ORDER: For the reasons set forth in the attached Memorandum & Order, the court imposes sanctions on Attorney Alan S. Futerfas. Futerfas is ORDERED to pay a penalty to the court in the form of $500, payable to the Clerk of Court. Ordered by Judge Nicholas G. Garaufis on 7/2/2012. (Fox, Peter)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
IN RE APPLICATION OF DEBBIE GUSHLAK
PURSUANT TO 28 U.S.C. § 1782 FOR THE
TAKING OF DISCOVERY FOR USE IN A
MEMORANDUM & ORDER
NICHOLAS G. GARAUFIS, United States District Judge.
The court is in receipt of Attorney Alan S. Futerfas’s response to its order to show cause
why Futerfas should not be sanctioned under Rule 11 of the Federal Rules of Civil Procedure for
presenting a frivolous legal argument to the court. (Docket Entry # 98.) Because the court finds,
based on the totality of the circumstances in this case, that Futerfas raised this argument in
subjective bad faith, the court imposes sanctions under Rule 11(c)(3). Pursuant to Rule 11(c)(4),
Futerfas is ORDERED to pay a penalty to the court in the form of $500, payable to the Clerk of
On April 30, 2012, the court ordered Futerfas, who was at the time defending contempt
proceedings against his clients Myron Gushlak and Yelena Furman, to show cause why he
should not be sanctioned pursuant to Rule 11 for raising the frivolous argument that the court
had been divested of jurisdiction to enforce its own facially valid subpoenas due to respondents’
appeals from two orders granting leave for the applicant in this case to serve those subpoenas.
Not only was this argument totally unsupported by case law or common sense, but it had been
thoroughly debunked by Magistrate Judge Orenstein in a report and recommendation (“R&R”)
that the court ultimately adopted. Still, Futerfas persisted in raising the frivolous divestiture
argument in his clients’ objections to the R&R.1
In relevant part, Rule 11(b) requires a lawyer to certify, “to the best of that person’s
knowledge, information, and belief, formed after an inquiry reasonable under the
circumstances,” that his or her “legal contentions are warranted by existing law or by a
nonfrivolous argument for extending, modifying or reversing existing law or for establishing
new law.” If Rule 11(b) is violated, the court may impose sanctions, either upon a motion by the
opposing party or on its own initiative. See Fed. R. Civ. P. 11(c). The conduct that constitutes a
violation of Rule 11(b) differs, however, depending on whether the prospect of sanctions arises
by motion or by an order to show cause. In In re Pennie & Edmonds LLP, the Second Circuit
drew on language in the Advisory Committee notes to the 1993 amendment to Rule 11 to hold
that where, as here, the court itself initiates an inquiry into a potential Rule 11 violation,
sanctions should not be imposed unless the responding attorney acted with “subjective bad
faith.” See 323 F.3d 86, 87 (2d Cir. 2003). This is in contrast to the mens rea standard that
applies when a party makes a motion for Rule 11 sanctions. In those cases, the standard is
objective unreasonableness. Id. at 90 (citing Ted Lapidus, S.A. v. Vann, 112 F.3d 91, 96 (2d
Cir. 1997)). The rational for this distinction is that a motion for sanctions allows the responding
attorney an opportunity to withdraw or disclaim his or her offending contention, whereas the
court-initiated sanctions process does not. Id. at 91. This approach is not universally accepted,
see id. at 93-102 (Underhill, J. dissenting); Young v. City of Providence, 404 F.3d 33, 40 (1st
In his response to the court’s order to show cause, Futerfas devotes substantial space to
highlighting his co-counsel’s role in formulating the divestiture argument. (See, e.g., Resp. at 1, 14-18.)
By signing a “pleading, written motion, or other paper” submitted to the court, however, a lawyer accepts
responsibility for the integrity of the arguments and representations contained therein. See Fed. R. Civ. P.
11(b). Futerfas signed and filed his clients’ objections to the R&R, and so he is fully accountable for any
Rule 11 violations related to that submission.
Cir. 2005), but it remains the law of the Circuit, see ATSI Commc’ns, Inc. v. Sharr Fund, Ltd.,
579 F.3d 143, 150 (2d Cir. 2009).
Here, the court issued an order to show cause sua sponte, and so it cannot impose
sanctions on Futerfas without first finding that he acted with subjective bad faith.
Not surprisingly, “bad faith” is a relatively loosely defined term of art. The Second
Circuit has stated that cases are brought in bad faith when “the claim is entirely without color
and has been asserted wantonly, for the purposes of harassment or delay.” Browning Debenture
Holders’ Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir. 1977). More recent formulations
of the term dispense with any inquiry into motive, and allow bad faith to be inferred solely from
the “pursuit of frivolous contentions,” Dow Chem. Pac., Ltd. v. Rascator Maritime, S.A., 782
F.2d 329, 345 (2d Cir. 1986), or actions that are “completely without merit,” 60 E. 80th Street
Equities, Inc. v. Sapir (In re Jerasimos Papapanayotou, Esq.), 218 F.3d 109, 116 (2d Cir. 2000).
It is unclear, however, whether these more recent cases are still good law insofar as their
definitions of bad faith relate to Rule 11. Their apparent disregard for motive or intent is
difficult to square with the heightened culpability standard articulated in Pennie & Edmonds, and
so the court does not rely on them.
Reference to recent district court cases similarly fails to provide clear guidance. Since
the Circuit clarified the standard for court-initiated sanctions, district courts have found
subjective bad faith in a variety of cases, ranging from those involving overtly dishonest or
contemptuous behavior, see, e.g., Gollomp v. Spitzer, 06-CV-802 (FJS/RFT), 2007 U.S. Dist.
LEXIS 8524, at *28-29 (N.D.N.Y. Feb. 5, 2007), aff’d, 568 F.3d 355 (2d Cir. 2009) (imposing
sanctions on counsel under 28 U.S.C. § 1927 for lying to the magistrate judge about his
disciplinary record); SEC v. Smith, 798 F. Supp. 2d 412, 426 (N.D.N.Y. 2011) (imposing
sanctions on a party for intentionally misrepresenting her financial interest in a trust);
Washington 1993, Inc. v. Hudson (In re Hudson), No. 00-11683, Adversary No. 00-90091, 2010
Bankr. LEXIS 3003, at *16-17 (Bankr. N.D.N.Y. Aug. 30, 2010) (imposing sanctions on pro se
litigant for filing recusal motion that included the baseless allegation that the bankruptcy judge
committed a crime by altering the content of a submission), down to those where the court
simply regarded an argument as frivolous, see, e.g. McGuire v. Village of Tarrytown, No. 08CIV-2049 (KTD), 2011 U.S. Dist. LEXIS 10321, at *4 (S.D.N.Y. Sept. 14, 2011).
The court concludes that the best interpretation of subjective bad faith must fall
somewhere in between these two extremes. The standard can neither be so strict as to require a
lie about a historical fact or contempt, nor can it be so lenient as to allow the court to impose
sanctions for nothing more than a frivolous argument. If it were the former, then the court would
be unable to impose sanctions for conduct prohibited by several important provisions of Rule 11,
cf. Fed. R. Civ. P. 11(b)(2) (allowing for sanctions for “legal contentions” not warranted by law),
which are expressly made grounds for court-imposed sanctions by subsection (c)(3) of that rule.
If it were the latter, sanctions could be imposed for mere negligence. Instead, the court
concludes that, in the context of this case, a finding of subjective bad faith requires evidence of
what might be referred to as “frivolous-plus.” That is, it is not sufficient to find that a legal
argument is frivolous. There must also be either direct or circumstantial evidence that counsel
knew that the argument was without merit. One type of circumstantial evidence of such
knowledge is evidence that the argument was made for an improper purpose. Subsection (b)(1)
of Rule 11 provides examples of such improper purposes such as “to harass, cause unnecessary
delay, or needlessly increase the cost of litigation.” Where these motives are present, it is fair to
conclude that counsel was aware that the frivolous argument was baseless, but raised it anyway
because success on the merits was not the ultimate objective.
Cameron International Trading Co. v. Hawk Importers, Inc., No. 03-CV-2496 (JS), 2011
U.S. Dist. LEXIS 4976 (E.D.N.Y. Jan. 18, 2011), provides a good example of this standard in
practice. There, the court imposed sanctions on defense counsel after finding that two of
counsel’s arguments were frivolous and that these arguments were raised for improper purposes.
The case arose after the court dismissed a complaint pursuant to a stipulation of
settlement and dismissal. See id. at *2-5. The court also “so ordered” the settlement itself,
which, among other things, allowed either party to invoke the court’s jurisdiction in the future
for the purposes of enforcing the terms of the settlement. See id. The so-ordered settlement thus
in effect became a consent decree. When the plaintiffs later sued on the decree, seeking to
remedy the defendants’ alleged breach, the defendants moved to dismiss on the grounds of lack
of jurisdiction. See id. They argued that the court did not adopt the settlement agreement’s
continued-jurisdiction provision because the court did not rewrite the terms of the settlement
agreement into its decree, but rather incorporated them through reference. See id. at *8-11.
According to the defendants, the “logical construct” of the court’s orders was that jurisdiction to
enforce the settlement agreement would terminate upon dismissal of the underlying complaint.
See id. at *7-8.
These arguments were frivolous. In imposing sanctions, the court examined the depth of
the frivolity, the relationship of the frivolous argument to other positions taken by the
defendants, and the defendants’ overall course of conduct. See id. at *12-16. It found that
because the court had expressly incorporated the terms of the settlement into its decree, the
defendants’ arguments were “absurd” and “nonsensical.” See id. at *12, *15. It also found that
the defendants had taken a number of positions contrary to these arguments, including seeking to
invoke the court’s jurisdiction after dismissal of the complaint. See id. at *12-13. Finally, the
court found that, “[c]onsidering Defendants’ conduct in its entirety,” the conduct reflected “a
manifest and calculated disrespect for the Court and its authority.” Id. at 15. The defendants had
failed to appear at several conferences, appeared unprepared, made other frivolous arguments,
and generally employed a strategy of delay. See id. at 14-15. In short, the court concluded that
“Defendants’ counsel . . . endeavored to ‘harass, cause unnecessary delay, and needlessly
increase the cost of litigation.’” Id. at 16 (quoting Fed. R. Civ. P. 11(b)(1)). Having found the
presence of these ulterior motives, the court concluded that the defendant’s frivolous argument
was made in bad faith. Id.
In this case, Futerfas is subject to sanctions for similar reasons. Not only was the
divestiture argument utterly frivolous, but the court finds that Futerfas knew the argument was
baseless and raised it anyway for improper reasons.
The divestiture argument was frivolous.
“It is a ‘basic proposition that all orders and judgments of courts must be complied with
promptly. If a person to whom a court directs an order believes that order is incorrect the
remedy is to appeal, but, absent stay, he must comply promptly with the order pending appeal.’”
United States v. Pescatore, 637 F.3d 128, 144 (2d Cir. 2011) (quoting Maness v. Meyers, 419
U.S. 458, 458 (1975)). The primary way that a district court ensures compliance with its orders
and judgments pending appeal is, of course, through its powers of contempt.2 See, e.g., Blue
Cross & Blue Shield v. Am. Express, 467 F.3d 634, 638 (7th Cir. 2006) (holding that district
court retained jurisdiction to hold contempt proceedings following defendant’s alleged violation
of a consent decree while appeal of that decree was pending); Acevedo-Garcia v. Vera-Monroig,
368 F.3d 49, 58 (1st Cir. 2004) (affirming holding of defendant in contempt for failure to comply
with writ of execution while appeal of underlying judgment was pending); Farmhand, Inc. v.
Anel Eng’g Indus., 693 F.2d 1140, 1146 (5th Cir. 1982) (holding that district court retained
jurisdiction to hold contempt proceedings following defendant’s alleged violation of permanent
injunction while appeal of that injunction was pending); Nat’l Serv, Indus., Inc. v. Vafla Corp.,
694 F.2d 246, 249-250 (11th Cir. 1982) (affirming holding of defendants in contempt for failure
to comply with post-judgment discovery while appeal of the underlying judgment and
post-judgment discovery order was pending); Ross v. Thomas, No. 09-Civ.-5631 (SAS), 2011
U.S. Dist. LEXIS 60444, *3-4 (S.D.N.Y. Jun. 6, 2011) (noting defendant had been held in
contempt for transferring assets in violation of restraining notice while appeal of underlying
judgment was pending); United States v. Schulz, No. 07-CV-352 (RIA), 2008 U.S. Dist. LEXIS
57948, *3-4, *12 (N.D.N.Y. Apr. 28, 2008) (holding defendant in contempt for noncompliance
with terms of injunction while appeal of the injunction was pending). And district courts can
District courts may also exercise jurisdiction in other ways while their orders and
judgments are pending on appeal. They may, for example, cancel notices of lis pendens, see Am. Town
Ctr. v. Hall 83 Assocs., 912 F.2d 104, 110 (6th Cir. 1990); issue bench warrants for the arrest of
contemnors, see In re Campbell, 761 F.2d 1181, 1186 (6th Cir. 1985); and order post-judgment discovery,
see Nat’l Serv. Indus., Inc., 694 F.2d at 249-50; Bar v. United States, No. 87-CV-3979 (DGT), 1995 U.S.
Dist. LEXIS 3600, *1 (E.D.N.Y. Mar. 9, 1995). In an analogous situation, a bankruptcy court may order
the sale of an estate’s assets while an appeal of the bankruptcy court’s order expunging a creditor’s claim
on those assets is pending before the district court. See In re Fischer, 53 Fed. Appx. 129, 133 (2d Cir.
2002) (summary order).
and do use contempt orders to enforce compliance with subpoenas while challenges to the merits
of those subpoenas are pending in the courts of appeal. See, e.g., N.L.R.B. v. Cincinnati Bronze,
Inc., 829 F.2d 585, 587-89 (6th Cir. 1987) (affirming holding of respondent in contempt for
failure to comply with court order enforcing an administrative subpoena while appeal from that
order was pending); Brown v. Braddick, 595 F.2d 961, 963-64 (5th Cir. 1979) (recognizing
district court’s jurisdiction to hold respondent in contempt for failing to comply with its
subpoena while appeal from order denying motion to quash the subpoena was pending).
The rule is uncontroverted. And how could it be? If an appeal from an order or
judgment divested the district court of jurisdiction to enforce that order or judgment, there would
be no point to Rule 62(d) of the Federal Rules of Civil Procedure, which provides for a stay of an
appealed order or judgment with the posting of a supersedeas bond. Similarly, there would be no
reason for litigants to petition for a stay, as, ironically, respondents have done in this case. If the
effect of judgments and orders were automatically stayed pending appeal, a great deal of well
established practice and procedure would be superfluous. Moreover, in cases like this one,
where the district court issues an ex parte order allowing for the service of subpoenas, divestiture
of enforcement jurisdiction would effectively convert the Circuit into a court of first instance
because respondents could entirely avoid litigating the validity of the subpoena at the district
All of this would be obvious to an attorney acting reasonably, but it was apparently not
Under the existing system, a party that does not want to comply with an ex parte
subpoena must choose between challenging the validity of the subpoena in the district court through a
motion to quash, or obtaining a stay pending appeal. Either scenario will produce at least some legal
analysis of the merits of the subpoena for the court of appeals to review.
clear to Futerfas as he prepared to litigate the contempt motion.4 Although basic legal research
or a moment’s thought would have revealed the futility of his divestiture argument, Futerfas
nevertheless decided to raise it before Judge Orenstein.
He was, of course, rebuked. (See R&R (Docket Entry # 82) at 17-18.) In rejecting
Futerfas’s divestiture argument, Judge Orenstein cited numerous cases (many of which are also
cited above), and he referred to two of legal profession’s most noted treatises. As quoted in
Judge Orenstein’s R&R, Wright and Miller’s Federal Practice and Procedure states that “[u]nless
the judgment is stayed, the district court may act to enforce it despite the pendency of an
appeal.” (R&R at 18.) Moore’s Federal Practice concurs: “Until the district court’s judgment is
superseded or stayed, the judgment is fully in effect and the district court retains the authority to
enforce the judgment.” (Id.) Lest there be any confusion about the scope of these statements,
the Federal Rules of Civil Procedure define “judgment” as “any order from which an appeal
lies.” Fed. R. Civ. P. 54(a).
Remarkably, in the face of this contrary authority, Futefas did not back down. Instead, he
included among his objections to the R&R a section with the heading “THE REPORT
& RECOMMENDATION ERRED IN CONCLUDING THAT THIS COURT RETAINS
JURISDICTION OVER THE CASE.” (Obj. (Docket Entry # 85) at 21.) In that section, which
is four pages in length, Futerfas raised two arguments, neither of which addressed the relevant
portion of the R&R in any way.
First, Futerfas cited Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982), for
Because the order to show cause does not relate to Futerfas’s submissions to Judge
Orenstein, but rather to his objection to the R&R, the court need not decide whether Futerfas acted with
bad faith or mere negligence in raising the divestiture argument at that earlier stage of the proceedings.
the well-known and undisputed proposition that “a federal district court and a federal court of
appeals should not attempt to assert jurisdiction over a case simultaneously.” (See Obj. at 22
(citing Griggs, 449 U.S. at 58).) He did not mention, however, that Griggs concerned an effort to
amend, rather than enforce, a judgment while an appeal was pending. See 449 U.S. at 61. Nor
did Futerfas cite any of the numerous cases that expressly distinguish the scenario in Griggs
from that in this case where a district court strives to enforce its own judgment. See, e.g., Blue
Cross & Blue Shield, 467 F.3d at 368; In re Fischer, 53 Fed App’x at 133; Am. Town Ctr., 912
F.2d at 110; Cincinnati Bronze, Inc., 829 F.2d at 588-89; Farmhand, Inc. 693 F.2d at 1145-46.
Had Futerfas considered any of these cases—many of which were cited in the R&R—he would
have known that Griggs was inapposite.
Second, Futerfas blatantly mischaracterized the primary basis for Judge Orenstein’s
recommendation. Whereas Judge Orenstein rejected Futerfas’s divestiture argument principally
on the grounds that the contempt proceedings were an exercise of the court’s retained power to
enforce its appealed orders (see R&R at 17-18), Futerfas disregarded that discussion and
pretended that the rejection rested entirely on a determination that the merits of the subpoenas
were not ripe for appeal. (See Obj. at 22-24). Having thus created a straw man to explain Judge
Orenstein’s divestiture recommendation, Futerfas beat it relentlessly, arguing from case law that
subpoenas issued pursuant to 28 U.S.C. § 1782 can be challenged on appeal immediately.
Futerfas’s contention that merits of the subpoenas are properly before the Court of
Appeals may be correct, but that is utterly irrelevant to the question of whether an appeal of an
order or judgment—ripe or not—divests the district court of jurisdiction to enforce that order or
judgment while on appeal. While Judge Orenstein did suggest that Futerfas’s appeals did not
include a challenge to the subpoenas (see R&R at 6), this position did nothing to alter his
subsequent determination that there is no divestiture of the court’s power to enforce whatever
aspects of the orders were on appeal (see id. at 17). None of the numerous cases Judge Orenstein
cited turn on the ripeness of an appeal. Nor could they; the rule that, absent a stay, a district
court maintains jurisdiction to enforce orders and judgments that are pending on appeal is
necessarily premised on the fact that those orders and judgments are final and appealable.
Otherwise, there could be no appeal and the question of divestiture would not arise.
It was these arguments made in Futerfas’s objections that caused the court to issue the
order to show cause. Futerfas’s total disregard for applicable case law, reason,
and—especially—the content of the R&R clearly establish that he was at least negligent in
including the divestiture argument among his objections. If the court could impose sanctions on
Futerfas for acting in an objectively unreasonable manner, it would not hesitate to do so.
Whether Futerfas’s degree of culpability rose to the level of subjective bad faith,
however, presents a closer question. The court must find based on that totality of circumstances
that Futerfas knew that the divestiture argument was without merit. As described above, this
inquiry requires the court to consider factors beyond the pure frivolity of Futerfas’s argument.
To begin with, the court cannot ignore the procedural context in which Futerfas raised his
frivolous argument. Judge Orenstein issued his R&R only after extensive motion practice
wherein Futerfas and his co-counsel “engaged in dilatory tactics and presented frivolous
arguments to delay even longer [their clients’] compliance with this court’s lawful orders.”
(R&R 20-21.) These tactics included continuously petitioning the court for various forms of
unmerited relief. (See Order of Contempt (Docket Entry # 90) at 4, 9 (discussing the
speciousness of various motions made by Futerfas).) In addition, during this period of time,
Futerfas and his co-counsel requested that the court stay the contempt proceedings pending
resolution of the appeals (Docket Entry # 65), and one day later petitioned the Court of Appeals
to hold the appeals in abeyance pending the resolution of the contempt proceedings. See Mot. to
Hold Appeal in Abeyance, In re Application of Debbie Gushlak, No. 11-2584, Dkt. No. 50 (2d
Cir. Oct. 5, 2011). Futerfas did not inform the district court that, as he sought a stay pending
appeal, he was simultaneously seeking to hold the appeal in abeyance. He did not inform the
Court of Appeals that, as he sought to have the appeal held in abeyance, he was simultaneously
seeking to stay the district court proceedings. Obviously, had both of Futerfas’s motions been
granted, the case would have ground to a halt—stayed at both the district court and appellate
levels—and Futerfas’s clients would never have been called upon to comply with the subpoenas.
Such gamesmanship—which Futerfas has never attempted to explain—evinces an intent to
frustrate the judicial process and harass the applicant in this case.
Futerfas’s tactics were also inconsistent with the substance of his divestiture argument. If
Futerfas truly believed that the court lacked jurisdiction in this case after his appeal, it is strange
indeed that he would invoke again and again the court’s remedial powers on behalf of his clients.
And it is stranger still that Futerfas would petition the Court of Appeals—upon which he is
relying to rescue him from these supposedly ultra vires district court proceedings—to hold his
appeal in abeyance so that he could continue to litigate the case in what he regarded to be an
improper and illegitimate forum. All of this calls into question the sincerity of Futerfas’s belief
in the merits of the divestiture argument.
Next, the court must account for the manner in which Futerfas presented the divestiture
As noted above, Futerfas ignored almost all of Judge Orenstein’s treatment of the
divestiture argument. He did so despite the fact that the primary discussion of the argument
appears in a section conspicuously headed, “The Applicant’s Motion for Contempt Sanctions,”
the second sentence of which is: “The Respondents’ sole basis for refusing to comply with the
subpoenas is their argument that the notices of appeal they filed operated to divest this court of
jurisdiction to issue further orders in the proceeding and, in effect, gave rise to an automatic stay
of the enforcement of the judgment.” (R&R at 17 (emphasis added).) Most people with legal
training would read this sentence as an indication that analysis addressing the divestiture
argument is soon to follow. And indeed it does, complete with nearly a page and a half of
citations. (See id. at 17-18.) Discussion of this material, however, is nowhere to be found in
Instead, Futerfas built a straw man. In a separate and much earlier section of the R&R
headed, “Stay Pending Appeal,” Judge Orenstein suggested that an appellate challenge to the
merits of the subpoenas would be premature. (See R&R at 6.) He then reasoned that Futerfas
must not be an pursuing an unripe appeal, and thus concluded that the merits of the subpoenas
were not before the Court of Appeals. (See id at 6-7.) After Judge Orenstein had so construed
the appeal, he stated: “Thus, even if the appeal of the June and August Orders divested this court
of jurisdiction over the Application, I conclude it did not divest this court of its inherent
authority . . . to impose contempt sanctions on a recalcitrant subpoena recipient.” (See id at 7.)
This last conclusion was, at most, an alternative basis for rejecting the divestiture argument; and
it is, perhaps, better characterized as an offhand remark. Judge Orenstein appears to have been
simply noting that, if the merits of the subpoenas were not part of the appeal, then there was no
appeal to “do any divesting” of the contempt proceedings. In any event, Judge Orenstein went
on later in the R&R to fully address—and reject—the merits of the divestiture argument. (See
id. at 17-18.) Futerfas, however, detected that Judge Orenstein’s statement about the scope of
the appeal might rest on an incorrect proposition of law, and decided to devote the entirety of his
argument in the objections to defending the ripeness of his appeal. As discussed above, this
point is irrelevant. Indeed, construing the scope and ripeness of Futerfas’s appeal is an issue for
the Court of Appeals, not for this court.
Futerfas’s tunnel vision is suspect. It is difficult for the court to accept that a lawyer of
Futerfas’s experience (cf. Resp. at 2 (lauding Futerfas’s professional qualifications)) could so
severely misread the R&R as to genuinely believe that Judge Orenstein’s rejection of the
divestiture argument rested on language appearing in the much earlier section of R&R about the
finality of the court’s orders. Rather, the objections give rise to a strong inference that Futerfas
searched the R&R for an error of law, found what he perceived to be one, and then falsely
attributed Judge Orenstein’s recommendation on divestiture to it. Because the primary basis for
the recommendation was unassailable, it appears that Futerfas simply decided to disregard it.
Finally, the court must consider Futerfas’s response to the order to show cause. In it,
Futerfas asserts again and again that he raised the divestiture argument in good faith, but there is
little in the submission to support this claim. To start with, only about four pages in the
twenty-five-page document actually address the order to show cause. And, here, the only
explanation Futerfas offers is the assertion that the divestiture argument “is not frivolous and is
grounded in law and fact.” (Resp at 14.) He then repeats his straw-man argument, focusing on
the irrelevant issue of whether the subpoenas were immediately appealable. (Id. at 15-18.)
That Futerfas would cling to the divestiture argument even after the court’s order to show
cause is astonishing. The argument in the response is every bit as frivolous as it was in earlier
iterations, and is actually rendered worse because, now, unlike in his objections, Futerfas falsely
claims to find support for his position in the case law cited by Judge Orenstein.
Whereas, in his objections, Futerfas ignored the legal authority supporting Judge
Orenstein’s recommendation to reject the divestiture argument, Futerfas now refers to four cases
cited by Judge Orenstein to support that recommendation: Brown v. Braddick, 595 F.2d 961 (5th
Cir. 1979); N.L.R.B. v. Cincinnati Bronze, Inc., 829 F.2d 585 (6th Cir. 1987); American Town
Center v. Hall 83 Associates, 912 F.2d 585 (6th Cir. 1990); and Sekaquaptewa v. MacDonald,
544 F.2d 544 (9th Cir. 1976).5 (See Resp. at 14, 15, 16-17.) Remarkably, Futerfas contends that
“Mr. Rosner and attorneys at our firms carefully examined the decisions” but “found them to be
non-controlling as the circuit [sic], and even more importantly, inapposite to the section 1782
context.” (Id. at 15.) Specifically, Futerfas states: “After careful thought and consideration,
myself, Mr. Rosner and our staff truly believed, and still do today, that the context of the cited
decisions was not applicable to the section 1782 context where the subpoena, rather than being
ancillary to a primary litigation, is the whole of the matter being decided by the court.” (Id.) Put
together, these statements are susceptible to only one reasonable interpretation: that Futerfas read
Brown, Cincinnati Bronze, American Town Center, and Sekaquaptewa, and that he believed in
good faith that the enforcement actions at issue in those cases were distinguishable because they
Judge Orenstein, of course, cited numerous other cases and treatises that all
unequivocally supported his recommendation. (See R&R at 17-18.) Futerfas does not address these
sources in his response.
concerned appeals from “ancillary,” rather than final, orders.
To the extent this is what Futerfas means, it is demonstrably false. Either Futerfas did
not read or consider those cases, and hence has lied in his response, or he considered them and is
knowingly misrepresenting their content. As discussed below, Brown, Cincinnati Bronze,
American Town Center, and Sekaquaptewa all involved final appealable orders. That is why the
respective circuit courts reached the merits of the appeals and did not dismiss them for lack of
jurisdiction. Indeed, and in direct contradiction to Futerfas’s statement in his response, Brown
and Cincinnati Bronze involved orders relating to subpoenas that were “the whole of the matter
being decided by the district court.”
In Brown, the district court issued a subpoena pursuant to 35 U.S.C. § 24 to assist with
discovery in an administrative proceeding pending before the United States Patent Office. See
595 F.2d at 963. The respondent appealed, and the Fifth Circuit expressly held that “[t]he
district court order granting Brown’s discovery request should be treated as final and
appealable.” Id. at 965. The court then went on to determine that the district court retained
jurisdiction to enforce the order through contempt proceedings while the appeal was pending.
Id. The district court’s use of its power under 35 U.S.C. § 24 to issue a subpoena in assistance of
another proceeding pending before an administrative tribunal is analogous this court’s use of its
power under 28 U.S.C. § 1782 to aid with discovery for a foreign proceeding.
Similarly, in Cincinnati Bronze, the district court issued an order enforcing an
administrative subpoena, as it was authorized to do by statute. See 829 F.2d at 587, 588. The
application for the order was not “ancillary to a primary proceeding” in federal court; it initiated
a stand-alone proceeding, just as did the applications in Brown and in this case. The resulting
order was final and appealable, cf. id. at 587 (“[T]he original order enforcing the subpoena was
affirmed by this court on December 1, 1986.”), and the order could be enforced via contempt
proceedings while it was pending on appeal, see id. at 587-89.
American Town Center and Sekaquaptewa did not even involve subpoenas, but, in any
event, the appeals in question were from final orders. In American Town Center, the district
court granted summary judgment against the plaintiff in a contract dispute. 912 F.2d at 104.
While an appeal from the judgment was pending, the court cancelled notices of lis pendens that
the plaintiff had placed on the defendant’s real property, and the court appeals held that this
exercise of jurisdiction was proper. Id. at 104, 110. The court doubts that Futerfas would
contest the finality of an order imposing full summary judgment. In Sekaquaptewa, the district
court issued an order of compliance in connection with an earlier judgment. See 544 F.2d at
398. This order was final and appealable, and the district court retained jurisdiction to initiate
contempt proceedings to enforce it while it was pending on appeal. See id. at 406.
The effect of this style of briefing is to cast further doubt on Futerfas’s motive to raise the
divestiture argument in his objections. Far from establishing the good faith of that decision,
Futerfas’s response itself contains what appear to be knowing misrepresentations. It is one thing
to attempt to distinguish the facts of one case from those of another—this is a well-known and
important part of lawyering—it is quite another to manufacture a distinction by making up the
facts of a published case.
In sum, the circumstances of this case compel the court to find that Futerfas acted with
subjective bad faith when he raised the divestiture argument in his objections. First, the
argument was frivolous, and was made more so by the fact that Futerfas was aware—or should
have been aware—of the portion R&R forcefully rejecting it. Second, the argument was raised
in the context of an overall litigation strategy that appears to have been designed “to harass,
cause unnecessary delay, and needlessly increase the cost of litigation.” Fed. R. Civ. P. 11(b)(1).
Third, the argument itself relied on a reading of the R&R so tortured that the court does not
believe—nor does Futerfas contend—that it was simply a good faith mistake. And finally,
Futerfas’s response to the order to show cause is woefully inadequate; Futerfas simply re-asserts
what the court has already ruled to be a frivolous argument, and, in the process, makes what the
court is forced to conclude are knowing misrepresentations—either about his level of
preparedness or about the facts of cases cited by Judge Orenstein.
Accordingly, the court finds that Futerfas violated Rule 11(b)(2) of the Federal Rules of
Civil Procedure by signing and submitting the objections even though they contained a frivolous
argument made in subjective bad faith. Pursuant to Rule 11(c)(4), Futerfas is ORDERED to pay
a penalty to the court in the form of $500, payable to the Clerk of Court. The court finds that
this is penalty is reasonable in that it will provide effective deterrence to other litigants practicing
before the court, and, importantly, to Futerfas himself, as his clients remain in contempt and the
case has not yet been resolved.
NICHOLAS G. GARAUFIS
United States District Judge
Dated: Brooklyn, New York
July 2, 2012
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