NPF Franchising, LLC v. SY Dawgs, LLC

Filing 292

Memorandum Opinion and Order. The Court finds the Buchalter Law Firm to be jointly and severally liable with the NPF and the Individual Attorneys for attorneys' fees, expenses and costs in the amount of $287,248.77, plus pre-judgmen t interest, and post-judgment interest, as originally calculated by the Court in its May 7,2021 Memorandum Opinion. This Judgment has been satisfied in full through the release and disbursement of the Supersedeas Bond to Defendant and, therefore, no additional amounts are due. Defendants' Motion for Sanctions Against Interested Parties Buchalter, A Professional Corporation, and Tracy A. Warren Pursuant to the Court's Inherent Authority (Docket # 286 ), which seeks additional sanctions outside the scope of remand, is hereby DENIED. This case is hereby TERMINATED. IT IS SO ORDERED. Judge Donald C. Nugent on 10/17/2022. (M,S)

Case: 1:18-cv-00277-DCN Doc #: 292 Filed: 10/17/22 1 of 9. PageID #: 6665

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

NPF FRANCHISING LLC,

CASE NO. 1:18 CV 277

Plaintiff,
JUDGE DONALD C. NUGENT

V.

Magistrate Judge William H.Baughman,Jr.
SYDAWGS,LLC,

MEMORANDUM OPINION
AND ORDER

Defendant.

On May 2, 2021,this Court issued a Memorandum Opinion and Judgment, awarding
attorneys fees' and costs to Defendant, Sy Dawgs,LLC,as follows;

NPF is liable to Sy Dawgs for attorneys' fees, expenses and costs in the
amoimt of$480,546.85, pursuant to Paragraph 14 ofthe Parties' Non-Disclosure
and Non-Competition Agreement.
Ofthat amovmt, NPF,Buchalter and the Buchalter attomeys ofrecord are
hereby jointly and severally liable for attorneys' fees, expenses and costs in the
amount of$287,248.77, plus pre-judgment interest, and post-judgment interest to
accrue starting 30 days from the date ofthis Order, as calculated in the manner set
forth in 28 U.S.C. § 1961, as discovery sanctions.

(Docket #262 at p. 29.) Attomeys J. Patrick Allen, Kathryn B. Fox, Rick A. Waltman, and Tracy

Warren ofthe Buchalter Law Firm represented Plaintiff, NPF Franchising LLC,at all times

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relevant. The sanctions for discovery misconduct were awarded pursuant to Fed. R. Civ. P. 37.'
On Jrme 3,2021,Interested Parties J. Patrick Allen, Buchalter, Kathryn B. Fox, Rick A.

Waltman, and Tracy Warren,filed their Notice of Appeal to the Sixth Circuit Court of Appeals,
challenging this Court's award of"attorneys' fees discovery sanctions" against the Individual

Attorneys and Buchalter. (Civil Appeal Statement ofParties and Issues, Document 6, Court of

Appeals Case No. 21-3516.) A Supersedeas Bond in the amount of$313,000 was posted,
covering the attorneys' fees award and interest. (Docket #271.)

On Jrme 15, 2022,the Sixth Circuit Court of Appeals issued an Opinion, affirming this
Court's award of Rule 37 discovery sanctions against the Individual Attorneys representing NPF
in this case- J. Patrick Allen, Kathryn B. Fox,Rick A. Waltman, and Tracy Warren; reversing
this Court's award of Rule 37 discovery sanctions against the Buchalter Law Firm on the basis
that Rule 37 does not allow sanctions against a law firm; and,remanding the case with the
following instruction:
While we cannot sustain sanctions against the Buchalter Law Firm under Rule 37,
the district court could impose sanctions against the firm pursuant to its inherent
authority. To sanction in this manner,the district court must find that the party
litigated "in bad faith, vexatiously, wantonly, or for oppressive reasons." Big Yank
Corp. V. Liberty Mut. Fire Ins. Co., 125 F.3d 308,313(6th Cir. 1997)(quoting
Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240,247(1975)). The
district court could also impose sanctions "in the interest ofjustice." Ray A.
Scharer & Co. v. Plabell Rubber Prods., Inc., 858 F.2d 317, 320(6th Cir. 1988).
In a footnote in its opinion, the district court expressed an inclination to impose
sanctions \mder its inherent authority if not for its mistaken beliefthat it could
sanction the law firm under Rule 37. Mem. Op. re Def.'s Mot. for Fees & Costs,
R. 262,PagelD 6438 n.3. We remand to the district court to determine whether it
deems sanctions against the Buchalter Law Firm to be appropriate under the

This case was repeatedly and imduly complicated and prolonged by the failures of
NPF and its attorneys to meaningfully or honestly participate in the discovery process.
These failures were thoroughly and exhaustively explained in prior Court rulings.
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district court's inherent power. See BDTProds.,602 F.3d at 756.
(Docket #275 at p. 17.)
On July 8,2022, the Individual Attorneys and Buchalter filed a Motion to Release and

Order Disbursement of Cash Deposit Supersedeas Bond to Defendants in Satisfaction of
Judgment Against the Individual Attomeys. (Docket #279.) The Motion was granted on August
25,2022.(Docket #288.) The portion ofthis Court's May 2,2021 Judgment rendered against

NPF,Buchalter and the Buchalter Attomeys of Record jointly and severally has, therefore, been
fully satisfied.

On August 12,2022,following remand, Sy Dawgs filed a Motion for Sanctions Against
Interested Parties Buchalter, a Professional Corporation, and Tracy A. Warren Pursuant to the
Court's Inherent Authority. (Docket #286.) Sy Dawgs asks that this Court not only order

discovery sanctions against Buchalter, but also award an additional $193,298.08, plus interest,
against both Ms. Warren and Buchalter, pursuant to the Court's inherent authority. Sy Dawgs
argues that Ms. Warren and Buchalter "unreasonably delayed the resolution ofthis matter,

costing Sy Dawgs the opportunity to collect $200,000 from NPF as the prevailing party on NPF's
claims" because NPF became uncollectable, and that"Ms. Warren and Buchalter filed false

affidavits with this Court and engaged in a nationally publicized smear campaign against"
Defendants Joel Bartsch and Connie May. (Docket #286 at p. 2.)
On September 12, 2022, Ms. Warren and Buchalter filed their Response in Opposition.
(Docket #289.) Ms. Warren and Buchalter state that they "do not dispute, and fully accept, this
Court's prior sanctions order" and "have promptly fulfilled their obligations thereunder, and
submitted pa5ntnent, in full, of all amounts ordered, plus interest." (Docket #289 at p. 1.)
However, Ms. Warren and Buchalter argue that Defendants' Motion "improperly exceeds the
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scope ofthe Sixth Circuit's remand,in violation ofthe "mandate rule." Allard Enterprises, Inc.

V. Advanced Programming Resources, Inc., 249 F.3d 564(6"' Cir. 2001). Ms. Warren and
Buchalter state the following:

•

Defendants' request for additional, non-discovery sanctions against the
Interested Parties exceeds the mandate ofthe Sixth Circuit, which directed

further proceedings to evaluate Buchalter's liability for the discovery
conduct previously at issue.
•

Defendants previously requested sanctions for reimbursement for their full
attorneys' fees based upon the same non-discovery related conduct at issue
here. Both the Magistrate Judge and this Court declined to grant this
relief, and Defendants did not appeal this determination. The law ofthe
case doctrine prohibits Defendants from requesting the same sanctions
anew on remand.

•

The discovery sanction against Warren is a finaljudgment that has been
fully satisfied, and principles ofclaim preclusion, issue preclusion, and
vicarious liability prohibit Defendants from seeking further sanctions
based on the same conduct it could have raised, and did raise, in the prior
proceedings. Defendants have been fully compensated for the conduct that
Warren and the other Buchalter attorneys were found responsible, and the
need to fix Buchalter's liability for this conduct pursuant to the Sixth
Circuit's mandate is now moot.

•

Defendants cannot demonstrate by clear and convincing evidence that the
non-discovery related conduct at issue was entirely without color and that
Buchalter and Warren were motivated by bad faith. As concluded by the
Magistrate Judge,"NPF's claims to protect the league it had built never
seemed particularly frivolous even if it was unsuccessful in proving them."
(Doc. No. 239, p. 9).

•

Defendants cannot demonstrate that the amount it now seeks, which
includes $132,811 of attorneys' fees incurred prior to Buchalter appearing
in this case, were incurred because of, and solely because of, the alleged
sanctionable conduct of Buchalter or Warren.

(Docket #289 at pp. 1-2.)

On September 20, 2022, Sy Dawgs filed its Reply Brief. (Docket #290.) Sy Dawgs
reiterates its prior arguments regarding what it alleges to be inherently sanctionable misconduct

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by both Ms. Warren and Buchalter, and argues that the Sixth Circuit remanded the sanctions

issue "without restriction on what the bases for such sanctions might be and without suggesting
any limitation on what evidence might be considered in issuing such sanctions." (Docket #290 at

p. 3.) Sy Dawgs seeks and additional $193,298.08 in sections from Ms. Warren and Buchalter-

the portion ofthe $480,546.85 awarded against NPF under the prevailing party provision ofthe
Non-Disclosure and Non-Competition Agreement that was not included in the amount imposed
jointly and severally against NPF,Buchalter and the Buchalter Attomeys of Record jointly and
severally.
Discussion

The Sixth Circuit reviewed the following issues on appeal; whether the Individual
Attomeys- J. Patrick Allen, Kathryn B. Fox,Rick A. Waltman, Tracy A. Warren - and the
Buchalter Law Firm were afforded due process before discovery sanctions were imposed against
them; whether this Court abused its discretion issuing discovery sanctions jointly and severally
against the Individual Attomeys and Buchalter; whether the amount of sanctions awarded against
the Individual Attomeys and Buchalter was appropriate; and, whether in the event ofremand,the
case should be assigned to a different District Court Judge. (Docket #275 at p. 8.)

The Court of Appeals Opinion begins,"In this appeal, which involves the National Pro
Fastpitch League, we are asked to review a 'foul ball' call in discoverv." It continues, stating the
underlying issue on appeal was this Court's imposition of Rule 37 sanctions against Counsel "for

failure to produce documents and its engagement in other discoverv abuses." (Docket #275 at p.
2. Emphasis added.)
The Sixth Circuit held that the Individual Attomeys and Buchalter were given notice and

an opportunity to be heard prior to discovery sanctions being imposed against them and affirmed
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this Court's sanction ofthe Individual Attorneys under Rule 37(d). The Sixth Circuit reversed
this Court's decision only to the extent that the discovery sanctions against Buchalter were levied
pursuant to Rule 37, holding that Rule 37 does not allow for sanctions against a law firm unless

the law firm is a party to the lawsuit. However,the Sixth Circuit explained that Buchalter could
be sanctioned under the Court's inherent authority, or in the interests ofjustice, and remanded the
issue of whether such sanctions are warranted. The Sixth Circuit held that reassignment to a

different District Coiut Judge on remand was unnecessary.
The issue remanded,therefore, is limited to whether Buchalter should be sanctioned

under the Court's inherent authority, or in the interests ofjustice, for the well-documented

discovery abuses in this case, the amount of which has already been ordered by this Court and

affirmed by the Court of Appeals. Requests for sanctions beyond the scope ofthis limitation will
not be addressed by the Court.

To impose discovery sanctions against the Buchalter pursuant to this Court's inherent
authority, the Court"must find that the Buchalter Law Firm litigated 'in bad faith, vexatiously,
wantonly, or for oppressive reasons.'" NPFFranchising, LLC v. Sy Dccwgs, LLC,(quoting Big

Yank Corp. v. Liberty Mut. Fire Ins. Co., 125 F.3d 308, 313 (b"* Cir 1997); Alyeska Pipeline
Serv. Co. v. Wilderness Soc'y, 421 U.S. 240,247(1975)). As discussed in this Court's

Memorandum Opinion dated May 7,2021:
The Magistrate Judge also analyzed the issue of whether SY Dawgs should be
awarded attorneys' fees pursuant to this Court's inherent authority to sanction bad
faith conduct, ultimately concluding that awarding attorneys'fees as sanctions for
discovery misconduct was a better fit rmder the facts and circumstances ofthis
case. Considering the pervasive misconduct of NPF and the Buchalter attorneys in
this case, the Court is inclined to award fees under its inherent powers. Three
things are particularly troubling for the Court-the Buchalter attorneys'
failure to follow even the most basic rules, principles and norms of discovery;
questions regarding the Buchalter attorneys' truthfulness in their
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representations to the Court; and,the fact that NPF and the Buchalter
attorneys filed this case February 2,2018 and continued to string Sy Dawgs
and the Court along for almost a year and a half, with no indication that it
could substantiate any of its claims, only to jump ship when the possibility of
an unfavorable ruling was imminent. However,the Court respects that
Magistrate Judge's thoughtful analysis On this issue and an award of attorneys fees

under hoth the Parties' Non-Disclosure and Non-Competition Agreement and
Rule 37 fully compensates Sy Dawgs for the attorneys' fees, costs and expenses
incurred in this case.

(Docket #23 at p. 23,Footnote 3.)
Buchalter argues that Sy Dawgs failed to demonstrate sanctionable conduct specifically
attributable to the Firm -asserting the Firm itself was not driving the litigation or the decisions
being made by the Individual Attorneys working on this case. Buchalter states:
The prolonged pursuit of weak claims and interviews with ESPN reporters was
not a coordinate corporate strategy at Buchalter, the topic of management
discussions or shareholder meetings, or otherwise something that benefitted
Buchalter in any way whatsoever....[WJhen Buchalter was made aware after the
sanctions order was issued, Buchalter immediately arranged separate counsel, and
posted a cash appellate bond, with interest, to allow the opportunity for appellate
review. Upon affirmance, Buchalter immediately made arrangements for the
payment for the entire sanctions order owed to Defendants, in full. (Docket #289
at p. 11.)
The Court has no basis upon which to doubt the truth of Buchalter's claim that the Firm
itself did not make day-to-day litigation decisions in this case. However,the discovery issues in

this case spanned many months- as did the contentious litigation regarding discovery sanctions and multiple Buchalter attorneys were involved. The case attracted national media attention.
Ms. Warren is a Shareholder in the Firm and her signature appeared on Court filings. The
Individual Buchalter Attorneys signed below the Buchalter name, representing to the Court and

opposing Counsel that the Individual Attorneys were litigating this case on behalf of Buchalter.
Therefore, while the "prolonged pmsuit of weak claims"- which included repeated obstruction
ofthe discovery process- may not have been a "coordinate corporate strategy," the Firm
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certainly should have been aware of what was happening at some level.
As stated hy this Court in its May 7, 2021 Memorandum Opinion, the Coiirt was troubled

by "the Buchalter attorneys' failure to follow even the most basic rules, principles and norms of
discovery; questions regarding the Buchalter attorneys' truthfulness in their representations to the
Court; and,the fact that NPF and the Buchalter attorneys filed this case February 2,2018 and
continued to string Sy Dawgs and the Court along for almost a year and a half, with no indication
that it could substantiate any ofits claims, only to jump ship when the possibility of an
unfavorable ruling was imminent." The Individual Attorneys acted in bad faith and,imder the
facts and circumstances ofthis case,the interests ofjustice are best served hy holding both the
Buchalter Law Firm and the Individual Attorneys jointly and severally liable for the discovery

sanctions in the amovmt previously imposed by this Court and upheld by the Court of Appeals.^
Conclusion

For the foregoing reasons, the Court finds the Buchalter Law Firm to be jointly and

severally liable with the NPF and the Individual Attorneys for attorneys' fees, expenses and costs

in the amoimt of$287,248.77, plus pre-judgment interest, and post-judgment interest, as
originally calculated by the Court in its May 7,2021 Memorandum Opinion.

This Judgment has been satisfied in full through the release and disbursement ofthe
Supersedeas Bond to Defendant and, therefore, no additional amounts are due.
Defendants' Motion for Sanctions Against Interested Parties Buchalter, A Professional

The Sixth Circuit held,"The district court could also impose sanctions 'in the
interest ofjustice."(quoting Ray A. Scharer & Co. v. Plabell Rubber Prods., 858 F.2d

317,320(6"' Cir. 1988)("Attorney's fees have been awarded pursuant to a court's inherent
authority to sanction 'in the interest ofjustice' even in the absence of a specific finding of
bad faith, despite language in Roadway Express to the contrary. Grinnell Brothers, Inc. v.
Touche Ross & Co.,655 F.2d 725 (6th Cir. 1981)."))
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Corporation, and Tracy A. Warren Pursuant to the Court's Inherent Authority (Docket #286),

which seeks additional sanctions outside the scope of remand, is hereby DENIED.
This case is hereby TERMINATED.
IT IS SO ORDERED.

DONALD C. NUGI

Senior United States Dis^i^t Judge

: 6c-{l>kl\

DATED