The opinion of the court was delivered by: BARBARA JONES, District Judge
Before the Court is Plaintiff's motion to vacate the judgment,
entered after Plaintiff accepted Defendants' Rule 68 offer, and
its motion to hold Defendants in contempt of court. For the
reasons to follow, I grant Plaintiff's motion to vacate the
judgment and deny the motion to hold Defendants in contempt.
On December 3, 2003, Plaintiff obtained an ex parte seizure
order authorizing seizure of allegedly infringing merchandise and
related documents from Defendants. On December 9, 2003, I issued
an order, memorializing a conference I conducted with the parties
that day, directing the Defendants to "supply plaintiff with
purchase and sales orders pertaining to defendants' purchase of
jewelry similar to that described in the complaint. Such papers
must be delivered to the plaintiff by December 10, 2003, or defendants must notify the Court of the need to extend the
deadline." 12/9/03 Order at 2.
After several communications between the parties and
conferences with the Court regarding the timing and
confidentiality of the documents to be produced, Defendants
produced the customer and supplier documents that it had in its
possession on December 29, 2003. The documents reflected that
Defendants' purchased between $50,000 and $70,000 of jewelry for
resale from a company named Unicorn of Hong Kong. It is
undisputed, however, that the document production did not contain
all of Defendants' invoices of its relevant purchases from
Unicorn, but rather contained only the invoices that Defendants
had in their possession at the time. These invoices, according to
Defendants' recent admissions, were largely incomplete because of
their haphazard record-keeping. Mr. Sholom Rubinoff, principal of
Defendants Rubinoff Imports, Inc. and Rubinoff Jewelry, Inc.,
declared that he "did not keep . . . detailed business
records. . . . ledgers, journals, and other books of account[s]
reflecting the entire business." (Rubinoff Decl. at ¶ 5). In
fact, Mr. Rubinoff averred that he did not "systematically
maintain records of old purchases and sales," and instead
"dispose[d] or some old invoices in the ordinary course of [his]
business." (Rubinoff Decl. at ¶ 6). It is undisputed that at no time did Defendants' attorney, Mr.
Steven Horowitz, inform Plaintiff that the Defendants did not
keep regular records or that the documents Defendants produced
reflected only some, but not all, of the purchase information
that Plaintiff was seeking.
On December 26, 2003, Defendants served upon Plaintiff a
Rule 68 offer of judgment in the amount of $60,000, which was set to
expire on January 12, 2004. During the time that the offer was
pending, counsel for the parties communicated about the profits
realized by the Defendants. Defendants' counsel asserted that, by
its calculation, Defendants realized a profit of $54,291, and
provided Plaintiff with, what it characterized, as "a summary of
the calculation of gross profits on the jewelry items at issue
along with relevant explanations." (Pl's Ex. 1 (1/2/03 Ltr. from
Steven Horowitz to Theodore Steingut)). It is undisputed that
this calculation accounted only for the jewelry reflected in the
documents Defendants produced to Plaintiff.
Plaintiff accepted the offer of judgment for $60,000 on January
12, 2004, and this Court entered judgment on January 20, 2004. Following the entry of judgment, Plaintiff commenced litigation
against Defendants' supplier, Unicorn. During the course of that
litigation, Plaintiff obtained several of the Rubinoff
Defendants' invoices that they had not been produced during this
litigation, which reflected that the Rubinoff Defendants likely
profited between $84,500 and $115,000 over and above the
amounts previously disclosed. Specifically, Unicorn produced an
invoice dated December 2, 2003, which reflected that the Rubinoff
Defendants purchased approximately 50 pieces of jewelry from
Unicorn, as well as invoices dated October 3, 2003, November 11,
2003, and January 20, 2004 reflecting numerous purchases that
were not disclosed prior to the settlement. (See Pl's Ex. 2).
Notably, Unicorn's production showed that the Rubinoff Defendants
had produced invoices generated almost a year before the seizure,
but not others that were generated much closer to the time of the
seizure including one that was dated one day before this
Based on this new information, Plaintiff made a motion to
vacate the judgment pursuant to Federal Rule of Civil Procedure
60(b) on April 21, 2004. After reviewing the parties' briefs, as
well as conducting a 2-day hearing that included witness
testimony and exhibits, it is my opinion that the judgment should be vacated because the Defendants made
material misrepresentations and engaged in misconduct with
respect to the documents they produced and their representations
relating to the amount of profits they realized from the
allegedly infringing jewelry.
1. Motion to Vacate the Judgment Pursuant to Rule 60
Rule 68 judgments may be vacated under Rule 60(b), which allows
a court, in its sound discretion, to "relieve a party . . . from
a final judgment order," for several enumerated reasons.
Fed.R.Civ.P. 60(b); see also Mendell v. Gollust, 909 F.2d 724, 731
(2d Cir. 1990), aff'd, 501 U.S. 115 (1991). According to
60(b)(3), a court may vacate a judgment upon a showing of "fraud
(whether heretofore denominated intrinsic or extrinsic),
misrepresentation, or other misconduct of an adverse party." Fed
R. Civ. P. 60(b)(3).
In order to vacate the judgment under Rule 60(b)(3), Plaintiff
"must demonstrate, by clear and convincing evidence, that
`material misrepresentations' were made," which "prevented
plaintiff from `fully and fairly' presenting his case." Walther
v. Maricopa Int'l Inv. Corp., 2002 WL 31521078, *3 (S.D.N.Y.
Nov. 12, 2002) (citing Fleming v. New York Univ., 865 F.2d 478, 484 (2d Cir. 1989). I
believe Plaintiff has met its burden here.
I ordered Defendants, both by written order and verbally, to
produce all relevant supplier documents, without limitation to
documents that Defendants currently had in their possession. It
was clear to me, as well as to Defendants' attorney, that
Plaintiff was seeking all supplier purchase records.
However, Defendants' attorney never informed Plaintiff or the
Court that Defendants did not possess many of the relevant
records, including records of purchases made within months of the
litigation and records that, in total, reflected ...