ImpactOffice LLC v. Hard et al

Filing 36

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
:
IMPACTOFFICE LLC
:
v.

:

Civil Action No. DKC 16-1675

:
JAMES HARD, et al.
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this case is
a

motion

for

sanctions

filed

Melissa Edwards (“Defendants”).

by

Defendants

(ECF No. 31).

James

Hard

and

The issues have

been fully briefed, and the court now rules, no hearing being
deemed necessary.

Local Rule 105.6.

For the following reasons,

the motion for sanctions will be denied.
I.

Background
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
the

non-solicitation

employment

agreements

Plaintiff’s competitor.

and
by

non-compete
working

for

(ECF No. 2).

provisions
W.B.

Mason

of

their

Co.,

Inc.,

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
No. 25).

On June 28, Defendants filed a motion to dismiss the

amended complaint pursuant to Fed.R.Civ.P. 12(b)(6).
26).

Plaintiff

responded

in

opposition

(ECF

(ECF No.

No.

27),

and

Defendants replied on July 29 (ECF No. 28).

On August 2, 2016,

Plaintiff

dismissal

prejudice
29).

filed

a

pursuant

notice
to

of

voluntary

Fed.R.Civ.P.

41(a)(1)(A)(i).

without
(ECF

No.

As no answer to the original or amended complaint or

motion

for

summary

judgment

had

been

filed,

August

16,

2016,

Defendants

filed

the

notice

was

(ECF No. 30).

approved, and Plaintiff’s case was closed.1

the

On

instant

motion

for

sanctions, seeking costs and fees pursuant to 28 U.S.C. § 1927
or the inherent power of the court to impose sanctions.
No. 31).

(ECF

The court invited Plaintiff to respond to Defendants’

motion, see Local Rule 105.8, and Plaintiff filed a response in
opposition (ECF No. 33).
Both
actions

Plaintiff

must

be

and

Defendants replied.
Defendants

considered

in

1

argue

light

of

(ECF No. 35).
that

the

related

parties’

litigation.

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).
2

Impact

moved

to

consolidate

this

case

with

two

others:

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.
TDC-16-1851 (D.Md.).

Motion to Consolidate Cases, W.B. Mason,

No. DKC-16-1814 (D.Md. June 10, 2016), ECF No. 17.

Impact also

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.
pending

are

ImpactOffice

LLC

v.

Siniavsky,

No.

Also

TDC-15-3481

(D.Md.), Paul v. ImpactOffice, LLC, No. DKC-16-2686 (D.Md.), and
at

least

one

state

court

case

related

to

these

issues.

Plaintiff’s counsel also represented Impact in W.B. Mason, and
the

Defendants

here

and

the

defendants

represented by the same attorneys.

in

W.B.

Mason

were

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
Chamberlin

and

Angela

Dunham,

filed

a

complaint

against

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.
8,

another

former

Impact

employee
3

filed

a

On August

lawsuit

against

Plaintiff, Complaint, Levin v. ImpactOffice LLC et al., No. DKC16-2790

(D.Md.

Defendants

Aug.

Hard

and

8,

2016),

Edwards,

ECF

Mr.

No.

1;

Chamberlin,

two

days

later,

Ms.

Dunham

and

voluntarily dismissed their suit and joined Levin as plaintiffs,
Amended Complaint, Levin, No. DKC-16-2790 (D.Md. Aug. 10, 2016),
ECF No. 3.
II.

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,
expenses,

and

such conduct.”

attorneys’

fees

reasonably

28 U.S.C. § 1927.

incurred

because

of

“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.”
v.

Grutman,

942

F.2d

236,

242

(4th

Cir.

1991).

The

Bakker
§ 1927

inquiry “focuses on the conduct of the litigation and not on its
merits.”

DeBauche v. Trani, 191 F.3d 499, 511 (4th Cir. 1999)

(noting that “an attorney who files a meritorious claim and wins
a

substantial

§ 1927”).

verdict

may

still

be

assessed

sanctions

under

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).
4

Bad faith

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,”
Griffin

Whitaker,

LLC

v.

Torres,

No.

DKC

10–0725,

2010

WL

3895384, at *5 (D.Md. Oct. 1, 2010) (quoting Dobkin v. Johns
Hopkins
(D.Md.

Univ.,
Mar.

Civ.

24,

No.

HAR

1995)),

or

93–2228,
when

1995

WL

“duplicative

167802,
or

at

*2

unnecessary

filings” are made, Hunt v. Lee, 166 F.App’x 669, 671 (4th Cir.
2006).
Alternatively, Defendants seek sanctions pursuant to the
inherent

power

litigants.

of

the

federal

courts

to

sanction

bad

faith

See Chambers v. Nasco, Inc., 501 U.S. 32, 45-46

(1991) (noting that courts may impose sanctions where “a party
has

‘acted

in

bad

oppressive

reasons’”

Wilderness

Soc’y,

faith,
(quoting

421

U.S.

vexatiously,
Alyeska
240,

wantonly,

Pipeline

258-59

Express, Inc. v. Piper, 447 U.S. 752 (1980).

Serv.

(1975)));

or
Co.

for
v.

Roadway

Unlike sanctions

pursuant to § 1927, which may only be imposed on counsel, the
court may impose such sanctions on a party or counsel.

See Blue

v. U.S. Dep’t of Army, 914 F.2d 525, 533 (4th Cir. 1990).

An

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
5

party

who

shows

bad

faith

by

delaying

litigation[.]”); Brubaker, 943 F.2d at 1382.
be imposed sparingly.

or

disrupting

the

Sanctions are to

See, e.g., Jacobs v. Venali, Inc., 596

F.Supp.2d 906, 914 n.10 (D.Md. 2009).
III. Analysis
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).

Defendants

argue that sanctions are warranted because Plaintiff promptly
brought

the

[s]trategic

case

and

[a]dvantage”

“[u]se[d]
(id.

at

the
3);

[l]itigation
continued

to

to

its

litigate

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).

Defendants further

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.

Taking

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.”
6

(Id. at

3).

The timely filing of a complaint clearly does not merit

sanctions.

The crux of Defendants’ argument appears to be that

Plaintiff improperly filed piecemeal litigation, but each of the
pending

cases

—

half

of

which

were

filed

by

former

Impact

employees, not by Plaintiff — involved different defendants who
resigned from Impact at different times.

Moreover, Plaintiff

promptly moved to consolidate the cases once they were removed
to federal court.
Defendants

next

suggest

that

sanctions

are

warranted

because Plaintiff “repeatedly voiced its intent to continue to
pursue the litigation” following the denial of its motion for a
temporary
likelihood

restraining
of

success

(Id.

at

5-7).2

merits

is

one

order.
on

the

of

While
the

the

factors

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-

2

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.
at 4).
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.
7

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).

The

decision to continue to pursue a case following the denial of
injunctive

relief

cannot,

standing

alone,

be

construed

as

a

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
a

plaintiff

to

filing . . . a

“dismiss
notice

of

an

action

dismissal

without
before

a

court

the

order

opposing

by

party

serves either an answer or a motion for summary judgment[.]”
(ECF

No.

29).

Defendants

characterize

this

action

as

“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).

(ECF

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.
1971))).

In

Armstrong,

the

plaintiff’s

notice

of

voluntary

dismissal of his amended complaint was vacated because an answer
8

had

been

served

and

a

motion

for

summary

judgment

had

been

filed, heard, and adjudicated regarding the plaintiff’s original
complaint.

Armstrong, 453 F.2d at 915-16.

Here, however, it is

uncontested that Defendants had not yet served an answer or a
motion

for

complaint.

summary

judgment

to

the

original

or

amended

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)
(recommending

sanctions

where

stipulations

of

dismissal

were

filed one and two days before first day of jury trial and other
actions

of

counsel

warranted

sanctions),

or

after

a

summary

judgment hearing, see Harris v. Bank of Delmarva, No. MJG-132999, 2015 WL 847389, at *3 (D.Md. Feb. 25, 2015), as in the
cases

on

which

Defendants

rely

(ECF

No.

31-1,

at

13).

Defendants’ objection essentially appears to be to the Rules
themselves,

which

plainly

permit

3

Plaintiff’s

action.3

Moreover, Fed.R.Civ.P. 41(a) permits a plaintiff to
dismiss
an
action
at
this
stage
“without
prejudice.”
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
Fed.R.Civ.P. 41(d).
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
9

Plaintiff’s timely filings provide no evidence that Plaintiff or
its counsel acted in bad faith to protract the proceedings.4
Defendants
itself

makes

further

it

argue

“apparent”

that

that

the

the

entirely duplicative and unnecessary.”

voluntary

“entire

dismissal

proceeding

was

(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
Rules

be

the

sole

basis

counsel.

Defendants’

impossible

position

of

for

the

argument
being

imposition

would

subject

put
to

of

sanctions

attorneys
sanctions

in
if

on
the

their

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.
4

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.
(ECF No.
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,
2016.”
Order, Chapman, No. TDC-16-1851 (D.Md. July 19, 2016),
ECF No. 27. Plaintiff accordingly filed a motion to consolidate
in Chapman.
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
conference.”
(ECF No. 35, at 5).
Regardless, Impact’s
counsel’s compliance with the plain text of a court order in a
different case cannot merit § 1927 sanctions.
10

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
to

its

employees

on

August

3,

the

day

after

the

voluntary

dismissal, that stated, “we will continue to take every step to
enforce our agreements[.]”
argue

that

this

email

(ECF No. 31-5, at 2).

is

inconsistent

dismissal and merits § 1927 sanctions.
It

is

illogical

to

contend

that

with

the

Defendants
voluntary

(ECF No. 31-1, at 12).
this

internal

document

multiplied the proceedings in the closed case, however, and the
email

does

faith.

not

show

that

counsel

or

Plaintiff

acted

in

bad

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
to

continue

to

pursue

or

defend

against

the

other

pending

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

11

acted in bad faith, the court will also exercise its discretion
not to award sanctions at this time.
Plaintiff

has

requested

an

award

of

fees

and

costs

in

connection with the expense of opposing Defendants’ motion for
sanctions, pursuant to Local Rule 105.8.
The

local

appropriate

rule

provides

that

cases

imposing

sanctions

unjustified sanctions motions.”

(ECF No. 33, at 34).

courts
upon

“will

consider

parties

Local Rule 105.8(a).

who

in
file

Although

Defendants’ motion will be denied, it would not be appropriate
to award sanctions to Plaintiff here, and Plaintiff’s request
will be denied.
IV.

Conclusion
For the foregoing reasons, the motion for sanctions filed

by Defendants James Hard and Melissa Edwards will be denied.
separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

12

A