Almodovar v. NYC Candy Store Shop Corp. et al

Filing 37

OPINION AND ORDER. For the foregoing reasons, Plaintiff's motion for sanctions is DENIED. The Clerk of Court is directed to terminate all pending motions, adjourn all remaining dates, and close this case. SO ORDERED. (Signed by Judge Katherine Polk Failla on 7/5/2017) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
LOUIS ALMODOVAR,
:
:
Plaintiff,
:
:
v.
:
:
NYC CANDY STORE SHOP CORP. and
:
AZOIC ASSOCIATES LLC,
:
:
Defendants. :
:
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: July 5, 2017
______________

16 Civ. 3795 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:
Before the Court is Plaintiff Louis Almodovar’s motion for sanctions
against Defendant Azoic Associates LLC (“Azoic”) and counsel for Azoic
(“Defense Counsel”), pursuant to 28 U.S.C. § 1927 and the Court’s inherent
power. Specifically, Plaintiff seeks sanctions in the nature of an award of
attorney’s fees to Plaintiff’s counsel in the sum of $2,500. For the reasons that
follow, Plaintiff’s motion is denied.
BACKGROUND
Plaintiff filed the Complaint in this matter on May 20, 2016, alleging that
Defendants Azoic and NYC Candy Store Shop Corp. (“NYC Candy Store”)
violated, inter alia, the Americans with Disabilities Act, 42 U.S.C. §§ 1218112189, and its implementing regulations. (Dkt. #1). NYC Candy Store and
Azoic filed their Answers and Counterclaims on June 29, 2016 (Dkt. #8), and
August 23, 2016 (Dkt. #16), respectively. The Court held an Initial Pretrial
Conference on August 24, 2016, and entered a Case Management Plan and

Scheduling Order on the following day. (Dkt. #19). Under that Order, the
deadline for the completion of fact discovery was January 5, 2017, and a closeof-discovery Pretrial Conference was set for January 12, 2017. (Id.). In the
days preceding the conference, the Court contacted Plaintiff’s counsel about
certain required pre-conference submissions that were outstanding. (See Feb.
2, 2017 Conf. Tr. (Dkt. #26) at 4:4-6, 12:6-8). It was only then that Plaintiff’s
counsel informed the Court that the reason for the missed deadline was that
this case had long since been resolved by the parties. (Id.). Accordingly, on
January 10, 2017, the Court issued an Order of Discontinuance. (Dkt. #21).
On January 19, 2017, Plaintiff requested that the action be restored
pursuant to the Order of Discontinuance and scheduled for further
proceedings because “Azoic … never executed the settlement agreement” and
“NYC Candy Store has failed to comply with the terms of the settlement
agreement, which it signed.” (Dkt. #22). Accordingly, the Court issued on the
same day an order reopening this matter and setting a status conference for
February 2, 2017. (Dkt. #23).
At that conference, Plaintiff’s counsel informed the Court that a
settlement agreement had been circulated among all three parties but that only
NYC Candy Store had signed the agreement and forwarded payment (Feb. 2,
2017 Conf. Tr. at 3:18-20); Plaintiff’s counsel also described his unsuccessful
efforts to communicate with Defense Counsel, who apparently did not return
his calls (id. at 4:9-14, 6:17-22). The parties discussed the installation by NYC
Candy Store of an ADA-compliant ramp (id. at 10:24-11:11), and Defense

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Counsel committed to having his client sign the settlement agreement by
February 10, 2017 (id. at 11:15-17). Finally, Plaintiff’s counsel raised the
possibility of “mak[ing] an application to the Court for legal fees … based upon
the actions that took place after the settlement agreement was drafted and the
terms agreed to.” (Id. at 12:4-13:4). There was some indication, as well, from
Plaintiff’s counsel and Defense Counsel that the parties’ dispute over additional
legal fees could upend finalization of the settlement agreement. (See id. at 1213). However, Plaintiff’s counsel did not suggest a forthcoming application for
sanctions or disciplinary measures at this conference. (See generally id.).
On February 10, 2017, Plaintiff filed a joint status letter requesting an
extension of the deadline for Azoic both to sign the settlement agreement and
to pay Plaintiff the additional legal fees previously sought. (Dkt. #24). Plaintiff
requested that “in the event of a default in delivering those items … the Court
permit [Plaintiff] to file a letter motion for sanctions and costs, including
reasonable attorney’s fees.” (Id.). The Court granted the application and
extended Azoic’s deadline to February 21, 2017. (Dkt. #25).
On February 23, 2017, Plaintiff filed the instant letter motion for
sanctions (Dkt. #28) and supporting brief and declaration (“Pl. Br.” (Dkt. #29)).
On March 14, 2017, Defense Counsel filed his opposition letter brief (“Def.
Opp.” (Dkt. #31)) on behalf of himself and his client. Thereafter, on April 7,
2017, Defense Counsel filed a status report that included the following
explanation:
As of this writing my firm is still waiting on our client to
sign the final stipulation of settlement. There have been
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billing issues between my firm and the client unrelated
to this matter which remain unresolved and which have
contributed to my client’s on-going refusal to sign the
final stipulation of settlement. [Defense Counsel’s
supervisor] is aware of this, and he is going to reach out
to the client directly next week regarding the matter. My
client has previously stated that his signature would be
forthcoming, only for the issue to remain unresolved.
(Dkt. #32). The letter also noted Defense Counsel’s opposition to Plaintiff’s
sanctions motion, highlighting that Plaintiff’s counsel’s fees pursuant to the
ADA had already been paid. (Id.; see also Feb. 2, 2017 Conf. Tr. at 4:20-25).
Defense Counsel concluded, “Again, I apologize to the Court for the delay in
closing out this matter. I hope that it will be resolved shortly.” (Id.).
Consequently the Court issued an order on April 10, 2017, directing the parties
either to file a fully executed settlement agreement by April 21, 2017, or else
appear for a conference on April 24, 2017, to discuss, inter alia, Plaintiff’s
pending motion for sanctions; the presence of Defense Counsel’s client contact
at Azoic was also ordered. (Dkt. #34).
On April 21, 2017, the parties filed a fully executed consent stipulation
settling this matter, in which Defendants agreed, inter alia, to certain remedial
measures and to pay monetary compensation in resolution of all claims. (Dkt.
#35). The parties also agreed to bear their own attorneys’ fees and costs in
connection with this action that were not otherwise encompassed by the
settlement agreement. (Id.). On April 24, 2017, the Court “so-ordered” the
stipulation and adjourned sine die the conference of the same day. (Dkt. #36).
The Court did not close the case in light of the instant motion for sanctions.

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DISCUSSION
Section 1927 provides in relevant part that “[a]ny 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
attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C.
§ 1927. The imposition of sanctions under § 1927 is appropriate only “when
there is a finding of conduct constituting or akin to bad faith.” Sakon v.
Andreo, 119 F.3d 109, 114 (2d Cir. 1997). Before reaching such a conclusion,
a court “must find clear evidence that [i] the offending party’s claims were
entirely meritless and [ii] the party acted for improper purposes.” Revson v.
Cinque & Cinque P.C., 221 F.3d 71, 79 (2d Cir. 2000).
Similarly, “[i]n order to impose sanctions pursuant to its inherent power,
a district court must find that: [i] the challenged claim was without a colorable
basis and [ii] the claim was brought in bad faith, i.e., motivated by improper
purposes such as harassment or delay.” Enmon v. Prospect Capital Corp., 675
F.3d 138, 143 (2d Cir. 2012) (internal quotation marks omitted). “When a
district court invokes its inherent power to impose attorney’s fees or to punish
behavior by an attorney in ‘the actions that led to the lawsuit ... [or] conduct of
the litigation,’ which actions are taken on behalf of a client, the district court
must make an explicit finding of bad faith.” United States v. Seltzer, 227 F.3d
36, 41-42 (2d Cir. 2000) (quoting Hall v. Cole, 412 U.S. 1, 15 (1973)). 1
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The Court recognizes that “when the district court invokes its inherent power to
sanction misconduct by an attorney that involves that attorney’s violation of a court
order or other misconduct that is not undertaken for the client’s benefit, the district
court need not find bad faith before imposing a sanction under its inherent power.”

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The Second Circuit has “declined to uphold awards [of attorneys’ fees]
under the bad-faith exception absent both clear evidence that the challenged
actions are entirely without color and are taken for reasons of harassment or
delay or for other improper purposes and a high degree of specificity in the
factual findings of the lower courts.” Wilson v. Citigroup, N.A., 702 F.3d 720,
724 (2d Cir. 2012) (internal quotation marks and citations omitted); see also
Milltex Indus. Corp. v. Jacquard Lace Co., 55 F.3d 34, 39-40 (2d Cir. 1995)
(reversing sanction because attorney’s actions in representing client were
neither “entirely without color [of legal legitimacy]” nor undertaken with
“improper purposes”).
“[A]n award made under § 1927 must be supported by a finding of bad
faith similar to that necessary to invoke the court’s inherent power.” Oliveri v.
Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986). “[T]he only meaningful
difference between an award made under § 1927 and one made pursuant to
the court’s inherent power is ... that awards under § 1927 are made only
against attorneys or other persons authorized to practice before the courts
while an award made under the court’s inherent power may be made against

United States v. Seltzer, 227 F.3d 36, 42 (2d Cir. 2000) (emphasis added). In Seltzer,
the Second Circuit held that there had been no allegation that the sanctionable conduct
“was undertaken as part of [counsel’s] role in representing her client. Rather, both …
charges involve a lawyer’s negligent or reckless failure to perform his or her
responsibility as an officer of the court. Under circumstances such as these, sanctions
may be justified absent a finding of bad faith given the court’s inherent power to
manage [its] own affairs so as to achieve the orderly and expeditious disposition of
cases.” Id. at 41 (internal citation and quotation marks omitted). Here, the Court
considers Defense Counsel’s conduct to have been more a result of representing his
client than was the attorney’s in Seltzer and accordingly will seek to identify bad faith;
indeed, as will be further discussed below, the Court credits Defense Counsel’s
representation that the delays here were principally due to a conflict with his client
related to billing issues on a different matter.

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an attorney, a party, or both.” Enmon, 675 F.3d at 144 (quoting Oliveri, 803
F.2d at 1273) (internal quotation marks omitted).
The Court declines to impose sanctions on Azoic pursuant to the Court’s
inherent power and likewise declines to impose sanctions on Defense Counsel
pursuant to § 1927 or to the Court’s inherent power. To be clear, Azoic’s and
Defense Counsel’s conduct in this regard was careless and unacceptable, but
Plaintiff has failed to proffer evidence, and the Court can find none on this
record, that would be sufficient to make the requisite factual findings with “a
high degree of specificity” that such conduct was “entirely without color and …
taken for reasons of harassment or delay or for other improper purposes.”
Wilson, 702 F.3d at 724; see also Revson, 221 F.3d at 79.
Defense Counsel communicated, albeit belatedly, that the reason for the
delays related to unresolved billing issues with Azoic on a different matter.
(Dkt. #32). See Sorenson v. Wolfson, No. 16-1224, 2017 WL 1043073, at *3 (2d
Cir. Mar. 16, 2017) (summary order) (“District courts are entitled to examine all
‘surrounding circumstances’ when making a determination of bad faith.”
(quoting Oliveri, 803 F.2d at 1277)). It would appear, then, that counsel-client
discord was the root cause of the delays in this matter. This does not excuse
Azoic’s or Defense Counsel’s behavior, particularly the latter’s failure to keep
opposing counsel and the Court apprised of his inability to comply with
impending deadlines and his failure to seek the Court’s leave to extend those
deadlines. This is also not to say that the root cause of such delays — a rift
between counsel and his client that is only belatedly communicated to the

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Court — could never support a finding of bad faith. But on this sparse record,
the Court does not find clear evidence to support specific factual findings that
Azoic’s or Defense Counsel’s behavior was motivated by improper purposes.
The Court also declines Plaintiff’s invitation to impose sanctions because
Azoic and Defense Counsel have not been afforded the requisite due process in
connection with the instant application. It is well-established that “before the
court imposes ‘any kind of sanctions,’ it must afford the person to be
sanctioned due process, including notice that sanctions may be imposed.”
Sakon, 119 F.3d at 114 (quoting In re Ames Dep’t Stores, Inc., 76 F.3d 66, 70
(2d Cir. 1996) (emphasis in original)). “Like other sanctions, attorney’s fees
certainly should not be assessed lightly or without fair notice and an
opportunity for a hearing on the record.” Id. (quoting Roadway Express, Inc. v.
Piper, 447 U.S. 752, 767 (1980)) (internal quotation marks omitted). Indeed,
[a person] whom the court proposes to sanction must
receive specific notice of the conduct alleged to be
sanctionable and the standard by which that conduct
will be assessed, and an opportunity to be heard on that
matter, and must be forewarned of the authority under
which sanctions are being considered, and given a
chance to defend himself against specific charges.
In re 60 E. 80th St. Equities, Inc., 218 F.3d 109, 117 (2d Cir. 2000) (quoting
Sakon, 119 F.3d at 114) (internal quotation marks omitted); see also Wilson,
702 F.3d at 725 (holding that the district court abused its discretion in
imposing sanctions without the requisite procedural protections).
Here, Azoic and Defense Counsel have not been afforded the full set of
procedural protections envisioned by the Second Circuit. See Arrowhead
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Capital Fin., Ltd. v. Seven Arts Entm’t, Inc., No. 14 Civ. 6512 (KPF), 2017 WL
1653568, at *1 (S.D.N.Y. May 2, 2017) (reconsidering and withdrawing
sanctions imposed “without giving [defense counsel] appropriate notice of its
intention and an opportunity to respond”). The Court had intended for the
scheduled April 24, 2017 conference to serve as an opportunity for Azoic and
Defense Counsel to be provided the requisite notice and chance to be heard
(see Dkt. #28 (“If the conference is held, the parties will also be prepared to
discuss Plaintiff’s pending motion for sanctions.”)), but that conference was
adjourned after execution of the settlement agreement (Dkt. #36), and another
conference never requested. Because Azoic and Defense Counsel have received
some but not all of the procedural protections to which they are entitled, the
Court declines to exercise its discretion to impose sanctions.
Finally, it should be noted that while Azoic and Defense Counsel
unquestionably shoulder much of the blame for “needlessly prolonging the
instant litigation” (Pl. Br. 1), they do not shoulder it alone; Plaintiff and coDefendant NYC Candy Store each contributed to that delay as well. To review
briefly, the Court entered a discovery schedule in August 2016 and set a postfact discovery conference for January 2017. (Dkt. #19). According to Plaintiff,
a settlement in principle was reached in September 2016. (See, e.g., Pl. Br. 1).
But the Court was never made aware of this fact. This matter remained active
on the Court’s docket for three additional months until January 2017 when the
Court initiated contact with Plaintiff’s counsel regarding the approaching postdiscovery conference. It was only then that Plaintiff’s counsel notified the

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Court that a settlement had been reached months earlier and requested that
an Order of Discontinuance be issued. (See Dkt. #21). Just over a week later,
Plaintiff sought the restoration of this matter because “Azoic … never executed
the settlement agreement” and “NYC Candy Store has failed to comply with the
terms of the settlement agreement, which it signed.” (Dkt. #22). Put
differently, for months Plaintiff failed to inform the Court that he had settled
this matter or, alternatively, that Azoic had not yet executed the settlement
agreement. And although Plaintiff and NYC Candy Store’s dispute over
settlement was eventually resolved, one of the proffered grounds for Plaintiff’s
application to restore the matter was NYC Candy Store’s failure to comply with
the settlement agreement. (See id.). Had each of the parties in this matter
fulfilled their respective responsibilities, this action, including the issue of
Azoic’s execution of the settlement agreement, could have been addressed and
resolved months earlier.

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CONCLUSION
For the foregoing reasons, Plaintiff’s motion for sanctions is DENIED.
The Clerk of Court is directed to terminate all pending motions, adjourn all
remaining dates, and close this case.
SO ORDERED.
Dated:

July 5, 2017
New York, New York

__________________________________
KATHERINE POLK FAILLA
United States District Judge

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