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ImpactOffice LLC v. W.B. Mason Co., Inc.

United States District Court, D. Maryland

November 8, 2016

IMPACTOFFICE LLC, et al.
v.
W.B. MASON CO., INC., et al.

          MEMORANDUM OPINION

          DEBORAH K. CHASANOW United States District Judge.

         Presently pending and ready for resolution in this case is a motion for sanctions filed by Defendants W.B. Mason Co., Inc., Daniel Chamberlin, and Angela Dunham ("Defendants"). (ECF No. 50) . The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion for sanctions will be denied.

         I. Background

         On June 2, 2016, Plaintiffs ImpactOffice LLC, ImpactOffice Group LLC, and Office Essentials, Inc. ("Plaintiffs" or "Impact") filed this breach of contract case in state court, alleging that Plaintiffs' former employees, Defendants Chamberlin and Dunham, breached their non-solicitation and noncompete agreements by working for Defendant W.B. Mason. Plaintiffs also brought claims of tortious interference with contractual relations and tortious interference with prospective advantage against Defendant W.B. Mason. (ECF No. 2)-[1]Plaintiffs were granted a temporary restraining order the same day, and, also on June 2, Defendants removed the case to the United States District Court for the District of Maryland. (ECF No. 1) .

         This case was litigated for two months before it was voluntarily dismissed. Plaintiffs filed a motion to remand (ECF No. 23), and a motion for a temporary restraining order (ECF No. 24), both of which were denied following a hearing on June 16 (ECF No. 36) . On June 28, Defendants moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6). (ECF No. 42). Plaintiffs filed both a response in opposition (ECF No. 44) and an amended complaint (ECF No. 43) on July 15. The filing of the amended complaint rendered Defendants' motion to dismiss moot, and Defendants' motion was accordingly denied as moot. (ECF No. 46) . Defendants then filed a motion to dismiss Plaintiffs' amended complaint on July 19. (ECF No. 45). On August 2, 2016, Plaintiffs filed a notice of voluntary dismissal without prejudice pursuant to Fed.R.Civ.P. 41 (a) (1) (A) (i) . (ECF No. 47) . As no answer to the original or amended complaint or motion for summary judgment had been filed, the notice was approved, and Plaintiffs' case was closed.[2] (ECF No. 49) .

         On August 16, 2016, Defendants filed the instant motion for sanctions, seeking costs and fees pursuant to 28 U.S.C. § 1927 or the inherent power of the court to impose sanctions. (ECF No. 50). The court invited Plaintiffs to respond to Defendants' motion, see Local Rule 105.8, and Plaintiffs filed a response in opposition (ECF No. 52). Defendants replied. (ECF No. 54).

         Both Plaintiffs and Defendants argue that the parties' actions must be considered in light of related litigation. Shortly after removal, Plaintiffs moved to consolidate this case with two others: ImpactOffice LLC et al. v. Hard, et al., No. DKC-16-1675 (D.Md.), and Chapman et al. v. ImpactOffice LLC, No. TDC-16-1851 (D.Md.). Plaintiffs voluntarily dismissed this case before the motion to consolidate was decided. Also pending are ImpactOffice LLC v. Siniavsky, No. TDC-15-3481 (D.Md.), Paul v. ImpactOffice, LLC, No. DKC-16-2686 (D.Md.), and at least one state court case related to these issues (see ECF No. 54, at 9). The litigation in Hard followed a similar track to this case and was also voluntarily dismissed by Plaintiffs on August 2. Plaintiffs' counsel also represented Impact in Hard, and the Defendants here and the defendants in Hard were represented by the same attorneys. Although the cases were not consolidated, Defendants in this case and in Hard filed nearly identical motions for sanctions on August 16, and Plaintiffs filed nearly identical oppositions. Moreover, on August 3, the day after Plaintiffs' notice of voluntary dismissal, Defendants Chamberlin and Dunham, together with Hard defendants James Hard and Melissa Edwards, filed a complaint against Plaintiffs, seeking declaratory judgment on the issues raised in the instant case. Complaint, Hard et al. v. ImpactOffice LLC et al., No. TDC-16-2751 (D.Md. Aug. 3, 2016), ECF No. 1. On August 8, another former Impact employee filed a lawsuit against Plaintiffs, Complaint, Levin v. ImpactOffice LLC et al., No. DKC-16-2790 (D.Md. Aug. 8, 2016), ECF No. 1; two days later, Defendants Chamberlin and Dunham, Mr. Hard, and Ms. Edwards voluntarily dismissed their suit and joined Levin as plaintiffs, Amended Complaint, Levin, No. DKC-16-2790 (D.Md. Aug. 10, 2016), ECF No. 3.

         II. Standard of Review

         Section 1927 provides that an 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." 28 U.S.C. § 1927. "Section 1927 was intended to sanction conduct Rule 11 does not reach; i.e., protracting or multiplying the litigation to run up the opposing party's costs, remedied by awarding excess attorneys' fees and costs." Bakker v. Grutman, 942 F.2d 236, 242 (4th Cir. 1991) . The § 1927 inquiry "focuses on the conduct of the litigation and not on its merits." DeBauche v. Trani, 191 F.3d 499, 511 (4th Cir. 1999) (noting that "an attorney who files a meritorious claim and wins a substantial verdict may still be assessed sanctions under § 1927"). The imposition of sanctions under § 1927 requires a finding of bad faith on the part of the attorney. EEOC v. Great Steaks, Inc., 667 F.3d 510, 522 (4th Cir. 2012); Brubaker v. City of Richmond, 943 F.2d 1363, 1382 n.25 (4th Cir. 1991) . Bad faith may be found when, for example, "the attorney's actions are so completely without merit as to require the conclusion that they must have been taken for some improper purpose such as delay, " Griffin Whitaker, LLC v. Torres, No. DKC 10-0725, 2010 WL 3895384, at *5 (D.Md. Oct. 1, 2010) (quoting Dobkin v. Johns Hopkins Univ., Civ. No. HAR 93-2228, 1995 WL 167802, at *2 (D.Md. Mar. 24, 1995)), or when "duplicative or unnecessary filings" are made, Hunt v. Lee, 166 F.App'x 669, 671 (4th Cir. 2006).

         Alternatively, Defendants seek sanctions pursuant to the inherent power of the federal courts to sanction bad faith litigants. See Chambers v. Nasco, Inc., 501 U.S. 32, 45-46 (1991) (noting that courts may impose sanctions where "a party has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons'" (quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59 (1975))); Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980) . Unlike sanctions pursuant to § 1927, which may only be imposed on counsel, the court may impose such sanctions on a party or counsel. See Blue v. U.S. Dep't of Army, 914 F.2d 525, 533 (4th Cir. 1990). An award under the court's inherent power also requires a finding of bad faith. See Roadway Express, Inc., 447 U.S. at 766-67; Hutto v. Finney, 437 U.S. 678, 690 n.14 (1978) ("An equity court has the unquestioned power to award attorney's fees against a party who shows bad faith by delaying or disrupting the litigation[.]"); Brubaker, 943 F.2d at 1382. Sanctions are to be imposed sparingly. See, e.g., Jacobs v. Venali, Inc., 596 F.Supp.2d 906, 914 n.10 (D.Md. 2009).

         III. Analysis

         Defendants hypothesize that Plaintiffs' actions throughout this litigation were intended to delay the adjudication of the merits of its restrictive covenants in order to facilitate the July sale of the company. (ECF No. 50-1, at 14) . Defendants argue that sanctions are warranted because Plaintiffs promptly brought the case and "[u]se[d] the [1] itigation to its [s]trategic [a]dvantage" (id. at 3, 5); continued to litigate following the denial of a temporary restraining order (id. at 6-7, 14); "strategically timed" the filing of the amended complaint and notice of dismissal to cause delay (id. at 7-8, 12-13, 15), and filed a "contradictory" motion to consolidate in another case (id. at 8-10, 15) . Defendants further argue that Plaintiffs' actions following the dismissal of this case evince bad faith. (Id. at 13).

         The conduct of Plaintiffs and Plaintiffs' attorneys does not meet the standard of bad faith necessary to support sanctions under § 1927 or the inherent authority of the court. Taking Defendants' arguments in turn, they first allege that Plaintiffs improperly "rushed" into state court to file the complaint in this and a related case and to "immediately seek a temporary restraining order." (Id. at 4). The timely filing of a complaint clearly does not merit sanctions. The crux of Defendants' argument appears to be that Plaintiffs improperly filed piecemeal litigation, but each of the pending cases - half of which were filed by former Impact employees, not by Plaintiffs - involved different defendants who resigned from Impact at different times. Moreover, Plaintiffs promptly moved to consolidate the cases once they were removed to federal court.

         Defendants next suggest that sanctions are warranted because Impact "repeatedly voiced its intent to continue to pursue the litigation" following the denial of its motion for a temporary restraining order. (Id. at 6-7) .[3] While the likelihood of success on the merits is one of the factors considered on such a motion, a denial of a temporary restraining order is not a decision on the merits. The court did note, "some of the provisions in these agreements . . . cause me to question whether they are overbroad, " and described the noncompete clauses as "problematic, " (ECF No. 50-4, at 15), but the court also found that Plaintiffs had not shown that money damages would be insufficient in denying the motion (id. at 16) . The ...


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