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United States District Court, S.D. New York

November 1, 2004.


The opinion of the court was delivered by: HAROLD BAER, JR., District Judge[fn1] [fn1] Gabriela Leal, a Fall 2004 intern in my Chambers and a second-year law student at CUNY Law School, provided substantial assistance in the research and drafting of this Opinion.


Plaintiffs Source Enterprises, Inc., Source Magazine, LLC (collectively, "the Source") and Wissam Exclusive ("Wissam") (collectively, "the plaintiffs") filed suit against defendants Tanners Avenue Corp. ("Tanners"), Ballers USA, Inc. ("Ballers"), X Kore, LLC ("X Kore"), The Spot on 149th Street ("The Spot"), and various John Does, Jane Does and ABC Companies, in which the plaintiffs alleged violations of the Lanham Act, 15 U.S.C. § 1051, et seq., common law trade name infringement, and state law unfair competition, and sought monetary damages and equitable relief. The plaintiffs moved by order to show cause for a preliminary injunction. A hearing was not held on this matter because all of the defendants entered into a preliminary injunction on consent, which this Court "So Ordered" on March 9, 2004. Thereafter, the Source and Wissam reached a settlement agreement with Ballers and The Spot, which the Court "So Ordered" on May 27, 2004. Also on May 27, 2004, this Court granted the Source's and Wissam's motion for a default judgment and permanent injunction with respect to X Kore.

A bench trial was held on May 19, 2004 and May 27, 2004 on the plaintiffs' claims against Tanners, the only remaining identified defendant. At the conclusion of trial, Tanners consented to a permanent injunction and I dismissed the plaintiffs' claims for the reasons stated on the record.*fn2 Thus, the only remaining issues are the plaintiffs' applications for an award of attorney's fees pursuant to section 35 of the Lanham Act, 15 U.S.C. § 1117 and sanctions for Tanners' alleged violation of various discovery orders. It is these issues that I turn to now.


  The Source has for many years published magazines pertaining to hip-hop culture and music under THE SOURCE trademark. Over the last few years, the Source has begun a line of licensed products carrying its name. In August 2003, the Source authorized Wissam to manufacture a series of leather jackets to honor deceased rap stars, denominated the "fallen legends" series. These jackets were embossed with covers of THE SOURCE magazine that depict deceased rhythm and blues and hip-hop artists, such as Tupac Shakur, Aaliyah, and Lisa "Left Eye" Lopes. The plaintiffs brought this suit after it discovered that these jackets were being counterfeited and sold at retail stores in the New York City area, as well as a trade show in Las Vegas, Nevada.

  The March 5, 2004 Order to Show Cause permitted the plaintiffs to inspect and copy the defendants' records regarding the allegedly infringing merchandise, and following the hearing scheduled for March 10, 2004, to take the defendants' depositions upon twenty-four hours notice. As mentioned, the scheduled hearing did not occur because all defendants entered into a preliminary injunction on consent. The Court held pre-trial conferences with the parties on March 18, 2004, April 15, 2004, and May 6, 2004. After the first pre-trial conference, it was agreed that the parties would continue to undertake discovery. Pursuant to this, the plaintiffs noticed depositions of Tanners representatives, Sangkoo Han ("Mr. Han")*fn3 and his daughter, Sandy Taeyoun Han ("Ms. Han")*fn4 for April 5, 2004. Neither Mr. Han, Ms. Han, nor their counsel, Matthew Jeon ("Jeon") appeared on the scheduled date. Ultimately, these depositions were conducted two days later on April 7, 2004. The next day, the plaintiffs provided Tanners with a letter that summarized the documents requested during depositions. These included documents relating to any orders taken or catalogues displayed during the MAGIC trade show in February 2004 and any communications or orders placed with a suspected manufacturer of the counterfeit jackets. Tanners did not respond to these requests.

  At the April 15, 2004 pre-trial conference, the plaintiffs informed the Court of Tanners' lack of cooperation and, accordingly, the Court ordered that all documents be produced by April 25, 2004. The Court was again informed at the May 6, 2004 pre-trial conference that Tanners had not produced any documents. The Court then ordered Tanners to respond to the plaintiffs' document requests by May 10, 2004 and scheduled trial for May 19, 2004. By letter dated May 11, 2004, plaintiffs informed the Court that the discovery requests were still outstanding and requested that sanctions be imposed, including that: "(1) defendant Tanners be precluded from asserting defenses to this action; (2) damages against defendant be established at $25,000 due to Tanners' refusal to provide sales information; and (3) $5,000.00 in attorneys fees." Letter from Gabriel to the Court of 5/11/04. In response, the Court informed the parties that if Tanners appeared in court on May 19, 2004 without having complied with discovery, the Court would enter a default and impose sanctions.

  Notwithstanding this string of court orders, Tanners persistently failed to respond to the plaintiffs' discovery requests, and, as a result, the plaintiffs were unable to effectively prepare for trial. Indeed, the trial was ultimately adjourned from May 19, 2004 until May 25, 2004 because defense counsel did not have all of his witnesses available. Before concluding the proceedings for the day, the Court had the plaintiffs' April 8, 2004 discovery request read into the record and, again, ordered that Tanners respond by May 21, 2004. When Tanners finally did produce documents on the very day of the deadline, its production was incomplete. Tanners did not produce all documents until May 24, 2004, the day before the scheduled second day of trial.

  Moreover, Tanners did not file an answer in this matter. The Court, however, denied the plaintiffs' motion for default, because, inter alia, Tanners was present on the date of trial and ready to go forward on the case, as least that was what Tanners represented. As it turns out, Jeon also neglected to inform his client, Mr. Han, that trial was scheduled to commence on May 19, 2004. However, Ms. Han, an employee of Tanners, eventually arrived in Court. According to Jeon, Ms. Han was present in his office at 8:30 AM, but she had to take a detour to Secaucus, New Jersey prior to her court appearance to retrieve some documents that Jeon had apparently only requested she obtain that morning. At the conclusion of trial, the plaintiffs' conceded that they were unable to prove damages and instead requested an award of attorneys' fees and sanctions because of Tanners' alleged willful infringement and failure to abide by numerous discovery orders. As mentioned, Tanners consented to a permanent injunction and I dismissed the plaintiffs' claims against Tanners. The parties were instructed to submit post-trial briefs on the issues of attorneys' fees and sanctions.


  A. Lanham Act Attorney's Fees

  Section 35 of the Lanham Act, 15 U.S.C. § 1117(a), provides, in pertinent part, that "[t]he court in exceptional cases may award reasonable attorneys fees to the prevailing party." Typically, courts have found that "exceptional cases" within the meaning of the statute are those where the cases involve "fraud or bad faith," Twin Peaks Prods. V. Publications Int'l Ltd., 996 F.2d 1366, 1383 (2d Cir. 1993), or "intentional, deliberate, or willful infringement," Guess?, Inc. v. Gold Ctr. Jewelry, 997 F. Supp. 409, 412 (S.D.N.Y. 1998). I have already concluded that there was no evidence of willful infringement on the part of Tanners and to the extent there remains any doubt on this score, I reiterate my finding here. Nevertheless, the Second Circuit has found that attorneys' fees may be awarded in the absence of willful infringement, where there was "fraudulent conduct in the course of conducting trademark litigation." Patsy's Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 222 (2d Cir. 2003) (affirming the district court's award of attorneys' fees pursuant to 15 U.S.C. § 1117(a) where the defendant submitted false evidence at trial). The plaintiffs argue that an award of attorneys' fees for misconduct during the course of the litigation is warranted under this Second Circuit holding. However, upon closer inspection, it is evident that there are very few instances of an award of attorneys' fees under the Lanham Act where there was no willful infringement. Indeed, the only two courts that have relied upon Patsy's Brand, Inc. to support for an award of attorneys' fees under the Lanham Act for misconduct involved willful Lanham Act violations. E.g., De La Torre Bueno v. Dance Perspectives Found., Inc., No. 02 Civ. 8542, 2004 WL 1724950, at *2 (S.D.N.Y. July 30, 2004); Ramada Franchise Sys., Inc. v. Boychuk, 283 F. Supp.2d 777, 792-93 (N.D.N.Y. 2003).

  Moreover, these cases involve misconduct of a fraudulent nature, not mere non-compliance. For example, in Patsy's Brand, Inc., the district court ruled that the defendant's reliance on a fabricated document and false assertions via counsel and its principle was "more tha[n] sufficient to establish the bad faith necessary to justify an award to Plaintiff of the full amount of its attorneys' fees and costs." No. 99 Civ. 10175, 2001 WL 1154669, at *1 (S.D.N.Y. Oct. 1, 2001), aff'd as modified, 317 F.3d 209, 222 (2d Cir. 2003); see also De La Torre Bueno, 2004 WL 1724950, at *2 (awarding attorneys' fees based on a jury finding of willful trademark infringement and false assertions by the defendant's principle, which were contradicted by documentary evidence). Here there is no similar claim of spurious documents or perjured testimony. Instead, defense counsel simply failed, albeit repeatedly, to provide discovery. This, I believe, is better addressed via the applicable discovery sanctions and the Court's inherent power to sanction and not under the Lanham Act.

  B. Sanctions

  There are three alternate grounds for the imposition of sanctions in this case. First, "Federal Rule of Civil Procedure [("Fed.R. Civ. P.")] 37 provides for the imposition of sanctions, including attorneys fees and costs, for certain discovery abuses." Cielo Creations, Inc. v. Goa Da Trading Co., Ltd., No. A 04 Civ. 1952, 2004 WL 1460372, at *2 (S.D.N.Y. June 28, 2004) (citing Fed.R. Civ. P. 37 and Roadway Exp., Inc. v. Piper, 447 U.S. 752, 763 (1980)). Specifically, Fed.R. Civ. P. 37(b)(2) provides, in pertinent part, that when "a party fails to obey an order to provide or permit discovery," the court may sanction that party by requiring "that party failing to obey the order . . . pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust." The Second Circuit has held that "the imposition of sanctions under Rule 37 is within the discretion of the district court." John B Hull, Inc., v. Waterbury Petroleum Prods., Inc., 845 F.2d 1172, 1176 (2d Cir. 1988). Such sanctions may be awarded against counsel. E.g., Yeboah v. United States, No. 99 Civ. 4923, 2000 WL 1576886, at *4 (S.D.N.Y. Oct. 20, 2000).

  Second, sanctions may also be imposed upon counsel pursuant to 28 U.S.C. § 1927, which provides that "[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." As another court in this District has observed, "[s]ection 1927 sanctions may be awarded against an attorney for discovery abuses." Cielo Creations, Inc., 2004 WL 1460372, at *3 (citing Apex Oil Co. v. Belcher Co. of N.Y., Inc., 855 F.2d 1009, 1019-20 (2d Cir. 1988)). Third, the Court may impose sanctions pursuant to its inherent power, which derives from "the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962). This inherent power permits the Court to sanction a wide range of contempt and disobedience of court orders. Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991). Such sanctions may also be levied directly against counsel. Id. at 45 (explaining that "[t]here are ample grounds for recognizing . . . that in narrowly defined circumstances federal courts have inherent power to assess attorney's fees against counsel, even though the so-called `American Rule' prohibits fee shifting in most cases.") (alteration in original) (quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 764 (1980)).

  Sanctions here are warranted because of Tanners' repeated failure to comply with discovery orders, which thwarted an expeditious resolution of this case and hindered the plaintiffs' ability to prosecute this action. Tanners contends that "documents requested by the plaintiff [were] provided as [they] became available." Def. Mem. in Opp. at 3. However, at trial I discovered that this was simply not the case. The plaintiffs made several requests for various documents and Tanners ignored those requests. For example, the plaintiffs requested a Tanners catalogue "[a]t the deposition and then immediately after." Transcript ("Tr.") at 83:16-17. Jeon admitted, "There was a request made at the deposition. I remember this came up at deposition." Tr. at 83:18-19. But Jeon "[n]ever got one." Tr. at 83:21. What is even more troubling is that Ms. Han, Jeon's first witness and one of Tanner's three employees, testified that she "[could] definitely get . . . one," Tr. at 83:10, but that she had not given a catalogue to Jeon" because she "didn't know that one was requested," Tr. at 84:1-2. Gabriel was forced to demand production of several previously requested documents at trial. As this exchange makes clear, much of the difficulty in discovery was the result of counsel's errors and should not therefore be borne by Tanners. Indeed, as noted, Jeon apparently neglected to even inform his client, Mr. Han, of the May 19, 2004 scheduled trial date. When pressed for an explanation of his conduct, Jeon replied, "this is the first time I have ever gone to trial within a month after the conference." Tr. at 145:24-25. Jeon will therefore be liable for $5,000, no part of which should be paid by his client, Tanners.

  Any three of these sources provide ample authority for this Court to impose sanctions on Tanners for its unashamed violations of numerous discovery orders. Nonetheless, 28 U.S.C. § 1927 requires that the Court provide specific notice of the authority pursuant to which sanctions are being imposed, Lapidus, S.A. v. Vann, 112 F.3d 91, 97 (2d Cir. 1997) (holding that due process requires that "[a]n attorney . . . be forewarned of the authority under which sanctions are being considered"). Here, counsel was informed of plaintiffs' application for attorneys' fees and sanctions, although no specific authority, other than the Lanham Act, was cited at the conclusion of trial or in plaintiffs' memoranda. Thus, in an abundance of caution, I rely solely on this Courts' inherent authority and Fed.R. Civ. P. 37.


  For the foregoing reasons, Tanners' defense counsel, Matthew Jeon, is sanctioned in the amount of $5,000. The Clerk of the Court is instructed to close any pending motions and remove this case from my docket.


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