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Goldberger Co., LLC v. Uneeda Doll Co., Ltd.

United States District Court, S.D. New York

July 21, 2017

GOLDBERGER COMPANY, LLC, Plaintiff,
v.
UNEEDA DOLL COMPANY, LTD. and LARRY R. HOGGE, Defendants.

          OPINION & ORDER

          ANDREW J. PECK, United States Magistrate Judge.

         Plaintiff 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. No. 71.)

         For the reasons set forth below, Uneeda's motion for sanctions is DENIED.

         FACTS

         Parties

         Plaintiff 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.)

         The Allegations in Goldberger's Complaint

         Goldberger 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.)

         Goldberger's 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.)

         Goldberger 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.)

         Procedural History

         Goldberger 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).[1]

         Uneeda's Motion for Sanctions

         Uneeda 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.)

         Uneeda 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, 2017[2] to April 15, 2017, and also requests the fees incurred for this motion. (Id. at 22-24.)

         ANALYSIS

         I. LEGAL STANDARDS GOVERNING SANCTIONS

         A. The Court's Inherent Powers

         "[A] 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).[3] "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. ...


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