BMaddox Enters. v. Oskouie

BMADDOX ENTERPRISES LLC, Plaintiff, v. MILAD OSKOUIE, et al., Defendants.

17 Civ. 1889 (RA)(HBP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

September 30, 2019

OPINION AND ORDER

PITMAN, United States Magistrate Judge:

I. Introduction

By notice of motion dated September 7, 2017, plaintiff BMaddox Enterprises LLC ("BMaddox") and plaintiff's principal and counterclaim defendant Brandon Maddox (collectively "plaintiffs") seek an Order imposing sanctions on defendants Milad Oskouie, Osko M Ltd. and Platinum Avenue Holdings Pty, Ltd. pursuant to Rule 11 of the Federal Rules of Civil Procedure (Plaintiff & Counterclaim Defendants' Motion for Sanctions Against Defendants & Counterclaimants Pursuant to Fed.R.Civ.P. 11, dated Sept. 7, 2017 (Docket Item ("D.I.") 55)). By notice of motion dated March 13, 2018, plaintiffs also seek an Order imposing sanctions on defendants pursuant to the Court's inherent power (Plaintiff & Counterclaim Defendants' Second Motion for Sanctions, dated Mar. 13, 2018 (D.I. 112)). By notice of motion dated March 29, 2018, defendants cross-move for Rule 11 sanctions against plaintiffs (Notice of Motion, dated Mar. 29, 2018 (D.I. 128)). By notice of motion dated April 5, 2018, plaintiffs seek a second Order imposing sanctions on defendants pursuant to the Court's inherent power (Plaintiff & Counterclaim Defendants' Third Motion for Sanctions, dated Apr. 5, 2018 (D.I. 137)). By notice of motion dated June 18, 2018, plaintiffs seek a second Order for Rule 11 sanctions against defendants (Plaintiff & Counterclaim Defendants' Motion for Sanctions Against Defendants & Counterclaimants Pursuant to Fed.R.Civ.P. 11, dated June 18, 2018 (D.I. 161)).

For the reasons set forth below, plaintiffs' motions are denied, and defendants' cross-motion is denied.

II. Background¹

BMaddox commenced this action on March 14, 2017, asserting claims for copyright infringement pursuant to 17 U.S.C. §§ 501 et seq., violation of the Digital Millennium Copyright Actpursuant to 17 U.S.C. § 512(f), false and misleading advertising pursuant to Section 43 of the Lanham Act, 15 U.S.C. § 1125, violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(g), common law misappropriation of trade secrets and deceptive trade practices pursuant to New York General Business Law § 349 (Complaint and Demand for Jury Trial, dated Mar. 14, 2017 (D.I. 6) ¶¶ 63-140). On July 25, 2017, defendants filed their answer and counterclaims against plaintiffs (Verified Answer to Complaint and Counterclaims, dated July 25, 2017 (D.I. 32) ("Ans.")). Defendants' counterclaims include claims for violations of the Anticybersquatting Consumer Protection Act pursuant to 15 U.S.C. §§ 8131 and 1125(d), defamation per se and trade libel, false advertising pursuant to Section 43 of the Lanham Act, 15 U.S.C. § 1125, unfair competition, tortious interference with contractual relations and prospective contractual relations, violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(g), violation of the Digital Millennium Copyright Act, 17 U.S.C. § 512(f), monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, trespass to chattels, intentional infliction of emotional distress, invasion of privacy under South Dakota law and violation of New York Civil Rights Law §§ 50-51 (Ans. ¶¶ 140-94, 203-48). Defendants also seek declarations of the invalidity of plaintiff'scopyrights and of their non-infringement of any copyrights owned by plaintiffs (Ans. ¶¶ 195-202).

Plaintiffs filed their first motion for sanctions pursuant to Fed.R.Civ.P. 11 on September 7, 2017, claiming that defendants wilfully misrepresented facts in their initial filings, asserted frivolous legal arguments in their motion for a temporary restraining order and asserted frivolous counterclaims; plaintiffs sought dismissal of defendants' counterclaims (Plaintiff & Counterclaim Defendants' Motion for Sanctions Against Defendants & Counterclaimants Pursuant to Fed.R.Civ.P. 11, dated Sept. 7, 2017 (D.I. 55)). Plaintiffs subsequently moved to dismiss defendants' counterclaims on the merits (Counterclaim Defendants' Motion to Dismiss Counterclaim Plaintiffs' Counterclaims, dated Sept. 27, 2017 (D.I. 67)). That motion remains pending.

On March 6, 2018, after an in-court discovery conference, I ordered defendants to produce all documents that are responsive to plaintiff's November 6, 2017 document request no later than March 20, 2018 (Order, dated Mar. 6, 2018 (D.I. 111)). A week later, on March 13, 2018, plaintiffs filed their second motion for sanctions (Plaintiff & Counterclaim Defendants' Second Motion for Sanctions, dated Mar. 13, 2018 (D.I. 112)), seeking relief pursuant to the Court's inherent power for defendants'alleged harassment of plaintiffs, plaintiffs' counsel and third parties (Plaintiff & Counterclaim Defendants' Brief in Support of Their Second Motion for Sanctions, dated Mar. 13, 2018 (D.I. 113)). After filing a motion to stay the action for six months (Notice of Motion, dated Mar. 14, 2018 (D.I. 116)), defendants cross-moved for sanctions pursuant to Fed.R.Civ.P. 11 (Notice of Motion, dated Mar. 29, 2018 (D.I. 128)).

Plaintiffs filed their third motion for sanctions on April 5, 2018 (Plaintiff & Counterclaim Defendants' Third Motion for Sanctions, dated Apr. 5, 2018 (D.I. 137)), again seeking sanctions pursuant to the Court's inherent power for defendants' allegedly meritless filings and frivolous legal arguments, including defendants' March 29, 2018 cross-motion for sanctions (Plaintiff & Counterclaim Defendants' Memorandum in Support of Their Third Motion for Sanctions, dated Apr. 5, 2018 (D.I. 138)). After an in-court discovery conference on May 2, 2018, I ordered plaintiffs to file a supplemental submission that set out defendants' discovery defaults (Order, dated May 3, 2018 (D.I. 148)); plaintiffs filed their supplemental memorandum of law and an accompanying declaration by counsel on May 16, 2018 (Plaintiff & Counterclaim Defendants' Supplemental Memorandum in Support [of] Their Third Motion for Sanctions, dated May 16, 2018 (D.I. 153); Declaration of Anderson J. Duff, dated May 16, 2018 (D.I. 154)).

On May 11, 2018, defendants' counsel moved to withdraw from his representation of defendants (Notice of Motion, dated May 11, 2018 (D.I. 149)). The Honorable Ronnie Abrams, United States District Judge granted defendants' counsel's motion to withdraw on August 30, 2018 and stayed the action until October 5, 2018, by which time Oskouie was ordered to advise the Court whether he had obtained new counsel or would be proceeding pro se (Order, dated Aug. 30, 2018 (D.I. 169)). By email dated October 5, 2018, Oskouie advised the Court that he would be proceeding pro se.

III. Analysis

A. Applicable Legal Standards

1. Sanctions Pursuant to Fed.R.Civ.P. 11

Rule 11 provides that

A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets.

Fed.R.Civ.P. 11(c)(2).

Rule 11 and principles of due process require that "the subject of a sanctions motion be informed of: (1) the source of authority for the sanctions being considered; and (2) the specific conduct or omission for which the sanctions are being considered so that the subject of the sanctions motion can prepare a defense."

Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170, 175 (2d Cir. 2012) (per curiam), quoting Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323, 334 (2d Cir. 1999).

"[T]he 'safe-harbor provision [of Rule 11] is a strict procedural requirement' and '[a]n informal warning . . . without service of a separate Rule 11 motion is not sufficient.'" Chong v. Kwo Shin Chang, 599 F. App'x 18, 19 (2d Cir. 2015) (summary order), quoting Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., supra, 682 F.3d at 175; accord Sarachek v. Aaronson, 18 Civ. 8393 (NSR), 2019 WL 3456888 at *3 (S.D.N.Y. July 31, 2019) (Roman, D.J.) ("A movant's failure to comply with the procedural requisites will result in the denial of the motion."); Behrens v. JPMorgan Chase Bank N.A., 16 Civ. 5508 (VSB), 2019 WL 1437019 at *14 (S.D.N.Y. Mar. 31, 2019) (Broderick, D.J.) (collecting cases); Nardoni v. City of New York, 17 Civ. 2695 (GHW)(GWG), 2019 WL 542349 at *4 (S.D.N.Y. Feb. 12, 2019) (Gorenstein, M.J.) (Report & Recommendation),adopted at, 2019 WL 952333 (S.D.N.Y. Feb. 27, 2019) (Woods, D.J.).

2. Sanctions Pursuant to the Court's Inherent Power

An award of sanctions under the Court's inherent power requires a finding that the offending party "acted in bad faith, vexatiously, wantonly or for oppressive reasons." Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991); accord Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., supra, 682 F.3d at 178; In re 60 E. 80th St. Equities, Inc., 218 F.3d 109, 115 (2d Cir. 2000) (party seeking sanctions under court's inherent power must make showing sufficient to support "a finding of conduct constituting or akin to bad faith"). Sanctions under the Court's inherent power may also be imposed made where a litigant has perpetrated a fraud upon the Court. McMunn v. Mem'l Sloan-Kettering Cancer Ctr., 191 F. Supp. 2d 440, 445 (S.D.N.Y. 2002) (Buchwald, D.J.) ("[A] fraud upon the court occurs where it can be demonstrated, clearly and convincingly, that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability impartially to adjudicate a matter by improperly influencing the trier orunfairly hampering the presentation of the opposing party's claim or defense." (internal quotation marks omitted)).

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