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Victor Stanley, Inc. v. Creative Pipe, Inc.

United States District Court, D. Maryland

August 14, 2017

VICTOR STANLEY, INC. Plaintiff
v.
CREATIVE PIPE, INC., et al. Defendants

          MEMORANDUM AND ORDER RE: SANCTIONS/CONTEMPT

          Marvin J. Garbis United States District Judge.

         The Court has before it the Certification of Civil Contempt [ECF No. 733] issued by Magistrate Judge Sullivan and the materials submitted relating thereto.

         The Court has held a hearing, heard evidence and had the benefit of the arguments of counsel. The Court has made its factual findings set forth herein based on its evaluation of the evidence and the reasonable inferences drawn therefrom.

         I. BACKGROUND

         Plaintiff Victor Stanley Inc. (“VSI”) has, since 1962, been manufacturing and selling site furnishings[1] with a reputation for producing high quality merchandize. Beginning in or about 2004, Defendant Mark Pappas (“Pappas”) and his company, Defendant Creative Pipe, Inc. (“CPI”) competed with VSI, producing and selling similar (sometimes identical) products under the trade name “Fuvista.”[2] In 2006, VSI filed the instant law suit, asserting various claims against Pappas and CPI that were ultimately “boiled down” to claims based upon copyright infringement, unfair competition, false advertising, and design patent infringement.

         In the course of litigating the instant case, Defendants Pappas and CPI engaged in a massive degree of spoliation of evidence detailed in Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497 (D. Md. 2010). As stated therein:

Through four years of discovery, during which Defendant Mark Pappas, President of Defendant CPI, had actual knowledge of his duty to preserve relevant information, Defendants delayed their electronically stored information (“ESI”) production; deleted, destroyed, and otherwise failed to preserve evidence; and repeatedly misrepresented the completeness of their discovery production to opposing counsel and the Court.

Id. at 499-500.

         In the Memorandum, Order and Recommendation [ECF No. 377), then-Magistrate Judge Grimm recommended that Defendants be ordered to pay monetary sanctions equivalent to attorneys' fees and costs caused by Defendants' spoliation. By the Order Re: Sanctions Motion [ECF No. 381], the Court adopted the decision, awarding VSI attorneys' fees and costs in an amount to be determined and a default judgment as to liability on the copyright infringement claim. In the Memorandum and Order issued January 24, 2011 [ECF No. 448], then-Magistrate Judge Grimm determined the total due for fees and costs to be $1, 049, 850.04. On June 24, 2011, the said Memorandum and Order was adopted as the decision of the Court. Memorandum and Order Re: Sanction Award, ECF No. 476.

         On February 24, 2011, the Court completed a six-day bench trial on Plaintiff's claims. On September 30, 2011, the Court issued the Memorandum of Decision [ECF No. 480], awarding VSI damages totaling $2, 454, 931.10 with judgment interest and costs. The Amended and Final Judgment Order [ECF No. 488] was issued November 4, 2011. On December 30, 2013, the Court issued the Order Re: Attorney Fees [ECF No. 665] awarding VSI $748, 334.72 of legal fees and expenses to be paid by Defendants Pappas and VSI that were included in the Supplemental Judgment Order [ECF No. 666]. Hence, the total of damages, costs, legal fees, and sanctions to which Defendants have been held liable to VSI is in excess of $4, 000, 000.00.

         Defendants did not proceed in good faith in regard to their obligations to VSI. They failed to make the required payments, or any payments at all, and proceeded to take actions to obstruct the ability of VSI to effect collection of the judgment obligations. Their actions led to the issuance of a warrant to arrest Pappas [ECF No. 521] from which Pappas fled to Belize. Pappas was arrested in Belize by Belizean police and was returned to the United States on August 6, 2012. He was then taken into custody in Houston, Texas by the United States Marshal and brought to the District of Maryland to show cause why he and CPI should not be held in contempt for failure to comply with Court Orders.

         On August 17, 2012, Pappas was released from custody by this Court subject to conditions that included a schedule for Defendants to make certain payments. Order Releasing Mark T. Pappas With Conditions [ECF No. 563]. Defendants Pappas and CPI did not comply with the conditions and, on December 19, 2013, were held liable for a further award of attorneys' fees by virtue of their actions to avoid payment to VSI of the sanctions award. See Order Re: Attorney Fees Related to Violations of Sanctions [ECF No. 664].

         The underlying motions upon which the currently-alleged contempt is based relate to discovery and payment obligations. These are:

(1) The February 8, 2012 Order [ECF No. 538] issued by then-Magistrate Judge Grimm[3] requiring Defendants to produce “all responsive documents in their possession, custody or control” in connection with VSI's First Request for Production of Documents to CPI, and to “answer all interrogatories completely and not evasively, ”
(2) The November 20, 2014 Order [ECF No. 686] issued by Magistrate Judge Sullivan requiring Defendants to produce “full and complete answers to all of the interrogatories propounded in [VSI's] Third Request for Production of Documents, ” and
(3) The April 20, 2016 Order [ECF No. 722] of Magistrate Judge Sullivan requiring Plaintiffs to pay Plaintiff $1, 281, 315.91 by May 23, 2016.

         Because Defendants had not complied with the first two of these Orders, on February 23, 2015, VSI filed a Motion for Sanctions and Finding of Contempt for Failure to Comply With the Court's Orders of February 8, 2012 and November 20, 2014 [ECF No. 687].

         On April 20, 2016, Magistrate Judge Sullivan issued his Memorandum Opinion [ECF No. 721] regarding Defendants' failure to comply and the harm caused to VSI as a result of the compliance failures. Magistrate Judge Sullivan held that Defendants had failed to comply with the Orders at issue in several respects and found that monetary sanctions of $1, 232.993.97, and an award of costs of $48, 321.94, was appropriate. Memorandum Opinion [ECF No. 721] at 27. The Magistrate Judge required the total of $1, 281, 315.91 to be paid by May 23, 2016 and certified as paid by a status report filed by May 31, 2016. Id. at 28. The Magistrate Judge stated: “If the parties report that Defendants have failed to make the required payment in full, the Court will certify this fact to the district judge in this case for a civil contempt inquiry pursuant to 28 U.S.C. § 636(e)(6)(B)(iii).” Id.

         In a joint status report filed May 23, 2016 [ECF No. 728], the parties stated that the payments had not been paid and that the Defendants intended to appeal the Order imposing the payment obligation [ECF No. 721]. Defendants did not, however, file an appeal from the Order of April 20, 2016.

         On May 24, 2016, VSI filed Plaintiff's Request For Certification [ECF No. 729] requesting the Magistrate Judge to certify to the district judge that the Defendants had committed various acts that constitute civil contempt. See 28 U.S.C. § 636(e)(6)(B)(iii).

         On July 11, 2016, Magistrate Judge Sullivan issued the Certification of Civil Contempt [ECF No. 733], stating:

the undersigned finds that civil contempt proceedings are warranted, and respectfully recommends that Defendants be directed to appear on a date certain before the Honorable Marvin J. Garbis, Senior United States District Judge, to show cause why they should not be found in contempt of Court for failing to comply with this Court's orders of February 8, 2012, November 20, 2014, and April 20, 2016.

Id. at 3.

         On December 20, 2016, the district court issued the Show Cause ...


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