United States District Court, D. Maryland
IMPACTOFFICE LLC, et al.
W.B. MASON CO., INC., et al.
DEBORAH K. CHASANOW United States District Judge.
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.
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)-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) .
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. (ECF No. 49) .
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).
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.
Standard of Review
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).
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
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
 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).
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
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)
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