United States District Court, D. Columbia
August 29, 2005.
LESLIE ATKINS, individually and d/b/a LESLIE ATKINS COMMUNICATIONS, Plaintiff,
BENSON J. FISCHER, et al., Defendants.
The opinion of the court was delivered by: COLLEEN KOTELLY, District Judge
Plaintiff Leslie Atkins, d/b/a Leslie Atkins Communications,
Inc., brought this action against Defendants Benson J. Fischer,
the Fischer Organization, Inc., and the Fischer Brewing Company,
Inc. (collectively, "Defendants"), alleging copyright
infringement in the commercial use of six-pack carrier and bottle
designs for a product called "Redneck Beer" in violation of the
Copyright Act of 1973, 17 U.S.C. § 102, and Section 43(a) of the
Lanham Act, 15 U.S.C. § 1125(a). Currently before the Court is
Plaintiff's Motion for Finding that Defendants and Their Prior
Counsel, Stanley Goldschmidt, Esquire, Attempted to Perpetrate a
Fraud Against This Court and For an Award of Appropriate
Sanctions, the separate Oppositions filed by Defendants and Mr.
Goldschmidt, and Plaintiff's Combined Reply. Also pending before
the Court is Mr. Goldschmidt's Motion for Sanctions Against
Plaintiff for Violation of Federal Rule of Civil Procedure 11,
and Plaintiff's subsequent Opposition.
Upon a searching examination of the parties' respective
filings, all attached exhibits, the relevant case law, and the
entire record herein, the Court shall grant-in-party and
deny-in-part Plaintiff's motion and shall deny Mr. Goldschmidt's motion for
sanctions.*fn1 Given the present posture of the case, the
Court shall set a status conference in order to set out the
scheduling groundwork for the upcoming trial on the merits in the
A. Procedural History
Plaintiff Leslie Atkins, d/b/a Leslie Atkins Communications,
Inc., has for over twenty years, offered clients a wide range of
public relations, advertising, and marketing services. Defendant
Benson J. Fischer, an entrepreneur planning to produce a novelty
beer,*fn2 dubbed "Redneck Beer," hired Plaintiff during
September of 1993 to design a bottle label and a six-pack carrier
for his anticipated beer. Under the first stage of the relevant
agreement, Plaintiff delivered to Defendant Fischer a preliminary
illustration of a beer bottle label featuring a blue jean pocket
and a red bandana. The second phase of the agreement, which
required Plaintiff to produce the same label and carrier in
"camera-ready" final form, was never completed, and the agreement
was terminated. Between August 1995 and June 1996, Redneck Beer
was proudly sold in fine stores in thirty-four (34) states across the United
States using a bottle label and carrier designed by a third-party
which also featured a denim pocket and a red bandana.
Contending that the subsequent design infringed upon her
copyrighted work, Plaintiff filed her Complaint in this action in
March 1998. After the close of discovery, pursuant to a
Memorandum Opinion and Order dated November 30, 2001, this Court
denied Plaintiff's motion for summary judgment and sua sponte
granted summary judgment for Defendants. See Atkins v. Fischer,
Civ. No. 98-800, at 33-34 (D.D.C. Nov. 30, 2001) (order granting
summary judgment to Defendants). The Court concluded that (1)
Defendants had an implied nonexclusive license to use Plaintiff's
work in the commercial production of Redneck Beer; and (2) the
six-pack carrier design actually used by Defendants in the sale
of Redneck Beer was not substantially similar to Plaintiff's
preliminary designs. Id. In addition, the Court dismissed
Plaintiff's Lanham Act claim. Id. Upon appeal, the D.C. Circuit
determined that (1) an issue of material fact existed as to
whether Defendants had an implied license to use Plaintiff's
marketing design for production, and (2) an issue of material
fact also existed as to whether Plaintiff's marketing copy and
the actual production copy of the six-pack carrier were
"substantially similar." See Atkins v. Fischer, 331 F.3d 988,
993-995 (D.C. Cir. 2003). Given these substantial issues of
material fact, the D.C. Circuit reversed this Court's November
30, 2001 ruling and remanded the case to this Court for further
consideration. Id. at 995.
While trial in this case appeared imminent after the decision
by the Court of Appeals, Defendants immediately filed a motion to
stay litigation pending resolution of bankruptcy proceedings. On
November 18, 2003, this Court granted Defendants' motion to stay
as it related to Defendant Benson Fischer. On April 19, 2004,
Defendants informed the Court that Defendant Fischer had consented to relief from the automatic bankruptcy
stay and that this case would now move forward. On June 18, 2004,
Plaintiff filed her current Motion for Sanctions. The Court then
held a status conference with the parties on June 30, 2004,
wherein the Court was informed that this case could not proceed
to trial until the Motion for Sanctions was resolved. However, an
expedient resolution of Plaintiff's motion was thwarted by
Defendants' Motion for an Order Directing Plaintiff's Counsel to
Allow Access to Discovery Documents a motion filed by
Defendants' new counsel, who had determined that a "substantial
amount of discovery related materials" were missing from the
files handed over to them by Defendants' previous attorneys.
See Defs.' Mot. for Order to Allow Access at 2. Defendants
sought to have Plaintiff provide them with access to her copies
of the missing documents, which Defendants would then copy at
their own expense; however, these requests were rebuffed by
Plaintiff's counsel. Id. at 3. Importantly, while Defendants
acknowledged that the missing documents "are not of plaintiff's
making," they stressed that they could not mount a proper defense
of Plaintiff's Motion for Sanctions without the documents many
of which could only be obtained from Plaintiff. Id. at 4.
In order to resolve this dilemma, the Court issued a Memorandum
Opinion and Order on August 17, 2004, which focused on the fact
that "Defendants cannot respond to Plaintiff's motion, or defend
themselves in a potential future trial, without the full record
in this case." Atkins v. Fischer, Civ. No. 98-800, at 3 (D.D.C.
Aug. 17, 2004) (order requiring Plaintiff's counsel to provide
Defendants access to those documents Defendants could not obtain
through any other source). Noting the burden on Plaintiff whose
"attorney works in a small office with few resources to handle
Defendants' request" the Court ordered that "Defendants shall
be permitted access to Plaintiff's files to obtain only those
documents that they do not have in their own files and that
cannot be obtained from other sources." Id. In return for this
privilege, the Court ordered "that Defendants be required to
compensate Plaintiff's counsel not only for the costs of copying
documents, but also for the time that Plaintiff's counsel's
representatives must expend in order to locate and prepare the
documents for Defendants." Id. at 4. Finally, the Court
directed that "Plaintiff shall estimate how much it will cost to
complete this project and provide this estimate to Defendant[s]
prior to beginning work on the project. Plaintiff shall endeavor
to minimize the expense of this undertaking by utilizing
low-level staff where possible." Id.
Despite the Court's even-handed, clear bargain, progress in
this process immediately broke down. Plaintiff filed a Motion for
Clarification of the Court's Order on September 7, 2004, in which
she announced that her counsel would copy all identified
documents "except for documents produced by the Fischer
defendants themselves in this case almost all of which
Defendants now claim are `missing,'" Pl.'s Mem. in Support of Her
Mot. for Clarification at 2. Plaintiff further asserted that Mr.
Fischer (on behalf of Defendants), Mr. Stanley Goldschmit, Esq.,
former counsel to Defendants, and Mr. Richard Schimel, Esq.,
successor counsel, must each "file affidavits attesting that they
do not have the Fischer and Fischer Companies' documents that
were supplied in discovery and after conducting a diligent search
to include agents and their representatives, they have been
unable to locate the same." Id. at 1. Asserting that Plaintiff
was unilaterally altering this Court's August 17, 2004 Order and
imposing additional requirements, Defendants immediately objected
to Plaintiff's actions and threatened a motion for sanctions on
their own. The Court was then forced to resolve this dispute
through another Memorandum Opinion and Order, dated December 1,
2004. In this Order, the Court required
that Plaintiff provide Defendants access to or copies
of all materials requested by Defendants which are
outlined in the Status Report filed on September 15,
2004. No affidavits are required from Defendant[s],
though Defendant[s] [are] under a continuing ethical
obligation to inform Plaintiff if any of these
materials requested are actually within their
possession. Plaintiff must give Defendants access to
or copies of these materials by no later than
Thursday, December 23, 2004, or [her] pending Motion
for Finding that Defendants and Their Prior Counsel,
Stanley Goldschmidt, Esquire, Attempted to Perpetrate
a Fraud Against this Court and for Appropriate
Sanctions will be denied by the Court. The previous
scheme created by the Court's August 17, 2004,
Opinion and Order, which provided compensation for
Plaintiff's counsel and staff for preparing the
documents and copying them, will remain in place.
Atkins v. Fischer, Civ. No. 98-800, at 13-14 (D.D.C. Dec. 1,
2004) (order denying Plaintiff's Motion for Clarification)
(emphasis in original).
The Court's December 1, 2004 Opinion and Order, which
constituted a global resolution of all pending production-related
disputes, apparently had the intended impact, as separate Status
Reports filed by both Plaintiff and Defendants on January 6th and
7th, 2005, indicated that Defendants were ultimately provided the
necessary requested materials. The Court then entered a briefing
schedule to complete the briefing of Plaintiff's Motion for
Sanctions; Defendants filed their Opposition on February 7, 2005,
while Plaintiff filed her Reply on February 21, 2005. At the same
time that the production-related disputes were reaching a
simmering point in this case, Defendants former counsel, Mr.
Stanley H. Goldschmidt, Esq., filed a cross-motion for sanctions
against Plaintiff on August 31, 2004, and Plaintiff filed an
Opposition to that motion on September 13, 2004. The Court stayed
consideration of that motion until it could resolve Plaintiff's
Motion for Sanctions concurrently. Given that Plaintiff's Motion
for Sanctions is now fully briefed, nearly one (1) year after it
was initially filed, the Court can resolve both fully briefed sanctions-related motions.
B. Factual Context of the Sanctions-Based Motions
Plaintiff's Motion for Sanctions, now fully ripe, asserts that
"there is compelling reason to believe that Plaintiff Benson
Fischer ("Fischer") and his former attorney, Stanley Goldschmidt,
Esq., attempted to perpetrate a fraud upon this Court by
fabricating evidence and hiding material evidence during
discovery which, among other things, would have precluded this
Court's grant of summary judgment." Pl.'s Mot. for Sanctions at
1. According to Plaintiff, absent Defendants' fraud, "Plaintiff's
appeal would have been unnecessary." Id. As such, Plaintiff
contends that "[a]n award of appropriate sanctions to include
entry of default judgment, an award of substantial attorneys'
fees, and referral of Mr. Fischer's conduct to the United States
Attorney's Office is in order." Id.
Plaintiff's argument for the draconian sanction of default
judgment rests upon four (4) major contentions.
1. History of Misconduct in Contemporaneous, Related
First, Plaintiff cites to the "history of misconduct" by Mr.
Fischer and his former attorney, Mr. Goldschmidt, "in other
contemporaneous litigation." Id. at 4. Plaintiff points to two
different cases, coetaneous to this case, in which Messrs.
Fischer and Goldschmidt were sanctioned for misconduct: (1)
Fischer Brewing Co. v. Flax, Superior Court of the District of
Columbia, Civ. No. 678-97, aff'd, Fischer v. Estate of Howard L.
Flax, 816 A.2d 1 (2003); and (2) In re Fischer, United States
Bankruptcy Court of the District of Maryland, Case No.
03-13704-DK. Id. at 4, 9. The Fischer v. Flax litigation
dealt with a breach of contract lawsuit by Mr. Fischer against
(1) Mr. Howard Flax, who signed an agreement with Mr. Fischer
providing for a substantial finder's fee if Mr. Flax was able to locate
financing for the Fischer Brewing Company and Redneck Beer, and
(2) the law firm representing Mr. Flax, Paley Rothman. Id. at
4-5. During the Fischer v. Flax litigation, Superior Court
Judge Steffen W. Graae, after a bench trial on the "bad faith
litigation" counterclaim, sanctioned Mr. Fischer for almost
$930,000.00 in attorney's fees and costs for bad faith litigation
and $40,000.00 in punitive damages. Pl.'s Reply at 1-2. Judge
Graae concluded that Mr. Fischer's suit "rests on false
allegations, fraudulent documentation, and a stubborn refusal to
acknowledge wrongdoing, the suit represents the grossest kind of
abuse of the legal process." Id. at 2; Pl.'s Mot. for
Sanctions, Ex. 3 (May 3, 2000 Opinion and Order) at 23.
Specifically, Judge Graae found that "the evidence is clear and
convincing that Mr. Fischer knowingly constructed a fraudulent
suit against Flax and [his] lawyers," Pl.'s Mot. for Sanctions,
Ex. 3 (May 3, 2000 Opinion and Order) at 21. Judge Graae also
focused on the fact that Mr. Fischer's actions "raise[d]
questions about efforts he may have made to manipulate witnesses
and lawyers in this case," id. at 19-20. Finally, in his
separate award of punitive damages against Mr. Fischer, Judge
Graae found that "[i]t is obvious that an oath to tell the truth
means little or nothing to Mr. Fischer and that he is still
intent on manipulating the legal process." Pl.'s Mot. for
Sanctions, Ex. 5 (Dec. 18, 2000 Order and Judgment).
Judge Graae also awarded Rule 11 sanctions against Mr.
Goldschmidt, who represented Mr. Fischer in Fischer v. Flax,
and his co-counsel, Mr. Arthur Kahn, Esq., in the sum of
$50,000.00. Pl.'s Mot. for Sanctions, Ex. 6 (Dec. 2, 2003 Opinion
and Order). Judge Graae concluded that Mr. "Goldschmidt and Mr.
Kahn served as nothing more than mouthpieces for the threats Mr.
Fischer made. . . . Goldschmidt's and Mr. Kahn's pleadings may
have satisfied Mr. Fischer's thirst for vengeance, but they did not meet the legal
or factual standards contemplated by Rule 11." Id. at 11. Judge
Graae went on to find that "the Court considers the professional
conduct of Goldschmidt and Mr. Kahn to be well beyond the pale.
These two experienced lawyers knew, or had to know, they did not
have sufficient evidence to make a case for tortious interference
by Mr. Mark and his law firm, Paley Rothman. . . . The Court can
only characterize their conduct as willful and badly motivated."
Id. at 13-14. Plaintiff, in addition to focusing on Judge
Graae's sanctioning of Mr. Goldschmidt in Fischer v. Flax, also
focuses on the fact that Mr. Goldschmidt in attempting to
defend himself in that action claimed that he suffered from "a
state of mental intoxication and loss of impulse control and
judgment," Pl.'s Mot. for Sanctions, Ex. 7 (Statement from Mr.
Goldschmidt's medical doctor), due to "clinical depression and
drug induced intoxication," Pl.'s Mot. for Sanctions at 7.
Plaintiff emphasizes that "[i]t is of interest that Goldschmidt
claims that he suffered from clinical depression and drug induced
intoxication through the Fischer litigation which was also the
period of time that the instant litigation was pending before
this Court." Id. at 8. Plaintiff further stresses that Mr.
Goldschmidt, along with Mr. Fischer, was sanctioned once again
for another $30,000.00 after being found in contempt by the
Circuit Court for Montgomery County, Maryland, for stonewalling
collection-related discovery during post-judgment collection
efforts instigated by Paley Rothman. Pl.'s Mot. for Sanctions at
11-12; Pl.'s Reply at 3.
Following collection efforts, Mr. Fischer filed for personal
bankruptcy pursuant to Chapter 7 of the Bankruptcy Code. See In
re Fischer, United States Bankruptcy Court for the District of
Maryland, Case No. 03-13704-DK. Plaintiff contends that in his
bankruptcy case, Mr. "Fischer has engaged in the same pattern of
behavior that he displayed in the Fischer v. Flax litigation" by refusing "to appear for depositions when ordered"
and presenting "evidence in the Bankruptcy Court which he likely
fabricated after the fact." Pl.'s Mot. for Sanctions at 9. For
instance, in an Order dated March 12, 2004, Bankruptcy Judge Keir
granted sanctions to Plaintiff, a creditor in Mr. Fischer's
bankruptcy case, for Mr. Fischer's refusal to comply with a Court
order directing a FRBP 2004 examination; Judge Keir's Order also
provided for sanctions against Mr. Fischer's bankruptcy attorney,
Mr. Richard Rosenblatt. See Pl.'s Mot. for Sanctions, Ex. 12
(3/10/04 Tr. of Bankruptcy Court Hearing).
Plaintiff contends that the conduct of Messrs. Fischer and
Goldschmidt in litigation contemporaneous to this case must be
considered relevant by this Court in the resolution of
Plaintiff's present Motion for Sanctions. Essentially, Plaintiff
argues that Mr. Fischer and his lawyers, including former counsel
Mr. Goldschmidt, have exhibited a pattern of misconduct that
"constitutes chronic abuse of the legal standard." Pl.'s Reply at
10. Plaintiff describes the behavior by Defendants and their
counsel as "extraordinary by any standard" wherein "fabricating
documents, lying under oath, and using the legal system to
further personal vendettas is Fischer['s] modus operandi."
Pl.'s Mot. for Sanctions at 12. Plaintiff posits that it would
"blink? reality for this Court to ignore the extreme
misconduct," Pl.'s Reply at 8, as it is quite likely that Mr.
Fischer and Mr. Goldschmidt exhibited a similar pattern of
behavior in this case.
2. Withholding of Discovery in This Case
Second, Plaintiff cites to the alleged discovery abuses by
Defendants and their former counsel, Mr. Goldschmidt, in
suppressing material evidence in this case. Pl.'s Mot. for
Sanctions at 13; Pl.'s Reply at 11. Plaintiff focuses on three
(3) alleged instances of suppression of key evidence: (1) the
production of false gross revenues incurred during the sale of
Redneck Beer, which significantly underestimate the total sales of Redneck
Beer, Pl.'s Mot. for Sanctions at 13 & n. 10; (2) the apparent
withholding by Mr. Fischer and Mr. Goldschmidt of documents
showing that the Atkins' Logo was used in t-shirts produced and
sold under license and the actual samples of the t-shirts
themselves, id. at 13-20; and (3) the intentional suppression
of the "missing" documents in this case, subject to this Court's
discovery-related production orders requiring Plaintiff to share
certain documents with Defendants' new counsel, Pl.'s Reply at
Plaintiff alleges that income tax-related documents produced by
Defendants in this case stated that from 1995 through 1996 (the
period during which the Fischer Brewing Company sold Redneck
Beer), total sales amounted to roughly $1.5 million. Pl.'s Mot.
for Sanctions at 13. However, Plaintiff points to two different
Washington Post articles which apparently contradict this
figure. Id. at 13, n. 10. In the first article, Plaintiff
asserts that Mr. Fischer claims that over 375,000 cases of
Redneck Beer were sold; at $9.05 per case, Plaintiff estimates
that such sales would have produced revenues of $3.4 million. In
the second article, it is reported that Fischer Brewing "sold
almost 15 million bottles" of Redneck Beer; Plaintiff estimates
that at $9.05 per case, gross revenues would have been
approximately $5.7 million. Id. As such, Plaintiff implies that
Mr. Fischer and his former counsel, Mr. Goldschmidt, must be
hiding the true revenues related to Redneck Beer. Id.
However, Plaintiff spends most of her argument on the
allegation that Mr. Fischer and Mr. Goldschmidt withheld key
evidence that Atkins' Logo was used in t-shirts produced and sold
under license pursuant to a November 15, 1995 agreement between
the Fischer Brewing Company and Cambridge Sportswear, Inc. Id.
at 13-20. In this agreement, Cambridge Sportswear provided the
Fischer Brewing Company a $100,000.00 initial royalty fee in
order to possess the exclusive license to produce Redneck Beer-branded
clothing and wearing apparel. Id. at 14. According to
Plaintiff, during Plaintiff's examination of Mr. Fischer in the
In re Fischer bankruptcy case, Mr. Fischer maintained that this
contract was "to license the name Redneck beer. Specifically the
name, nothing else." Id. at 14 (citing 1/19/04 Fischer Dep. at
41). Indeed, Plaintiff contends that "[a]t no time did Fischer or
Goldschmidt ever produce T-shirts or other clothing made by
Cambridge under license in discovery in this case." Id.
However, in the Fischer v. Flax litigation, Mr. Fischer
produced a copy of a business plan which had been Bates stamped
LFB000369-LFB000579. Id. at 16. Unlike the business plan
produced in Flax, the business plan produced by Defendants in
this case "lacked the Cambridge T-shirt photographs confirming
Cambridge's reproduction on the T-shirts of the Atkins logo. Also
lacking were photos of a model with Redneck beer, a promotional
photo which included and made use of the Atkins Logos." Id. at
17. Plaintiff contends the omissions from the business plan were
deliberate, despite the protestations of Mr. Fischer and Mr.
Goldschmidt, because such information would have precluded this
Court's November 30, 2001 grant of summary judgment under an
implied non-exclusive license theory. Id. at 17-18.
Specifically, according to Plaintiff,
Fischer's licensing to Cambridge Sportswear of
Redneck Beer trademarked goods, including the Atkins
Logos for use on wearing apparel would not be within
any implied nonexclusive license to use the Atkins
Logos for commercial production and distribution of
beer. And, under no circumstances could Fischer grant
an exclusive license to Cambridge. An implied
license (which is all that Fischer could have had),
at best, is nonexclusive. Fischer could not grant
an exclusive license that he himself did not have.
Id. at 18 (emphasis in original). As such, given the importance
of this complete business plan and "the remarkable history of
prevarication" laid out by Plaintiff, Plaintiff asserts that
"Fischer and Goldschmidt cannot be heard to say that the failure
to produce key documents (and apparel samples) that were clearly in their possession was a simple
oversight." Id. at 20.
Finally, Plaintiff argues that Mr. Fischer and Mr. Goldschmidt
are continuing to hide documents related to this litigation.
Pl.'s Reply at 11-13. Specifically, Plaintiff contends that it is
the practice of Messrs. Fischer and Goldschmidt "to claim that
they do not have documents and to not produce documents," id.
at 11, and that practice has exhibited itself with respect to the
very documents subject to this Court's production-related orders
of August 17, 2004 and December 1, 2004. According to Plaintiff,
in a hearing held before the Bankruptcy Court on October 20,
2004, Mr. Fischer stated to the court that Mr. Goldschmidt
retains one hundred (100) to two hundred (200) boxes of his
business files, and indicated through counsel that he has tried
unsuccessfully to obtain the documents from Mr. Goldschmidt.
Id. at 12 (citing Pl.'s Reply, Ex. B (Oct. 20, 2004 Bankruptcy
Court Tr. at 70-71). Plaintiff speculates that these boxes
contain even more material than was copied by Defendants'
successor counsel in this case from Plaintiff's files pursuant to
the Court's Orders, and suggests that Mr. Goldschmidt who has
been held in contempt in Montgomery County, Maryland, for failing
to produce documents has failed to produce these documents in
order to cover up his own misconduct. Id. at 11-12 & n. 15.
Plaintiff concludes by stating that "[w]e have absolutely no
doubt that the allegedly missing Fischer documents can be found
(or recreated from) the 200 boxes and that Messrs. Fischer and
Goldschmidt have, yet again, played games with this Court and
with everyone else in this case." Id. at 13.
3. Fischer's Alleged Fabrication of a Fake Mock-Up Bottle
Third, Plaintiff asserts that evidence has come to light that
indicates Mr. Fischer fabricated a mock-up, or prototype, bottle
of Redneck Beer featuring the original concept of a red bandana and denim pocket in an attempt to support his claims that
he and not Plaintiff is entitled to the copyright of the
relevant design. Pl.'s Mot. for Sanctions at 20. During the
earlier round of dispositive motions, Defendants had alleged that
Mr. Fischer, prior to meeting Plaintiff, had constructed a
mock-up Redneck Beer bottle, using a Budweiser beer bottle, in
order to demonstrate his concept of how the ultimate design
should look; Defendants also argued that Mr. Fischer had also
created some preliminary sketches highlighting his design ideas.
See Atkins v. Fischer, Civ. No. 98-800, at 11-12 (D.D.C. Nov.
30, 2001). The Court rejected Defendants' argument, given Mr.
Fischer's vague and inconclusive testimony regarding whether he
actually showed Plaintiff the alleged mock-up bottle and
sketches, and given the unequivocal testimony by both Plaintiff
and Mr. Thomas Gaadt (the artist hired by Plaintiff to sketch the
Atkins designs) that they never saw the mock-up bottle. Id.
Despite the fact that the Court rejected Defendants' mock-up
bottle claim as a matter of law, Plaintiff continues to focus on
the importance of the mock-up bottle which has long been the
subject of major discovery disputes. Essentially, Plaintiff
maintains that the mock-up bottle was created after the fact by
Mr. Fischer in order to evade Plaintiff's claims. To support this
argument, Plaintiff contends: (1) contrary to Mr. Fischer's
deposition testimony, see 4/3/00 Fischer Dep. at 388, the
mock-up bottle as confirmed by Anheuser Busch Company through
an analysis of a picture of the mock-up bottle was not a
Budweiser beer bottle at all, as the mock-up bottle was of a
clear color, see Pl.'s Mot. for Sanctions at 23-24 (citing
7/28/00 Dep. of Mark Elliott, Senior Manager in the Packaging
Technology Group for Anheuser Busch); (2) the refusal by
Plaintiff's former counsel, Mr. Goldschmidt, to hand over the
actual bottle for further testing leads to an inference that
Defendants were aware that the bottle was created ex post
facto, and sought to hide that fact, id. at 24-25; (3) virtually all
testimony in this case indicates that no one was shown the
mock-up bottle by Mr. Fischer, contrary to his assertions, id.
at 22 (citing to the fact that only Mr. Harvey Berkman and Mr.
Steve Solomon testfied that they ever saw the mock-up bottle, and
arguing that their testimony was vague), Pl.'s Reply at 25-28;
and (4) Plaintiff's review of standard bottle markings in the
United States, assisted by an expert witness with experience in
the glass industry (Mr. C. Phillip Ross), indicates that the
numbers engrossed on the mock-up bottle "96 and a symbol that
looks like a B and then the number 9934 and then the number 2,"
Pl.'s Reply at 29 has led her to "believe that the symbol `96'
on the mock-up bottle refers to the year of manufacture of that
bottle," id., ensuring that the mock-up was created long after
Mr. Fischer held discussions with Plaintiff regarding design
Plaintiff contends that the "fabricated" mock-up bottle had a
significant impact on this litigation. According to Plaintiff,
"[t]he vast majority of discovery conducted by the Plaintiff from
1999 until 2001 was the result of the concocted Mock-up Bottle
defense." Pl.'s Mot. for Sanctions at 26. Moreover, Mr.
"Fischer's lies and fabrication converted a straightforward
copyright infringement case into a case where a major issue in
discovery was whose copyright it is." Id. Plaintiff avers that
this kind of behavior by Mr. Fischer is similar to his actions
taken in the Fischer v. Flax litigation, and that default
judgment is the required sanction for such malfeasance. Id.;
Pl.'s Reply at 30.
4. Defendants' Counterclaims Were Filed in Bad Faith and
Without a Legal or Factual Basis
Fourth, and finally, similar to the Fischer v. Flax
litigation, wherein Judge Graae expressly found that Mr.
Fischer's claims against Mr. Flax were without legal or factual
basis or proper investigation, Plaintiff contends that Defendants'
counterclaims in this case were filed without legal or factual
basis. See Pl.'s Mot. for Sanctions at 26-27. Defendants filed
four (4) counterclaims in this case: (1) breach of contract; (2)
tortious interference with business relations; (3) infringement
of trademark; and (4) infringement of the trademark. See
generally Defs.' Ans. Defendants' counterclaims were filed over
seven years ago and Plaintiff's previous counsel never filed a
Motion for Rule 11 Sanctions at that time. After Defendants'
filed their counterclaims, Plaintiff brought a Motion to Dismiss
those claims; this Court granted Plaintiff's motion as to
Counterclaim I (breach of contract), but denied the motion as to
the remaining counterclaims. The remaining three (3)
counterclaims were ultimately dismissed by Defendants'
stipulation on September 26, 2000. Despite these facts, Plaintiff
maintains that "[t]he counterclaims were utterly lacking in
specific detail," Pl.'s Mot. for Sanctions at 27, that they were
without any factual basis, id. at 29, and that they were filed
simply to "prolong? the litigation and mak[e] it much more
costly than it needed to be," id. at 31.
In sum, Plaintiff notes that "[t]he point of all of this is to
demonstrate to the Court that Fischer (and his former counsel,
Goldschmidt), on an ongoing basis made false and fraudulent
assertions, have acted in reckless disregard of the truth and/or
have used litigation as a weapon." Id. at 33. According to
Plaintiff, "[c]ourts need to take firm action with litigants such
as this. Our rule of law cannot function if the Fischers and
Goldschmidts of this world are permitted to do whatever they
want." Id. As such, Plaintiff argues that Defendants'
misconduct calls for default judgment, as well as "an appropriate
award of actual and punitive damages in an amount sufficient to
deter [Mr. Fischer] and others similarly situated from
attempt[ing] to perpetrate this kind of fraud." Id. at 39.
Moreover, Plaintiff suggests that a referral of this matter to
the United States Attorney's Office for review and/or initiation of criminal
contempt proceedings is appropriate. Id. at 39-40.
In response, Defendants' former counsel, Mr. Stanley H.
Goldschmidt, Esq., has brought a Motion for Rule 11 Sanctions
against Plaintiff and her counsel. See Goldschmidt's Mot. for
Sanctions at 1-2. Mr. Goldschmidt's curt motion simply refers to
the applicable Rule 11 standards and then references his
Opposition to Plaintiff's Motion for Sanctions. Id. Mr.
Goldschmidt's Opposition essentially accuses Plaintiff's counsel,
Mr. Carlos M. Recio, of filing Plaintiff's Motion for Sanctions
with distortions, half-truths, and outright lies to such an
extent that "Mr. Recio has overstepped the boundaries of his
immunity." Goldschmidt's Opp'n at 13. According to Mr.
Goldschmidt, "[t]he Motion filed by Mr. Recio represents
lawyering at its worst. Not only is there not an ounce of
substance, civility or refinement contained in the Motion, but
Mr. Recio totally misleads this Court, by failing to include
appropriate exhibits and withholding other information, which
would have mandated against his filing of the Motion." Id. at
12. Mr. Goldschmidt further objects to Plaintiff's use of
Goldschmidt's "encountered difficulties in another case" and
Plaintiff's use of his recent medical troubles to portray him "as
a psychotic basket case with a drug addiction." Id. As such,
Mr. Goldschmidt requests that this Court not only reject
Plaintiff's motion, but impose the requisite sanctions to thwart
the "prevarications" of Plaintiff's counsel. Id.
II: LEGAL STANDARDS
Plaintiff requests that the Court sanction Defendants and their
former counsel, Mr. Stanley H. Goldschmidt, Esq., pursuant to the
"numerous overlapping sources of this Court's sanction's
authority: the Federal Rules of Civil Procedure,
28 U.S.C. § 1927, and this Court's inherent authority." Pl.'s Mot. for Sanctions at 33. Plaintiff
contends that "because of the attempted perpetration of fraud on
this Court," "judgment by default should be entered" in favor of
Plaintiff "and attorney's fees awarded." Id. at 34. While
Defendants simply attempt to refute Plaintiff's allegations in
their filing, Mr. Goldschmidt has brought his own Motion for
Sanctions against Plaintiff pursuant to Federal Rule of Civil
Procedure 11(b). See Goldschmidt's Mot. for Sanctions at 1-2;
Goldschmidt's Opp'n at 12-13. As such, before the Court can
discuss the content of the cross-motions for sanctions, the Court
first must set out the relevant legal standards underlying the
Court's ability to sanction a litigant or counsel in an action.
A. Rule 11
Rule 11 of the Federal Rules of Civil Procedure provides that
all pleadings, motions or other papers filed with the Court shall
be signed by an attorney. Fed.R.Civ.P. 11. The signature
affixed pursuant to Rule 11 certifies that the pleading or motion
"is not being presented for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the
cost of litigation," that "the claims, defenses, and other legal
contentions therein are warranted by existing law or by a
nonfrivolous argument for the extension, modification, or
reversal of existing law or the establishment of new law," and
that "the allegations and other factual contentions have
evidentiary support or, if specifically so identified, are likely
to have evidentiary support after a reasonable opportunity for
further investigation or discovery." Id. Where a pleading or
motion is signed in violation of the Rule, the court may sanction
the party or signatory attorney appropriately. Id.
The "central purpose of Rule 11 is to deter baseless filings in
district court and thus . . . streamline the administration and
procedure of the federal courts." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393, 110 S.Ct. 2447, 110 L.Ed.2d 359
(1990). Since the 1993 amendments, the language of Rule 11
indicates that the imposition of sanctions is left to the
discretion of the district court judge. See Rafferty v. Nynex
Corp., 60 F.3d 844, 852 n. 12 (D.C. Cir. 1995); Fed.R.Civ.P.
11(c) (noting that when the rule has been violated, a court may
impose an appropriate sanction); see also 5A Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure §
1336 (2d ed. Supp. 2000) (commenting that the scope of the
Advisory Committee's list of factors to consider when deciding
whether or not to impose a sanction suggests that "the district
court is given the widest possible latitude under the new"
version of Rule 11). As possible sanctions pursuant to Rule 11,
the court has an arsenal of options at its disposal, "such as
striking the offending paper; issuing an admonition, reprimand,
or censure; requiring participation in seminars or other
educational programs; ordering a fine payable to the court; [or]
referring the matter to disciplinary authorities." See
Fed.R.Civ.P. 11 advisory committee's note (1993).
B. Rule 37(b)(2)
Rule 37(b)(2) of the Federal Rules of Civil Procedure permits a
court to issue such orders "as are just" to sanction a party who
fails to obey an order to provide or permit discovery, including
a discovery order under Rule 26, governing discovery generally,
and Rule 35, governing orders for independent physical or mental
examinations. See Fed.R.Civ.P. 37(b)(1). Such sanctions may
include taking certain facts as established, prohibiting the
introduction of certain evidence, striking pleadings or parts
thereof, staying further proceedings until the order is obeyed,
or dismissing the action or proceeding or any part thereof and/or
rendering a judgment by default against the disobedient party.
See Fed.R.Civ.P. 37(b)(2); Bonds v. Dist. of Columbia,
93 F.3d 801, 807-08 (D.C. Cir. 1996), cert. denied, 520 U.S. 1274,
117 S.Ct. 2453, 138 L.Ed.2d 211 (1997); Shepherd v. Am. Broadcasting Cos.,
62 F.3d 1469, 1474 (D.C. Cir. 1995). The possible sanctions set out
in Rule 37(b)(2) are not mutually exclusive; the court may impose
several of the specified sanctions at the same time. See 8A
Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus,
Federal Practice and Procedure §§ 2284, 2289 (2d. ed. 1994).
The imposition of the number and type of sanctions employed under
Rule 37(b)(2) is left to the discretion of the trial judge. See
id. § 2284 ("With a rule as flexible as Rule 37, inevitably a
broad discretion must be given the trial judge with regard to
However, the Court is limited in its ability to sanction
parties pursuant to Federal Rule of Civil Procedure 37(b)(2). The
D.C. Circuit has held that "`[a] production order is generally
needed to trigger Rule 37(b).'" Shepherd, 62 F.3d at 147
(quoting Attn'y Gen. v. The Irish People, Inc., 684 F.2d 928,
951 n. 129 (D.C. Cir. 1982), cert. denied, 459 U.S. 1172,
103 S.Ct. 817, 74 L.Ed.2d 1015 (1983)); see also Jamie S. Gorelick,
Stephen Marzen & Lawrence Solum, Destruction of Evidence § 3.4,
at 74 & n. 23 (1989 & Supp. 1995) ("[f]ederal court decisions . . .
unanimously agree that sanctions pursuant to Rule 37 may not be
awarded absent violation of a court order"). As such, in order to
sanction a party pursuant to Rule 37(b)(2), the Court must
identify a specific discovery order that was actually violated.
C. 28 U.S.C. § 1927
The court may also impose sanctions pursuant to
28 U.S.C. § 1927. The statute provides that:
[a]ny attorney or other person admitted to conduct
cases in any court of the United States or any
Territory thereof 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. The purpose of Section 1927 is to allow the
Court "to assess attorney's fees against an attorney who
frustrates the progress of judicial proceedings." United States
v. Wallace, 964 F.2d 1214, 1218 (D.C. Cir. 1992). Before
imposing sanctions on an attorney, the court must evaluate
whether the attorney's conduct was "at least reckless[.]" Id.
at 1217. "[U]nintended, inadvertent, and negligent acts[,
however] will not support an imposition of sanctions under
section 1927." Id. at 1219 (quoting Cruz v. Savage,
896 F.2d 626, 631 (1st Cir. 1990)).
For an action to be considered reckless misconduct, there must
be a "`conscious choice of a course of action, either with
knowledge of the serious danger to others involved in it or with
knowledge of facts which would disclose this danger to any
reasonable man.'" Id. at 1220 (quoting Restatement (Second) of
Torts § 500 cmt. g (1964)). A showing by the moving party that
the counsel in question acted recklessly or deliberately "in the
face of a known risk" is required. Healey v. Labgold,
231 F. Supp. 2d 64, 68 (D.D.C. 2002) (citing Wallace,
964 F.2d at 1219). Once the moving party has met its burden, the court may
then award sanctions under 28 U.S.C. § 1927. A variety of courts
have noted, however, that "[t]he power to assess costs against an
attorney under § 1927 . . . is a power that must strictly be
construed and utilized only in instances evidencing a `serious
and standard disregard for the orderly process of justice.'"
Dreiling v. Peugeot Motors of Am., Inc., 768 F.2d 1159, 1165
(10th Cir. 1985) (quoting Keitel v. Las Vegas Hacienda, Inc.,
404 F.2d 1163, 1167 (7th Cir. 1968) and citing United States v.
Ross, 535 F.2d 346, 349 (6th Cir. 1976)).
D. The Court's Inherent Power
When the Federal Rules of Civil Procedure do not provide courts
with sufficient authority to protect the integrity of the judicial system and prevent
abuses of the judicial process, courts have the inherent power to
impose sanctions for abusive litigation practices undertaken in
bad faith. See Shepherd, 62 F.3d at 1472; Young v. Office of
the U.S. Senate Sergeant at Arms, 217 F.R.D. 61, 65 (D.D.C.
2003). "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. 32, 43,
111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (quoting Link v. Wabash R.R. Co.,
370 U.S. 626, 630-31, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962)).
However, "[b]ecause of their very potency, inherent powers must
be exercised with restraint and discretion." Id. at 44,
111 S.Ct. 2123 (citing Roadway Express, Inc. v. Piper,
447 U.S. 752, 764, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980)).
"The inherent power encompasses the power to sanction attorney
or party misconduct, and includes the power to enter a default
judgment." Shepherd, 62 F.3d at 1475 (citations omitted).
Pursuant to the Court's inherent power, the Court may also enter
a variety of sanctions, including fines, awards of attorneys'
fees and expenses, contempt citations, disqualifications or
suspensions of counsel, and drawing adverse evidentiary
inferences or precluding the admission of evidence. Id. (citing
Gregory P. Joseph, Sanctions: The Federal Law of Litigation
Abuse § 28(A) (2d ed. 1994)).
E. Imposition of a Default or Dismissal as a Sanction for
While the Court does possess the power to dismiss a plaintiff's
complaint or enter default judgment against a defendant as a
sanction for previous malfeasance, default judgment the central
request of Plaintiff's present motion is a very severe sanction
that is contrary to the "judicial system's strong presumption in
favor of adjudications on the merits." Shepherd, 62 F.3d at 1475. Default judgment is a "drastic step, normally to be
taken only after unfruitful resort to lesser sanctions." Id. at
1478 (citations omitted). Moreover, the sins of an attorney
should not be visited upon an innocent client. See Shea v.
Donohoe Constr. Co., 795 F.2d 1071, 1077-78 (D.C. Cir. 1986).
Indeed, where "the client's only fault is his poor choice of
counsel," default judgment is a "disproportionate sanction" and
an attempt should first be made to sanction the attorney. Id.
Importantly, a district court may use its power to enter a
sanction as severe as dismissal or default judgment only if it
finds, first, that there is clear and convincing evidence that
the fraudulent or bad faith misconduct actually occurred, and
second, that a lesser sanction "would not sufficiently punish and
deter the abusive conduct while allowing a full and fair trial on
the merits." Shepherd, 62 F.3d at 1472 (default judgment
reversed because the district court failed to make these two
findings); Young, 217 F.R.D. at 65. Moreover, a "district court
must not only find the misconduct by clear and convincing
evidence, but must also provide a specific, reasoned explanation
for rejecting lesser sanctions." Id. at 1480; cf. Outley v.
City of New York, 837 F.2d 587, 591 (2d Cir. 1988) ("Before the
extreme sanction of preclusion may be used by the district court,
a judge should inquire more fully into the actual difficulties
which the violation causes, and must consider less drastic
The D.C. Circuit has provided further guidance on the limits of
the sanction of dismissal or default judgment by articulating
three (3) possible although not mandatory justifications for
dismissal as a sanction for misconduct, regardless of whether the
court bases its decision on the Federal Rules of Civil Procedure
or its inherent power. See Webb v. Dist. of Columbia,
146 F.3d 964, 971 (D.C. Cir. 1998). Under Webb, such sanctions are
justified when: (1) the other party has been "so prejudiced by the misconduct that it would be
unfair to require [the party] to proceed further in the case";
(2) the party's misconduct has put "an intolerable burden" on the
court by requiring the court to modify its own docket and
operations in order to accommodate the delay; or (3) the court
finds it necessary "to sanction conduct that is disrespectful to
the court and to deter similar misconduct in the future." Id.;
see also Butera v. Dist. of Columbia, 235 F.3d 637, 661 (D.C.
Cir. 2001). "A sanction pursuant to any of these considerations
must be based upon findings supported by the record." Id.
(citing Bonds, 93 F.3d at 809). Given these stringent
standards, it is clear that "default judgment must be a `sanction
of last resort.'" Id. (quoting Shea, 795 F.2d at 1075).
The Court shall begin its examination of the pending motions by
first analyzing Plaintiff's Motion for Sanctions against
Defendants and their former attorney, Mr. Stanley H. Goldschmidt,
Esq.; the Court will then scrutinize the contentions in Mr.
Goldschmidt's Rule 11 Motion for Sanctions against Plaintiff.
A. Plaintiff's Motion for Sanctions Against Defendants and Mr.
As noted previously, supra Section I(B)(1)-(4), Plaintiff
asserts that default judgment against Defendants, and additional
sanctions against Defendants and their former attorney in this
litigation, Mr. Goldschmidt, are warranted due to four (4)
important considerations: (1) the history of misconduct exhibited
by Defendants and Mr. Goldschmidt as their counsel in separate
litigations contemporaneous to this case; (2) the illegitimate
withholding of discovery in the present case by Defendants and
their counsel; (3) Defendant Fischer's alleged fabrication of the
mock-up bottle of Redneck Beer, which constituted a fraud on this
court, delayed discovery, and compelled this Court to erroneously grant Defendants' motion for
summary judgment under an implied license theory; and (4) the
fact that Defendants' counterclaims filed in this case were
without legal or factual basis. The Court shall review each of
Plaintiff's contentions in turn.
1. History of Misconduct in Separate, Contemporaneous
As detailed by the Court in the Background section of this
Memorandum Opinion, Plaintiff's Motion for Sanctions and
Plaintiff's Reply are replete with references to the misconduct
both proven and alleged of Defendants and their former counsel,
Mr. Goldschmidt, in two separate litigations that occurred
contemporaneous with the first phase of this action: (1) Fischer
Brewing Co. v. Flax, Superior Court of the District of Columbia,
Civ. No. 678-97, aff'd, Fischer v. Estate of Howard L. Flax,
816 A.2d 1 (2003); and (2) In re Fischer, United States
Bankruptcy Court of the District of Maryland, Case No.
03-13704-DK. See Pl.'s Mot. for Sanctions at 4, 9. Essentially,
Plaintiff contends that the misconduct by Defendants and their
counsel in previous litigations is particularly relevant to the
present Motion for Sanctions, as it highlights the pattern and
practice or modus operandi of Defendants and Mr.
Goldschmidt in that they intentionally raise groundless claims,
stonewall legitimate discovery requests, evade court orders,
harass their opponents, and exhibit no regard for honest practice
under the Federal Rules. See, e.g., id. at 4-12; Pl.'s Reply at
It has long been held that in considering the implementation of
sanctions against a party or a counsel to a litigation, a
district court may consider all the circumstances surrounding the
alleged violation. See Link, 370 U.S. at 635, 82 S.Ct. 1386.
"The totality of circumstances can include events which did not
occur in the case proper but occurred in other cases and are, by
their nature, relevant to the pending controversy." Thibeault v.
Square D Co., 960 F.2d 239, 246 (1st Cir. 1992) (citing Moody v. Miller, 864 F.2d 1178, 1181 (5th
Cir. 1989) (per curium) (in imposing sanctions, district court
could properly consider plaintiff's "past history with the
federal courts")); see also Johnson v. Comm'r of Internal
Revenue, 289 F.3d 452, 456-57 (7th Cir. 2002) (Posner, J.) ("The
Tax Court was not required to ignore [the attorney's] bad conduct
in other cases; indeed, it would have been remiss not to consider
it.") (citing cases); Hissom v. New York City Dep't of Housing,
Civ. No. 86-2340, 1987 WL 45807, at *7 (S.D.N.Y. Dec. 22, 1987)
("in order to further the purpose of deterrence, the court should
take into account whether the persons subject to sanctions have
abused the judicial system in the past"). In making a sanctions
determination, "a court should consider whether the attorney's
conduct was repetitious as opposed to isolated, willful as
opposed to negligent, and whether the attorney has a history of
similar conduct in other cases." MAI Photo News Agency, Inc. v.
Am. Broadcasting Co., Civ. No. 97-8908, 2001 U.S. Dist. LEXIS
1680, at *19-*20 (S.D.N.Y. Feb. 22, 2001). Importantly, even
"dogged good-faith persistence in bad conduct becomes
sanctionable once an attorney learns or should have learned that
it is sanctionable." Johnson, 289 F.3d at 457 (citations
Defendants and their former counsel, Mr. Goldschmidt, attempt
to convince the Court to ignore Plaintiff's recitations of their
prior misdeeds for two (2) key reasons. First, they claim that
Plaintiff's "recital of these matters contains a myriad of
inaccuracies, misrepresentations and half truths and misuses
discrete facts out of context." Defs.' Opp'n at 2; see also
Goldschmidt Opp'n at 12 (contending that Plaintiff's citations
"were obviously interposed by Mr. Recio in an attempt to `poison
the well' with the Court since . . . his arguments with respect
to the `substance' of his Motion are replete with falsehoods, and
Mr. Recio apparently believed these issues could provide him with `cover' to camouflage his prevarications"). However,
neither Defendants nor Mr. Goldschmidt detail precisely which of
Plaintiff's laundry list of past violations in other cases are
"unsubstantiated accusations," and neither party offers any
explanation for the findings of previous courts in regard to
their behavior. See Defs.' Opp'n at 1-2; Goldschmidt Opp'n at
11-12. Second, Defendants and Mr. Goldschmidt both claim that the
matters raised by Plaintiff "are extraneous and irrelevant to the
issues at hand." Goldschmidt Opp'n at 12; see also Defs.' Opp'n
at 2 ("More important, the Flax and Fischer bankruptcy cases
are unrelated to the instant litigation, have no bearing on the
instant case and would be inadmissible as evidence." (citing
Lanham v. Whitfield, 805 F.2d 970, 972 (11th Cir. 1986)
(affirming trial court's barring of evidence of other litigation
involving defendant on grounds that it would cause substantial
However, the assertion by Defendants and Mr. Goldschmidt that
previous sanctions and misconduct in related cases are entirely
irrelevant is not only undermined by the great weight of case
law, but also by the Federal Rules of Civil Procedure themselves.
For instance, the 1993 Advisory Committee Notes to Rule 11
Whether the improper conduct was willful, or
negligent; whether it was part of a pattern of
activity, or an isolated event; whether it infected
the entire pleading, or only one particular count or
defense; whether the person has engaged in similar
conduct in other litigation; whether it was intended
to injure; what effect it had on the litigation
process in time or expense; whether the responsible
party is trained in the law; what amount, given the
financial resources of the responsible person, is
needed to deter that person from repetition in the
same case; what amount is needed to deter similar
activity by other litigants: all of these may in a
particular case be proper considerations.
Fed.R.Civ.P. 11 advisory committee's note (1993) (emphasis
added). Accordingly, a court is certainly free to consider the
conduct of a party or counsel in another litigation when
examining possible sanctionable activity in the instant action.
However, contrary to the extraordinary emphasis placed on the
prior misconduct of Defendants' and Mr. Goldschmidt in other
contemporaneous cases by Plaintiff, the usefulness of prior
misconduct outside the present litigation is limited. As the
First Circuit noted:
We emphasize that this is but one of many factors to
be considered in passing upon the question of
sanctions. We also note that, in the case at hand,
there is nothing to indicate that the judge's
decision to preclude the evidence turned on this
point. Indeed, wholly apart from counsel's track
record, preclusion was a supportable remedy for late
supplementation on the record before the district
Thibeault, 960 F.2d at 246 n. 6. As such, the Court shall not
consider Defendants' and Mr. Goldschmidt's history of misconduct,
borne out in numerous sanctions-related decisions across many
courts, as solely determinative of its decision in this case.
Simply, Plaintiff must prove that Defendants and Mr. Goldschmidt
contravened this Court's Orders, the Federal Rules, and
acknowledged standards of practice in this case in order to
support her Motion for Sanctions. The established history of
misconduct in contemporaneous litigation shall influence the
Court in two respects, however: (1) the Court shall analyze the
conduct of Defendants and Mr. Goldschmidt with additional, more
searching scrutiny, and compare their explanations against the
evidence in this fulsome record; and (2) should the Court
conclude that Defendants and Mr. Goldschmidt have violated
established norms of practice to a sanctionable degree, their
past pattern of misconduct shall influence the type and extent of
2. Alleged Withholding of Discovery in the Present Case
Plaintiff's Motion for Sanctions focuses next on three (3)
alleged instances of suppression of key evidence by Defendants
and their former counsel, Mr. Goldschmidt, in this case: (1) the production of false gross revenues incurred during the sale of
Redneck Beer, which significantly underestimated the total sales
of Redneck Beer, Pl.'s Mot. for Sanctions at 13 & n. 10; (2) the
apparent withholding by Mr. Fischer and Mr. Goldschmidt of the
fact that the Atkins' Logo was used in t-shirts produced and sold
under license, id. at 13-20; and (3) the "missing" documents in
this case, subject to this Court's discovery-related production
orders requiring Plaintiff to share certain documents with
Defendants' new counsel, Pl.'s Reply at 11-13. The Court shall
review each allegation regarding the illegitimate suppression of
evidence in turn.
i. Production of False Gross Revenues
In Plaintiff's Motion for Sanctions, Plaintiff, in a lengthy
footnote, implies that the income tax returns filed by Defendants
as part of discovery in this case relevant for purposes of
damages significantly understate the total gross revenues
garnered by the Fischer Brewing Company through the sale of
Redneck Beer. See Pl.'s Mot. for Sanctions at 13 & n. 10. In
support of this inference, Plaintiff relies on two separate
Washington Post articles, from 1997 and 2000, respectively, in
which she claims that "Fischer reported to the Washington Post
that he had sales of well over 375,000 cases of Red Neck beer
between March 1995 and March 1996" and that Defendants ultimately
"sold almost 15 million bottles of Red Neck Beer." Id. at n.
10. Using these figures, Plaintiff estimates that sales of
Redneck Beer should have earned Defendants between $3.4 5.7
million in gross revenues. Id. Linking this disparity to the
past conduct of Defendants in other litigations, Plaintiff
suggests that Defendants falsified their federal income tax
returns. Id.*fn3 Three central problems exist with Plaintiff's insinuations,
each of which decisively undermines her assertion of
falsification. First, Plaintiff distorts the true content and
context of the two aforementioned Washington Post articles. In
a January 23, 1997 article, the Washington Post reported that
Mr. Fischer "created and began bottling Redneck Beer an
American-style brew of which he has sold almost 15 million
bottles"; however, the article was primarily concerned with Mr.
Fischer's failed acquisition of the national Palm Restaurant
chain the article made no further mention of Redneck Beer, and
provided no source for its figures. See Margaret Webb Pressler,
Palms Down on $70 Million; Offer to Buy Falls "Significantly"
Short of Tempting Pricey Chain, WASH. POST, Jan. 23, 1997, at
E1. The second article cited to by Plaintiff, published on
January 17, 2000, is an extensive discussion of the downfall of
the Fischer Brewing Company and Redneck Beer. See Margaret Webb
Pressler, The Beer Baron Signs Off On a Dream, WASH. POST, Jan.
17, 2000, ("The Beer Baron") at F10. However, rather than
noting that Fischer Brewing Company "had sales of well over
375,000 cases of Red Neck Beer," as Plaintiff claims, see Pl.'s
Mot. for Sanctions at 13 n. 10, the article simply reports that
"Redneck sold extremely well, and by March, Fischer had sent
375,000 cases of beer to distributors in 34 states," The Beer
Baron at F10 (emphasis added). There is certainly an important
distinction between goods shipped to vendors and goods ultimately
sold. Plaintiff's conflation of these two very different
concepts, and her failure to recognize that one cannot infer
gross revenues from items shipped, undermines her claim based on
these news articles that Defendants falsified their income for
the purposes of their federal income taxes and discovery in this
case. Second, during discovery in this case, Defendants produced over
nine hundred (900) pages of financial statements and tax
documents pertaining to the Fischer Brewing Company. These
documents include complete federal tax returns for the years 1995
and 1996, year-to-date general ledgers, accountants' compilation
reports of revenues, expenses, assets, and liabilities, as well
as supporting documentation for these reports. See Defs.'
Opp'n, Ex. A (Aff. of Pete V. Albanis, counsel for Mr. Fischer)
at 1-2. These federal tax returns and year-to-date general
ledgers were audited by the accounting firm of Reiberger,
Pollekoff & Kozak. See Defs.' Opp'n, Ex. B (Aff. of Bruce
Pollekoff) at 1. In response to Magistrate Judge Kay's May 1,
2000 Order in this case, Mr. Fischer even produced an affidavit
from the Fischer Brewing Company's accountant, Mr. Bruce
Pollekoff, stating that there was no commingling of funds between
the Fischer Organization, Inc., and the Fischer Brewing Company.
Id. at 1-2. Plaintiff's motion finds no fault with any of this
substantial documentation; indeed, instead of showing internal
conflicts within Defendants' financial disclosures, Plaintiff
relies solely upon a misreading of an unreliable, outside source
to impugn Defendants' tax returns. Given the efforts of
Defendants in producing detailed financial information and
providing evidence supporting the veracity of that production,
Plaintiff's baseless assertions cannot be sustained.
Third, Plaintiff fails to recognize that newspaper articles
constitute inadmissible hearsay, and cannot be admitted into
evidence to support the truth of the matter asserted. "Evidence
constituting hearsay is normally inadmissible because it lacks
sufficient guarantees of reliability." Hutira v. Islamic
Republic of Iran, 211 F. Supp. 2d 115, 123 (D.D.C. 2002) (citing
Arthur Best, Evidence: Examples and Explanations at 61 (2d Ed.)
(noting that "the reliability problems of out-of-court statements
are thought to be so great that common law decisions and the
Federal Rules of Evidence take the position that a rule of exclusion will
produce the fairest results overall")). Courts have routinely
concluded that "`[u]nsupported newspaper articles usually provide
no evidence of the reporter's perception, memory or sincerity
and, therefore, lack circumstantial guarantees of
trustworthiness.'" Id. (quoting Eisenstadt v. Allen,
113 F.3d 120, 1997 WL 211313 (9th Cir. 1997) ("newspaper articles clearly
fall within the definition of hearsay . . . and, thus, are
inadmissible") and citing United States v. Harris,
271 F.3d 690, 696 (7th Cir. 2001) (noting that "daily newspapers are not
reliable evidentiary sources")). As such, courts within this
Circuit have consistently barred newspaper articles from
introduction as evidence due to the fact that they constitute
inadmissible hearsay. See, e.g., Metro. Council of NAACP
Branches v. Fed. Communications Comm'n, 46 F.3d 1154, 1165 (D.C.
Cir. 1995) ("We seriously question whether a New York Times
article is admissible evidence of the truthfulness of its
contents."); United States v. Pollard, 161 F. Supp. 2d 1, 6
(D.D.C. 2001) (barring admission of newspaper articles as
insufficient proof of a party's claim). Given that Plaintiff's
accusation of tax fraud rests solely upon inadmissible hearsay
that cannot stand as evidence of the truth of the matter
asserted, Plaintiff's argument is without foundation and does not
warrant the Court's further consideration.
ii. Alleged Withholding of Cambridge Apparel Material
Plaintiff's Motion for Sanctions next accuses Mr. Fischer and
Mr. Goldschmidt of intentionally withholding the most complete
iteration of the Fischer Brewing Company Business Plan, which
would have revealed the fact that Defendants licensed the
exclusive right to manufacture Redneck Beer apparel containing
the Atkins Logo to Cambridge Sportswear, Inc., and which included
attached photographs of sample clothing attire bearing the
Redneck Beer name and logo. See Pl.'s Mot for Sanctions at
13-20. Plaintiff notes that this material was clearly subject to her First Request for the Production of
Documents and Things, which specifically demanded "Original
copies of all REDNECK BEER PRODUCTS or other things bearing the
REDNECK BEER ILLUSTRATIONS or the name REDNECK BEER." Id. at 14
(citing Pl.'s First Request for Docs. at 6, Request No. 3).
Plaintiff further objects to the fact that Defendants did not
provide her samples of the resulting sportswear apparel, despite
the broad nature of her document request and despite the fact
that such samples apparently existed. See id. at 14-15 (noting
that in a deposition in the Flax litigation, Mr. Fischer
testified that "clothing was produced, and I have some samples").
Plaintiff first became aware of the existence of a deal between
the Fischer Brewing Company and Cambridge Sportswear when
Defendants produced one iteration of a Redneck Beer-related
Business Plan created by Mr. Fischer in order to gain investors
in his enterprise. See id. at 15-17; see also Pl.'s Mot. for
Sanctions, Ex. 19 (Business Plan produced in this case).
Plaintiff did not investigate this deal further because she
apparently relied on Mr. Fischer's claim that "Cambridge
Sportswear simply produced Redneck branded sportswear, but not
sportswear using the Atkins logos she designed," Pl.'s Reply at
14, and his promise that Defendants had produced all documents in
this case, Pl.'s Mot. for Sanctions at 17. Moreover, Plaintiff
was provided no photographs of the apparel during discovery.
According to Plaintiff, because the material provided "did not
include any depiction of the Redneck Branding wearing apparel
showing use of the Atkins logos," Pl.'s Reply at 14, she did not
consider the Cambridge Sportswear agreement to be a key issue in
this case. In the Spring of 2004, however, Plaintiff discovered
that a more complete Business Plan not produced in this
litigation did reveal the licensing of the Atkins Logo to
Cambridge Sportswear. Pl.'s Reply at 20 n. 25; Pl.'s Mot. for Sanctions at 16-17 & Ex. 20
(Business Plan not produced in this case). Plaintiff, armed with
this new information, now asserts that the complete Cambridge
Sportswear information is a major issue, and based on
Defendants' past behavior and the context of the document
production that information was intentionally withheld. See
Pl.'s Mot. for Sanctions at 12-20.
Plaintiff contends that this intentional withholding of
discovery had two major impacts on this litigation: (1) it
needlessly, and substantially, increased the discovery-related
costs of this litigation, see id. at 17-18; and (2) it led this
Court to conclude erroneously that Defendants had been granted a
nonexclusive license to use the Atkins Logo, whereas knowledge of
an exclusive license regarding that Logo would have precluded
summary judgment, see id. at 18-20. According to Plaintiff,
because of Defendants' malfeasance, Plaintiff was forced to
undertake a costly although ultimately successful appeal.
Plaintiff contends that this wrongful suppression of material
evidence would have continued in this case had Plaintiff not had
an opportunity in the Spring of 2004 to review documents produced
in the related Fischer v. Flax litigation in the Superior Court
of the District of Columbia, wherein she discovered the existence
of a more detailed Business Plan. See id. at 16-17; Pl.'s Reply
at 20 n. 25.
Given the intricate factual background of this argument, and
the parties' cross-accusations as to this matter, the Court shall
carefully review, on a step-by-step basis, the context of
Plaintiff's contention that Defendants and their former counsel,
Mr. Goldschmidt, intentionally withheld this information. First,
it is uncontested that during the deposition process in this
case, Mr. Fischer testified that the Fischer Brewing Company
produced several versions of a Redneck Beer-related business plan
in order to attract investors; according to Mr. Fischer, the Business Plan "was prepared, 1995, modified several times
throughout the period of six months." Defs.' Opp'n, Ex. E
(3/20/00 Fischer Dep. at 1180:16-17). Second, it is also
uncontested that both the version of the Business Plan produced
during discovery in this case (Plaintiff's Exhibit 19 to her
Motion for Sanctions) and the version not produced during
discovery in this case (Plaintiff's Exhibit 20 to her Motion for
Sanctions) were originally produced in the Fischer v. Flax
litigation in the Superior Court for the District of Columbia
that occurred contemporaneously to this action. Pl.'s Reply at
14; Defs.' Opp'n at 6-7. However, these documents were produced
in the Fischer v. Flax litigation by a third-party defendant in
that case, Laidlaw & Co., and not by Defendants here. See
Defs.' Opp'n, Ex. E (3/20/00 Fischer Dep.) at 1181 (during Mr.
Fischer's deposition in this case, Mr. Goldschmidt interjects and
notes that the Business Plan introduced as an exhibit by
Plaintiff originally came from Laidlaw's files, as indicated by
the LBF prefix on the Bates stamp); Defs.' Opp'n at 6-7;
Goldschmidt Opp'n at 6; Pl.'s Mot. for Sanctions at 16 n. 11. The
Business Plan produced in this case is roughly 193 pages long,
see Pl.'s Mot. for Sanctions, Ex. 19, while the Business Plan
not produced in this case is roughly 199 pages in length and
attaches photographs of the resulting Redneck Beer-related
apparel, id., Ex. 20.
Given that it is also uncontested that Defendants never
produced the 199-page Business Plan in this case (Exhibit 20),
the Court must look at what information it currently has before
it in order to determine whether Defendants' failure to produce
that document was negligent or intentional. Three considerations
compel the Court to conclude that Defendants' non-production of
the 199-page Business Plan was ultimately the result of
negligence on their part. First, the relevant timeline does not
support Plaintiff's assertion that Defendants withheld the most complete Business Plan iteration because they had knowledge that
its contents would prevent a ruling in their favor under an
implied license theory. Simply, this case was first filed in
March 1998, and discovery began in earnest on or before February
1999. Defendants, however, did not think to add an affirmative
defense of "implied license" until December 29, 2000, when they
finally entered a Motion to Amend their Answer to Plaintiff's
Complaint in order to assert such a claim. See Defs.' Mot. to
Amend Answ. On February 15, 2001, this Court entered an order
granting Defendants' motion, but forcing Defendants to pay for
all costs related to the reopening of discovery surrounding their
"implied license" claim. See Atkins v. Fischer, Civ. No. 98-800
(D.D.C. Feb. 15, 2001) (order granting Defendants' Motion to
Amend but ordering sanctions); Atkins v. Fischer, Civ. No.
98-800 (D.D.C. May 11, 2001) (order denying Plaintiff's Motion to
Strike Defendant's "implied license" defense); Atkins v.
Fischer, Civ. No. 98-800 (D.D.C. Feb. 7, 2002) (order modifying
the previous sanctions order). Therefore, it cannot be said that
Defendants had a grand plan to emerge victorious on an "implied
license" argument from the very start of this litigation; rather,
such an argument was only first put forward roughly three (3)
years after the instigation of this case and after the close of
all discovery. Given the late hour of the "implied license"
defense and the fact that they had to pay for reopened discovery,
it is highly unlikely that (1) Defendants realized that the
additional material in the 199-page plan could have endangered
that defense, and then (2) purposefully sought to suppress that
information for three years in advance in order to assure the
success of that late defense. Instead, all evidence points to the
fact that Defendants only thought of the "implied license"
defense at the last minute and, having already produced a
Business Plan, were negligent in not providing a later iteration
despite their continuing duty to produce it. Second, Defendants' disclosures belie Plaintiff's accusation
that they intentionally suppressed the fact that the Cambridge
Sportswear agreement might have implicated the Atkins Logos.
Multiple documents produced by Defendants in this case clearly
put Plaintiff on notice that the apparel agreement implicated
Redneck Beer logos and designs. For instance, the 193-page
Business Plan actually produced in this litigation clearly
indicates in the "Marketing" section that:
The Company has made an agreement with Cambridge
Manufacturing Company, Inc. located in Appomattox,
Virginia to manufacture various outerwear apparel,
including but not limited to, T shirts, sweatshirts,
hats, gloves, sweaters, pants, coats, jackets, socks,
vests, scarfs, dresses, and boxer shorts. Cambridge
Manufacturing currently sells various products to JC
Pennys, Kmart, WalMart, and various other retailers.
With over 100 representatives in the field, Cambridge
feels that the REDNECK logo will have mass appeal.
Cambridge will be providing various outerwear to the
Pl.'s Mot. for Sanctions, Ex. 19 (Business Plan provided in this
case) at 38 (LBF006239; D001223) (emphasis added). Therefore,
while the Business Plan provided in this litigation might not
have been the most complete version, it did reveal two key
details: (1) the Cambridge agreement implicated the Redneck logo,
not simply the "Redneck Beer" name, and therefore might have
concerned the use of the logo Plaintiff designed for Defendants;
and (2) actual outerwear bearing such logo(s) was available and
discoverable, if not from Defendants then from
Moreover, Defendants in this litigation also produced
numerous correspondence from Mr. Fischer to Courtland
Manufacturing Co. indicating that the various apparel graphics
were not up to par. See Defs.' Opp'n, Ex. G (3/18/1996 Letter
from Mr. Fischer to Mr. Fred H. Lawson, Jr., of Courtland
Manufacturing) at 1 ("This weekend I was in the Sports Authority
store and noticed a very large variety of t-shirts that had much
better graphics and designs than does the Redneck t-shirts you
are currently producing."); id. at 2 (2/20/1996 Letter from Mr.
Fischer to Mr. Lawson) ("I noticed on . . . the white T-shirt
with the Redneck logo . . ."; "With regard to the bandana . . .";
suggesting that the baseball jacket should be "similar to the red
and black hat with the logo `Redneck' embroidered on the front";
noting that "On this design, I do not beleive [sic] a red bandana
would be applicable"; expressing hope that "your new artist can
come up with more creative ideas"); id. at 3 (1/31/96 Letter
from Mr. Fischer to Mr. Lawson) (indicating that "the design on
the T-shirt was acceptable" but "the graphics did not have enough
The Court points to these disclosures, present in the materials
produced by Defendants during discovery in this case, not to
suggest that Plaintiff somehow failed in a duty to root out
material hinted at but not produced by Defendants as required.
Rather, the Court focuses on this information to emphasize that
it is highly unlikely that a guilty party intent on suppressing
evidence relating to logos that might implicate Plaintiff's
design and threaten an "implied license" defense would produce
so much material revealing the use of Redneck Beer logos and
graphics in officially-licensed apparel. Simply, a perceptive
litigant could have used the information actually produced by Defendants to defeat Defendants'
"implied license" argument in a manner similar to the one
suggested by Plaintiff in her Motion for Sanctions. See Pl.'s
Mot. for Sanctions at 18-20. While the additional information in
the 199-page Business Plan and the attached photographs of the
apparel would have aided that effort, the success of the attack
on the "implied license" defense would not have been wholly
dependent on it. As such, given the sheer wealth of disclosures
made by Defendants relating to the use of Redneck Beer-related
logos and graphics in the production of apparel, the Court
concludes that it is more likely than not that Defendants'
non-production of the slightly-longer version of the Business
Plan was less deliberate than negligent.
Third, and finally, Defendants were experiencing a change in
lead counsel during the early portion of their response to
Defendants' First Request for Production of Documents and Things.
While this changeover certainly does not excuse the failure to
produce the 199-page version of the Business Plan, it does help
to explain why its nondisclosure might have occurred, and why
that nondisclosure might have been the result of negligence.
While Mr. Goldschmidt did file an appearance on behalf of
Defendants in this case on March 5, 1998, (1) M. Miller Baker,
Esq., and the law firm of Carr Goodson Warner entered their
appearance on behalf of the Fischer Organization, Inc., on June
1, 1998, see Docket Entry #16; and (2) Mr. Thomas Patrick Ryan,
Esq., and the law firm of McCarthy, Wilson & Ethridge entered
their appearance o behalf of The Fischer Brewing Company on July
17, 1998, see Docket Entry #27. Messrs. Bakes and Ryan entered
the suit as primary counsel on behalf of Defendants after their
insurance company determined that coverage would be provided,
while Mr. Goldschmidt remained in the case solely for the purpose
of prosecuting the Counterclaims which were not covered by the
insurance company. See Goldschmidt Opp'n at 4. Messrs. Miller and Ryan
remained the primary attorneys for Defendants in this case until
May 1999, when they withdrew their appearances and Mr.
Goldschmidt became lead counsel. See id. (citing Docket Entries
#38 & #39). The Responses to Plaintiff's First Request for
Production which would have covered the various iterations of
the Business Plan were prepared, signed, and sent off by
Messrs. Miller and Ryan on March 29, 1999, and April 4, 1999,
i.e., before Mr. Goldschmidt began as lead counsel in this case.
See Goldschmidt Opp'n, Exs. 4 & 5.*fn5
Plaintiff is correct to point out that the 193-page Business
Plan actually produced by Defendants in this case (Exhibit 19 to
Plaintiff's Motion for Sanctions) was originally produced by
Laidlaw & Co. in the Flax litigation; as such, Mr. Goldschmidt
attorney for Mr. Fischer in that litigation necessarily had
to transmit that document to Messrs. Miller and Ryan, who then
provided it to Plaintiff as part of discovery. It is therefore
unexplained as to why Mr. Goldschmidt turned over the 193-page
Business Plan from the Flax litigation for discovery in this
case, but not the 199-page Business Plan (Plaintiff's Exhibit
20). Moreover, once Mr. Goldschmidt assumed the lead counsel
position in this case, he certainly had a duty pursuant to
Federal Rule of Civil Procedure 26(e)(2) to continue to
supplement all disclosures, responses, and documentary evidence
in discovery. See Klonoski v. Mahlah, 156 F.3d 255, 268 (1st
Cir. 1998) (Rule 26 "imposes a broad requirement on parties to
update their earlier disclosures and discovery responses"); 8 Charles Alan Wright, Arthur R. Miller, &
Richard L. Marcus, Federal Practice and Procedure § 2049.1 (2d.
ed. 1994). Given these considerations, the Court considers the
changeover in counsel and the possible confusion resulting from
that transition to be a mitigating factor in the nondisclosure of
the 199-page Business Plan. While such a transition certainly
does not excuse the ultimate negligent failure by Defendants and
their counsel to produce the document, the changeover does help
to explain how a mistake might have taken place.
In sum, the Court concludes that Plaintiff has not introduced
sufficient evidence let alone the kind of "clear and convincing
evidence" required for default judgment, see Shepherd,
62 F.3d at 1472 to establish that Defendants and their former counsel,
Mr. Goldschmidt, intentionally withheld and suppressed the
199-page Business Plan, which contained a more detailed
discussion of the Cambridge Sportswear apparel deal involving
Redneck Beer logos and some sample photographs. Rather, the Court
concludes that the nondisclosure was likely the result of
inexcusable negligence, given (1) the timeline of discovery and
Defendants' late introduction of the "implied license"
affirmative defense; (2) the substantial disclosures present in
the materials actually produced by Defendants that indicated the
Cambridge deal involved the use of logos and that showed Mr.
Fischer's displeasure with the use of graphics and logos on that
apparel; and (3) the changeover in counsel during the discovery
process, which might well have complicated and confused the
The Court further concludes that Defendants' lack of production
of the 199-page Business Plan and the sample photographs does not
sustain Plaintiff's claim that she was unduly prejudiced at the
motion's stage in this litigation. Rather, the Court finds that,
based on the materials produced by Defendants in this litigation, substantial
support for Plaintiff's response to Defendants' implied license
defense as identified in her current Motion for Sanctions was
available to Plaintiff at that time. Moreover, given the fact
that Plaintiff now has the complete 199-page Business Plan and
sample photographs, Plaintiff will not be prejudiced when the
trial in this case occurs. Plaintiff's ultimate lack of
prejudice, however, does not excuse Defendants' negligent lack of
production. As discussed in further detail in this Memorandum
Opinion, infra Section III(A)(5), the Court refuses to condone
such a failing in Defendants' discovery obligations; accordingly,
employing its discretion and acting pursuant to its inherent
powers, the Court shall impose a fine of $5,000.00 upon
Defendants and their former counsel Mr. Goldschmidt, to which
both Defendants and Mr. Goldschmidt are jointly and severally
iii. Allegation that Defendants Are Still Withholding
Finally, in an argument raised in her Reply but not her Motion
for Sanctions, Plaintiff accuses Mr. Goldschmidt specifically of
continuing to withhold documents. See Pl.'s Reply at 11-13.
Plaintiff contends that the documents missing from Defendants'
possession, and subject to this Court's production-related orders
of August 17, 2004 and December 1, 2004, are currently in Mr.
Goldschmidt's possession. Id. To substantiate this claim,
Plaintiff cites to an October 20, 2004 hearing in Mr. Fischer's
bankruptcy case, during which Mr. Fischer posited that his former
counsel, Mr. Goldschmidt, retained 100 to 200 boxes of his
business files of which he now cannot access. Id. at 12
(citing 10/20/04 Bankruptcy Hrg. at 70-74). As such, Plaintiff
finds fault with Mr. Goldschmidt's October 29, 2004 Affidavit in
this case in which he "never stated that he had 100 to 200 boxes
of Fischer documents" and only stated that "he looked only in his
office and that `Security Storage informed me that they do not
have any record of any Fischer/Atkins files in storage.'" Id. at 13 (citing 10/29/04 Goldschmidt Aff.
¶ 10). Moreover, Plaintiff also finds fault with Defendants over
this issue, noting that Mr. Fischer apparently "made no effort to
demand in writing (as opposed to orally) that Goldschmidt turn
over all of the 100 to 200 boxes to Fischer, or to Chicago
Counsel," i.e., Plaintiff's most recent counsel in this action.
Id. Plaintiff concludes by suggesting that she has "absolutely
no doubt that the allegedly missing Fischer documents can be
found (or recreated from) the 200 boxes and that Messrs. Fischer
and Goldschmidt have, yet again, played games with this Court and
with everyone else in this case." Id.
Three problems exist to undermine Plaintiff's argument.
First, Plaintiff's argument concerning boxes allegedly withheld
by Mr. Goldschmidt was introduced for the first time in her
Reply; her original Motion for Sanctions made no mention of such
a problem, and Plaintiff filed no supplement to her Motion for
Sanctions preceding Defendants' Opposition. As such, her argument
is procedurally improper. See Presbyterian Med. Ctr. of the
Univ. of Penn. Health Sys. v. Shalala, 170 F.3d 1146, 1152 (D.C.
Cir. 1999) (court need not consider an argument raised for the
first time in reply brief); Town of Norwood, Mass. v. Fed.
Energy Regulatory Comm'n, 962 F.2d 20, 25 (D.C. Cir. 1992)
("because the petitioner did not preserve the argument in its
opening brief, we reject as untimely the petitioner's attempt to
raise the point in its reply brief"); McBride v. Merrell Dow and
Pharmaceuticals, Inc., 800 F.2d 1208, 1210 (D.C. Cir. 1986) ("We
generally will not entertain arguments omitted from an
appellant's opening brief and raised initially in his reply
Second, contrary to Plaintiff's claims, all evidence in the
record indicates that Mr. Goldschmidt has turned over all
documents relating to this case that he has located. In addition to his October 29, 2004 Affidavit in this case, which was not
required by the Court's August 17, 2004 Order, Mr. Goldschmidt
filed a May 25, 2005 Supplemental Affidavit indicating that he
had discovered and turned over new materials. According to Mr.
I recently came across certain documents related to
this case. They were mixed in boxes relating to
another legal matter that I had one time handled for
Mr. Fischer. I would classify such documents as
`miscellaneous' documents, in no particular order,
such as portions of files from one of the law firms
that previously represented the Defendants in this
case (aside from myself) and what appear to be extra
copies of some deposition exhibits. I did not find
any deposition transcripts or document productions.
The documents, in aggregate, fit into two boxes.
See 5/25/05 Goldschmidt Suppl. Aff. at 1-2, ¶ 4. Mr.
Goldschmidt further attests that, "To the best of my knowledge, I
have no further Fischer/Atkins files or documents in my office or
in storage.' Id. at 2, ¶ 5. Mr. Goldschmidt's continuing good
faith supplementation of information, as he locates it, makes it
less likely that he is intentionally hiding information relating
to this case. Moreover, at this point, there is no basis on the
present record to assume that all documents have not been turned
Third, while Plaintiff attempts to reargue the "missing
document" issue i.e., the fact that Defendants' most recent
counsel was lacking necessary documents originally produced
during the 1998-2001 discovery process in this case because they
had not been turned over or were lost the Court has effectively
resolved this issue with its August 17, 2004 and December 1, 2004
Orders. As the parties themselves both admitted in Status Reports
filed on January 6 and 7, 2005, all issues involving the missing
discovery have been resolved, and the necessary documents have
been shared by Plaintiff with Defendants' most recent counsel.
Moreover, it is clear that Defendants are not withholding the
"missing" documents: pursuant to the Court's twin orders,
Defendants were forced to pay for both the cost of preparing and
copying the documents, as well as for the time spent by representatives of Plaintiff's
counsel in aiding the enterprise. As such, it would defy economic
logic for Defendants to pay to access Plaintiff's
discovery-related information in this case when they already
possessed such materials. Accordingly, even assuming arguendo
that Mr. Goldschmidt was somehow withholding further documents in
this case, Plaintiff has introduced no evidence that Defendants
have any role in that suppression of evidence. Indeed, given that
this case has been active for over seven (7) years, has gone up
to the Court of Appeals, and has involved multiple counsel on all
sides, it is quite likely that the "missing" documents were
simply lost or misplaced in the process. Accordingly, the Court
finds that Plaintiff has not established that Defendants are
continuing to withhold the formerly "missing" documents relevant
to this case.
3. Plaintiff's Contention that Mr. Fischer Fabricated the
Plaintiff's third major argument in favor of the sanction of
default judgment against Defendants is her assertion that Mr.
Fischer fabricated the prototype mock-up bottle of Redneck Beer
that he claims he created prior to meeting with Plaintiff to
discuss logo designs. See Pl.'s Mot. for Sanctions at 20-25;
Pl.'s Reply at 23-30. Plaintiff claims that it is apparent that
Mr. Fischer fabricated this evidence after the fact in an attempt
to defeat her claims "just as he fabricated the Howard Reissner
letters in the Fischer v. Flax litigation after the fact to
support his claim there." Pl.'s Reply at 30. Specifically,
Plaintiff bases her contention on four (4) main arguments: (1)
contrary to Mr. Fischer's deposition testimony, see 4/3/00
Fischer Dep. at 388, the mock-up bottle was not a Budweiser beer
bottle at all, see Pl.'s Mot. for Sanctions at 23-24 (citing
7/28/00 Dep. of Mark Elliott, Senior Manager in the Packaging
Technology Group for Anheuser Busch); (2) the refusal by
Plaintiff's former counsel, Mr. Goldschmidt, to hand over the actual bottle for further testing leads to an inference that
Defendants were aware that the bottle was created ex post
facto, and sought to hide that fact, id. at 24-25; (3)
virtually all testimony in this case indicates that no one was
shown the mock-up bottle by Mr. Fischer, contrary to his
assertions, id. at 22, Pl.'s Reply at 25-28; and (4)
Plaintiff's review of standard bottle markings in the United
States has led her to "believe that the symbol `96' on the
mock-up bottle refers to the year of manufacture of that bottle,"
ensuring that the mock-up was created long after Mr. Fischer held
discussions with Plaintiff regarding design plans, Pl.'s Reply at
Defendants and Mr. Goldschmidt, in responding to Plaintiff's
allegations, do not address Plaintiff's contentions that the
mock-up bottle was not a Budweiser bottle and that the symbols on
the bottle indicate that it was likely manufactured in 1996.
However, Defendants and Mr. Goldschmidt spend a significant
amount of time and effort pointing to (1) various documentary
evidence, including letters dated from 1993 and 1995 that
apparently refer to Mr. Fischer's preliminary sketches and the
mock-up bottle itself, see Defs.' Opp'n 11-12, Goldschmidt
Opp'n at 7-8; (2) Mr. Fischer's own deposition testimony, which
contradicts Plaintiff's assertions, see Defs.' Opp'n at 10-11;
and (3) the testimony of numerous third-party witnesses that
supports Mr. Fischer's version of the mock-up bottle story,
either explicitly or implicitly, including the testimony of Mr.
Craig Goodman, Mr. Gary Nordinger, Mr. Regis Sabol, Mr. Steve
Solomon, and Mr. Harvey Berkman, see Defs.' Opp'n at 12-14,
Goldschmidt Opp'n 7-9.
Here, the Court is faced with a major dispute of material fact
for which it has neither the information nor the inclination to
attempt to resolve at this point. This kind of fundamental issue,
upon which there is conflicting discovery, testimony, and
scientific evidence, involves the kind of balancing and
credibility determinations best left for trial. Plaintiff has now
been provided access to the mock-up bottle, and is certainly free to
call experts during the upcoming trial in this action in an
attempt to undermine Defendants' claims. Plaintiff is further
welcome to cross-examine Defendants' witnesses and Mr. Fischer
himself in an attempt to undermine their credibility or poke
holes in portions of their recollections. However, given the
fundamental conflict and important issue at stake, it is simply
inappropriate for the Court to order the draconian sanction of
default judgment essentially based upon a determination of fact
for Plaintiff on this issue. It may well prove that the
fact-finder ultimately agrees with Plaintiff's assessment, and
finds that Mr. Fischer did construct the mock-up bottle after the
fact in order to undermine Plaintiff's claims; based on the
present record, such a determination is simply not one that this
Court can or should make.
4. Plaintiff's Allegation that Defendants' Counterclaims Were
Filed Without Legal or Factual Basis
Plaintiff's final argument in her Motion for Sanctions against
Defendants and their former counsel, Mr. Stanley H. Goldschmidt,
Esq., is an assertion that that Defendants' counterclaims in this
case (1) breach of contract; (2) tortious interference with
business relations; (3) infringement of trademark; and (4)
infringement of the trademark were filed without legal or
factual basis. See Pl.'s Mot. for Sanctions at 26-27; Pl.'s
Reply at 30-35. Plaintiff contends that Messrs. "Fischer and
Goldschmidt filed baseless counterclaims simply to harass the
Plaintiff. They did not pursue these counterclaims aggressively
because they knew they had no factual basis for them." Pl.'s
Reply at 35. As such, Plaintiff argues that sanctions pursuant to
this Court's inherent power, or Federal Rule of Civil Procedure
11, are appropriate. Id. at 34-35. Both Defendants and Mr. Goldschmidt spend a significant time
explaining why their counterclaims were filed in good faith,
recounting concerns that (1) Plaintiff may have breached her
contract with Defendants by providing inferior artwork, requiring
them to seek the assistance of other graphic artists to create
the final Redneck Beer design (Counterclaim I), see Defs.'
Opp'n at 17-18; (2) Plaintiff, by allegedly contacting
third-parties such as Stroh's Brewing Company and asserting her
ownership of the copyright of the relevant designs (the validity
of which Defendants questioned) against Defendants, could have
produced the kind of "chilling effect" on their efforts to sell
Redneck Beer and advertise merchandise that constituted tortious
interference (Counterclaim II), id. at 18-19, Goldschmidt Opp'n
at 10; and (3) Plaintiff, by filing an application for a
copyright of the Redneck Beer-related logos with the United
States Copyright Office, might have been contemplating the use of
those designs in commerce. which they felt could have constituted
trademark infringement, Defs.' Opp'n at 19-20, Goldschmidt Opp'n
at 10. Upon an analysis, the Court finds Defendants explanations
as to the good faith basis of their counterclaims to have a
sufficient basis to preclude sanctions.
Moreover, the Court notes that Defendants' counterclaims were
filed over seven (7) years ago and Plaintiff's previous counsel
never filed a Motion for Rule 11 Sanctions at that time.
Plaintiff contends that she has not waived objections to the good
faith basis of Defendant's counterclaims because she served Mr.
Goldschmidt with a draft Rule 11 sanctions motion regarding those
counterclaims on May 19, 1998, see Pl.'s Reply, Ex. E (draft
motion for sanctions). However, despite threatening to file the
motion with the Court if Defendants did not withdraw their
counterclaims within twenty-one (21) days, id. at 2, it is
uncontested that Plaintiff never filed that motion with this
Court; Plaintiff preferred instead to file a Motion to Dismiss Defendants' Counterclaims. Given that over seven (7) years have
passed since Defendants filed their counterclaims in this action,
the Court finds Plaintiff's attempted resurrection of her
moribund sanctions motion to be untimely.
Finally, the Court emphasizes that Defendants' counterclaims,
which proved to ultimately be fruitless, are no longer part of
this litigation and were dealt with through appropriate channels.
While these counterclaims proved ultimately to be futile, the
Court notes that counterclaims are filed before discovery has
commenced, often when a party, uncertain of how the facts will
turn out, simply wants to preserve their rights. Some leeway in
the evaluation of the basis for those counterclaims is in order.
After Defendants' filed their counterclaims, Plaintiff brought a
Motion to Dismiss those claims; this Court granted Plaintiff's
motion as to Counterclaim I (breach of contract), but denied the
motion as to the remaining counterclaims. As such, the Court's
ruling implicitly indicated that some discovery as to the
remaining counterclaims was certainly warranted. Once discovery
commenced, the remaining three (3) counterclaims were ultimately
dismissed by Defendants' own stipulation on September 26, 2000
essentially, Defendants, recognizing the futility of their
counterclaims, properly withdrew them from consideration in this
Accordingly, given the explanations provided by Defendants and
Mr. Goldschmidt, the significant time gap between Defendants'
introduction of their counterclaims and Plaintiff's Motion for
Sanctions, the leeway provided to party's in filing
counterclaims, and the ultimately appropriate resolution of those
counterclaims, the Court finds that neither Defendants nor Mr.
Goldschmidt engaged in conduct with respect to Defendants'
counterclaims in this case that rose to the level of being
sanctionable. 5. Summary
Plaintiff requests the draconian sanction of default judgment
in her favor given the alleged malfeasance of Defendants and
their former counsel, Mr. Stanley Goldschmidt. While the Court
acknowledges and considers their oft-sanctioned activities in the
Flax v. Fischer and In re Fischer litigations, Plaintiff
still must establish by clear and convincing evidence that
Defendants and Mr. Goldschmidt engaged in significant
sanctionable activity in this case in order to take such a
drastic step, or even to impose lesser sanctions. Considering the
totality of the circumstances identified by Plaintiff, the Court
in exercising its discretion finds that default judgment in
favor of Plaintiff is not the appropriate remedy in this case.
Rather, the Court concludes that (1) Plaintiff has presented no
valid evidence indicating that Defendants falsified the total
revenues related to Redneck Beer; (2) Plaintiff has failed to
provide sufficient evidence to indicate that Defendants'
nondisclosure of the 199-page Business Plan (Exhibit 20 to
Plaintiff's Motion for Sanctions) was intentional rather than
negligent, or that she was substantially prejudiced by
Defendants' nondisclosure during either the motions stage in this
case or at this time before trial; and finds that (3) the
"missing" documents issue has been resolved by two earlier orders
entered by this Court, and Plaintiff has presented no new
evidence indicating that documents produced in this case were
subsequently "lost" due to the malfeasance of Defendants or Mr.
Goldschmidt. While Plaintiff spends an inordinate amount of time
attempting to convince the Court that Mr. Fischer fabricated the
prototype mock-up bottle of Redneck Beer, this issue ultimately
constitutes a major conflict of material fact one that is best
left for the forthcoming trial. Finally, Plaintiff's efforts to
resurrect a seven (7)-year old argument that Defendants'
counterclaims were filed in bad faith is unavailing given the
sufficient basis for the filing at the time, the passage of time, and the appropriate
resolution of those counterclaims.
As such, the Court finds that Plaintiff has not established,
through clear and convincing evidence, a basis for an entry of
default judgment in her favor pursuant to any of the Federal
Rules or this Court's own inherent power. The Court notes that,
in addition to the problems identified above, (1) there are
simply too many disputes of material fact on the present record
to justify such a draconian action; (2) Judge Graae, in imposing
significant sanctions in the Flax litigation, only took such a
step after making findings pursuant to a bench trial on the "bad
faith litigation" counterclaims; (3) Defendants' nondisclosure
did not directly contravene any of this Court's Orders, and was
not directly covered by any of Plaintiff's Motions to Compel in
this case; and (4) after the completion of the trial in this
case, it may well be the case that some of these factual disputes
will be resolved and the alleged conduct of Defendants and their
former counsel, Mr. Goldschmidt, more apparent.
However, the Court finds that Plaintiff has established that
Defendants and Mr. Goldschmidt failed to meet the discovery
obligations to provide all requested materials in discovery, and
to supplement any document productions a fact essentially
uncontested by Defendants and Mr. Goldschmidt. Specifically,
Defendants and Mr. Goldschmidt failed to produce the complete
199-page Business Plan and attendant sample photographs as
required. Based upon the totality of circumstances identified by
Plaintiff and the present record, the Court concludes that this
failure was the result of their negligence, and not intentional
malfeasance. While such a negligent violation of their discovery
obligations did not substantially prejudice Plaintiff in this
case, the failing did cause Plaintiff to spend extra time and
resources in an effort to locate the information and then
litigate the nondisclosure. As such, the Court employing its discretion and exercising its inherent powers shall impose a
fine of $5,000.00 upon Defendants and Mr. Goldschmidt as a
sanction, to be owed jointly and severally, to be paid to
Plaintiff before the trial date in the above-captioned action.
Accordingly, the Court shall grant-in-part and denyin-part
Plaintiff's Motion for Sanctions.
B. Mr. Goldschmidt's Motion for Rule 11 Sanctions
As noted previously, Mr. Goldschmidt's Motion for Rule 11
Sanctions simply incorporates his Opposition to Plaintiff's
Motion for Sanctions, and contains little more than the statutory
framework for Federal Rule of Civil Procedure 11 and various
conclusory statements. See Goldschmidt's Mot. for Sanctions at
1-2. As may be discerned through a review of Mr. Goldschmidt's
Opposition, Mr. Goldschmidt is essentially complaining that (1)
Plaintiff's Motion for Sanctions was filled with a "number of
false accusations, innuendo and misrepresentations," Goldschmidt
Opp'n at 1, because "in attempting to build a case against [Mr.
Goldschmidt], Mr. Recio [Plaintiff's counsel] deliberately
omitted certain material facts, along with documentation, of
which he has knowledge and possession, that completely exonerates
[Mr. Goldschmidt]," id. at 2; and (2) Mr. Recio's motion and
communications with Mr. Goldschmidt have been filled with
repeated derogatory comments and "cheap shots" on the public
record regarding Mr. Goldschmidt's former medical condition,
id. at 3, 11-12.*fn6
Plaintiff's response does not address the substance of Mr.
Goldschmidt's assertions. Rather, Plaintiff contends that because
Mr. Goldschmidt is the former counsel to Defendants in this case,
and not a party to this litigation, he lacks standing to file a
Rule 11 motion on his behalf. Pl.'s Opp'n to Goldschmidt's Mot. for Sanctions at 1-2.
Moreover, Plaintiff contends that Mr. Goldschmidt cannot be
awarded the attorney's fees that he requests pursuant to Rule 11
because he is proceeding pro se and therefore has not incurred
any such fees. Id. at 2.
Even assuming arguendo that Mr. Goldschmidt has standing to
bring his Motion for Rule 11 Sanctions, the Court concludes that
the motion fails to meet the criteria necessary to sustain a Rule
11 sanction. Simply, Mr. Goldschmidt has not established that
Plaintiff's Motion for Sanctions was presented for an improper
reason, such as harassment or delay; rather, given the sheer
length, depth, and breadth of Plaintiff's motion, it is evident
that Plaintiff legitimately believed that improprieties had
occurred and were continuing in this case. See Fed.R.Civ.P.
11(b)(1). Moreover, Plaintiff's claims were clearly warranted by
existing law, even if Plaintiff ultimately lacked sufficient
evidence to sustain all of her assertions under the law. See
Fed.R.Civ.P. 11(b)(2). Finally, Plaintiff's contentions
certainly had some evidentiary support, as evidenced by the
Court's sanctioning of Defendants and Mr. Goldschmidt for their
negligent failure to comply with their discovery obligations.
Indeed, to a large extent, major disputes of material facts
rather than totally baseless claims prevented the success of
Plaintiff's ultimate request, i.e., default judgment in her
favor. See Fed.R.Civ.P. 11(b)(3). Because Mr. Goldschmidt
cannot meet the necessary criteria to establish a Rule 11
violation on the part of Plaintiff, the Court shall deny Mr.
Stanley H. Goldschmidt's Motion for Sanctions for Violation of
Federal Rule of Civil Procedure 11.
For the reasons set forth above, the Court shall grant-in-part
and deny-in-part Plaintiff's Motion for Finding that Defendants
and Their Prior Counsel, Stanley Goldschmidt, Esquire, Attempted to Perpetrate a Fraud Against This Court and For an
Award of Appropriate Sanctions, and shall deny Mr. Goldschmidt's
Motion for Sanctions Pursuant to Federal Rule of Civil Procedure
11. Moreover, the Court shall also deny as moot Defendants'
Motion for Leave to File Affidavit in Support of their Opposition
to Plaintiff's Motion for Sanctions, and Plaintiff's subsequent
Motion to Strike Defendants' Affidavit. Pursuant to this Court's
finding of a negligent violation of their discovery obligations
in this case, Defendants and Mr. Goldschmidt are jointly and
severally liable for a fine of $5,000.00, payable to Plaintiff,
that must be paid before the start of trial in this case. An
Order setting out these rulings and the date of a status
conference to prepare for trial accompanies this Memorandum
© 1992-2005 VersusLaw Inc.