United States District Court, S.D. New York
July 14, 2004.
JUDITH RIPKA CREATIONS, INC., Plaintiff,
RUBINOFF IMPORTS, INC., Defendant.
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 approximately
125% more in profits than was reflected in the records it
Instead, Defendants made representations about the production
that are easily interpreted to mean that they were producing
all relevant supplier documents. For example, in a letter to
the Court dated December 10, 2003, Mr. Horowitz stated that he
was prepared to "provid[e] the supplier documents to plaintiff
and most if not all of the customer documents described in your
Honor's Order dated December 9, 2003. Pursuant to said Order,
however, defendants request until tomorrow to ascertain if there
are additional customer invoices." Similarly, in a letter to the Court the following day, Mr. Horowitz repeated that he would
produce "All supplier documents and most customer invoices." In
addition, the cover letter accompanying the December 29
production stated, "enclosed are the customer and supplier
invoices of defendant produced pursuant to Judge Jones' order."
These statements, which are representative of many of Mr.
Horowitz's statements to both the Court and Plaintiff were, at a
minimum, misleading and omitted essential information that
Defendants should have disclosed.
Defendants argue that they were obligated only to produce the
documents that they had in their possession, and that they had no
duty to disclose the fact that these documents did not comprise
the universe of relevant documents. Therefore, Defendants
contend, there is no basis for the Court to vacate the judgment.
First, as I stated earlier, my communications with the parties,
as well as the December 9 order, implicitly imposed upon
Defendants a duty to disclose that they did not have, or were not
producing, all relevant supplier documents. Second, Mr.
Horowitz's statements regarding the productions were, in and of
Third, even if I did not find that Defendants had a duty to
disclose, I would nonetheless vacate the judgment under Rule 60(b)(3) because Mr. Horowitz made statements in the
course of settlement negotiations that affirmatively
misrepresented the amount that Defendants profited from the
allegedly infringing jewelry. Although the Defendants knew that
Plaintiff was not aware that it lacked complete information, Mr.
Horowitz indicated that the maximum profits Defendants realized
were those reflected in the documents previously produced. In
addition to the representations I discussed earlier, Mr.
Horowitz, in response to Plaintiff's questions regarding
Defendants' calculations, stated that the Rule 68 offer "was
calculated to significantly exceed the potential provable
profits." (1/9/04 Ltr. from Steven Horowitz to Theordore
Steingut). These statements were false and misleading, and were
made by the Defendants with the intent to induce Plaintiff to
settle for a much lesser amount than the profits Defendants
For these reasons, I find that there is clear and convincing
evidence that Defendants made material misrepresentations by
omitting the fact that they were not producing all of the
relevant invoices and that the profits they realized did not
exceed $55,000. See Fleming, 865 F.2d at 484. Had Defendants
disclosed this information, Plaintiff would not have settled at the time or for the amount
that it did.
In addition, I note that I do not need to find intentional bad
faith on the part of the Defendants in order to vacate the
judgment under Rule 60(b)(3). I could, and do, find that
Defendants' failure to produce documents requested in discovery
and ordered by this Court constitutes "misconduct," as that term
is used in Rule 60(b)(3). See Catskill Dev., LLC v. Park Place
Entm't Corp., 286 F. Supp.2d 309, 314-15 (S.D.N.Y. 2003)
(holding that "accidental failure to disclose or produce
materials requested in discovery can constitute `misconduct'
within the purview of Rule 60(b)(3).").
Lastly, I note that the Defendants will not suffer any
prejudice if the judgment is vacated. At the time the judgment
was entered, this case was still in the early stages of discovery
and far from being trial-ready.
Accordingly, the judgment entered in this case is vacated
pursuant to Rule 60(b)(3).
2. Motion to Hold Defendant in Contempt
Plaintiff also moves to hold Defendants in contempt for
violating this Court's January 26, 2004 Order prohibiting them
from returning to Unicorn any pieces of the allegedly infringing
jewelry for a refund or for any other purpose that would put the jewelry back in the stream of
commerce. Plaintiff alleges that Defendants returned two pieces
of jewelry to Unicorn for reimbursement. In support of this
argument, Plaintiff produces a March 5, 2004 letter from Unicorn
that indicates that Defendants "sent two necklaces" to it "as
returned goods." In response, Defendants assert that the
necklaces had been returned to them for repair by two customers,
and that it sent the necklaces to Unicorn solely for the purpose
of having them do the repairs.
In order to hold Defendants in contempt, I would have to find
that the "proof of non-compliance" with this Court's orders "is
clear and convincing." United States v. Local 1804-1, Int'l
Longshoremen's Ass'n, AFL-CIO, 44 F.3d 1091, 1095-96 (2d Cir.
1995). The evidence produced by Plaintiff, however, simply does
not convince me that the Defendants are in contempt of my orders.
Therefore, Plaintiff's motion is denied.
For the reasons above, I grant Plaintiff's motion to vacate the
judgment, and deny its motion to hold Defendants in contempt of
Court. I also reinstate the temporary restraining order in place
at the time the judgment was entered. Defendants opposition papers to a preliminary injunction are
due on or before July 28, and Plaintiff's reply papers are due on
or before August 4.
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