United States District Court, D. Maryland
DEBORAH K. CHASANOW UNITED STATES DISTRICT JUDGE
pending and ready for resolution in this case is a motion for
sanctions filed by Defendants James Hard and Melissa Edwards
("Defendants"). (ECF No. 31). 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.
26, 2016, Plaintiff ImpactOffice LLC ("Plaintiff"
or "Impact") filed this breach of contract case in
state court, alleging that Defendants, Plaintiff's former
employees, breached the non-solicitation and non-compete
provisions of their employment agreements by working for W.B.
Mason Co., Inc., Plaintiff's competitor. (ECF No. 2) .
Defendants removed the case to the United States District
Court for the District of Maryland the following day. (ECF
case was litigated for approximately two months before it was
voluntarily dismissed. After its motion for a temporary
restraining order or preliminary injunction was denied (ECF
Nos. 16; 23), Plaintiff filed an amended complaint on June 27
(ECF No. 25) . On June 28, Defendants filed a motion to
dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)
(6) . (ECF No. 26). Plaintiff responded in opposition (ECF
No. 27), and Defendants replied on July 29 (ECF No. 28). On
August 2, 2016, Plaintiff filed a notice of voluntary
dismissal without prejudice pursuant to Fed.R.Civ.P. 41 (a)
(1) (A) (i) . (ECF No. 29) . As no answer to the original or
amended complaint or motion for summary judgment had been
filed, the notice was approved, and Plaintiff's case was
closed. (ECF No. 30). 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. 31)
. The court invited Plaintiff to respond to Defendants'
motion, see Local Rule 105.8, and Plaintiff filed a
response in opposition (ECF No. 33). Defendants replied. (ECF
Plaintiff and Defendants argue that the parties' actions
must be considered in light of related litigation. Impact
moved to consolidate this case with two others:
ImpactOffice LLC et al. v. W.B. Mason Co. r
Lnc. r et al., No. DKC-16-1814 (D.Md.), and
Chapman et al. v. LmpactOffice LLC, No. TDC-16-1851
(D.Md.). Motion to Consolidate Cases, W.B. Mason,
No. DKC-16-1814 (D.Md. June 10, 2016), ECF No. 17. Impact
also voluntarily dismissed W.B. Mason on August 2,
before the motion to consolidate was decided. Notice of
Voluntary Dismissal, W.B. Mason, No. DKC-16-1814
(D.Md. Aug. 2, 2016), ECF No. 47. Also pending are Lmpact
Office LLC v. Siniavsky, No. TDC-15-3481 (D.Md.),
Paul v. LmpactOffice, LLC, No. DKC-16-2686 (D.Md.),
and at least one state court case related to these issues.
Plaintiff's counsel also represented Impact in W.B.
Mason, and the Defendants here and the defendants in
W.B. Mason were represented by the same attorneys.
Although the cases were not consolidated, Defendants in this
case and in W.B. Mason filed nearly identical
motions for sanctions on August 16, and Impact filed nearly
identical oppositions. Moreover, on August 3, the day after
Plaintiff's notice of voluntary dismissal, Defendants
Hard and Edwards, together with W.B. Mason
defendants Daniel Chamberlin and Angela Dunham, filed a
complaint against Plaintiff, seeking declaratory judgment on
the issues raised in the instant case. Complaint, Hard et
al. v. LmpactOffice 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 Plaintiff, Complaint,
Levin v. ImpactOffice LLC et al., No. DKC-16-2790
(D.Md. Aug. 8, 2016), ECF No. 1; two days later, Defendants
Hard and Edwards, Mr. Chamberlin, and Ms. Dunham 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 Plaintiff's 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. 31-1, at 13-14) .
Defendants argue that sanctions are warranted because
Plaintiff promptly brought the case and "[u]se[d] the
 itigation to its [s]trategic [a]dvantage"
(id. at 3); continued to litigate following the
denial of a temporary restraining order (id. at 5-7,
14); "strategically timed" the notice of dismissal
to cause delay (id. at 7-8, 12-14), and filed
"contradictory" motions to consolidate in other
cases (id. at 8-9, 14). Defendants further argue
that Plaintiff's actions following the dismissal of this
case evince bad faith. (Id. at 14) .
conduct of Plaintiff and Plaintiff's 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 Plaintiff improperly "rushed" into state court
to file the complaint and to "immediately seek a
temporary restraining order." (Id. at 3) . The
timely filing of a complaint clearly does not merit
sanctions. The crux of Defendants' argument appears to be
that Plaintiff improperly filed piecemeal litigation, but
each of the pending cases - half of which were filed by
former Impact employees, not by Plaintiff - involved
different defendants who resigned from Impact at different
times. Moreover, Plaintiff promptly moved to consolidate the
cases once they were removed to federal court.
next suggest that sanctions are warranted because Plaintiff
"repeatedly voiced its intent to continue to pursue the
litigation" following the denial of its motion for a
temporary restraining order. (Id. at 5-7)
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 non- compete clauses as "problematic,
" (ECF No. 31-4, at 15), but the court also found that
Plaintiff had not shown that money damages would be
insufficient in denying the motion (id. at 16) . The
decision to continue to pursue a case following the denial of
injunctive relief cannot, standing alone, be construed as a
necessarily bad faith attempt to multiply the proceedings.
days after Defendants filed their reply in support of their
motion to dismiss, Plaintiff filed a notice of voluntary
dismissal pursuant to Fed.R.Civ.P. 41(a) (1) (A) (i), which
allows a plaintiff to "dismiss an action without a court
order by filing ... a notice of dismissal before the opposing
party serves either an answer or a motion for summary
judgment[.]" (ECF No. 29) . Defendants characterize this
action as "strategically timed" in "a
concerted effort by Impact to delay the Court's rulings,
" and object to the dismissal given the two months spent
in litigation and the lack of a "warning." (ECF No.
31-1, at 7-8) . Defendants further argue that the dismissal
did not comport with the intention of the rule, "to
permit a disengagement of the parties at the behest of the
plaintiff only in the early stages of a suit, before the
defendant has expended time and effort in the preparation of
his case." (Id. at 13 (quoting Armstrong v.
Frostie Co.,453 F.2d 914, 916 (4th Cir.
1971))) . In Armstrong, the plaintiff's notice
of voluntary dismissal of his amended complaint was vacated
because an answer had been served and a motion for summary
judgment had been filed, heard, and adjudicated regarding the
plaintiff's original complaint. Armstrong, 453
F.2d at 915-16. Here, however, it is uncontested that
Defendants had not yet served an answer or a motion for
summary judgment to the original or amended complaint. The
litigation in this case proceeded for only two months; the
case was not dismissed shortly before trial, see Shank v.
Eagle Techs., Inc., No. CIV.A. RWT-10-2231, 2013 WL
4442033, at *1, 12-14 (D.Md. Aug. 15, 2013), R. & R.
adopted by No. CIV.A. RWT 10-2231, 2013 WL 5487865
(D.Md. Sept. 30, 2013) (recommending sanctions where
stipulations of dismissal were filed one and two days before
first day of jury trial and other actions of counsel
warranted sanctions), or after a ...