Odish et al v. Apple, Inc. et al

Filing 67

ORDER GRANTING IN PART DEFENDANTS MOTION FOR SANCTIONS 44 . Signed by District Judge Judith E. Levy. (TBan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Joseph Odish, Cranbrook Capital
Consulting Group, LLC,
Plaintiffs,

Case No. 15-cv-11955
Hon. Judith E. Levy
Mag. Judge Mona K. Majzoub

v.
Apple,
Inc.,
Timothy
Cook,
Northrop Grumman Corp., Wesley
Bush, Nuance Communications,
Inc. Cognitive Code Corp., Leslie
Spring, Mimi Chen, John Chen,
Salvatore Difazio, Robert Rosen,
International Business Machines
Corp, Joel Bock, Patrick Miller,
Oracle Corp., U.S. Dentons,
Defendants.
________________________________/
ORDER GRANTING IN PART DEFENDANTS’ MOTION
FOR SANCTIONS [44]
Before the Court is an unopposed motion by the Cognitive Code
defendants1 to impose monetary sanctions on plaintiffs under Fed. R.
Civ. P. 11. (Dkt. 44.) Defendants were granted leave to file such a

Cognitive Code Corp., Salvatore Difazio, Leslie Spring, Mimi Chen, and
John Chen.
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motion by the Court’s order of October 28, 2015. (Dkt. 35.)2 For the
reasons stated below, defendants’ motion is partially granted.
Defendants recount plaintiffs’ repetitive filings against them in
this Court, and the particularly egregious nature of this lawsuit, which
has been prosecuted despite the obvious preclusion of the claims against
defendants through a final judgment on the same and related matters
by the United States District Court for the Central District of
California. (Dkt. 44 at 12; See generally Dkt. 35.) Defendants also
assert that a string of feckless lawsuits brought against them by
plaintiffs in this District have featured “false accusations, insults and
implied threats of criminal prosecution” that are not grounded in fact.
(Dkt. 44 at 14-15.) Defendants argue that plaintiffs had their fair and
full opportunity to discover any relevant evidence and prosecute the
core claims against them in the California litigation, in which
defendants prevailed at summary judgment. (Id. at 16.) Defendants
support their motion for monetary sanctions with a memorandum of

In a separate order based on a show-case order and responses by plaintiffs
and defendants, the Court found plaintiffs to be “vexatious litigants” and imposed
Rule 11 sanctions designed to deter that conduct. (Dkt. 34, Dkt. 40, Dkt. 41, Dkt.
42, Dkt. 47.)
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law and materials documenting their fees and costs in opposing this
lawsuit.
Plaintiffs did not file an opposition to defendants’ motion, but the
Court will construe plaintiffs’ opposition to its show-cause order
regarding much of the same behavior (Dkt. 40, 41), as a relevant
response to this motion. When ordered to justify their having brought
this lawsuit predicated on matters precluded by final judgment of
another court, plaintiffs:
devote[d] their responses to recounting the misdeeds of
others (see generally, Dkt. 40, 41), accusing the United
States District Court of the Central District of California of
having had its proceedings “corrupted by the stench of
bribery and graft” (Dkt. 40 at [3]), and blaming their
missteps on their ‘inexperience’ as litigants.
(Order Imposing Sanctions, Dkt. 47 at 2.) These assertions were set
forth despite Odish having been a licensed lawyer for twenty years.
(Id.) Plaintiffs failed to provide an explanation or set forth good cause
for filing a lawsuit based on precluded claims and issues, and they have
not demonstrated an inclination to curb their pattern of filing
duplicative, futile lawsuits against the Cognitive Code defendants.

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(See generally Dkt. 40, 41.) Significantly, plaintiffs have not argued
that this lawsuit is not precluded by the California case.
Defendants filed a supplemental brief in support of their motion
discussing a recent decision from the California Court of Appeals,
Fourth District, applying Fed. R. Civ. P. 11 to uphold sanctions against
a litigant who filed successive lawsuits raising claims that were clearly
barred by issue and claim preclusion. (Dkt. 60.)
I.

Discussion
Fed. R. Civ. P. 11(c) empowers courts to impose sanctions on a

party who has violated Rule 11(b) by litigating in a disingenuous way.
Rule 11(b) bars a litigant from making submissions to the court “for any
improper purpose, such as to harass, cause unnecessary delay, or
needlessly increase the cost of litigation.”

Fed. R. Civ. P. 11(b)(1).

Sanctions may also be imposed if “a reasonable inquiry discloses the
pleading, motion, or paper is (1) not well grounded in fact, (2) not
warranted by existing law or a good faith argument for the extension,
modification or reversal of existing law, or (3) interposed for any
improper purpose such as harassment or delay.” Merritt v. Int'l Ass'n of
Machinists & Aerospace Workers, 613 F.3d 609, 626 (6th Cir. 2010)
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(quoting Herron v. Jupiter Transp. Co., 858 F.2d 332, 335 (6th Cir.
1988)). The rule “stresses the need for some pre-filing inquiry into both
the facts and the law to satisfy the affirmative duty imposed.”

Id.

(quoting Herron, 613 F.3d at 626; Fed. R. Civ. P. 11 advisory
committee’s note to the 1983 amendment). This duty is an ongoing
obligation, and the evaluation of counsel’s conduct in meeting this
ongoing duty of inquiry “is measured by an objective standard of
reasonableness under the circumstances.” Id.
In addition to the Court’s statutory authority to impose sanctions
when a litigant’s conduct does not meet this reasonableness standard,
the Court separately holds inherent power to “assess attorney’s fees
when a party has ‘acted in bad faith, vexatiously, wantonly, or for
oppressive reasons.’”

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

(1991) (holding that Rule 11 did not displace the Court’s inherent power
to impose sanctions for bad-faith conduct) (quoting Alyeska Pipeline
Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59 (1975)). This power
is a “narrow exception” to the American Rule, which holds that
recuperation of ones fees in the successful defense of a lawsuit is
generally not allowed in the United States, absent a statutory provision

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or enforceable contract granting them. Id. at 46-37; Shimman v. Int'l
Union of Operating Engineers, Local 18, 744 F.2d 1226, 1229 (6th Cir.
1984) (en banc), cert. den’d, 469 U.S. 1215 (1985) (discussing the
“American Rule” announced in Arcambel v. Wiseman, 3 U.S. 306 (1796)
& citing cases). “Attorney fees may not be awarded based solely on prelitigation conduct giving rise to the underlying claim. However, prelitigation misconduct ‘in bringing an action or in causing an action to be
brought’ and misconduct ‘during the course of the litigation’ may rise to
the level of sanctionable bad faith.”

Griffin Industries, Inc. v. U.S.

E.P.A., 640 F.3d 682, 685 (6th Cir. 2011) (quoting Shimman, 744 F.2d
at 1230-31). That said, a party “who harms another in bad faith is
nonetheless entitled to defend a lawsuit in good faith. ‘A party is not to
be penalized for maintaining an aggressive litigation posture . . . .’”
Shimman, 744 F.2d at 1232 (quoting Lipsig v. National Student
Marketing Corp., 663 F.2d 178, 180–81 (D.C. Cir. 1980)).
Because the award of attorney fees in the case of bad faith is a
punitive, rather than a deterrent sanction, there must be findings “(1)
that the position advanced or maintained by a party was meritless, (2)
that the meritlessness was known to the party, and (3) that the position

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was advanced or maintained for an improper purpose, such as
harassment.”

Griffin Indus., Inc., 640 F.3d at 685-86 (citing BDT

Products, Inc. v. Lexmark Intern., Inc., 602 F.3d 742, 752 (6th Cir.
2010); Stalley v. Methodist Healthcare, 517 F.3d 911, 920 (6th Cir.
2008); Big Yank Corp. v. Liberty Mut. Fire Ins. Co., 125 F.3d 308, 313
(6th Cir. 1997)).

This finding requires more than the knowing pursuit

of a meritless claim.

Id. at 686.

“Harassing the opposing party,

delaying or disrupting litigation, hampering the enforcement of a court
order, or making improper use of the courts are all examples of the sorts
of conduct that will support a finding of bad faith or improper purpose.”
Id. (quoting BDT Products, 602 F.3d at 754).
Here, plaintiffs admit that they have frivolously filed inaccurate
complaints, which is conduct not only objectively unreasonable under
Rule 11, but also qualifies for the bad-faith exception to the American
Rule. In a filing purportedly providing reasons why defendant’s counsel
Howard Fredman should not be allowed to appear before this Court,
plaintiffs admit that their first amended complaint was filed “[i]n a
move to outsmart [Fredman] and render his motion [to dismiss] moot.”
(Dkt. 7 at 2.)

Plaintiff Odish adds, “I revised and amended the

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complaint, asserting new claims. The complaint on file is still not the
true complaint. The true complaint will be filed and served next week,
along with injunctive relief and eventually [sic].” (Id.) This admission
depicts conduct that departs from zealous advocacy and instead falls
squarely within Rule 11’s facial prohibitions against filing a pleading
with the Court for the improper purposes of harassment and needlessly
increasing the costs of litigation. Indeed, this conduct meets the far
stricter standard for bad faith that separately authorizes the Court to
award attorney’s fees through the exception to the American Rule. This
conduct alone suffices to grant defendants their fees and costs
associated with addressing the first amended complaint, as well as
plaintiffs’ two filings directed at barring Fredman from representing his
clients in this case. (See Dkt. 6, 7.)
But, the sanctionable conduct goes on.

As discussed in the

October 28, 2015 order dismissing all claims against the Cognitive Code
defendants, plaintiffs filed their first amended complaint one month
after the California district court issued its order denying plaintiffs’
Rule 60 motion in that matter. (Dkt. 35 at 29-30.) The issues and
claims decided by the California court were the same as, or closely

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related to, the issues and claims raised by plaintiffs here; therefore, the
Court found that subject-matter jurisdiction was lacking with regard to
the case against the Cognitive Code defendants. (Dkt. 35 at 25-40.)
Plaintiffs have not provided any argument that the Court erred in
its analysis of the preclusive effect of the California court’s decision, and
neither have they explained why they have persisted in asserting in
this lawsuit allegations that the California court rendered invalid. See,
e.g., Smith v. S.E.C., 129 F.3d 356, 363 n.7 (6th Cir. 1997); Erebia v.
Chrysler Plastics Products Corp., 891 F.2d 1212, 1216 n.1 (6th Cir.
1989) (a judgment retains its preclusive effect even when an appeal is
pending). After the California court’s July 20, 2015 decision denying
plaintiffs’ motion for relief from judgment, it was plainly clear to
plaintiffs that, as a matter of law, their assertions in this lawsuit could
no longer rely on any issues and claims inconsistent with the California
court’s rulings. (See discussion, Dkt. 35 at 25-40.)
Here, where the attorney is also the client and the matter was of
direct knowledge to him, plaintiffs’ counsel violated his duty to the
Court and his adverse parties to withdraw claims when he discovered
they were meritless as a matter of law. Yet, he failed to do so when he

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amended his complaint on August 24, 2015, and he also persisted in
bringing these meritless issues and claims in his motion for leave to
amend. (Dkt. 5, Dkt. 16.) In short, there is no reasonable basis, after
the California court’s denial for plaintiffs’ Rule 60 motion on July 20,
2015, for plaintiffs to have persisted with their claims against the
Cognitive Code defendants.
Defendants also challenge the legitimacy of plaintiffs’ “Ex Parte
Emergency Motion for Injunction Barring California Attorney Howard
Fredman from Appearing in this Matter for Being Unfit per Michigan
Rules of Conduct” filed on August 24, 2015 (Dkt. 6), and the “Response
to Motion” filed by plaintiffs the next day on the same topic (Dkt. 7).
Defendants opposed these filings by responsive memorandum that was
filed on September 1, 2015, the same day plaintiffs withdrew the
motion. (Dkt. 14, 15.) Given that plaintiffs withdrew their motion only
after defendants were forced to expend resources to oppose it, and also
considering the incendiary language and admissions of Rule 11
violations within plaintiffs’ two filings related to defendants’ counsel,
see discussion p. 7-8, supra, sanctions are warranted on this aspect of
the litigation.

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Plaintiffs’ prosecution of this lawsuit, particularly after the
California court upheld its decision, is not objectively reasonable;
rather, it is an impermissible attempt to press legal claims and issues
already dismissed by another court of competent jurisdiction, and it has
been conducted in admitted violation of Rule 11.

Defendants are

eligible to recover their fees and costs related to their motion to dismiss,
the briefing of the motion targeting Fredman, as well as other
documented resources expended to defend this lawsuit after July 20,
2015.
II.

Evaluation of Defendants’ Documentation of Fees
Defendants document fees and costs of $52,760.00, and ask for an

award of $38,446.50. (Dkt. 44 at 20.) This amount reflects 134.9 hours
of work. (Id.) Defendants document their lodestar, that is, “the product
of the number of hours billed and a reasonable hourly rate,” and then
adjust that downward to reflect the mean billing rate for attorneys in
the Eastern District of Michigan—$285.00 per hour for an attorney of
Fredman’s experience. (Id. at 19-20 (citing Hensley v. Eckerhart, 461
U.S. 424, 434 (1983)).)

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The Court finds defendants’ calculation of the $285 hourly rate to
be a reasonable rate in this District. However, in light of the evaluation
of defendants’ claims and plaintiffs’ conduct, a portion of defendants’
documented hours must be excluded. First, hours expended on this case
prior to the July 20, 2015 ruling by the California court are excluded,
other than those hours applied to the motion to dismiss, because up
until that time, plaintiffs still had a pending claim related to those
contested issues and claims.

Second, some of defendants’ hours are

described as work related to Odish’s qui tam case filed separately in
this Court on September 28, 2015, and dismissed on October 29, 2015.
(Case No. 15-cv-13395.) Defendants were not served, and they did not
file an appearance in that matter. As a result, there is no basis to grant
defendants fees and costs related to that separate case.
In light of these rulings, the following hours are not to be included
in defendants’ award of sanctions:
Docket and Page

Hours to be Removed

Dkt. 44-3 at 1

1.5 on 6/4/2015
1.0 on 6/5/2015

Id. at 2

1.0 on 6/17/2015
1.0 on 6/18/2015
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0.7 on 6/19/2015
Id. at 3

0.5 on 6/22/2015

Id. at 4

0.8 on 7/2/2015
0.5 on 7/6/2015
1.0 on 7/8/2015

Id. at 5

0.5 on 7/13/2015

Id. at 10

4.0 on 10/6/2015

Id. at 11

0.6 on 10/14/2015
0.4 on 10/26/2015

Total Hours Reduced 13.6 hours at $285 = $3,876.00

The total reasonable amount of fees and costs owed to defendants
is their proposed lodestar calculation of $38,446.50, less $3,876.00 for
hours not attributable to plaintiffs’ Rule 11 violations in this particular
case, which equals $34,570.50.
III.

Plaintiffs’ Ability to Pay
The Court is aware of its responsibility to “make some inquiry

concerning an attorney’s ability to pay a monetary sanction . . . even
when the offended party’s actual expenditures appear reasonable.”
Jackson v. Law Firm of O”Hara, Ruberg, Osborne and Taylor, 875 F.2d
1224, 1230 (6th Cir. 1989). The burden to prove inability to pay lies
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with the individual sanctioned.

Garner v. Cuyahoga Cty Juvenile

Court, 554 F.3d 624, 642 (6th Cir. 2009); Kratage v. Charter Twp. Of
Commerce, 926 F. Supp. 102, 105 (E.D. Mich. 1996) (citing Gaskell v.
Weir, 10 F.3d 626, 629 (9th Cir. 1993); In re Kunstler, 914 F.2d 505, 524
(4th Cir. 1990)).
Here, plaintiffs did not file an opposition to this motion for
sanctions, even for the sole purpose of asserting their inability to pay a
potential sanction.

Therefore, in consideration of the Court’s duty,

plaintiffs are granted until no later than March 21, 2016 to submit
competent evidence probative of their capacity to pay the reasonable
attorney fees and expenses of $34,570.50 resulting from plaintiffs’ Rule
11 violations.
IV.

Conclusion
For the reasons stated above, plaintiffs are granted until no later

than March 21, 2016 to make a showing supported by competent
evidence that they are not able to pay the full sanction. Absent such a
showing,

plaintiffs

will

be

ordered

to

compensate

defendants’

reasonable attorney fees and expenses of $34,570.50 resulting from the
Rule 11 violations set forth above.
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IT IS SO ORDERED.
Dated: March 11, 2016
Ann Arbor, Michigan

s/Judith E. Levy
JUDITH E. LEVY
United States District Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served
upon counsel of record and any unrepresented parties via the Court’s
ECF System to their respective email or First Class U.S. mail addresses
disclosed on the Notice of Electronic Filing on March 11, 2016.
s/Felicia M. Moses
FELICIA M. MOSES
Case Manager

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