United States District Court, S.D. New York
OPINION & ORDER
J. PECK, United States Magistrate Judge.
Goldberger Company, LLC brought this action against Uneeda
Doll Company, Ltd. and its vice president, Larry R. Hogge
(collectively "Uneeda"), alleging unfair
competition, false advertising, trademark infringement, and
other claims under federal and New York state law. (Dkt. No.
5: Compl.) Goldberger voluntarily dismissed the case, without
prejudice, on March 17, 2017. (Dkt. No. 49.) Presently before
the Court is Uneeda's post-dismissal motion for sanctions
pursuant to Rule 11 of the Federal Rules of Civil Procedure,
28 U.S.C. § 1927, and the Court's inherent powers.
(Dkt. No. 62: Uneeda Mot. for Sanctions.) Uneeda seeks $83,
126.62 as partial reimbursement for its attorneys' fees
and costs incurred in defending against Goldberger's
action, plus the additional fees incurred for this motion.
(Dkt. No. 64: Uneeda Br. at 22-24.) The parties have
consented to decision of the motion by a United States
Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Dkt.
reasons set forth below, Uneeda's motion for sanctions is
Goldberger and defendant Uneeda both manufacture and sell
children's dolls and related accessories. (Dkt. No. 21:
Am. Compl. ¶¶ 1, 19-23, 43; Dkt. No. 27: Hogge Aff.
¶ 2.) Defendant Larry Hogge is Uneeda's president
and has been employed by Uneeda since 2002. (Hogge Aff.
¶¶ 1, 6.)
Allegations in Goldberger's Complaint
alleged that Uneeda took dolls manufactured by Goldberger as
part of their "Baby's First" line and placed
them in Uneeda packaging to induce retailer customers to buy
Uneeda's dolls rather than Goldberger's.
(See Dkt. No. 21: Am. Compl. ¶¶ 1, 46.)
Specifically, the complaint alleges that "[o]n or about
December of 2015, a representative or agent of Defendant
[Uneeda] provided a third party doll retailer located in
South America . . . [Ripley] with two of [Goldberger's]
'Baby's First' dolls in Uneeda's packaging .
. ., and sought to solicit orders" from Ripley. (Am.
Compl. ¶ 47.) Goldberger alleged that such conduct
caused Ripley to enter into a contract with Uneeda instead of
Goldberger because of Uneeda's lower prices, whereas
"[t]ypically, Goldberger would have entered into a
multi-year account with Ripley that would have resulted in
several hundred thousand dollars in revenues." (Dkt. No.
35: Goldberger Opp. to Mot. to Dismiss Ex. 1: Holtzman Aff.
¶ 8.) Goldberger claimed that the loss of the Ripley
account, and possibly other accounts not identifiable at the
time the complaint was filed, directly resulted from
Uneeda's conduct. (Id. ¶¶ 8, 10.)
basis for bringing this action was a December 9, 2015 email
from Soledad Jones, a Goldberger sales representative in
South America affiliated with non-party Funmaxtoys, to Robert
Schleicher, Goldberger's director of sales, and Jeff
Holtzman, Goldberger's CEO. (Holtzman Aff. Ex. 1.) Jones
emailed that while at a sales meeting in Peru with Ripley in
an attempt to sell Goldberger's "Baby's
First" line of dolls, Ripley's representative showed
them Uneeda's dolls that copied Goldberger's and were
offered for "prices so much Cheaper!!"
(Id.) Jones attached a photograph ("the
Photograph") to the email showing two dolls each in a
box with a "Uneeda" label displayed on the corner
of the packaging with the name of the doll line listed as
"I Love baby!!" (Id.) The dolls have
"BF" displayed on their clothing in multiple
places, which Goldberger contends is a recognized
abbreviation for its "Baby's First" dolls, as
well as other characteristics that allegedly are recognizable
features of Goldberger dolls. (Id.) After receiving
this email, Holtzman did not call Jones or anyone from
Funmaxtoys, and did not "recall whether [he]
addressed" the issue by sending a reply email to Jones.
(Dkt. No. 63: Haddad Aff. Ex. C: Holtzman Dep. at 23-24.) Nor
to Holtzman's knowledge did anyone else at Goldberger
seek more information from Jones regarding her conversation
with the Ripley representatives or the Photograph.
(Id. at 24-25.)
claims trademark rights to the "BF" mark, the
dolls' outfits, and the unique characteristics of the
dolls' appearance. (Am. Compl. ¶¶ 22-36.) On
the basis of the email and the Photograph, Goldberger alleged
that Uneeda infringed on Goldberger's trademark rights in
order to increase Uneeda's sales. (Id. ¶
56.) Additionally, the complaint alleged that Hogge,
Uneeda's President and principal officer, was the
"moving, active, and conscious force" behind
Uneeda's actions, which he "approved and
authorized." (Id. ¶¶ 15-18.)
Goldberger's complaint sought monetary damages and
injunctive relief from Uneeda for "irreparable
damage" to Goldberger's goodwill and business
reputation. (Id. ¶¶ 67, 75, 83, 90, 97,
105, 112, 115.) Goldberger presented (in discovery) records
of decreased sales of Goldberger products between 2015 and
2016 in support of its damages claim. (See Haddad
Aff. Ex. D: Holtzman Dep. Ex. 11.)
initiated this action against Uneeda on June 17, 2016,
roughly six months after receiving Jones' email. (Dkt.
Nos. 1, 5: Compl.) Uneeda moved to dismiss on August 4, 2016,
alleging lack of personal jurisdiction and failure to state a
claim. (Dkt. No. 12: Uneeda Mot. to Dismiss.) Judge Pauley
struck the motion for failure to comply with court rules.
(Dkt. No. 13.) Goldberger amended its complaint on September
30, 2016. (Dkt. No. 21.) I held an unsuccessful settlement
conference with the parties on November 14, 2016. (Dkt. Nos.
20, 22.) Uneeda renewed its motion to dismiss on November 22,
2016. (Dkt. Nos. 26-28.) The motion was not based on
a failure to allege or prove damages. (Id.) Judge
Pauley heard oral argument on the motion to dismiss on
January 19, 2017, but reserved ruling. (Dkt. No. 43.)
Discovery proceeded while the motion to dismiss was pending.
(Dkt. No. 19: 9/16/16 Scheduling Order; see pages
12-13 below.) Two weeks before the March 31, 2017 deadline
for the close of fact discovery (9/16/16 Scheduling Order
¶ 7), Goldberger voluntarily dismissed the action
without prejudice pursuant to Federal Rule of Civil Procedure
41(a)(1)(A)(i) on March 17, 2017 (Dkt. No. 49).
Motion for Sanctions
wrote to Goldberger's counsel on November 23, 2016, and
again on January 18, 2017, stating that it intended to file a
motion for Rule 11 sanctions against Goldberger and its
counsel; the second letter attached a copy of the proposed
motion. (Dkt. No. 63: Haddad Aff. Exs. G, K.) Uneeda's
second letter asserted that, after discovery and briefing on
the motion to dismiss, it had become "more clear"
that "the Action is completely frivolous, without any
basis in fact and law[.]" (Haddad Aff. Ex. K: 1/18/17
Letter at 1.) Goldberger's counsel did not respond to
either letter. (See Dkt. No. 64: Uneeda Br. at 11.)
filed this sanctions motion on April 21, 2017 (Dkt. No. 62),
arguing that Goldberger continued to litigate this case for a
significant period of time despite having no damages. (Uneeda
Br. at 5.) Uneeda further asserts that Goldberger's
claims lacked any evidentiary support from the outset and
that Goldberger produced "fraudulent discovery responses
[and] false declarations" in support of its claims.
(Id.) Specifically, Uneeda claims that
Holtzman's deposition testimony conflicted with the
complaint, his prior affidavit, and Goldberger's
interrogatory responses. (Id. at 13-16.) Uneeda
seeks $83, 126.62, representing 85 percent of its
attorneys' fees and expenses incurred from February 28,
to April 15, 2017, and also requests the fees incurred for
this motion. (Id. at 22-24.)
LEGAL STANDARDS GOVERNING SANCTIONS
The Court's Inherent Powers
federal court . . . may exercise its inherent power to
sanction a party or an attorney who has 'acted in bad
faith, vexatiously, wantonly, or for oppressive
reasons.'" Ransmeier v. Mariani, 718 F.3d
64, 68 (2d Cir. 2013). "These powers are 'governed not
by rule or statute but by the control necessarily vested in
courts to manage their own affairs so as to achieve the
orderly and expeditious disposition of cases.'"
Chambers v. NASCO, Inc., 501 U.S. at 43-44, 111
S.Ct. at 2132; accord, e.g., Ransmeier
v. Mariani, 718 F.3d at 68 (The Court's
"authority to impose sanctions is grounded, first and
foremost, in [its] inherent power to control the proceedings
that take place before [it]"). "Because of their
very potency, inherent powers must be exercised with
restraint and discretion." Chambers v. NASCO,
Inc., 501 U.S. at 44, 111 S.Ct. at 2132; cf. ...