THE KNIT WITH v. KNITTING FEVER, INC. et al

Filing 456

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 12/21/16. 12/21/16 ENTERED AND COPIES ENTERED AND COPIES MAILED TO NOTICE ONLY PARTY AND SPECIAL MASTER, EMAILED.(rf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
THE KNIT WITH

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v.
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KNITTING FEVER, INC.,
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DESIGNER YARNS, LTD.,
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FILATURA PETTINATA V.V.G. DI
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STEFANO VACCARI & C., SION
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ELALOUF, DIANE ELALOUF, JEFFREY J. :
DENECKE, JR., JAY OPPERMAN,
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and DEBBIE BLISS
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THE KNIT WITH
v.
EISAKU NORO & CO., LTD.,
KNITTING FEVER, INC.,
SION ELALOUF, DIANE ELALOUF,
and JAY OPPERMAN

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CIVIL ACTION

NO. 08-4221

CIVIL ACTION

NO. 08-4775

MEMORANDUM OPINION
Savage, J.

December 21, 2016

In what should be the final chapter of this protracted litigation punctuated by
acrimony and questionable tactics, plaintiff The Knit With (“TKW”) has moved for review
of the Clerk’s taxation of costs in favor of the defendant, Knitting Fever, Inc. (“KFI”),
pursuant to Rule 54(d)(1). TKW’s two principal arguments are that the RICO statute 1
does not allow a prevailing defendant to recover costs and that KFI was not a prevailing
party.

1

18 U.S.C. § 1964(c).

After a review of the record, we determine that neither TKW nor KFI qualifies as
a prevailing party. Even if KFI were deemed a prevailing party, we would disallow costs
based on Judge Buckwalter’s finding that defense counsel engaged in conduct that
unnecessarily prolonged the case and heightened the animosity. 2 Therefore, reviewing
the Clerk’s taxation of costs de novo, 3 we shall vacate the Clerk’s taxation and deny
costs.
Background
TKW sued KFI, its officers and directors, and several foreign manufacturers of
yarn in September and October 2008, alleging that its business was harmed when it
sold mislabeled yarn it had purchased from the defendants. 4 The complaints in both
actions included claims for false advertising, common law unfair competition, state law
breach of warranty, and civil racketeering.

KFI filed counterclaims for defamation,

disparagement, and tortious interference with business relationships. 5 TKW’s claims for
false advertising and unfair competition were dismissed. 6 Summary judgment was later
granted in favor of KFI on the civil racketeering and breach of warranty claims. 7 Three
of four counterclaims were dismissed and summary judgment was granted in favor of
2

This case was reassigned after Judge Buckwalter retired and TKW moved for review of the
Clerk’s taxing costs.
3

Camesi v. Univ. of Pittsburgh Med. Cent., 818 F.3d 132, 136 (3d Cir. 2016) (citing In re Paoli
Yard PCB Litig., 221 F.3d 449, 461 (3d Cir. 2000)); Reger v. The Nemours Found., Inc., 599 F.3d 285,
287 (3d Cir. 2010) (quoting McKenna v. City of Phila., 582 F.3d 447, 454 (3d Cir. 2009) and citing In re
Paoli Yard, 221 F.3d at 461).
4

Compl. (Civ. A. No. 08-4221, Doc. No. 1); Compl. (Civ. A. No. 08-4775, Doc. No. 1).
Documents from the record refer to Civ. A. No. 08-4221, unless otherwise noted.
5

Answer at ECF 26–30 (Doc. No. 15).

6

Order at ECF 5–6 (Doc. No. 13-2); Order (Doc. No. 34); Order at ECF 9–10 (Civ. A. No. 084775, Doc. No. 10).
7

Orders (Doc. Nos. 401, 403).
2

TKW on the fourth for commercial disparagement. 8

After more than four years of

litigation, judgment was entered in favor of KFI and against TKW on all remaining
causes of action. 9
Although judgment was entered in favor of KFI on the breach of warranty and
racketeering claims, Judge Buckwalter noted that the substantive issues regarding the
mislabeling of yarns had never been resolved. 10 Because there was no decision on
whether the defendants had mislabeled the yarn, neither TKW nor KFI prevailed on the
core issue.
TKW appealed the judgment.

The Third Circuit affirmed the judgment and

awarded appellate costs to defendant KFI. In April 2016, TKW’s petition for certiorari to
the United States Supreme Court was denied. KFI submitted its bill of costs in this court
on June 29, 2016. 11
Analysis
Rule 54 allows costs to a prevailing party unless precluded by statute, a rule or
court order. Fed. R. Civ. P. 54(d)(1). If there is no prohibition against taxing costs, we
must determine if the party seeking costs was a prevailing party. If so, we then decide
what costs are allowable under 28 U.S.C. § 1920.
There is no statute or rule that disallows costs in this case. Contrary to TKW’s
contention, the RICO statute does not prohibit awarding costs to a prevailing defendant.

8

Orders (Doc. Nos. 200, 426).

9

Order (Doc. No. 403).

10

For example, the civil racketeering and breach of warranty claims failed due to lack of standing
and statute of limitations grounds, respectively. Order at n.1 (Doc. No. 446).
11

Bill of Costs (Doc. No. 449); Bill of Costs (Civ. A. No. 08-4775, Doc. No. 116).
3

Section 1964 provides that a successful RICO plaintiff can recover treble damages,
costs and attorney’s fees. 18 U.S.C. § 1964(c). Just because the statute permits a
plaintiff to recover costs under RICO does not mean a prevailing defendant cannot
recover costs under Rule 54.
defendants in RICO cases.

Indeed, courts have allowed costs to prevailing

See Chang v. Chen, 95 F.3d 27, 28 (9th Cir. 1996);

O’Ferral v. Trebol Motors Corp., 45 F.3d 561, 564 (1st Cir. 1995); see also Johnson
Enters. v. FPL Grp., Inc., 162 F.3d 1290, 1330–31 (11th Cir. 1998).
Having concluded that there is no bar to a prevailing party recovering costs in
this case, we must determine whether KFI was a prevailing party.
A prevailing party is the party obtaining a favorable judgment, even if that
judgment does not fully vindicate the litigant’s position. Devex Corp. v. Gen. Motors
Corp., 494 F. Supp. 1369, 1380 (D. Del. 1980), judgment aff'd on other grounds, 667
F.2d 347 (3d Cir. 1981), judgment aff'd, 461 U.S. 648 (1983); Lacovara v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 102 F.R.D. 959, 961 (E.D. Pa. 1984). Prevailing party
status is a fact-specific determination. Tyler v. O’Neill, 112 F. App’x 158, 162 (3d Cir.
2004); Lacovara, 102 F.R.D. at 961. In analyzing whether a party prevailed, the court
considers the practicalities of litigation. Lacovara, 102 F.R.D. at 961 (“[T]he complexity
of litigation may render difficult the identification of the prevailing party.” (quoting
Moore’s)); 10 J. Moore et al., Moore’s Fed. Prac. § 54.101[3] (2016).
In some cases, the result may be mixed; that is, each party wins some and loses
other respective claims or defenses. See Barber v. T.D. Williamson, Inc., 254 F.3d
1223, 1235 (10th Cir. 2001); Tao of Sys. Integration, Inc. v. Analytical Servs. &
Materials, Inc., 412 F. Supp. 2d 571, 574 (E.D. Va. 2006) (citing U.S. Search, LLC v.

4

U.S. Search.com, Inc., 300 F.3d 517, 522 n.4 (4th Cir. 2002); Testa v. Village of
Mundelein, 89 F.3d 443, 447 (7th Cir. 1996); Roberts v. Madigan, 921 F.2d 1047, 1058
(10th Cir. 1990); Johnson v. Nordstrom-Larpenteur Agency, Inc., 623 F.2d 1279, 1282
(8th Cir. 1980)). When neither litigant fully succeeds on its affirmative claims, “it may be
appropriate to require each party to bear its own costs.” Lacovara, 102 F.R.D. at 961.
Just as the district court has discretion to deny costs to a prevailing party, so does it
have discretion to determine whether a party prevailed. Tao of Sys. Integration, Inc.,
412 F. Supp. 2d at 574. In the event of a mixed judgment, the court may determine that
neither party prevailed and require each to bear its own costs. Amarel v. Connell, 102
F.3d 1494, 1523 (9th Cir. 1996) (citing Testa, 89 F.3d at 447); Croker v. Boeing Co.
(Vertol Div.), 662 F.2d 975, 998 (3d Cir. 1981) (en banc) (“The particular circumstances
of a case may permit a district court to refuse to award costs altogether or to apportion
them between the parties.”), overruled on other grounds, Halderman v. Pennhurst State
Sch. & Hosp., 673 F.2d 628, 644 (3d Cir. 1982) (en banc); Johnson, 623 F.3d at 1282
(citing Cornwell Quality Tools Co. v. C.T.S. Co., 446 F.2d 825, 833 (9th Cir.), cert.
denied, 404 U.S. 1049 (1972)).
There was no winner in this case.

Whether the yarns were intentionally

mislabeled, the core issue, was never decided on the merits. As Judge Buckwalter
noted, “the ultimate issues—whether the yarns-in-suit contained the labeled amount of
cashmere and whether some Defendants purposely sold the yarns despite knowing of
this mislabeling—were never resolved.” 12

12

Order at n.1 (Doc. No. 446).
5

While judgment was entered in favor of KFI on the breach of warranty and civil
racketeering claims, the grounds for dismissal of those claims did not decide the issues
on the merits. The breach of warranty claims were dismissed on statute of limitations
grounds and the RICO claims were dismissed for lack of standing. 13 Although TKW
prevailed on one counterclaim for commercial disparagement, TKW failed to sustain any
of its original claims. Its success on the counterclaim did not garner TKW any benefit it
had sought in the lawsuit. Under the circumstances, we decline to declare either TKW
or KFI the prevailing party.
Even if we determined KFI was the prevailing party, we would exercise our
discretion to deny costs based on its conduct during the litigation. Taxation of costs
may be disallowed where there has been misconduct by the prevailing party if the
misconduct rises to the level of unclean hands, bad faith, dilatory tactics, or a failure to
comply with the litigation process or costs award proceedings. Reger, 599 F.3d at 288
n.3.
Judge Buckwalter, who was in a better position to observe and assess the
conduct in the litigation, found that both sides had behaved poorly. In an order denying
KFI’s motion for sanctions, Judge Buckwalter noted:
At first blush, this Court was inclined to award sanctions against [TKW’s
counsel]. As noted by Defendants, the genesis of this action was Plaintiff
The Knit With’s purchase of $9,702.50 of knitting yarn from Defendant
Knitting Fever, Inc., which it claimed did not contain the labeled amount of
cashmere. Plaintiff’s relatively simple core claim, however, then exploded
into a complaint involving allegations of breach of warranty, Lanham Act
violations, and racketeering practices against not only the distributor of the
yarns, but a multitude of foreign companies and individuals, many of
whom had only a tangential relationship to the main issues. Litigation of
13

Id.
6

this case stretched over the course of four and a half years with almost
450 docket entries and close to 400 pages of court-issued opinions.
During this time, [TKW’s counsel] repeatedly (a) served overreaching
discovery requests that sought irrelevant personal information; (b)
engaged in rampant motion practice seemingly in efforts to either increase
the attorney[’]s fees recoverable under the RICO statute or obtain
sanctions against Defendants; (c) twice sought to disqualify defense
counsel; (d) submitted, as exhibits, affidavits not grounded in fact; and (e)
often took creative advocacy to the brink of misrepresentation of the law.
...
Moreover, the Court must note that defense counsel, while perhaps baited
by [the] tactics [of TKW’s counsel], bears some responsibility for the
protracted nature of these proceedings. In lieu of taking the higher ground
and working to disprove the substantive issues on their merits, Defendants
interrupted the forward-progress of the case by, for example, attacking
Plaintiff’s standing under a real party in interest theory, complicating
Plaintiff’s service of the foreign defendants thus requiring court
intervention, seeking and obtaining a discovery stay, and challenging
Plaintiff’s efforts to retain their choice of outside counsel. Aside from
exacerbating the delay, such tactics only fueled the ever-mounting
animosity between the parties. 14
Given Judge Buckwalter’s findings, even if we found KFI was the prevailing party,
we would still deny costs based on its conduct during the course of the litigation.
Conclusion
Because neither TKW nor KFI was a prevailing party, we shall vacate the Clerk’s
taxation of costs in favor of KFI.

14

Id.
7