United Realty Advisors, LP et al v. Verschleiser et al

Filing 65

MEMORANDUM OPINION AND ORDER. The Court has considered all of the arguments raised by the parties. To the extent not specifically addressed above, they are either moot or without merit. For the foregoing reasons, the defendants' application for sanctions in connection with the temporary restraining order application is denied. (Signed by Judge John G. Koeltl on 6/3/2015) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
UNITED REALTY ADVISORS, LP ET AL.,
Plaintiffs,

14 Cv. 5903

- against -

MEMORANDUM OPINION &
ORDER

ELI VERSCHLEISER ET AL.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
Defendants Eli Verschleiser, Raul Delforno, Ophir Pinhasi,
and Alex Onica move for sanctions against plaintiff Jacob
Frydman, an attorney proceeding pro se.

The defendants seek

sanctions pursuant to 28 U.S.C. § 1927.

Frydman previously

brought an order to show cause for a preliminary injunction
together with a request for a temporary restraining order.
After the defendants had opposed the numerous requests for
relief, Frydman abandoned a majority of the provisions in the
proposed order.

The Court then issued a narrow temporary

restraining order.
The defendants argue that Frydman’s initial request for a
broad temporary restraining order was without merit, brought in
bad faith, and warrants sanctions.

For the reasons stated

below, the motion for sanctions pursuant to § 1927 is denied.

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I.
Plaintiff Jacob Frydman filed the Original Complaint in
October 2014.

Frydman v. Verschleiser, No. 14cv8084 (S.D.N.Y.

filed Oct. 7, 2014). 1

The Original Complaint asserted twenty-one

causes of action, including claims for misappropriation of trade
secrets, fraud, unfair competition, and violations of the
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §
1961 et seq.

The Original Complaint identified Verschleiser,

Delforno, Pinhasi, Onica, and others as defendants.
On December 30, 2014, Frydman brought an order to show
cause for a temporary restraining against Verschleiser,
Delforno, Pinhasi, Onica, and others.

Frydman alleged that

Verschleiser solicited Al Akerman to give Verschleiser
confidential information concerning Frydman and various
companies in which Frydman had an interest.
9.

Frydman Decl. ¶¶ 8–

Akerman allegedly obtained this information while he was the

chief compliance officer for Cabot Lodge, one of Frydman’s
companies.

Frydman Decl. ¶ 8.

Frydman’s proposed temporary restraining order was very
broad.

For example, Frydman requested that the Court prohibit

the defendants from “making any contact with” with any

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Frydman and United Realty Advisors, L.P. had filed another
action against Verschleiser, Delforno, Pinhasi, and Onica.
Frydman v. Verschleiser, No. 14cv5903 (S.D.N.Y. filed July 30,
2014). The Court has consolidated these cases.
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prospective investor in United Realty Advisors, any person
affiliated with any broker-deal, or any news organization “for
the purpose, in whole or in part, of disclosing, sharing,
publishing, or proffering any information about or relating to
Frydman.”

Prop. Order to Show Cause ¶ 4.

Verschleiser, Delforno, Pinhasi and Onica opposed the
proposed order on multiple grounds.

The night before the

hearing, Frydman limited his request for relief; he filed an
amended proposed temporary restraining order that would have
prohibited the defendants from using, publishing, or disclosing
any propriety information.
After a hearing, the Court granted—in part—Frydman’s
request for a temporary restraining order.

The Order prohibited

the defendants from using or disclosing propriety or
confidential documents obtained from Akerman.

The Court also

specified that “nothing in this Order shall bar any of the
Opposing Parties from using any of the propriety information in
connection with [a] pending state court litigation . . . .

Any

papers filed under seal in this action may be disclosed under
seal in [the] state court action.”
At the hearing, counsel for Verschleiser, Delforno,
Pinhasi, and Onica orally requested that the Court impose
sanctions on Frydman pursuant to § 1927.

Tr. at 94–97.

While

the Court signed the limited temporary restraining order, and
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the parties eventually stipulated to a preliminary injunction,
the Court did not rule on the request for sanctions under § 1927
pending the receipt of letter briefs from the parties.
II.
Section 1927 provides:
Any attorney or other person admitted to conduct cases
in any court of the United States or any Territory
thereof 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 attorneys’ fees reasonably incurred because of such
conduct.

There is no dispute that the initial proposed temporary
restraining order was too broad.

One of the provisions may have

violated the First Amendment, see Bridge C.A.T. Scan Associates
v. Technicare Corp., 710 F.2d 940, 946–47 (2d Cir. 1983), and
another provision would have violated the Anti-Injunction Act.
See BrandAid Mktg. Corp. v. Biss, No. 03cv5088, 2003 WL
21998972, at *3 (S.D.N.Y. Aug. 21, 2003).
But § 1927 is not a catch-all provision designed to
penalize attorneys for making bad arguments.

Rather, an

attorney must have “multiplie[d] the proceedings” for sanctions
under § 1927 to be proper.

“As a statute with a punitive

thrust, § 1927 is to be strictly construed.”

Cresswell v.

Sullivan & Cromwell, 922 F.2d 60, 70 (2d Cir. 1990).

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“Under the plain statutory language, objectionable conduct—
even ‘unreasonable and vexatious’ conduct—is not sanctionable
unless it results in proceedings that would not have been
conducted otherwise.”

Peterson v. BMI Refractories, 124 F.3d

1386, 1396-97 (11th Cir. 1997).

Accordingly, Frydman may be

sanctioned only if his conduct multiplied proceedings.

See,

e.g., id.; Braunstein v. Az. Dep’t of Transp., 683 F.3d 1177,
1189 (9th Cir. 2012); DeBauche v. Trani, 191 F.3d 499, 511–12
(4th Cir. 1999); Zuk v. E. Penn. Psychiatric Inst., 103 F.3d
294, 297 (3d Cir. 1996); see also Roadway Exp., Inc. v. Piper,
447 U.S. 752, 762 (1980) (“But § 1927 does not distinguish
between winners and losers, or between plaintiffs and
defendants. . . .

It is concerned only with limiting the abuse

of court processes.”).
Frydman did not multiply the proceedings.

He filed a

proposed order to show cause for a temporary restraining order,
and then withdrew most of the requested relief.

What remained

was a claim for injunctive relief that was, for the most part,
granted.

The defendants filed one brief in opposition; the

Court held one hearing; and the Court then granted a limited
temporary restraining order.

Although most of Frydman’s

proposed order was unfounded, the Court did not resolve multiple
motions or hold multiple hearings.

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The opinions cited by the defendants are not to the
contrary.

Those cases involved protracted litigation of

baseless claims, Lee v. First Lenders Ins. Servs., Inc., 236
F.3d 443, 445 (8th Cir. 2001); Baker v. Urban Outfitters, Inc.,
431 F. Supp. 2d 351, 355–56 (S.D.N.Y. 2006); delay tactics,
Dahiya v. Kramer, No. 13cv3079, 2014 WL 1278131, at *1–2, *8
(E.D.N.Y. Mar. 27, 2014); unreasonable motions for
reconsideration, Johnson v. Univ. of Rochester Med. Ctr., 642
F.3d 121, 125–26 (2d Cir. 2011) (per curiam); the denial of all
requested relief, Dux S.A. v. Megasol Cosmetic GmbH, No.
03cv8820, 2006 WL 44007, at *1–2 (S.D.N.Y. Jan. 9, 2006); or
Federal Rule of Civil Procedure 37, see JSC Foreign Econ. Ass’n
Technostroyexport v. Int’l Dev. & Trade Servs., Inc., No.
03cv5562, 2005 WL 1958361, at *9 (S.D.N.Y. Aug. 16, 2005).
There is no question that Frydman, a pro se attorney who
has brought numerous cases, engaged in an ill-advised and
reprehensible litigation tactic.

He brought an overly broad

request for injunctive relief on December 30, only to drop most
of the requests for emergency injunctive relief after his
opponents had filed an expedited response.

He risked obscuring

the merits of his best claim—a claim that eventually resulted in
a temporary and then preliminary injunction.
If the plaintiffs pursue meritless claims, they may well be
subject to Federal Rule of Civil Procedure 11 sanctions—if the
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proper procedures for Rule 11 sanctions are followed.

At this

point, however, the request for sanctions under § 1927 for the
tactics in connection with the temporary restraining order is
denied.
CONCLUSION
The Court has considered all of the arguments raised by the
parties.

To the extent not specifically addressed above, they

are either moot or without merit.

For the foregoing reasons,

the defendants’ application for sanctions in connection with the
temporary restraining order application is denied.
SO ORDERED.
Dated:

New York, New York
June 3, 2015

___________/s/_________________
John G. Koeltl
United States District Judge

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