Goldberger Company, LLC v. Uneeda Doll Company, Ltd. et al
OPINION AND ORDER. For the reasons set forth above, Uneeda's motion for sanctions (Dkt. No. 62) is DENIED. SO ORDERED. re: 62 MOTION for Sanctions /Notice of Motion of Defendants Uneeda Doll Company, LTD. and Larry R. Hogge for Sanctions Against Goldberg Company, LLC and its Counsel filed by Larry R. Hogge, Uneeda Doll Company, Ltd. (Signed by Magistrate Judge Andrew J. Peck on 7/21/2017) Copies ECF to: All Counsel. (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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GOLDBERGER COMPANY, LLC,
-againstUNEEDA DOLL COMPANY, LTD. and
LARRY R. HOGGE,
16 Civ. 4630 (AJP)
OPINION & ORDER
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ANDREW J. PECK, United States Magistrate Judge:
Plaintiff Goldberger Company, LLC brought this action against Uneeda Doll
Company, Ltd. and its vice president, Larry R. Hogge (collectively "Uneeda"), alleging unfair
competition, false advertising, trademark infringement, and other claims under federal and New
York state law. (Dkt. No. 5: Compl.) Goldberger voluntarily dismissed the case, without prejudice,
on March 17, 2017. (Dkt. No. 49.) Presently before the Court is Uneeda's post-dismissal motion
for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and the
Court's inherent powers. (Dkt. No. 62: Uneeda Mot. for Sanctions.) Uneeda seeks $83,126.62 as
partial reimbursement for its attorneys' fees and costs incurred in defending against Goldberger's
action, plus the additional fees incurred for this motion. (Dkt. No. 64: Uneeda Br. at 22-24.) The
parties have consented to decision of the motion by a United States Magistrate Judge pursuant to
28 U.S.C. § 636(c). (Dkt. No. 71.)
For the reasons set forth below, Uneeda's motion for sanctions is DENIED.
Plaintiff Goldberger and defendant Uneeda both manufacture and sell children's dolls
and related accessories. (Dkt. No. 21: Am. Compl. ¶¶ 1, 19-23, 43; Dkt. No. 27: Hogge Aff. ¶ 2.)
Defendant Larry Hogge is Uneeda's president and has been employed by Uneeda since 2002.
(Hogge Aff. ¶¶ 1, 6.)
The Allegations in Goldberger's Complaint
Goldberger alleged that Uneeda took dolls manufactured by Goldberger as part of
their "Baby's First" line and placed them in Uneeda packaging to induce retailer customers to buy
Uneeda's dolls rather than Goldberger's. (See Dkt. No. 21: Am. Compl. ¶¶ 1, 46.) Specifically, the
complaint alleges that "[o]n or about December of 2015, a representative or agent of Defendant
[Uneeda] provided a third party doll retailer located in South America . . . [Ripley] with two of
[Goldberger's] 'Baby's First' dolls in Uneeda's packaging . . . , and sought to solicit orders" from
Ripley. (Am. Compl. ¶ 47.) Goldberger alleged that such conduct caused Ripley to enter into a
contract with Uneeda instead of Goldberger because of Uneeda's lower prices, whereas "[t]ypically,
Goldberger would have entered into a multi-year account with Ripley that would have resulted in
several hundred thousand dollars in revenues." (Dkt. No. 35: Goldberger Opp. to Mot. to Dismiss
Ex. 1: Holtzman Aff. ¶ 8.) Goldberger claimed that the loss of the Ripley account, and possibly
other accounts not identifiable at the time the complaint was filed, directly resulted from Uneeda's
conduct. (Id. ¶¶ 8, 10.)
Goldberger's basis for bringing this action was a December 9, 2015 email from
Soledad Jones, a Goldberger sales representative in South America affiliated with non-party
Funmaxtoys, to Robert Schleicher, Goldberger's director of sales, and Jeff Holtzman, Goldberger's
CEO. (Holtzman Aff. Ex. 1.) Jones emailed that while at a sales meeting in Peru with Ripley in an
attempt to sell Goldberger's "Baby's First" line of dolls, Ripley's representative showed them
Uneeda's dolls that copied Goldberger's and were offered for "prices so much Cheaper!!" (Id.)
Jones attached a photograph ("the Photograph") to the email showing two dolls each in a box with
a "Uneeda" label displayed on the corner of the packaging with the name of the doll line listed as
"I Love baby!!" (Id.) The dolls have "BF" displayed on their clothing in multiple places, which
Goldberger contends is a recognized abbreviation for its "Baby's First" dolls, as well as other
characteristics that allegedly are recognizable features of Goldberger dolls. (Id.) After receiving
this email, Holtzman did not call Jones or anyone from Funmaxtoys, and did not "recall whether [he]
addressed" the issue by sending a reply email to Jones. (Dkt. No. 63: Haddad Aff. Ex. C: Holtzman
Dep. at 23-24.) Nor to Holtzman's knowledge did anyone else at Goldberger seek more information
from Jones regarding her conversation with the Ripley representatives or the Photograph. (Id. at 2425.)
Goldberger claims trademark rights to the "BF" mark, the dolls' outfits, and the
unique characteristics of the dolls' appearance. (Am. Compl. ¶¶ 22-36.) On the basis of the email
and the Photograph, Goldberger alleged that Uneeda infringed on Goldberger's trademark rights in
order to increase Uneeda's sales. (Id. ¶ 56.) Additionally, the complaint alleged that Hogge,
Uneeda's President and principal officer, was the "moving, active, and conscious force" behind
Uneeda's actions, which he "approved and authorized." (Id. ¶¶ 15-18.) Goldberger's complaint
sought monetary damages and injunctive relief from Uneeda for "irreparable damage" to
Goldberger's goodwill and business reputation. (Id. ¶¶ 67, 75, 83, 90, 97, 105, 112, 115.)
Goldberger presented (in discovery) records of decreased sales of Goldberger products between
2015 and 2016 in support of its damages claim. (See Haddad Aff. Ex. D: Holtzman Dep. Ex. 11.)
Goldberger initiated this action against Uneeda on June 17, 2016, roughly six months
after receiving Jones' email. (Dkt. Nos. 1, 5: Compl.) Uneeda moved to dismiss on August 4, 2016,
alleging lack of personal jurisdiction and failure to state a claim. (Dkt. No. 12: Uneeda Mot. to
Dismiss.) Judge Pauley struck the motion for failure to comply with court rules. (Dkt. No. 13.)
Goldberger amended its complaint on September 30, 2016. (Dkt. No. 21.) I held an unsuccessful
settlement conference with the parties on November 14, 2016. (Dkt. Nos. 20, 22.) Uneeda renewed
its motion to dismiss on November 22, 2016. (Dkt. Nos. 26-28.) The motion was not based on a
failure to allege or prove damages. (Id.) Judge Pauley heard oral argument on the motion to dismiss
on January 19, 2017, but reserved ruling. (Dkt. No. 43.) Discovery proceeded while the motion to
dismiss was pending. (Dkt. No. 19: 9/16/16 Scheduling Order; see pages 12-13 below.) Two weeks
before the March 31, 2017 deadline for the close of fact discovery (9/16/16 Scheduling Order ¶ 7),
Goldberger voluntarily dismissed the action without prejudice pursuant to Federal Rule of Civil
Procedure 41(a)(1)(A)(i) on March 17, 2017 (Dkt. No. 49).1/
Uneeda's Motion for Sanctions
Uneeda wrote to Goldberger's counsel on November 23, 2016, and again on January
18, 2017, stating that it intended to file a motion for Rule 11 sanctions against Goldberger and its
counsel; the second letter attached a copy of the proposed motion. (Dkt. No. 63: Haddad Aff. Exs.
G, K.) Uneeda's second letter asserted that, after discovery and briefing on the motion to dismiss,
it had become "more clear" that "the Action is completely frivolous, without any basis in fact and
The Court notes that Uneeda could have prevented a Rule 41(a)(1)(A)(i) dismissal without
prejudice had it filed a protective (without prejudice) answer to the amended complaint even
while the motion to dismiss was pending.
law[.]" (Haddad Aff. Ex. K: 1/18/17 Letter at 1.) Goldberger's counsel did not respond to either
letter. (See Dkt. No. 64: Uneeda Br. at 11.)
Uneeda filed this sanctions motion on April 21, 2017 (Dkt. No. 62), arguing that
Goldberger continued to litigate this case for a significant period of time despite having no damages.
(Uneeda Br. at 5.) Uneeda further asserts that Goldberger's claims lacked any evidentiary support
from the outset and that Goldberger produced "fraudulent discovery responses [and] false
declarations" in support of its claims. (Id.) Specifically, Uneeda claims that Holtzman's deposition
testimony conflicted with the complaint, his prior affidavit, and Goldberger's interrogatory
responses. (Id. at 13-16.) Uneeda seeks $83,126.62, representing 85 percent of its attorneys' fees
and expenses incurred from February 28, 20172/ to April 15, 2017, and also requests the fees
incurred for this motion. (Id. at 22-24.)
LEGAL STANDARDS GOVERNING SANCTIONS
The Court's Inherent Powers
"[A] federal court . . . may exercise its inherent power to sanction a party or an
attorney who has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'" Ransmeier
v. Mariani, 718 F.3d 64, 68 (2d Cir. 2013).3/ "These powers are 'governed not by rule or statute but
Uneeda identifies this date as the point at which the case should have been dismissed by
Goldberger because both parties were aware that the case was not going to result in a
damage award. (Uneeda Br. at 22-23.)
Accord, e.g., Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S. Ct. 2123, 2132 (1991)
("'Courts of justice are universally acknowledged to be vested, by their very creation, with
power to impose silence, respect, and decorum, in their presence, and submission to their
lawful mandates.'"); Caldwell v. Pesce, 639 F. App'x 38, 39 (2d Cir.), cert. denied, 137 S.
Ct. 307 (2016); Eisemann v. Greene, 204 F.3d 393, 395 (2d Cir. 2000) (per curiam) ("Under
by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly
and expeditious disposition of cases.'" Chambers v. NASCO, Inc., 501 U.S. at 43-44, 111 S. Ct. at
2132; accord, e.g., Ransmeier v. Mariani, 718 F.3d at 68 (The Court's "authority to impose sanctions
is grounded, first and foremost, in [its] inherent power to control the proceedings that take place
before [it]"). "Because of their very potency, inherent powers must be exercised with restraint and
discretion." Chambers v. NASCO, Inc., 501 U.S. at 44, 111 S. Ct. at 2132; cf. United States v.
Seltzer, 227 F.3d 36, 41 n.2 (2d Cir. 2000) ("[T]he threshold finding required to justify sanctions
under the inherent powers doctrine is 'extremely high.'").
28 U.S.C. § 1927
Under 28 U.S.C. § 1927, a court may require any attorney "who so multiplies the
proceedings in any case unreasonably and vexatiously . . . to satisfy personally the excess costs,
expenses, and attorneys' fees reasonably incurred because of such conduct."4/ "Section 1927
authorizes the imposition of sanctions when 'there is a clear showing of bad faith on the part of an
its inherent powers to supervise and control its own proceedings, a district court has the
authority to award attorney's fees to the prevailing party when the losing party 'has acted in
bad faith, vexatiously, wantonly, or for oppressive reasons.'"); Schlaifer Nance & Co. v.
Estate of Warhol, 194 F.3d 323, 336 (2d Cir. 1999); Crown Awards, Inc. v. Trophy Depot,
Inc., 15 Civ. 1178, 2017 WL 564885 at *5 (S.D.N.Y. Feb. 13, 2017) (Peck, M.J.); Kennedy
v. City of N.Y., 12 Civ. 4166, 2016 WL 3460417 at *2 (S.D.N.Y. June 20, 2016).
"[A]wards pursuant to § 1927 may be imposed only against the offending attorney; clients
may not be saddled with such awards." United States v. Int'l Bhd. of Teamsters, Chauffeurs,
Warehousemen & Helpers of Am., AFL-CIO, 948 F.2d 1338, 1345 (2d Cir. 1991); see also,
e.g., Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d at 336 ("[I]n practice, 'the 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 . . .
while an award made under the court's inherent power may be made against an attorney, a
party, or both.'"); Crown Awards, Inc. v. Trophy Depot, Inc., 15 Civ. 1178, 2017 WL
564885 at *5 (S.D.N.Y. Feb. 13, 2017) (Peck, M.J.); Rates Tech. Inc. v. Broadvox Holding
Co., 56 F. Supp. 3d 515, 527 (S.D.N.Y. 2014).
attorney.'" Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d at 336.5/ "Section 1927, though,
should be construed narrowly and with great caution, so as not to stifle zealous advocacy."
Arclightz & Films Pvt. Ltd. v. Video Palace, Inc., 01 Civ. 10135, 2003 WL 22434153 at *7
(S.D.N.Y. Oct. 24, 2003) (quotations & fn. omitted).6/ "Furthermore, even where the statutory
standard is met, § 1927 by its terms ('may be required') confides an award of fees against counsel
to the Court's discretion." Arclightz & Films Pvt. Ltd. v. Video Palace, Inc., 2003 WL 22434153
at *7 (quotations omitted); accord, e.g., Crown Awards, Inc. v. Trophy Depot, Inc., 2017 WL
564885 at *5; Sorenson v. Wolfson, 170 F. Supp. 3d 622, 634 (S.D.N.Y. 2016) ("The Court has
discretion to decide whether to impose sanctions under 28 U.S.C. § 1927 and its inherent
Federal Rule of Civil Procedure 11
"By presenting to the court a pleading, written motion, or other paper – whether by
signing, filing, submitting, or later advocating it," an attorney or unrepresented party thereby
Accord, e.g., Zurich Am. Ins. Co. v. Team Tankers A.S., 811 F.3d 584, 591 (2d Cir. 2016);
Crown Awards, Inc. v. Trophy Depot, Inc., 2017 WL 564885 at *5; Rates Tech. Inc. v.
Broadvox Holding Co., 56 F. Supp. 3d at 526-27; Davey v. Dolan, 453 F. Supp. 2d 749, 757
(S.D.N.Y. 2006), aff'd, 292 F. App'x 127 (2d Cir. 2008); see also, e.g., United States v. Int'l
Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., AFL–CIO, 948 F.2d at
1345 ("By its terms, § 1927 looks to unreasonable and vexatious multiplications of
proceedings; and it imposes an obligation on attorneys throughout the entire litigation to
avoid dilatory tactics.").
Accord, e.g., Crown Awards, Inc. v. Trophy Depot, Inc., 2017 WL 564885 at *5; Zen Cont'l
Co. v. Intercargo Ins. Co., 151 F. Supp. 2d 250, 265 (S.D.N.Y. 2001), aff'd, 25 F. App'x 65
(2d Cir. 2002); see also, e.g., Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d at 341
("On the one hand, a court should discipline those who harass their opponents and waste
judicial resources by abusing the legal process. On the other hand, in our adversarial system,
we expect a litigant and his or her attorney to pursue a claim zealously within the boundaries
of the law and ethical rules.").
"certifies," "to the best of the person's knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances," that:
(1) it is not being presented for any improper purpose, such as to harass, cause
unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law
or by a nonfrivolous argument for extending, modifying, or reversing existing law
or for establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so identified,
will likely have evidentiary support after a reasonable opportunity for further
investigation or discovery[.]
Fed. R. Civ. P. 11(b)(1)-(3). "Rule 11 sanctions are designed to deter baseless filings." Arbor Hill
Concerned Citizens Neighborhood Ass'n v. Albany, 369 F.3d 91, 97 (2d Cir. 2004).
"If, after notice and a reasonable opportunity to respond, the court determines that
Rule 11(b) has been violated," the Court may impose sanctions on an attorney or unrepresented
party, either by motion or on its own initiative. Fed. R. Civ. P. 11(c)(1)-(3); see, e.g., Williamson
v. Recovery Ltd. P'ship, 542 F.3d 43, 51 (2d Cir. 2008), cert. denied, 555 U.S. 1102, 129 S. Ct. 946
(2009); Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 57 (2d Cir. 2000).7/
In deciding whether a pleading or other filing violates Rule 11, the Court typically
applies "'an objective standard of reasonableness[.]'" Catcove Corp. v. Heaney, 685 F. Supp. 2d 328,
337 (E.D.N.Y. 2010); accord, e.g., Ferrari v. U.S. Equities Corp., 661 F. App'x 47, 51 (2d Cir.
2016); Smith v. Westchester Cty. Dep't of Corr., 577 F. App'x 17, 18 (2d Cir. 2014); ATSI
See also, e.g., United States v. Allstate Ins. Co., No. 16-705, 2017 WL 1247138 at *2 (2d
Cir. Apr. 4, 2017); Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d 58, 63 (2d
Cir. 2012); Nuwesra v. Merrill Lynch, Fenner & Smith, Inc., 174 F.3d 87, 94 (2d Cir. 1999);
Bright-Asante v. Saks & Co., 15 Civ. 5876, 2017 WL 1064890 at *5 (S.D.N.Y. Mar. 16,
2017); Truong v. Nguyen, 10 Civ. 386, 2013 WL 4505190 at *3 (S.D.N.Y. Aug. 22, 2013);
Romeo & Juliette Laser Hair Removal, Inc. v. Assara I, LLC, 924 F. Supp. 2d 505, 508
Commc'ns, Inc. v. Shaar Fund, Ltd., 579 F.3d 143, 150 (2d Cir. 2009); Storey v. Cello Holdings
L.L.C., 347 F.3d 370, 387 (2d Cir. 2003) (Sotomayor, C.J.) (citing Margo v. Weiss, 213 F.3d 55,
65 (2d Cir. 2000)); Vanacore v. Vanco Sales LLC, 16 Civ. 1969, 2017 WL 2790549 at *6 (S.D.N.Y.
June 27, 2017); In re Austl. & N.Z. Banking Grp. Ltd. Sec. Litig., 712 F. Supp. 2d 255, 263
(S.D.N.Y. 2010); Chow v. City of N.Y., No. 09-CV-1019, 2010 WL 2103046 at *3 (E.D.N.Y. May
25, 2010).8/ "A party advances an objectively unreasonable claim if, at the time the party signed the
pleading, 'it is patently clear that [the] claim has absolutely no chance of success under the existing
precedents, and where no reasonable argument can be advanced to extend, modify or reverse the law
as it stands[.]'" Catcove Corp. v. Heaney, 685 F. Supp. 2d at 337 (quoting Eastway Constr. Corp.
v. City of N.Y., 762 F.2d 243, 254 (2d Cir. 1985)).9/
This "standard is appropriate in circumstances where the lawyer [or party] whose submission
is challenged by motion has the opportunity, afforded by the 'safe harbor' provision, to
correct or withdraw the challenged submission." In re Pennie & Edmonds LLP, 323 F.3d
86, 90 (2d Cir. 2003); accord, e.g., ATSI Commc'ns, Inc. v. Shaar Fund Ltd., 579 F.3d at
150. Where, however, a court invokes Rule 11 "'long after'" the offending litigant has "an
opportunity to correct or withdraw the challenged submission," the Second Circuit requires
a finding of "subjective bad faith." ATSI Commc'ns, Inc. v. Shaar Fund Ltd., 579 F.3d at
150; In re Pennie & Edmonds LLP, 323 F.3d at 90-92; Truong v. Nguyen, 2013 WL
4505190 at *3; Castro v. Mitchell, 727 F. Supp. 2d 302, 309 (S.D.N.Y. 2010); Centauri
Shipping Ltd. v. W. Bulk Carriers KS, 528 F. Supp. 2d 197, 200 (S.D.N.Y. 2007).
Accord, e.g., Vanacore v. Vanco Sales LLC, 16 Civ. 1969, 2017 WL 2790549 at *6; City
of Perry, Iowa v. Procter & Gamble Co., 15 Civ. 8051, 2017 WL 2656250 at *2 (S.D.N.Y.
June 20, 2017); Graves v. Deutsche Bank Sec., Inc., 07 Civ. 5471, 2010 WL 997178 at *7
(S.D.N.Y. Mar. 18, 2010), aff'd, 548 F. App'x 654 (2d Cir. 2013); Ho Myung Moolsan Co.
v. Manitou Mineral Water, Inc., 665 F. Supp. 2d 239, 263 (S.D.N.Y. 2009); see also, e.g.,
Morley v. Ciba-Geigy Corp., 66 F.3d 21, 25 (2d Cir. 1995) ("'An argument constitutes a
frivolous legal position for purposes of Rule 11 sanctions if, under an objective standard of
reasonableness, it is clear . . . that there is no chance of success and no reasonable argument
to extend, modify or reverse the law as it stands.'" (quoting Caisse Nationale de Credit
Agricole-CNCA, N.Y. Branch v. Valcorp, Inc., 28 F.3d 259, 264 (2d Cir. 1994))).
The Second Circuit has enumerated factors to be considered in determining whether
an inquiry was reasonable:
"[W]hat constitutes a reasonable inquiry may depend on such factors as how much
time for investigation was available to the signer; whether he had to rely on a client
for information as to the facts underlying the pleading, motion, or other paper;
whether the pleading, motion, or other paper was based on a plausible view of the
law; or whether he depended on forwarding counsel or another member of the bar."
Kamen v. AT & T, 791 F.2d 1006, 1012 (2d Cir. 1986) (emphasis omitted) (quoting Fed. R. Civ.
P. 11 Advisory Committee Notes to 1993 Amendments).
An attorney's subjective good faith belief in the merits of the claim is not a defense
to a Rule 11 motion if the claim is otherwise objectively unreasonable. See, e.g., Valenti v.
SleepMed, Inc., No. 15-CV-1281, 2017 WL 2945721 at *13 (D. Conn. July 10, 2017); Cont'l Cas.
Co. v. Marshall Granger & Co., LLP, 11 Civ. 3979, 2017 WL 1901969 at *6-7 (S.D.N.Y. May 9,
2017); LaVigna v. WABC Television, Inc., 92 Civ. 4330, 159 F.R.D. 432, 434 (S.D.N.Y. Jan. 11,
District Courts have "'broad discretion' to 'tailor appropriate and reasonable
sanctions under [R]ule 11.'" Lawrence v. Wilder Richman Sec. Corp., 417 F. App'x 11, 15 (2d Cir.
2010) (quoting O'Malley v. N.Y.C. Transit Auth., 896 F.2d 704, 709 (2d Cir. 1990)); see also Fed.
R. Civ. P. 11 Advisory Committee Notes to 1993 Amendments ("The court has significant discretion
in determining what sanctions, if any, should be imposed for a violation . . . ."). Sanctions may
include "nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and
warranted for effective deterrence, an order directing payment to the movant of part or all of the
reasonable attorney's fees and other expenses directly resulting from the violation." Fed. R. Civ. P.
11(c)(4). "Where a district court concludes that a monetary award is appropriate, its broad discretion
extends to determining the amount of the award." Lawrence v. Wilder Richman Sec. Corp., 417 F.
App'x at 15. Any sanction imposed must, however, be "limited to what suffices to deter repetition
of the conduct or comparable conduct by others similarly situated." Fed. R. Civ. P. 11(c)(4); e.g.,
Margo v. Weiss, 213 F.3d 55, 64 (2d Cir. 2000) ("Once a court determines that Rule 11(b) has been
violated, it may in its discretion impose sanctions limited to what is 'sufficient to deter repetition of
such conduct.'"); Ho Myung Moolsan Co. v. Manitou Mineral Water, Inc., 665 F. Supp. 2d at 265
(same). A court may award attorneys' fees as a sanction "if imposed on motion." Fed. R. Civ. P.
11(c)(4); see, e.g., Nuwesra v. Merrill Lynch, Fenner & Smith, Inc., 174 F.3d 87, 94 (2d Cir. 1999);
Hutter v. Countrywide Bank, N.A., 9 Civ. 10092, 2014 WL 4207588 at *25 (S.D.N.Y. Aug. 22,
"[E]ven when a district court finds a violation of Rule 11, '[t]he decision whether to
impose a sanction for a Rule 11(b) violation is . . . committed to the district court's discretion.'"
Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d at 63 ("In short, sanctions under Rule
11 are discretionary, not mandatory.").
SANCTIONS ARE NOT APPROPRIATE UNDER THE COURT'S INHERENT
AUTHORITY, 28 U.S.C. § 1927 OR RULE 11
The Court cannot find, on this record, that Goldberger or its counsel acted in bad
faith, for an improper purpose, or continued to pursue this case when they knew or should have
known that their claims were baseless or lacked evidentiary support. The December 9, 2015 Jones
email (see pages 2-3 above) provided Goldberger with a reasonable basis to bring this lawsuit:
Accord, e.g., Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d at 57 ("[A]bsent
a specific motion for attorneys' fees, the court only ha[s] authority to order sanctions payable
to the court."); Castro v. Mitchell, 727 F. Supp. 2d at 309 ("[A]ttorney's fees can only be
included in a sanction that is 'imposed on motion.'"). Sanctions imposed by the Court sua
sponte are limited to "nonmonetary directives" or "an order to pay a penalty into court."
Fed. Rule Civ. P. 11(c)(4); e.g., Nuwesra v. Merrill Lynch, Fenner & Smith, Inc., 174 F.3d
at 94; Castro v. Mitchell, 727 F. Supp. 2d at 309-10.
Jones described a sales meeting at which Ripley representatives showed her dolls with distinctive
Goldberger markings in Uneeda packaging; according to Jones, "[a]ll items exactly copied from
[Goldberger] and prices so much Cheaper!!" (Dkt. No. 35: Goldberger Opp. to Mot. to Dismiss Ex.
1: Holtzman Aff. Ex. 1.) Goldberger had reason to believe that what happened with Ripley was "a
representative example of what [Goldberger] believe[d] went on all with buyers throughout the
world" (Dkt. No. 45: 1/19/17 Oral Arg. Tr. at 18), but would need discovery to prove whether or not
this was an isolated occurrence.
When asked why there was an over six month delay between Jones' email and the
case's filing on June 17, 2016, Goldberger's counsel explained: "Immediately upon getting that email
from our South American representative [Jones], Uneeda was contacted, a lawyer was hired. Efforts
to resolve it ensued that went on and on for months . . . ." (1/19/17 Oral Arg. Tr. at 21-22.) After
initiating suit, Goldberger filed Rule 26(a) disclosures, commenced discovery that was continuing
when Goldberger dismissed this case, and sought Court intervention due to Uneeda's alleged failure
to produce requested documents and information. (See 1/19/17 Oral Arg. Tr. at 23-25 ("MR.
HADDAD [defense counsel]: . . . . [Y]our Honor, they [Goldberger] did take significant-- they
[Goldberger] did take discovery. . . . [W]e did some premediation discovery before we saw Judge
Peck last fall, and then we had actual formal discovery thereafter, and we responded to all of those
very pointed interrogatory questions that they asked about, did we sell any of these dolls to anybody,
who is our customers . . . ."); Dkt. No. 53: 2/28/17 Conf. Tr. at 2 ("MR. ROSS [plaintiff's counsel]:
Discovery is proceeding. . . . Both sides served additional discovery requests."); id. at 3-4 (referring
to Goldberger's Rule 26(a) disclosures); Dkt. No. 57: 3/13/17 Conf. Tr. at 11-16 ("MR. ROSS: . .
. . We also served a document request on the defendants. They objected to producing any of the
documents requested."); Dkt. No. 60: 4/5/17 Conf. Tr. at 9 ("MR. ROSS: . . . . There was two
months of discovery really. That's it. One deposition. There was document production which was
largely directed by us towards the damages issue.").) It appears that when discovery revealed that
Goldberger had no viable damages theory, it appropriately dismissed the case.
Uneeda argues that Goldberger should have known earlier that its damages theory
was flawed. (Dkt. No. 73: Uneeda Reply Br. at 2 ("[T]he most egregious conduct by Goldberger
concerns its claim for damages.").) But Uneeda cites no evidence to conclusively establish that
Goldberger knew at some date certain prior to March 17, 2017 (the dismissal date) that it could not
prove its damages case, notwithstanding Uneeda's continued denials of liability throughout
discovery. Indeed, discovery was still ongoing, and some of Goldberger's discovery requests still
were outstanding in the days immediately prior to the dismissal. (See generally 3/13/17 Conf. Tr.)
It is true that at oral argument on the motion to dismiss, Judge Pauley questioned
whether Goldberger's damages were "worth the candle" of the case going forward. (1/19/17 Oral
Arg. Tr. at 22.) Goldberger's counsel responded that damages were the "lost sales to Ripley and
others that will be discovered," i.e., through information that was in Uneeda's control. (Id. at 22-23.)
In other words, at that time, Goldberger still objectively believed that discovery would allow it to
Goldberger explained its damages theory as follows:
Plaintiff's damages will be computed, after fact and expert discovery has been
completed, as follows: an amount equal to Defendants' [Uneeda's] profits made from
the distribution of dolls infringing [Goldberger's] Trademarks and Trade Dress, plus
[Goldberger's] lost sales proximately caused by [Uneeda's] improper conduct,
including lost sales attributable to the lost Ripley account, plus an award of
[Goldberger's] costs and attorneys' fees . . . .
(Dkt. No. 63: Haddad Aff. Ex. J: Goldberger Resp. to Interrog. No. 19, at 9.)
At the March 13, 2017 discovery conference, I questioned whether Goldberger was
"spending a lot of money on a case that may have zero damages" based on a sales chart showing
Goldberger's reduced sales from 2015 to 2016. (3/13/17 Conf. Tr. at 10-11.) I explained that the
fact that Goldberger's sales had declined from year to year, without more, would not be sufficient
to prove causation (even if liability were proven), analogizing to a stock price drop being insufficient
in the securities law context to prove damages causation. (Id.) Perhaps that convinced Goldberger,
which asserts that it "made a cost/benefit analysis as to the possible damage recovery and the
difficulties of obtaining evidence from South America and Hong Kong." (Dkt. No. 66: Goldberger
Opp. Br. at 1.) In any event, Goldberger voluntarily dismissed its case before the week was out.
(See page 4 above.)
Uneeda identifies multiple inconsistencies between Goldberger's interrogatory
responses verified by Holtzman, and Holtzman's subsequent deposition testimony, that it cites as
additional evidence that this litigation was prosecuted in bad faith. (Dkt. No. 64: Uneeda Br. at 1316.)12/ In response to defendants' interrogatories, Goldberger, with verification from Holtzman,
Goldberger's four page opposition brief summarily contends that "Plaintiff's interrogatory
responses, Declaration, and Mr. Holtzman's deposition testimony do not contain
contradictions[,]" and that, in any event, the alleged inconsistencies are immaterial.
(Goldberger Opp. Br. at 1, 3.) Goldberger's brief offers little explanation for these
conclusory statements, aside from mischaracterizing Holtzman's deposition testimony.
(Compare Goldberger Opp. to Mot. to Dismiss Ex. 1: Holtzman Aff. ¶ 5 ("Over the last
several years, when I have had occasion to contact Uneeda, it was always with Mr. Hogge.")
and Haddad Aff. Ex. C: Holtzman Dep. at 193-94 ("Q: Prior to December 2015 you had
never spoken to [Hogge]? A: No, I don't really know him. I just know of him . . . ."), with
Goldberger Opp. Br. at 3 ("Mr. Holtzman's statement that when he spoke with Uneeda it was
always with Mr. Hogge, is factually correct. There is no evidence that he ever spoke with
anyone else at Uneeda . . . he spoke with Mr. Hogge, and only Mr. Hogge, upon learning of
the improper conduct of Uneeda in December 2015.").) Goldberger's assertion that
Holtzman's statements "do not contain contradictions" is simply not well-supported by the
stated: "Plaintiff identifies Rolf Klarmann [a Funmaxtoys employee] as the individual who took the
subject photograph" attached to Jones' email. (Haddad Aff. Ex. J: Goldberger Resp. to Interrog. No.
13, at 7.) Holtzman testified initially at his deposition that the Photograph was taken by Klarmann,
and that he (Holtzman) assumed it was taken when Klarmann was at Uneeda's showroom in Hong
Kong in 2015 with Jones. (Haddad Aff. Ex. C: Holtzman Dep. at 9-11.) Holtzman stated that his
basis for this knowledge was "exclusively the [Jones] e-mail[.]" (Id. at 12, 21.) When Uneeda's
counsel showed Holtzman that this information was nowhere to be found in the Jones email,
Holtzman admitted that he personally did not "know who took the photograph," and did not know
whether it had been taken in Hong Kong. (Id. at 21-22.)
Holtzman further testified that he did not know whether or not "Uneeda sold a single
one of [Goldberger's] dolls in their boxes[,]" either to Ripley or anyone else, and that he had no
knowledge of "how many times . . . Uneeda attempt[ed] to pass off Goldberger dolls in their
boxes[.]" (Id. at 55-56.) Holtzman admitted that he had "no way of knowing that Goldberger would
actually have entered into a multiyear contract with Ripley" had Uneeda's alleged conduct not
occurred (id. at 103), even though he previously stated in his affidavit in opposition to Uneeda's
motion to dismiss that "Goldberger lost the Ripley account as a direct consequence of Uneeda's
improper use of our dolls" (Goldberger Opp. to Mot. to Dismiss Ex. 1: Holtzman Aff. ¶ 8).13/
The inconsistencies between Holtzman's deposition testimony, Goldberger's
interrogatory responses that he verified and his affidavit do not alter the Court's conclusion that
sanctions are not appropriate here. Even though Holtzman signed the interrogatory responses on
Holtzman admitted that Goldberger had not made any sales to Ripley in 2015 or 2016 and
that any assertions of a multiyear contract that would have resulted in "several hundred
thousand dollars in revenues" would be speculation. (See Holtzman Dep. at 102-03.)
Goldberger's behalf, he was deposed as an individual, not a Federal Rule of Civil Procedure 30(b)(6)
witness. (Compare Haddad Aff. Ex. J: Goldberger Interrog. Resp. at 11, with Holtzman Dep. at 1
and 4/5/17 Conf. Tr. at 9: Holtzman deposed as an individual, not a 30(b)(6) witness.) Holtzman's
personal knowledge at his deposition is different than information he learned as an officer of
Goldberger and corporate representative signing interrogatory responses. See, e.g., Sabre v. First
Dominion Capital, LLC, 01 Civ. 2145, 2001 WL 1590544 at *1 (S.D.N.Y. Dec. 12, 2001) ("A
deposition pursuant to Rule 30(b)(6) is substantially different from a witness's deposition as an
individual. A 30(b)(6) witness testifies as a representative of the entity, his answers bind the entity
and he is responsible for providing all the relevant information known or reasonably available to the
entity.").14/ To be clear, this does not condone any of Holtzman's contradictory statements, and
Goldberger's counsel would have been wise to have Holtzman clarify his testimony at the conclusion
of the deposition. Uneeda's motion does not clarify who at Goldberger (attorneys included) knew
what, when, and Goldberger did not help by opposing the sanctions motion with a four page, cursory
brief. The Court is not prepared to find that Goldberger and/or its attorneys acted in bad faith or for
an improper purpose when they submitted filings that were later only somewhat contradicted by
Had Uneeda deposed Holtzman as a 30(b)(6) witness, he would have had to prepare to
"testify about information known or reasonably available to the organization." Fed. R. Civ.
P. 30(b)(6); see also, e.g., GEOMC Co. v. Calmare Therapeutics, Inc., No. 14-CV-01222,
2017 WL 2294282 at *2 (D. Conn. May 25, 2017) ("The testimony provided by a corporate
representative at a [Rule] 30(b)(6) deposition binds the corporation. This is quite unlike a
deposition of an employee of the corporation, which is little more than that individual
employee's view of the case and is not binding on the corporation." (quotations omitted));
8A CHARLES A. WRIGHT & ARTHUR R. MILLER, Fed. Prac. & Proc. Civ. § 2103 (3d ed.
2017). Because Uneeda did not do so, it was getting Holtzman's personal knowledge, not
Goldberger's corporate knowledge.
In conclusion, the Court does not find that Goldberger or its counsel acted in
subjective bad faith in commencing or continuing this action. The Court further does not find a
violation of Rule 11. Even if there were a Rule 11 violation, the Court would and does decline, in
the exercise of its discretion, to impose sanctions on Goldberger or its attorneys.
For the reasons set forth above, Uneeda's motion for sanctions (Dkt. No. 62) is
New York, New York
July 21, 2017
Andrew J. Peck
United States Magistrate Judge
Copies ECF to: All Counsel
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