Aviva Sports, Inc. v. Fingerhut Direct Marketing, Inc. et al

Filing 997

ORDER denying 961 Motion for Sanctions. The hearing on January 27, 2017, is cancelled. (Written Opinion) (Please see Order for details.) Signed by Judge Joan N. Ericksen on January 23, 2017. (CBC)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Aviva Sports, Inc.,
Plaintiff,
v.

Civil No. 09-1091 (JNE/FLN)
ORDER

Fingerhut Direct Marketing, Inc., Menard, Inc.,
Kmart Corporation, Wal-Mart Stores, Inc., and
Manley Toys, Ltd.,
Defendants.
The Court entered judgment in favor of Aviva Sports, Inc., and against Manley
Toys, Ltd., in the amount of $8,588,931.59. The amount comprised a portion of Manley
Toys’ profits from its falsely advertised products, an award under the Lanham Act of
Aviva Sports’ attorneys’ fees and costs, and previously ordered sanctions against Manley
Toys. Manley Toys appealed. The United States Court of Appeals for the Federal
Circuit affirmed.
In September and October 2015, Aviva Sports, now known as ASI, Inc., served
discovery requests on Manley Toys. Manley Toys did not respond. Aviva Sports moved
to compel Manley Toys to answer the discovery requests. In an Order dated January 4,
2016, the Honorable Janie S. Mayeron, United States Magistrate Judge, granted the
motion to compel and ordered Manley Toys to serve its responses to Aviva Sports’ First
Set of Requests for Production in Aid of Execution and First Set of Interrogatories in Aid
of Execution “on or before January 29, 2016, or within ten days after the date it receives

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a copy of this Order via U.S. mail, Certified Mail or Federal Express, whichever event
occurs earlier.” Manley Toys failed to comply.
In February 2016, Aviva Sports moved for sanctions against Manley Toys. The
next month, foreign representatives of Manley Toys filed a Chapter 15 Petition for
Recognition of a Foreign Proceeding in the United States Bankruptcy Court for the
District of New Jersey. The bankruptcy court provisionally granted relief, including a
stay of continued litigation against Manley Toys. In late March 2016, the Court
cancelled the hearing on Aviva Sports’ motion for sanctions. Several months later, in
light of the ongoing proceedings before the bankruptcy court, the Court denied Aviva
Sports’ motion for sanctions without prejudice to the motion’s renewal at an appropriate
time.
On October 25, 2016, the bankruptcy court granted in part and reserved in part
Aviva Sports’ Motion for Relief from Provisional Stay. The bankruptcy court stated in
part:
5.
Aviva is granted relief from the Provisional Stay to seek
liquidation of the dollar amount of monetary sanctions against Manley in
the Minnesota Action for violating the Minnesota Federal Court’s postjudgment discovery orders, provided that Aviva will not seek to execute at
this time on assets held in Manley’s name.
6.
The Provisional Stay does not apply, or is lifted to the extent
it does apply, to requests for monetary, injunctive, or other sanctions
against any person or entity, except Manley or the Liquidators (pending
further order of the Court, as set forth below), for the person’s or entity’s
involvement in violations of the Minnesota Federal Court’s post-judgment
discovery order or to compel compliance with such orders.
....

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10.
The Court reserves judgment on all relief requested in
Aviva’s Motion for Relief from Provisional Stay not specifically addressed
herein, including:
a.
Whether Aviva may take post-judgment discovery
from Manley or the Liquidators concerning the Manley Judgment . . . ;
b.
Whether Aviva may request from courts in the United
States relief from Manley or the Liquidators to help ensure the preservation
of evidence relating to the Manley Judgment . . . ;
c.
Whether Aviva may seek injunctive sanctions against
Manley for violating the Minnesota Federal Court’s post-judgment
discovery orders or to compel compliance with such orders;
d.
Whether Aviva may file and prosecute motions in the
Minnesota Action or elsewhere, including but not limited to motions to
amend the complaint and/or the judgment in the Minnesota Action, to hold
Toy Quest Ltd., and/or other affiliates or agents of Manley or Toy Quest
Ltd., liable for the Manley Judgment;
e.
Whether Aviva . . . may assert claims in any
appropriate forum that Toy Quest Ltd., and/or other affiliates or agents of
Manley, Manley Toy Direct, or Toy Quest Ltd., are alter egos of Manley,
and whether the Liquidators are estopped from arguing that this Chapter 15
proceeding or the Hong Kong “liquidation” prohibit, limit, or otherwise
affect such alter ego claims; and
f.
Whether Aviva . . . may assert non-independent
claims, including but not limited to fraudulent transfer, unjust enrichment,
conversion, and money had and received claims, in any appropriate forum
against Toy Quest Ltd., and/or other affiliates or agents of Manley, Manley
Toy Direct, or Toy Quest Ltd.
Approximately one month after the bankruptcy court granted in part and reserved
in part Aviva Sports’ motion for relief from the provisional stay, Aviva Sports filed a
Motion for Injunctive and Monetary Sanctions in this Court. Aviva Sports’ motion
states:
Judgment Creditor ASI Inc., f/k/a Aviva Sports Inc. (“Aviva”)
respectfully moves this Court to hold Judgment Debtor Manley Toys Ltd.

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(“Manley”) and certain persons and entities affiliated with Manley—
Samson Chan (a/k/a Chan Ming Yiu), Alan Chan (a/k/a Chan Siu Lun),
Brian Dubinsky, Toy Quest Ltd., and Aquawood LLC (collectively, the
“Controllers”)—in civil contempt for willfully violating this Court’s
January 4, 2016 order requiring Manley to respond to Aviva’s discovery
requests (the “Discovery Order”).
Specifically, Aviva asks this Court to enter an Order that:
• Enjoins the Controllers and any of their intermediaries,
affiliates, subsidiaries, or parent companies (except Manley
itself) from selling, importing, distributing, or shipping any
product into the United States until this Court orders that its
Discovery Order or the Judgment has been fully satisfied;
• Finds that Manley and the Controllers are jointly and
severally liable for Aviva’s attorneys’ fees and costs of
$833,452.50, which represent the value of Aviva’s attorneys’
time ($722,588.50) and costs ($110,864.00) from the date on
which Manley was obligated under Federal Rule of Civil
Procedure 34 to respond to the discovery requests that were
the subject of this Court’s Discovery Order (November 2,
2015) through the date on which the United States
Bankruptcy Court for the District of New Jersey (the
“Bankruptcy Court”) stayed this action (March 24, 2016), and
further requiring the Controllers to pay such amount;
• Finds that the Controllers are jointly and severally liable for
additional attorneys’ fees and costs of $1,025,397.07, which
represent the value of Aviva’s attorneys’ time ($953,568.25)
and costs ($71,828.82) from the date on which the
Bankruptcy Court stayed this action (March 24, 2016) to the
present, and further requiring the Controllers to pay such
amount; and
• Requires the Controllers to pay a daily sanction of $6,389.59
to compensate Aviva for its ongoing attorneys’ fees and costs,
as well as to coerce compliance with this Court’s Discovery
Order.
In the memorandum of law in support of its motion, Aviva Sports “respectfully
request[ed] the opportunity to supplement the record with more detailed evidence of the

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amount and reasonableness of its attorneys’ fees in the event that the Court determines
that an award of attorneys’ fees and costs is appropriate.”
Manley Toys did not respond to Aviva Sports’ motion. Samson Chan, Alan Chan,
Brian Dubinsky, Toy Quest Ltd., and Aquawood LLC opposed the motion.
To avoid piecemeal litigation and to promote judicial economy, the Court denies
without prejudice Aviva Sports’ motion in light of the partial reservation of Aviva
Sports’ motion for relief from the provisional stay, as well as its request to supplement
the record. See Dietz v. Bouldin, 136 S. Ct. 1885, 1891 (2016) (“[A] district court
possesses inherent powers that 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.’”); Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936)
(“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for
itself, for counsel, and for litigants. How this can best be done calls for the exercise of
judgment, which must weigh competing interests and maintain an even balance.”). The
hearing on January 27, 2017, is cancelled. Aviva Sports shall inform the Court of the
bankruptcy court’s ruling on the reserved issues.
Based on the files, records, and proceedings herein, and for the reasons stated
above, IT IS ORDERED THAT:
1.

Aviva Sports’ motion for sanctions [Docket No. 961] is DENIED without
prejudice.

2.

The hearing on January 27, 2017, is cancelled.

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3.

Aviva Sports shall inform the Court of the bankruptcy court’s ruling on the
reserved issues.

Dated: January 23, 2017
s/Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge

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