendants in this case and in W.B. Mason filed
nearly identical motions for sanctions on August 16, and Impact
filed nearly identical oppositions.
Moreover, on August 3, the
day after Plaintiff’s notice of voluntary dismissal, Defendants
Hard and Edwards, together with W.B. Mason defendants Daniel
Plaintiff, seeking declaratory judgment on the issues raised in
the instant case.
Complaint, Hard et al. v. ImpactOffice LLC et
al., No. TDC-16-2751 (D.Md. Aug. 3, 2016), ECF No. 1.
Plaintiff, Complaint, Levin v. ImpactOffice LLC et al., No. DKC16-2790
voluntarily dismissed their suit and joined Levin as plaintiffs,
Amended Complaint, Levin, No. DKC-16-2790 (D.Md. Aug. 10, 2016),
ECF No. 3.
Standard of Review
Section 1927 provides that an attorney “who so multiplies
the proceedings in any case unreasonably and vexatiously may be
required by the court to satisfy personally the excess costs,
28 U.S.C. § 1927.
“Section 1927 was intended to
sanction conduct Rule 11 does not reach; i.e., protracting or
multiplying the litigation to run up the opposing party’s costs,
remedied by awarding excess attorneys’ fees and costs.”
inquiry “focuses on the conduct of the litigation and not on its
DeBauche v. Trani, 191 F.3d 499, 511 (4th Cir. 1999)
(noting that “an attorney who files a meritorious claim and wins
The imposition of sanctions under § 1927 requires a
finding of bad faith on the part of the attorney.
EEOC v. Great
Steaks, Inc., 667 F.3d 510, 522 (4th Cir. 2012); Brubaker v. City
of Richmond, 943 F.2d 1363, 1382 n.25 (4th Cir. 1991).
may be found when, for example, “the attorney’s actions are so
completely without merit as to require the conclusion that they
must have been taken for some improper purpose such as delay,”
3895384, at *5 (D.Md. Oct. 1, 2010) (quoting Dobkin v. Johns
filings” are made, Hunt v. Lee, 166 F.App’x 669, 671 (4th Cir.
Alternatively, Defendants seek sanctions pursuant to the
See Chambers v. Nasco, Inc., 501 U.S. 32, 45-46
(1991) (noting that courts may impose sanctions where “a party
Express, Inc. v. Piper, 447 U.S. 752 (1980).
pursuant to § 1927, which may only be imposed on counsel, the
court may impose such sanctions on a party or counsel.
v. U.S. Dep’t of Army, 914 F.2d 525, 533 (4th Cir. 1990).
award under the court’s inherent power also requires a finding
of bad faith.
See Roadway Express, Inc., 447 U.S. at 766-67;
Hutto v. Finney, 437 U.S. 678, 690 n.14 (1978) (“An equity court
has the unquestioned power to award attorney’s fees against a
litigation[.]”); Brubaker, 943 F.2d at 1382.
be imposed sparingly.
Sanctions are to
See, e.g., Jacobs v. Venali, Inc., 596
F.Supp.2d 906, 914 n.10 (D.Md. 2009).
Defendants hypothesize that Plaintiff’s actions throughout
this litigation were intended to delay the adjudication of the
merits of its restrictive covenants in order to facilitate the
July sale of the company.
(ECF No. 31-1, at 13-14).
argue that sanctions are warranted because Plaintiff promptly
following the denial of a temporary restraining order (id. at 57, 14); “strategically timed” the notice of dismissal to cause
delay (id. at 7-8, 12-14), and filed “contradictory” motions to
consolidate in other cases (id. at 8-9, 14).
argue that Plaintiff’s actions following the dismissal of this
case evince bad faith.
(Id. at 14).
The conduct of Plaintiff and Plaintiff’s attorneys does not
meet the standard of bad faith necessary to support sanctions
under § 1927 or the inherent authority of the court.
Defendants’ arguments in turn, they first allege that Plaintiff
improperly “rushed” into state court to file the complaint and
to “immediately seek a temporary restraining order.”
The timely filing of a complaint clearly does not merit
The crux of Defendants’ argument appears to be that
Plaintiff improperly filed piecemeal litigation, but each of the
employees, not by Plaintiff — involved different defendants who
resigned from Impact at different times.
promptly moved to consolidate the cases once they were removed
to federal court.
because Plaintiff “repeatedly voiced its intent to continue to
pursue the litigation” following the denial of its motion for a
considered on such a motion, a denial of a temporary restraining
order is not a decision on the merits.
The court did note,
“some of the provisions in these agreements . . . cause me to
question whether they are overbroad,” and described the non-
Defendants cite an internal email to Plaintiff’s employees
regarding the status of the litigation, which noted that the
temporary restraining order had been denied but that a ruling
had not yet been made on the enforceability of the agreements,
and expressed that Plaintiff would “continue to take all steps
necessary to enforce our agreements.”
(ECF No. 31-1, at 7).
Defendants also object to a “false and misleading” internal memo
Plaintiff circulated to its employees regarding this case. (Id.
Plaintiff’s internal communications with its employees
do not show that its counsel unreasonably protracted or
multiplied the proceedings in this case or that Plaintiff acted
in bad faith.
compete clauses as “problematic,” (ECF No. 31-4, at 15), but the
court also found that Plaintiff had not shown that money damages
would be insufficient in denying the motion (id. at 16).
decision to continue to pursue a case following the denial of
necessarily bad faith attempt to multiply the proceedings.
Four days after Defendants filed their reply in support of
their motion to dismiss, Plaintiff filed a notice of voluntary
dismissal pursuant to Fed.R.Civ.P. 41(a)(1)(A)(i), which allows
filing . . . a
serves either an answer or a motion for summary judgment[.]”
“strategically timed” in “a concerted effort by Impact to delay
the Court’s rulings,” and object to the dismissal given the two
months spent in litigation and the lack of a “warning.”
No. 31-1, at 7-8).
Defendants further argue that the dismissal
did not comport with the intention of the rule, “to permit a
disengagement of the parties at the behest of the plaintiff only
in the early stages of a suit, before the defendant has expended
time and effort in the preparation of his case.”
(Id. at 13
(quoting Armstrong v. Frostie Co., 453 F.2d 914, 916 (4th Cir.
dismissal of his amended complaint was vacated because an answer
filed, heard, and adjudicated regarding the plaintiff’s original
Armstrong, 453 F.2d at 915-16.
Here, however, it is
uncontested that Defendants had not yet served an answer or a
The litigation in this case proceeded for only two
months; the case was not dismissed shortly before trial, see
Shank v. Eagle Techs., Inc., No. CIV.A. RWT-10-2231, 2013 WL
4442033, at *1, 12-14 (D.Md. Aug. 15, 2013), R. & R. adopted by
No. CIV.A. RWT 10-2231, 2013 WL 5487865 (D.Md. Sept. 30, 2013)
filed one and two days before first day of jury trial and other
judgment hearing, see Harris v. Bank of Delmarva, No. MJG-132999, 2015 WL 847389, at *3 (D.Md. Feb. 25, 2015), as in the
Defendants’ objection essentially appears to be to the Rules
Moreover, Fed.R.Civ.P. 41(a) permits a plaintiff to
Thereafter, a plaintiff who subsequently files an action based
on or including the same claim against the same defendant may be
ordered to pay the costs of the previous action under
The rule, then, contemplates that in the
normal case the costs of a voluntarily dismissed action may be
awarded, but only if a plaintiff files the same claim again.
Costs as a sanction for dismissal arise only if a new action is
Plaintiff’s timely filings provide no evidence that Plaintiff or
its counsel acted in bad faith to protract the proceedings.4
entirely duplicative and unnecessary.”
(ECF No. 31-1, at 12).
Such a holding would expose the attorneys of any plaintiff who
voluntarily dismissed its action to sanctions.
A violation of
the Rules may not be necessary for § 1927 sanctions, but neither
should the action of a party that is expressly permitted by the
clients chose to withdraw their case after counsel had “pursued
filed by the same party. Here, it is Defendants, not Plaintiff,
who have filed a new action including the same issues.
Defendants also suggest that Plaintiff sought to delay the
proceedings by filing a motion to consolidate in Chapman while
the motion to consolidate in W.B. Mason was pending.
31-1, at 14).
United States District Judge Theodore D. Chuang
ordered that “ImpactOffice LLC is directed to file the Motion to
Consolidate described in the Pre-Motion Conference by July 19,
Order, Chapman, No. TDC-16-1851 (D.Md. July 19, 2016),
ECF No. 27. Plaintiff accordingly filed a motion to consolidate
Motion to Consolidate Cases, Chapman, No. TDC-161851 (D.Md. July 19, 2016), ECF No. 28.
Defendants aver that
this order was issued “not because [Judge Chuang] was directing
the parties to file the motions, but because the schedule he was
ordering was what was discussed and agreed upon during the
(ECF No. 35, at 5).
counsel’s compliance with the plain text of a court order in a
different case cannot merit § 1927 sanctions.
the matter actively” (ECF No. 35, at 4), as of course they are
ethically required to do.
Finally, Defendants cite an internal email Plaintiff sent
dismissal, that stated, “we will continue to take every step to
enforce our agreements[.]”
(ECF No. 31-5, at 2).
dismissal and merits § 1927 sanctions.
(ECF No. 31-1, at 12).
multiplied the proceedings in the closed case, however, and the
Defendants filed suit against Plaintiff on August 3, and
Plaintiff was already involved in other pending suits related to
the same covenants.
The email, then, may suggest that Plaintiff
was prepared to defend against the newly filed suit and intended
matters, but it does not show that Plaintiff or counsel acted in
bad faith here.
Accordingly, there is no basis for finding that Plaintiff’s
counsel unreasonably and vexatiously multiplied the proceedings
or acted in bad faith, and Defendants’ motion for sanctions
pursuant to § 1927 will be denied.
Given the high standard
required and the lack of evidence that Plaintiff or counsel
acted in bad faith, the court will also exercise its discretion
not to award sanctions at this time.
connection with the expense of opposing Defendants’ motion for
sanctions, pursuant to Local Rule 105.8.
unjustified sanctions motions.”
(ECF No. 33, at 34).
Local Rule 105.8(a).
Defendants’ motion will be denied, it would not be appropriate
to award sanctions to Plaintiff here, and Plaintiff’s request
will be denied.
For the foregoing reasons, the motion for sanctions filed
by Defendants James Hard and Melissa Edwards will be denied.
separate order will follow.
DEBORAH K. CHASANOW
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?