Evidence of Pre-Suit Investigation Defeats Sanctions Claim


Rule 11 sanctions motions are most often filed after a defendant wins the case on summary judgment. The Defendant will then argue that the plaintiff’s claims were objectively unreasonable or that the plaintiff failed to conduct a pre-suit investigation. In Dominguez v. Barracuda Tackle, LLC, No. 8:20-cv-1538 KKM-AEP, a patent infringement lawsuit, the court granted summary judgment to the Defendant but denied Rule 11 sanctions on the ground that plaintiff had conducted a pre-suit investigation. The court’s opinion contains a thoughtful, if pithy, explanation for the denial of sanctions.

Defendants’ objections raise two principal assertions regarding the motion for sanctions: (1) Plaintiffs’ counsel did not perform a pre-suit investigation and (2) Plaintiffs’ legal claims were clearly unreasonable. Upon a de novo review, the Court agrees with the well-reasoned explanation of the Magistrate Judge on those points. First, the Court finds that the declaration of Yunior Dominguez is evidence of a pre-suit investigation. While the declaration was not signed by Plaintiffs’ counsel, it still shows that Plaintiffs and counsel explored the validity of claims prior to suit. Second, the Court agrees with the Magistrate Judge that a reasonable juror could conclude that the two bait nets at issue perform substantially the same function with substantially the same result. While ultimately this is not enough to create a triable issue of fact in the light of the claims construction, it was “not so quixotic as to warrant sanctions.” Rodick v. City of Schenectady, 1 F.3d 1341, 1351 (2d Cir. 1993). Indeed, if all suits that did not create a triable issue of fact were sanctionable, one doubts if the legal profession would continue to be a profitable enterprise. Although the Defendants assert that Plaintiffs filed this suit for the improper purpose of extracting a nuisance-value settlement from Defendants, at bottom, they offer no evidence of this malintent apart from the losing disposition of the claims. The Court declines to impose sanctions on this basis.

Edward X. Clinton, Jr. www.clintonlaw.net

Federal Judge Sanctions Lin Wood, Sidney Powell and other lawyers


In King v. Whitmer, No. 20-13134, Judge Linda Parker issued a 110 page opinion sanctioned several lawyers who filed the complaint and the amended complaint under Rule 11, the Court’s inherent authority and 28 U.S.C. §1927. This opinion is very significant and it may cause changes in the way election law is practiced in the future. The Court found that the allegations in the Complaint lacked a good faith basis in law and fact and that the lawyers vexatiously multiplied the proceedings. The court used every possible ground to support the sanctions award and made credibility findings.

A link to the opinion is here: https://www.michigan.gov/documents/ag/172_opinion__order_King_733786_7.pdf

At the time these lawsuits were brought, they appeared to me to be reckless and risky. It is one thing to allege that a voter was disenfranchised. It is another thing all together to allege that the entire election was a fraud.

11th Circuit Affirms Dismissal of “Shotgun” Pleading


Barmapov v. Amuial, 986 F.3d 1321 (11th Circ. 2021) affirms the dismissal of a shotgun pleading. A shotgun pleading is a poorly organized pleading usually filed by a pro se litigant. Here, the shotgun pleading was filed by an attorney, not a pro se litigant. The court described the pleading in this way:

Barmapov filed his initial complaint in the district court in March 2018, and he filed an amended complaint five months later. The amended complaint was 116 pages and 624 numbered paragraphs long, and it included 20 causes of action, under both federal and state law, against 23 named defendants and 20 John Doe defendants. The district court dismissed it because it was “in an improper shotgun format.” Barmapov had “lumped together” many of his allegations against the 23 named defendants, rendering his complaint “unclear and confusing as to which [d]efendant [was] being charged with which conduct.” The district court also described the complaint as “devoid of specific allegations” such that it was not clear what each defendant “specifically did to be liable as to each stated count.” Finally, the court criticized the complaint for incorporating about 350 paragraphs into each of the 20 counts, even though the “paragraphs [were] not all properly directed at the [d]efendants subject to [each] count, nor [were] they pertinent to each claim.” The court granted Barmapov leave to file a second amended complaint.

In his second amended complaint, Barmapov reduced the number of named defendants 1324*1324 to 16 and the length of the complaint to 92 pages and 440 numbered paragraphs. He also removed all federal causes of action. The 19 counts against the defendants included allegations of fraud, breach of fiduciary duty, and civil conspiracy —all presumably under Florida law.

The district court concluded that Barmapov’s second amended complaint “still fail[ed] to provide a short and plain statement justifying relief and … allegations that [were] simple, concise, and direct.

The court was unimpressed with the second amended complaint and dismissed the case with prejudice. The 11th Circuit affirmed with a published opinion.

But the second amended complaint undoubtedly falls into the second category of shotgun pleadings. It is rife with immaterial factual allegations, including five pages and 24 paragraphs of irrelevant details about the alleged criminal backgrounds of some of the defendants. To make matters worse, the complaint then incorporates these paragraphs into 13 of the 19 counts, including counts against defendants who had no part in this background history. Other examples of inconsequential details include Barmapov’s business background; the relationships among Yossi, Guy, and Avrham Amuial, Terry Rafih, and John Obeid; Barmapov’s history with Reuben Sastiel; the experiences of Barmapov’s grandson working for the Amuials; and the contentious business meetings between Barmapov, the Amuials, and Sastiel. In addition, the second amended complaint indiscriminately incorporates and repeats 249 numbered paragraphs of factual allegations—spanning 50 pages—into nine of the 19 counts, without any effort to connect or separate which of those 249 factual allegations relate to a particular count. As a result, these nine counts include factual allegations that are immaterial to the underlying causes of action. See Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1359 n.9 (11th Cir. 1997) (describing a complaint in which four counts incorporated all 43 numbered paragraphs of factual allegations, many of which appeared to relate to only one or two counts, as “an all-too-typical shotgun pleading”); see also Weiland, 792 F.3d at 1322 n.12 (identifying Chudasama as an example of one of the second category of shotgun pleadings).

If these problems were not enough to make Barmapov’s second amended complaint a shotgun pleading, the complaint also includes numerous vague and conclusory allegations. It alleges that Yossi Amuial “sabotage[d]” Barmapov’s efforts to apply for financing, but it provides no explanation as to how this sabotage occurred. It also briefly states that four of the defendants “worked together to forge Barmapov’s signature” on important paperwork. Later, it states that six of the defendants “worked in concert to forge Barmapov’s signature” on documents related to a financing agreement and that one of these defendants then fraudulently notarized Barmapov’s signature. But the complaint never explains how these alleged forgeries relate to any of the 19 causes of action. Finally, at the end of his narrative account, Barmapov asserts that “Yossi, Guy, Avrham and Reuben … expelled him as a member” of the joint venture 1326*1326 because he refused to contribute more money. But he offers no explanation as to how he could have been expelled when, by his own account, there was only one other member of the joint venture.

Because Barmapov’s second amended complaint is “replete with conclusory, vague, and immaterial” allegations, a defendant who reads the complaint would be hard-pressed to understand “the grounds upon which each claim [against him] rests.” Weiland, 792 F.3d at 1322-23. Take, for example, the first four counts, which allege that the Amuials and Reuben Sastiel were Barmapov’s business partners and that they breached their fiduciary duties. The complaint neither quotes nor provides any specific details about the operating agreement for the purported joint venture between Barmapov and these defendants. And its brief explanations of this business arrangement are nonsensical. The complaint states that only one of these four defendants—Sastiel—signed the operating agreement, but it asserts without explanation that the other three still owed fiduciary duties under the agreement. It calls Yossi a “member,” a “manager,” and an “agent” of the joint venture. It refers to Guy as a “member,” a “de facto manager,” and an “agent and employee.” Finally, it states that Avrham is a “member,” an “agent,” and a “de facto principal,” in addition to being Barmapov’s personal “confidant and business advisor.” If Barmapov himself cannot offer a coherent explanation for how the joint venture was structured, we cannot expect the defendants to do it for him by digging through 50 pages and 249 numbered paragraphs of scattershot factual allegations.

Comment: Ultimately, the dismissal of this complaint is the responsibility of the client’s lawyers who allowed a disorganized pleading to be filed with the court.

Poor Preparation of Rule 30(b)(6) Witness Merits Sanctions


In Westover v. Provident Mutual Life and Accident Ins. Co., No. C20-5931 (W.D. Washington, March 31, 2021), Provident Mutual designated a 30(b)(6) witness to testify. A 30(b)(6) witness is a company representative who is to testify on certain topics relevant to the litigation. Here, the witness testified but was unprepared on certain topics. The District Court awarded Rule 37 sanctions, but the sanctions were that the deponent was to sit for a second session, presumably after he studied the topics. The reasoning:

Sanctions are warranted here for Provident’s dilatory discovery production in relation to the Rule 30(b)(6) deposition, but not in the form that Plaintiffs request. Provident’s conduct is not so severe as to warrant monetary sanctions or warrant barring Provident from using the recently produced documents in opposition to Plaintiffs’ partial motion for summary judgment. Furthermore, it appears that the late-produced documents have not precluded Plaintiffs from filing a partial motion for summary judgment regarding the scope of ERISA preemption in accordance with the parties’ agreed schedule. See Dkt. 38.

It is concerning to the Court that Provident did not produce or make available all documents as requested in the Notice of Deposition. Therefore, the Court orders sanctions against Provident in requiring that Provident make its Rule 30(b)(6) witness available for a second deposition concerning the untimely produced documents and that Provident bear the cost of the second deposition.[2] The parties may stipulate to an extended briefing schedule on Plaintiffs’ partial motion for summary judgment and Provident’s motion to dismiss Plaintiffs’ state law claims, if the second Rule 30(b)(6) deposition is necessary to resolve the pending motions. Such a deposition may resolve Plaintiffs’ recently-filed second motion for sanctions, see Dkt. 48, and the parties should advise the Court if that is the case.

Remember that Federal Judges Have Broad Discretion


The order is quite short, but it has important significance for those preparing for trial in federal court. The case is Elliot v. Illinois Central Railroad 2:19-cv-02807 (W.D. Tennessee, April 5, 2021). The lawsuit arose out of a collision between a train and a truck. The plaintiff missed the deadline to disclose an expert. Plaintiff made an untimely disclosure. The Defendant moved pursuant to Rule 37(c)(1). The court declined to strike the untimely opinion. The court allowed the disclosure of the opinions and noted that Defendant’s expert can dispute the opinions.

In sum, even if your disclosure is untimely, the court has discretion to allow you to proceed. Obviously, moving quickly to cure the problem is a must.

Rule 59(e) Motion to Vacate Sanctions Judgment Fails


A defendant to a foreclosure lawsuit in federal court was sanctioned pursuant to Rule 37. The lender then won summary judgment and the court entered judgment in its favor. The Defendant appealed the foreclosure judgment. After judgment was entered, the court entered a second judgment on the fees and costs incurred by the plaintiff. The Defendant then filed a Rule 59(e) motion to vacate the award of attorney fees and costs. The key point to remember is that it is proper for a federal court to enter a second judgment for attorney fees or sanctions or costs after the initial judgment has become final. There is no rule against the court entering two judgments. Should this occur to you, simply file a second notice of appeal challenging the fee or cost award.

The Defendant argued that Rule 54(d) allowed for only one judgment for fees and that Rule 37 does not allow proceedings after the judgment was entered. The court rejected both arguments. The explanation:

In her motion, Ms. Wellington argues that the Court erred in filing two attorney fee awards and contends that Rule 54(d) allows for only one post-judgment fee award. Doc. 223 at 3. This argument fails for several reasons.

First, Rule 54(d)(2) governs attorney’s fees and nontaxable expenses to the prevailing party. FED. R. CIV. P. 54(d)(2)(A)-(D) (describing the procedure to claim attorney’s fees). In this case, MTGLQ was the prevailing party and sought fees pursuant to the promissory note and mortgage agreement between the parties. Doc. 209. The Court granted MTGLQ’s motion and awarded attorney’s fees on October 7, 2020. Docs. 220, 221. The attorney’s fees awarded by the Court’s October 7, 2020 judgment are separate from the attorney’s fees previously awarded as a sanction by the Court on January 18, 2019. Doc. 145. On January 18, 2019, the Court awarded attorney’s fees to MTGLQ—and later enforced the award in the October 30, 2020 judgment—as a sanction pursuant to Rule 37. Rule 54 is not applicable to Rule 37 sanctions. Rule 54 states “[s]ubparagraphs (A)-(D) do not apply to claims for fees and expenses as sanctions for violating these rules or as sanctions under 28 U.S.C. § 1927.” FED. R. CIV. P. 54(d)(2)(E). Because Rule 54 does not apply to the attorney’s fee awarded as sanctions pursuant to Rule 37, there are not two judgments for attorney’s fees under Rule 54, as Ms. Wellington contends.

Second, the Court appropriately awarded and enforced attorney’s fees as a sanction under Rule 37. Rule 37 governs the failure to make disclosures or cooperate in discovery, and sanctions for violations of discovery orders. FED. R. CIV. P. 37. Rule 37 requires the Court to order sanctions if a motion for discovery is denied. FED. R. CIV. P. 37(a)(5)(B) (“If the motion is denied, the court . . . must, after giving an opportunity to be heard, require the movant, . . . to pay the party or deponent who opposed the motion its reasonable expenses incurred in opposing the motion, including attorney’s fees.”). Ms. Wellington filed a motion to compel that the Court denied. See Docs. 107, 114. The Court then awarded MTGLQ its reasonable expenses incurred in opposing the motion, including attorney’s fees. Doc. 145. Ms. Wellington’s failure to pay the sanction prompted MTGLQ’s motion to enforce and the Court’s October 30, 2020 judgment granting that motion. Docs. 208, 222.

Ms. Wellington does not cite any legal authority for the proposition that orders for sanctions made pursuant to Rule 37 cannot be later enforced by a judgment. Rule 37(b)(2) provides that if a party “fails to obey an order to provide or permit discovery, including an order under . . . 37(a), the court where the action is pending may issue further just orders.” Here, the “further just order” came in the form of a judgment enforcing the sanctions imposed on Ms. Wellington under Rule 37(a).

Further, while Ms. Wellington is correct that Rule 37 itself contains no provision for any post-judgment proceedings (Doc. 223 at 3), the Court retains jurisdiction to rule on collateral matters such as discovery sanctions. “Although filing [a] notice of appeal generally divests the district court of jurisdiction over the issues on appeal . . . the district court retains jurisdiction over collateral matters not involved in the appeal.” Lancaster v. Indep. Sch. Dist. No. 5, 149 F.3d 1228, 1237 (10th Cir. 1998)(citations and quotation omitted). “Attorney’s fees awards are collateral matters over which the district court retains jurisdiction.” Id. As the Tenth Circuit Court of Appeals explains:

While the cases typically discuss attorney’s fees awards in the context of statutory grants of attorney’s fees to the prevailing party . . ., we see no basis to distinguish those cases from one like the present case in which fee awards are granted as sanctions. In either context, the award is collateral to the merits of the underlying action. Accordingly, we conclude the district court had jurisdiction to grant the Rule 37 motion.

Id. Thus, the Court had authority to decide MTGLQ’s post-judgment motion to enforce the order awarding attorney’s fees pursuant to Rule 37.

Conclusion: the litigant would have been better off simply filing a separate appeal of the fee judgment.

Citation: MTGLQ Investors, LP v. Wellington, No. 1:17-cv-00487 (D. New Mexico, February 3, 2021).

Irrational Behavior Dooms ADA Lawsuit


In Holt v. Houston Methodist Sugar Land Hospital, No. H-19-5464 (S.D. Texas Houston Division), December 31, 2020, the court dismissed an Americans With Disabilities Act discrimination case because the pro se plaintiff had developed a pattern of refusing to comply with discovery and court orders.

The explanation:

“Plaintiff has repeatedly failed to comply with Orders issued by the Magistrate Judge, including orders to appear for conferences. When ordered on October 3, 2019, not to file additional documents until the Court ruled on Defendant’s 2019 Motion to Dismiss, Plaintiff filed four additional documents on October 9, 2019. Plaintiff failed to appear as ordered for conferences on May 8, 2020, and on July 27, 2020.

Plaintiff also refused to participate in discovery. She failed to respond to written discovery and failed to appear for her deposition on June 24, 2020. Her only explanation for her refusal to comply with her discovery obligations was that she believed the Court had ruled in her favor on the ADA claims and that depositions occur at the beginning of a case. Even after the Magistrate Judge ordered her to comply [Doc. # 125], Plaintiff again refused to respond to written discovery and failed without explanation to appear for her deposition on September 24, 2020.

Between the February 28, 2020, Memorandum and Order ruling on Defendant’s 2019 Motion to Dismiss and December 29, 2020, when Plaintiff filed her “Motion to Deny Defendant Motion to Dismiss,” Plaintiff intentionally refused to participate in the prosecution of this lawsuit. Plaintiff’s refusal persisted notwithstanding at least four orders [Docs. # 119, # 123, # 125, and # 128] for her to participate in discovery, respond to an issue raised by Defendant, or appear for a conference. Plaintiff’s refusal to comply with court orders and participate in discovery persisted notwithstanding at least two orders [Docs. # 125 and # 128] warning her that failure to participate in discovery could result in dismissal of this lawsuit.

In her “Motion to Deny Defendant Motion to Dismiss,” Plaintiff notes that in the Magistrate Judge’s Order [Doc. # 100] entered October 3, 2019, Plaintiff was precluded from calling or appearing at Defendant’s place of business, at defense counsel’s office, or at the Court unless there was a hearing scheduled. This in no way explains or excuses Plaintiff’s failure to comply with Court orders, including the Order [Doc. # 125] requiring Plaintiff to appear for her deposition, or to respond to Defendant’s written discovery requests. Moreover, Plaintiff’s explanation for refusing to appear for her June 24, 2020 deposition was not that she believed her appearance at counsel’s office was precluded by the Magistrate Judge’s October 3, 2019 Order. Instead, Plaintiff stated that she would not appear for her deposition because oral depositions occur at the beginning of a case and she would “not be starting this case over.”

Plaintiff also cites the statement in the October 3, 2019 Order that discovery deadlines were vacated and a new scheduling conference would be held after the Court ruled on the 2019 Motion to Dismiss. It is clear, however, that the referenced scheduling conference occurred on May 8, 2020, but Plaintiff chose not to attend.

Plaintiff relies also on the statement in the October 3, 2019 Order that neither party could file anything in the case until the Court ruled on the 2019 Motion to Dismiss. The Court ruled on the 2019 Motion to Dismiss in its Memorandum and Order [Doc. # 112] issued February 28, 2020. After that date, there was no prohibition on Plaintiff filing additional matters. Yet after that date, until December 29, 2020, Plaintiff willfully refused to file anything, to participate in discovery, or to appear at conferences held by the Magistrate Judge.

In this case, there is a clear record of Plaintiff intentionally and steadfastly refusing to participate in discovery, to appear for conferences with the Magistrate Judge, and to prosecute her lawsuit in any way for a 10-month period. This intentional delay was caused by Plaintiff’s own conduct. As a result, the Court finds without reservation that sanctions are warranted.

The Court finds that there is no lesser sanction that would induce Plaintiff to comply with Court orders and with her discovery obligations. Plaintiff is pro se and filed this lawsuit in February 2019 challenging the termination of her employment in 2017. There is nothing in the record to suggest that Plaintiff has funds to pay a monetary sanction. Court orders and repeated warnings that failure to comply could result in dismissal of this lawsuit have not persuaded Plaintiff to fulfill her discovery obligations.

Although the Court recognizes that dismissal is a severe sanction, Plaintiff’s conduct in this case has been intentional and persistent. The case was filed almost two years ago. Yet, because of Plaintiff’s refusal to prosecute her lawsuit and comply with Court orders and discovery obligations, basic discovery has not begun. Indeed, to date Plaintiff has not responded to Defendant’s written discovery requests or appeared for her deposition. Dismissal of this case, after repeated warnings, is warranted.”

Comment: courts will tolerate a great many faults by pro se litigants, but, eventually, everyone has to comply with the rules.

11th Circuit Holds That District Courts Have Jurisdiction Over Sanctions Motion Even If They Do not Have Subject Matter Jurisdiction


The title of this post is a bit complex. I apologize for that. But the topic is important. Sometimes, a party brings a case to federal court and the court later determines that it lacks subject matter jurisdiction. The case is then dismissed for lack of jurisdiction. What happens, however, when there is a sanctions motion pursuant to 28 U.S.C. §1927? Joining other circuits that have considered the issue, the 11th Circuit held that the district courts do indeed have jurisdiction to decide sanctions motions. This is important as it gives the court the power to discipline conduct and award sanctions even if there was no jurisdiction over the entire case. Obviously, I think the opinion is correct and well-reasoned.

The reasoning:

In the world of jurisdiction, there’s an important distinction between the underlying case or controversy and certain “collateral” matters. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). The former includes the merits of the dispute as well as many procedural questions. The latter includes a limited set of issues “collateral to the merits” of the case. Willy v. Coastal Corp., 503 U.S. 131, 137, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992). Think things like “the imposition of costs, attorney’s fees, and contempt sanctions.” Cooter & Gell, 496 U.S. at 396, 110 S.Ct. 2447.

Although we call these issues “collateral,” that doesn’t make them any less important. Many involve the power to enforce compliance with the rules and standards that keep the judiciary running smoothly. See Willy, 503 U.S. at 137, 139, 112 S.Ct. 1076. Without them, “abuses of the judicial system” would go unchecked, “burdening courts and individuals alike with needless expense and delay.” Cooter & Gell, 496 U.S. at 397-98, 110 S.Ct. 2447. And that’s not just a matter of procedure. Because justice delayed is justice denied, these powers ensure that justice is done.

The distinction between the underlying case and collateral issues is important when it comes to jurisdiction because it affects a court’s power to decide an issue. Once a court loses jurisdiction over a case, it may no longer decide issues arising out of that case. See, e.g., Capron v. Van Noorden, 6 U.S. (2 Cranch) 126, 127, 2 L.Ed. 229 (1804). But it can still decide certain “collateral” issues related to the case. See Cooter & Gell, 496 U.S. at 395, 110 S.Ct. 2447.

Here, all agree that the district court lacked subject-matter jurisdiction over the case. So the question for us is whether Irish’s motion for sanctions under the district court’s inherent powers or § 1927 was a part of the underlying case (which would mean that the court lacked the power to rule on the motion) or a “collateral” issue (which would mean that it had the power to do so).

Fortunately, we don’t approach this question on a blank slate. The Supreme Court has told us that sanctions under Federal Rule of Civil Procedure 11 are a “collateral” issue and thus a court may decide a Rule 11 sanctions motion even if it lacks jurisdiction over the underlying case. See Willy, 503 U.S. at 137-39, 112 S.Ct. 1076. The decision reasoned that exercising jurisdiction in this context was both constitutionally permissible and practically important.

On the first point, the Court explained that ruling on a Rule 11 motion “implicates no constitutional concern because it does not signify a district court’s assessment of the . . . legal merits” of the case. Id. at 138, 112 S.Ct. 1076 (cleaned up). Instead, it concerns “a collateral issue: whether the attorney has abused the judicial process.” Id. (cleaned up). And because a district court does not have to decide the merits to rule on a Rule 11 motion, it does not improperly consider the “`case or controversy’ over which it lacks jurisdiction.” Id.

On the second point, the Court reasoned that exercising jurisdiction over a Rule 11 motion is practically important because “[t]he interest in having rules of 1310*1310procedure obeyed” outlives the merits of a case. Id. at 139, 112 S.Ct. 1076. This makes sense. The need to deter those who might violate the rules does not rise or fall with any particular case. It is an ever-present need of all courts. Simply put, district courts need the power to rule on these issues to ensure “the maintenance of orderly procedure.” Id. at 137, 112 S.Ct. 1076.

Both these points apply equally to sanctions under a court’s inherent powers or § 1927. These sanctions, like Rule 11 sanctions, do not require a court to rule on the merits of the underlying case. Our analysis in the next Part makes this clear. And the purpose of the sanctions outlasts the end of the case. Otherwise, parties who abuse the judicial procedures could get off scot-free anytime it turned out that the district court lacked subject-matter jurisdiction.

For good reason, then, all of our sister circuits to have faced this question have recognized jurisdiction in this context. See, e.g., Ratliff v. Stewart, 508 F.3d 225, 231 n.7 (5th Cir. 2007); Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 645 (6th Cir. 2006); In re Jaritz Indus., 151 F.3d 93, 96-97 (3d Cir. 1998); see also Fidrych v. Marriott Int’l, Inc., 952 F.3d 124, 137-38 (4th Cir. 2020); Zerger & Mauer LLP v. City of Greenwood, 751 F.3d 928, 931 (8th Cir. 2014).

Today, we join them and hold that a district court may address a sanctions motion based on its inherent powers or § 1927 even if it lacks jurisdiction over the underlying case.

Hyde v. Irish, 962 F.3d 1306 (11th Cir. 2020).

Comment: the court affirmed the denial of the sanctions motion.

Major League Baseball Wins Sanctions Against Supplement Maker


In DNA Sports Performance Lab, Inc. v. Major League Baseball, No. C20-00546 (N.D. California October 27, 2020), the district court awarded Rule 11 sanctions against DNA Sports for filing what it described as a “baseless” complaint against Major League Baseball. DNA markets certain supplements which have been banned by Major League Baseball and its players’ union. The district court found that the complaint was baseless and awarded Rule 11 sanctions. This plaintiff in the case, in my opinion, has pursued this type of litigation against Major League Baseball and its union. long after it was clear that the litigation was without merit and without basis in fact.

This is the description of the prior history of lawsuit between DNA Sports and Major League Baseball

“As detailed in the league’s motion for sanctions, DNA Sports and its attorneys have pursued the league, well before the instant suit, for the past nine years (Dkt. No. 42 at 4-5). Our tale begins with an October 2012 shakedown letter. Following two league investigations into DNA Sports’ former business venture, DNA Sports sent the letter accusing the league of character defamation, alleged $30,000,000 in damages, and threatened to sue unless the league promptly paid $6,000,000. DNA Sports, though, conceded that its products contained a banned substance under the Joint Drug Prevention and Treatment Program (Dkt. 42-2, Exh. A at 3).

In 2013, the league launched another investigation into the illegal sale of performance-enhancing drugs to players. Investigators targeted “anti-aging” clinics in Florida, including DNA Sports (Dkt. No. 19 at 5; Compl. ¶¶ 19-20).

In February 2014, DNA Sports sued the league in Florida state court, challenging the league’s investigation as unfair and discriminatory. But plaintiff missed several case management conferences and failed to perfect service until October, resulting in a November 2014 dismissal for failure to prosecute. Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, etc., et al., No. 3D14-2967, 2015 WL 1930327 (Fla. 3d Dist. Ct. App. Apr. 27, 2015).

In July 2016, following the league’s rejection of another letter, this time demanding $40,000,000, DNA Sports sued the Office of the Commissioner of Baseball and several league employees in the Southern District of New York challenging the same league investigation, alleging tortious interference with prospective economic advantage (Dkt. 42-2, Exh. D). After a pre-motion conference to discuss the league’s intent to file motions for dismissal under Rule 12(b)(1) and for sanctions, DNA Sports voluntarily dismissed that action in November 2016. Nix and DNA Sports Performance Lab, Inc. v. Office of Comm’r of Baseball, No. 16-CV-5604 (S.D.N.Y. July 14, 2016).

In late November 2016, less than a month after the dismissal, DNA Sports sued the league, the commissioner, and several league employees in New York state court for hacking DNA Sports’ social media accounts, tortious interference with economic advantage, and defamation of Nix — all in the course of the league investigation. Defendants removed to federal district court based on the hacking claim. Rather than move to remand or amend its complaint to satisfy federal pleading standards, DNA Sports voluntarily dismissed its federal hacking claim and proceeded with the state suit. The New York state court then dismissed the complaint in June 2018 as res judicata under FRCP 41’s two-dismissal rule, barred by statute of limitations issues, and for failure to state a claim. In December 2018, the state court denied DNA Sports’ motion to reargue the dismissal as frivolous and imposed attorney’s fees against DNA Sports and its counsel — fees which remained outstanding as of briefing here. Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, et al., No. 159953/2016, 2018 WL 2739433 (N.Y. Sup. Ct. June 7, 2018).

In April 2018, while litigating the third action, Neiman Nix — acting pro se — sued Kobre & Kim LLP and three attorneys (the league’s counsel), several MLB coaches and general managers, and over a dozen MLB clubs in Florida state court, alleging RICO, trade secret, and computer abuse violations. In December 2018, Mr. Nix voluntarily dismissed claims against the majority of the baseball clubs as well as Kobre & Kim and its lawyers. The action currently remains pending, however, against two remaining clubs and league personnel. Nix v. Luhnow, et al., No. 2018CA003920 (15th Fla. Cir. Ct., Palm Beach Cnty.).

In January 2019, DNA Sports sued the Office of the Commissioner of Baseball, current and former MLB commissioners, and several MLB employees in Florida state court for unlawful hacking and computer abuse violations in the course of the 2013 MLB investigation. After DNA Sports amended its complaint in response to a motion to dismiss, the court dismissed the claims against the commissioners but allowed DNA Sports to proceed with the remaining claims. Though that case pertained to the leagues’ alleged hacking of DNA Sports’ social media accounts during the 2013 investigation, DNA Sports sought discovery on the league’s stance and communications regarding IGF-1. Neiman Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, et al., No. 2019CA002611 (11th Fla. Cir. Ct., Miami-Dade Cnty.).

In March 2018, DNA Sports also sued ESPN, the Associated Press, and USA Today in the Southern District of Florida in March 2018, alleging that each had defamed plaintiffs by publishing or republishing a statement from the league that DNA Sports’ July 2016 tortious interference lawsuit “admit[ed] Nix and his company used bioidentical insulin-like growth factor (IGF-1), which is derived from elk antlers and is on baseball’s list of banned substances.” Nix and DNA Sports Performance Lab, Inc. v. ESPN, Inc., et al., No. 1:18-CV-22208-UU, 2018 WL 8802885, at *1-2 (S.D. Fla. Aug. 30, 2018). Plaintiff called the statement defamatory because it did not differentiate between natural and synthetic IGF-1, giving readers the impression that DNA Sports had engaged in illegal or legal-but-banned drug sales. The Southern District of Florida, however, held that the statement at issue was substantially correct and the omission did not render the report untrue, thus it was not defamatory. The district court dismissed the complaint with prejudice in August 2018. The Eleventh Circuit affirmed, ruling that league regulations banned all forms of IGF-1 — whether synthetic or natural. Nix and DNA Sports Performance Lab, Inc. v. ESPN, Inc., et al., 772 Fed. Appx. 807, 814 (11th Cir. 2019).

The instant action descends from the March 2018 suit. After the Eleventh Circuit’s decision, DNA Sports began to investigate the presence of natural IGF-1 in animal-derived protein products. Specifically, DNA Sports “consulted with several experts” about whether whey-protein products endorsed by the league would contain natural IGF-1 (allegedly, they would) (Reich Decl., Dkt. No. 31-1 at ¶¶ 9-10). DNA Sports did not test these products for IGF-1 but instead relied on what it and its experts deemed “common sense” (id. at ¶ 11; Opp. Br., Dkt. No. 46 at ¶ 6).

In June 2019, DNA Sports’ current attorney, Lance Reich, contacted the league’s general counsel inquiring about “the unfair competition and conduct by [the league] in maligning [DNA Sports] in public for selling products containing natural IGF-1” while the league and the union endorsed and profited “from the sale of other nutritional products that contain[ed] natural IGF-1.” As DNA Sports admits, Reich demanded that the league “cease its sponsorship and partnerships with all companies and entities that sell natural protein products that contain natural IGF-1,” and “publicly announce that all nutritional supplement products that contain natural IGF-1 are banned performance-enhancing substances,” or face a new suit (Reich Decl., Dkt. 31-1 at ¶ 12 & Exh. A). The league refused.”

The reasoning:

“

This order finds DNA Sports’ complaint baseless. That, along with finding Reich failed to conduct an adequate investigation, supports Rule 11 sanctions. And, such baselessness in addition to bad faith supports inherent authority sanction of DNA Sports itself.

First, this order finds DNA Sports’ complaint baseless. A prior order found glaring holes in the allegations against the union (Dkt. No. 53). Exhausted of defamation and other tort claims, plaintiffs sought relief under inapplicable statutes. To allege Lanham Act violations, plaintiffs must show that defendants made a false statement of fact in a commercial advertisement about its own or another’s product, that the statement actually and materially deceived its audience, and that plaintiff has been or is likely to be injured as a result of the false statement in the form of diverted sales or loss of goodwill. Southland Sod Farms v. Stover Seed Co. Eyeglasses, 108 F.3d 1134, 1139 (9th Cir. 1997). False advertising claims brought under state law require showing that defendants participated in or had control over the untrue or misleading advertisements. In re First Alliance Mortg. Co., 471 F.3d 977, 995-96 (9th Cir. 2006). Yet, DNA Sports admit that their products contain naturally-occurring IGF-1. They concede that the league and the union have banned IGF-1 in its natural and synthetic forms under their Joint Drug Prevention and Treatment Program. And they acknowledge that NSF International, an independent product-testing organization, certifies products as “safe for sport” after testing for banned substances enumerated in the drug program (Compl. at ¶¶ 8, 18, 29). So, DNA Sports brought false advertising and unfair competition claims, contesting the “certified for sport” declaration on several products that allegedly contained IGF-1, without ensuring they sued the right defendants (i.e., that defendants made, caused, or induced the allegedly false statement), showing requisite harm (i.e., that plaintiffs suffered injuries like diverted sales or loss of goodwill), or requesting appropriate relief (i.e., courts cannot enjoin action that has already ceased on its own accord) (Dkt. No. 53). Such baselessness supports an inference of improper motive. See Townsend, 929 F.2d at 1365.

The league’s prior motion for sanctions would have been granted for similar reasons. The majority of DNA Sports’ complaint rehashed prior suits against the league and relied on conclusory statements to baselessly allege Lanham Act, false advertising, and unfair competition claims. The complaint recapitulated the misdeeds of the league’s investigations that inspired DNA Sports’ February 2015, July 2016, November 2016, and January 2019 suits which were all settled by prior rulings (Compl. at ¶¶ 15, 19-20). It then invoked the press release that was the subject of the March 2018 suit to maintain that though it is true DNA Sports’ supplements contain banned IGF-1, the league publicly maligned plaintiffs and “essentially bann[ed] [them] from ever working again in any” league-related capacity (Id. at ¶ 24). This after admitting that DNA Sports never sold its supplements to league players on account of a non-competition agreement (Id. at ¶ 18). Finally, DNA Sports alleges that league players and coaches consume products with IGF-1 and have never been disciplined and several league-endorsed products that compete with DNA Sports contain IGF-1. All this lending itself to false advertising and unfair competition.

Recall that these claims require, among others, both a false statement and harm, such as lost goodwill or diverted sales. See Southland, 108 F.3d at 1139; First Alliance, 471 F.3d at 995-96. Yet DNA Sports’ complaint failed to show how the targeted products (the league-licensed Gatorade “Recover” whey protein bars, Cytosport Muscle Milk protein shakes, and Eyepromise nutritional supplements) compete with DNA Sports’ own products, which cost hundreds of dollars more and contain a banned substance. Further, plaintiffs failed to show how the use of the logo or the press release — the alleged commercial speech here — diverted sales from DNA Sports to these specific products and how this speech was false. Without these elements, their allegations against the league are baseless.

Second, given the obvious pitfalls in DNA Sports’ complaint, this order finds Attorney Reich failed to reasonably investigate these claims. To assess whether an attorney has conducted an adequate pre-filing investigation, courts must consider factual questions regarding the nature of the inquiry and must determine whether the legal issues raised were warranted. Cooter & Gell, 496 U.S. at 399. DNA Sports and Attorney Reich alleged that they “consulted with several experts” about whether whey-protein products endorsed by the league would contain natural IGF-1 (allegedly, they would) (Reich Decl. at ¶¶ 9-10). DNA Sports did not test these products for IGF-1 but instead relied on what it and its experts deemed “common sense” to determine that all these certified for sport products contained IGF-1 (id.at ¶ 11; Opp. Br. at ¶ 6). Beyond this, a cursory investigation into Lanham Act, false advertising, and unfair competition claims would have revealed the commercial speaker, material-deception, and injury elements which could have saved DNA Sports’ complaint or at least, saved the league and the union the trouble of motion practice. Attorney Reich failed in this regard.

Third, this order finds DNA Sports filed its complaint to harass the league and the union. DNA Sports’ history of litigation demonstrates both that this suit is brought in bad faith to vex and that dismissal alone will not dissuade DNA Sports from trying again. Though this is only the first suit against the union, it is the sixth suit arising out of the same original circumstances against the league. As detailed in the prior order, prior dismissals and sanctions have not tempered DNA Sports’ vendetta against the league. It has repeatedly dismissed its cases against the league and companies, either voluntarily or in response to court orders. Yet, true to its reliable pattern, after dismissal, DNA Sports has simply developed a different theory in a different court based on the same facts and continued its pursuit of the league. In 2018, after several these dismissals, a New York state court imposed monetary sanctions on DNA Sports and its previous counsel for frivolous and harassing conduct against the league. Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, et al., No. 159953/2016, 2018 WL 2739433 (N.Y. Sup. Ct. June 7, 2018). As DNA Sports’ litigation history demonstrates, however, these sanctions have not fazed DNA Sports. Rather, it has continued to sue the league, affiliated entities, and now the union, this despite outstanding monetary sanctions for troublesome lawyering. Considering this prior misconduct, dismissal alone will not deter DNA Sports from filing further baseless and harassing suits.

Indeed DNA Sports and Attorney Reich refuse to dismiss outstanding cases against the league, proving that DNA Sports does not intend to change its course of conduct. After the August 1 order, the league offered to withdraw its motion for sanctions “if Plaintiffs [would] dismiss with prejudice all outstanding litigation against the MLB defendants and agree to bring no further litigation against the MLB defendants” (Dkt. No. 60 at 14). Although plaintiffs dismissed the instant action with prejudice, DNA Sports still has outstanding litigation against some of the league’s clubs and commissioner. These remain intact despite the league’s offer to withdraw their sanctions motion entirely.

Given DNA Sports’ persistence, it may be that no amount of sanctions will deter it from continuing its crusade. The requested amount of fees, however, will at least compensate the union and the league for the harm done here. As this is the sixth case against the league (at least), a full award is appropriate. Though this is the first suit against the union, a full award is justified because it is part of an entrenched campaign of harassment.”

Comment: as a lawyer you have a duty to investigate allegations before you sign your name to a pleading. Please take the time to give every allegation a thorough review to determine if you have evidence to prove that it is true. If your first complaint alleging a novel theory flops, don’t keep refiling the litigation in other courts. That will only lead to discipline. If you are being pressured to make allegations you don’t believe are supported by solid evidence, walk away from the representation. You have a duty to the court system to make well-founded and factually based allegations.

Ed Clinton, Jr.

Dispute over $750 spawns Section 1927 Motion


Stelzer v. Endeavor Business Media, Inc., No. 18-cv-979 (W.D. Wisconsin 8/31/2020) was a copyright case filed for the wrongful use of a photograph. Stelzer, a professional photographer, took a picture and filed for copyright protection. Endeavor allegedly used that photograph without attribution and Stelzer sued. Endeavor offered to pay $750 and Stelzer accepted. Stelzer’s counsel then had a change of heart and tried to raise her demand and back out of the settlement. The district court enforced the settlement agreement and then denied to award section 1927 sanctions against plaintiff’s counsel. The explanation:

Endeavor asks the court to impose sanctions against Liebowitz under 28 U.S.C. § 1927. That section authorizes the court to sanction any attorney who unreasonably and vexatiously multiplies the proceedings in a case. Endeavor contends that Liebowitz’s attempt to back out of the settlement warrants a § 1927 sanction, and it asks the court to shift the cost of enforcing the settlement to Liebowitz.

Liebowitz is a notorious copyright litigator who has been sanctioned many times. The Southern District of Illinois recently sanctioned him for backing out of a settlement agreement, precisely the conduct at issue in this case. Ward v. Consequence Holdings, Inc., No. 3:18-CV-1734-NJR, 2020 WL 2219070 (S.D. Ill. May 7, 2020). Endeavor submitted the court’s opinion in that case as a purported notice of supplemental authority, Dkt. 21, which Liebowitz asks the court to strike, Dkt. 22. The court will deny the motion to strike; whether Liebowitz has been sanctioned for similar misconduct is a fair consideration. Liebowitz was also sanctioned by Southern District of New York, which required Liebowitz to provide notice of that sanction to every court in which he had a pending case. Dkt. 24. That court’s sanction order includes a list of 40 additional sanction orders against Liebowitz. And in this case, Magistrate Judge Crocker found that plaintiff—really Liebowitz—had not complied with plaintiff’s discovery obligations, so Judge Crocker shifted fees and warned against future non-compliance. Dkt. 11.

Nevertheless, the court declines to impose sanctions. Both sides bear responsibility for the unprofessional conduct of this case. Endeavor failed to inform the court that plaintiff had actually provided discovery responses before the hearing on the motion to compel, resulting in the withdrawal of the order on that motion. Dkt. 13. And Liebowitz’s attempt to back out of the settlement agreement was prompted, in part, by Endeavor’s three-month lack of diligence in responding to Liebowitz’s revisions to the settlement agreement. Endeavor hectored Liebowitz about his one-month delay; Endeavor’s three-month delay in responding to a few modest changes is inexcusable. Judge Crocker put it aptly: “The most charitable interpretation of what’s going on in this lawsuit is that neither side is doing its job.” Dkt. 13. There is blame enough for both sides; it’s fair that they bear their own expenses.

One last word of warning to Liebowitz. Liebowitz is admitted to practice in this court, and he has other cases pending. This court’s Local Rule 1.E. provides for automatic reciprocal discipline:

E. Reciprocal Discipline

1. When another jurisdiction enters an order of discipline against an attorney admitted to practice in this court, the same discipline is automatically effective in this court without further action by the court.

2. The attorney may apply to the chief judge for modification or vacation of the discipline in this court.

The judge in the Southern District of New York has referred Liebowitz for potential discipline. Accordingly, the court will order Liebowitz to inform the court within 10 days if his practice privileges are restricted, suspended, or revoked by any other jurisdiction.

Comment: Once the case was settled, it was bad manners, but not a violation of Section 1927, to renege and seek more money.