Brady et al v. Grendene USA, Inc., No. 3:2012cv00604 - Document 224 (S.D. Cal. 2015)
Court Description: ORDER Granting in Part and Denying in Part 210 The Bradys' Motion for Contempt and to Declare Defendants' Vexatious Litigants; Vacating Hearing Date. The Bradys' Motion for Contempt for Repeated Violations of Protective Order, and t o Declare Defendants Vexatious Litigants, is granted as to holding KMQ and Grendene in contempt and denied as to declaring KMQ and Grendene vexatious litigants; KMQ and Grendene are held in contempt and KMQ is barred from accessing information designated "Confidential - Attorneys' Eyes Only" pursuant to the Protective Order in this case; and The hearing set for May 1, 2015 is vacated. Signed by Judge Gonzalo P. Curiel on 4/29/15. (dlg)
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Brady et al v. Grendene USA, Inc. Doc. 224 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JAMES W. BRADY and PATRICIA M. BRADY, Plaintiffs, 12 v. 13 14 15 16 GRENDENE USA, INC., a Delaware Corporation, and GRENDENE S.A., a Brazil Corporation, 17 18 CASE NO. 3:12-cv-0604-GPC-KSC ORDER: (1) GRANTING IN PART AND DENYING IN PART THE BRADYS’ MOTION FOR CONTEMPT AND TO DECLARE DEFENDANTS VEXATIOUS LITIGANTS; (2) VACATING HEARING DATE [ECF No. 210] Defendants. AND RELATED COUNTERCLAIMS 19 20 I. INTRODUCTION 21 Before the Court is Plaintiffs James W. Brady and Patricia M. Brady’s 22 (collectively, the “Bradys”) Motion for Contempt for Repeated Violations of Protective 23 Order, and to Declare Defendants Vexatious Litigants. (ECF No. 210.)1 Defendants 24 Grendene USA, Inc. and Grendene S.A. (collectively, “Grendene”) oppose. (ECF No. 25 218.) 26 The parties have fully briefed the motion. (ECF Nos. 210, 218, 220.)The Court 27 28 1 On March 31, 2015, the Bradys filed an amended version of their memorandum of points and authorities supporting their motion. (ECF No. 213.) -1- 3:12-cv-0604-GPC-KSC Dockets.Justia.com 1 finds the motion suitable for disposition without oral argument pursuant to Civil Local 2 Rule 7.1(d)(1). Upon review of the moving papers, admissible evidence, and applicable 3 law, the Court GRANTS the Bradys’ motion as to contempt and DENIES the Bradys’ 4 motion as to declaring Grendene and its counsel vexatious litigants. 5 6 II. BACKGROUND On March 9, 2012, the Bradys filed a complaint against Grendene alleging 7 trademark infringement of their IPANEMA mark (the “Trademark Action” or “this 8 case”). (ECF No. 1.) On September 27, 2012, a protective order was entered in this 9 case by Magistrate Judge Karen S. Crawford (the “Protective Order”). (ECF No. 38.) 10 On December 15, 2014, Grendene filed a complaint against the Bradys alleging that 11 filing the Trademark Action constituted a breach of a settlement agreement between 12 Made in Brazil, Inc. (“MIB”), the Bradys’ company, and the Ipanema Show 13 Corporation, Grendene’s alleged predecessor-in-interest, that is at issue in the 14 Trademark Action (the “Breach of Contract Action”). Complaint, Grendene USA, Inc. 15 v. Brady, 3:14-cv-2955-GPC-KSC (S.D. Cal. Dec. 15, 2014), ECF No. 1. 16 On February 3, 2015, Grendene USA filed a complaint with the World 17 Intellectual Property Organization alleging that the Bradys registered their new 18 website, http://www.ipanemaus.com, in bad faith because it was similar to Grendene 19 USA’s website, http://www.ipanemausa.com (the “WIPO Action”). (ECF No. 210-3, 20 Ex. 1.) The WIPO Action was filed against the Bradys’ daughter as 21 http://www.ipanemaus.com was registered in their daughter’s name. (Id.) 22 On February 27, 2015, Grendene USA filed a complaint against the Bradys, their 23 daughter, and MIB in the United States District Court for the Middle District of Florida 24 alleging trademark infringement and unfair competition (the “Florida Action”). 25 Grendene USA, Inc. v. Brady, 6:15-cv-0314-CEM-GJK (M.D. Fla. Feb. 27, 2015), ECF 26 No. 1. 27 On March 2, 2015, Grendene’s law firm, Kupferstein Manuel & Quinto LLP 28 (“KMQ”), filed a complaint against the Bradys in Los Angeles Superior Court alleging -2- 3:12-cv-0604-GPC-KSC 1 breach of contract, fraud, and unfair competition (the “KMQ Action”). (ECF No. 2102 3, Ex. 3.) The KMQ Action arises out of the Bradys’ alleged failure to fulfill an order 3 for a $68 swimsuit placed by one of KMQ’s agents through the Bradys’ website. (Id.) 4 Based on these allegations, KMQ seeks $68 in actual damages and $6800 in punitive 5 damages. (Id.) 6 In bringing these lawsuits, the Bradys allege that Grendene and KMQ have 7 “repeatedly violated the protective order in this case.” (ECF No. 210-1, at 7, 12–13.) 8 Based on these alleged violations, the Bradys move this Court to: (1) find Grendene 9 and KMQ in contempt, (2) order Grendene and KMQ to dismiss all four of their actions 10 against the Bradys, (3) order Grendene and KMQ to pay the Bradys’ attorney fees, and 11 (4) declare Grendene and KMQ vexatious litigants. (ECF No. 210-1, at 13–14.) 12 IV. LEGAL STANDARD 13 A. Contempt 14 Federal Rule of Civil Procedure 70(e) allows the Court to find a party in 15 contempt for failure to comply with a court order. FED. R. CIV. P. 70. In the Ninth 16 Circuit, the moving party has the initial burden to show “by clear and convincing 17 evidence that the contemnors violated a specific and definite order of the court.” In re 18 Bennett, 298 F.3d 1059, 1069 (9th Cir. 2002) (citation and quotation marks omitted). 19 Once the moving party has satisfied its burden, the “burden then shifts to the 20 contemnors to demonstrate why they were unable to comply.” Id. (citation and 21 quotation marks omitted). Generally, a violation is found where a party fails “to take 22 all reasonable steps within the party’s power to comply” with a court order. Reno Air 23 Racing Ass’n., Inc. v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006) (citation and 24 quotation marks omitted). However, good faith actions based on reasonable 25 interpretations of a court order are a defense to civil contempt. Id. (citation and 26 quotation marks omitted). 27 B. Vexatious Litigants 28 “The All Writs Act, 28 U.S.C. § 1651(a), provides district courts with the -3- 3:12-cv-0604-GPC-KSC 1 inherent power to enter pre-filing orders against vexatious litigants. However, such 2 pre-filing orders are an extreme remedy that should rarely be used.” Molski v. 3 Evergreen Dynasty Corp., 500 F.3d 1047, 1057 (9th Cir. 2007) (internal citations 4 omitted). “A pre-filing review order is appropriate if (1) the plaintiff is given adequate 5 notice and an opportunity to oppose the order; (2) the Court compiles an adequate 6 record for review; (3) the Court makes substantive findings as to the frivolous or 7 harassing nature of the litigant’s actions; and (4) the order is narrowly tailored ‘to 8 closely fit the specific vice encountered.’” Missud v. Nevada, 861 F. Supp. 2d 1044, 9 1055 (N.D. Cal. 2012) aff’d 520 F. App’x 534 (9th Cir. 2013) (citations omitted). 10 Before issuing a pre-filing injunction, the Court must make a substantive finding of 11 “the frivolous or harassing nature of the litigant’s actions” that looks at “both the 12 number and content of the filings.” De Long v. Hennessey, 912 F.2d 1144, 1148 (9th 13 Cir. 1990) (quoting In re Powell, 851 F.2d 427, 431 (D.C. Cir. 1988) (per curiam)). 14 V. DISCUSSION 15 A. Protective Order 16 The Protective Order states that “[a]ll Protected Material shall be used solely for 17 this litigation . . . and not for any other purpose whatsoever, including without 18 limitation any other litigation . . . .” (ECF No. 38, at 4.) The Protective Order further 19 states that it does not “restrict in any way a Producing Party’s use or disclosure of its 20 own Protected Material” or restrict the disclosure of Protected Material “that is or has 21 become publicly known through no fault of the Receiving Party.” (Id. at 5.) Though 22 Grendene argues that this motion should have been brought before Magistrate Judge 23 Crawford, (ECF No. 218, at 2), this is incorrect as this case is neither a civil consent 24 nor a misdemeanor case where federal law specifically allows magistrate judges to 25 “exercise the civil contempt authority of the district court.” 28 U.S.C. § 636(e)(4). 26 1. The Bradys’ Sales 27 The Bradys marked reports showing the income and expenses of their swimwear 28 business between 1999 and 2009 as Confidential – Attorneys’ Eyes Only (“AEO”). -4- 3:12-cv-0604-GPC-KSC 1 (ECF No. 212, Ex. 4.) In the WIPO Action, Grendene alleges that “[t]he Bradys’ 2 swimwear business, whose sales were always miniscule by any standard, went into a 3 steady, sharp decline from the mid-1990s through 2006.” (ECF No. 210-3, Ex. 1, at 7.) 4 In the Florida Action, Grendene attached the complaint from the WIPO Action. (ECF 5 No. 210-3, Ex. 2.) 6 Grendene does not dispute that the information was designated AEO, but does 7 proffer five reasons why the allegations in the WIPO Action and Florida Action were 8 not violations of the Protective Order. (ECF No. 218, at 10–12.) First, Grendene points 9 to the fact that the Bradys have publicly quoted the same allegations in their present 10 motion. (Id. at 10.) However, the plain language of the Protective Order allows 11 disclosure of certain information that is publicly known at the time it is disclosed, not 12 the disclosure of information that subsequently becomes publicly known. (See ECF No. 13 38, at 5.) Thus the Bradys’s actions subsequent to Grendene’s alleged violations do not 14 absolve those disclosures. 15 Second, Grendene points to the fact that the Bradys waited until two months after 16 the WIPO Action was filed before filing their present motion and never sought to meet 17 and confer with Grendene about the issue. (ECF No. 218, at 10.) However, Grendene 18 cites no authority showing that a two month delay forfeits a Rule 70 motion or that 19 attempting to resolve a protective order issue with an opposing party is required before 20 filing a Rule 70 motion. 21 Third, Grendene points to the Bradys’ statement that they did not sell swimwear 22 in 2013 and that the Bradys did not “advertise or promote their products, exhibit at 23 trade shows, release new swimwear lines, update their Web site, or sell their products 24 in more than a handful of stores” between 2007 and 2013. (ECF No. 218, at 10; ECF 25 No. 117 ¶ 7.2) Contrary to Grendene’s assertion, one could not “easily discern” that the 26 Bradys’ sales declined between 1999 and 2009 based off information concerning the 27 28 2 Grendene incorrectly cites to paragraph 13 of ECF No. 117 rather than paragraph 7. -5- 3:12-cv-0604-GPC-KSC 1 years 2007 through 2013 as it is quite possible that sales could have been rising 2 between 1999 and 2007 yet falling between 2007 and 2013. (ECF No. 218, at 10.) 3 Fourth, Grendene points to language from this Court’s public November 12, 4 2014 order, (ECF No. 147, at 3, 12). (ECF No. 218, at 10–11.) Again, the information 5 in that order largely pertains to the Bradys’ swimsuit sales between 2007 and 2013. 6 (See ECF No. 147, at 3, 12 (referring to sales “[b]etween 2007 and 2013” and “the half 7 decade prior to this lawsuit”).) The only reference to sales between 1999 and 2009 is 8 the statement that “[b]etween 1999 and 2007, the Bradys sold over $2 million worth 9 of swimsuits bearing the IPANEMA and BLACK BEAN marks,” yet this reference 10 does not say whether the sales are increasing, declining, or remaining flat. (Id. at 3.) 11 Fifth, Grendene points to language contained in the Bradys’ public ex parte 12 motion to seal. (ECF No. 78-1, Exs. 1–2.) The Bradys’ ex parte motion was filed 13 because Grendene had initially filed a joint discovery statement publicly, (ECF No. 74), 14 forcing the Bradys to seek to seal that statement. (ECF No. 139, at 1.) The Bradys’ ex 15 parte motion publicly included Grendene’s statement that “sales of Ipanema Swimwear 16 were declining for years” above a chart listing the years 1999 through 2009. (ECF No. 17 78-1, Exs. 1–2.) In ruling on the Bradys’ ex parte motion, Magistrate Judge Crawford 18 noted that when the Bradys brought the failure to seal to Grendene’s attention, 19 Grendene “refused to withdraw the filings and instead attempted to defend their actions 20 by challenging the designation” which forced the Bradys to file the ex parte motion. 21 (ECF No. 139, at 8–9.) Based on Grendene’s actions, Magistrate Judge Crawford 22 ordered that the joint statement be sealed and awarded the Bradys attorney fees. (Id.) 23 Though the Bradys had publicly filed the information, they only did so because of 24 Grendene’s refusal to abide by the terms of the Protective Order. (See id.) Thus the 25 Court finds that at least some of the fault lies with Grendene which prevents Grendene 26 from using the Protective Order’s “no fault” exception. (See ECF No. 38, at 5.) 27 Additionally, Grendene’s argument that the Bradys have failed to remedy other 28 Protective Order violations does not somehow absolve Grendene of its own violations -6- 3:12-cv-0604-GPC-KSC 1 unless it fits under one of the exceptions. (See id.) 2 As the information regarding the Bradys’ sales between 1999 and 2009 had been 3 designated confidential and was never publicly disclosed through no fault of Grendene, 4 the Court finds that Grendene has violated the Protective Order in both the WIPO 5 Action and Florida Action. Because the Bradys have shown by “clear and convincing 6 evidence” that Grendene failed to comply with the Protective Order, the burden shifts 7 to Grendene to show “why they were unable to comply.” In re Bennett, 298 F.3d at 8 1069. Grendene makes no such showing. In fact, Grendene states that “the WIPO 9 Action is not based upon the Bradys’ declining sales” and striking the statement 10 “would have no effect on Grendene’s claim.” (ECF No. 218, at 4.) Grendene’s 11 statement makes clear that it failed “to take all reasonable steps” within its power to 12 comply with the Protective Order and thus the Court holds Grendene in contempt 13 pursuant to Rule 70(e).3 Reno Air Racing Ass’n, 452 F.3d at 1130. 14 2. The Bradys’ Daughter’s Testimony 15 The Bradys’ daughter was deposed on November 14, 2014, and portions of pages 16 82 through 84 of the deposition transcript’s first volume were marked Confidential – 17 Attorneys’ Eyes Only. (ECF No. 212, Ex. 5.) In the KMQ Action, KMQ alleges in its 18 complaint that the Bradys’ daughter admitted, in her deposition, “that she was 19 responsible for fulfilling any online orders that [the Bradys] received, but claimed that 20 she did not understand how [the Bradys’] online ordering system works” and “that [the 21 Bradys] had shipped a swimsuit to a customer in fulfillment of at least one other online 22 order she had received.” (ECF No. 210-1, at 9.) Grendene responds that this 23 information had been previously disclosed in a joint discovery motion. (See ECF No. 24 194, at 8, 12 n.11.) However, that joint motion was filed on March 3, 2015, and the 25 complaint in the KMQ Action was filed the day before, on March 2, 2015. (See ECF 26 No. 194; ECF No. 210-3, Ex. 3.) Thus at the time that KMQ filed its complaint, that 27 28 3 As the Court has found merit in the Bradys’ motion, the Court DENIES Grendene’s request for attorney fees. (ECF No. 218, at 21.) -7- 3:12-cv-0604-GPC-KSC 1 information had not yet been publicly disclosed. 2 Even if the joint discovery motion had been filed before KMQ’s complaint, the 3 language that Grendene points to was contained in Grendene’s portion of the joint 4 discovery motion. (ECF No. 194, at 8, 12 n.11.) As Magistrate Judge Crawford 5 previously noted, it is Grendene’s responsibility to ensure that its portions of a joint 6 motion comply with the Protective Order regardless of whether it submitted those 7 portions to the Bradys prior to the motion’s filing. (ECF No. 139, at 8 n.4 (“However, 8 the fact that the plaintiffs filed the Joint Motion does not relieve defendants of their 9 obligation to ensure that their contributions to the Motion comply with the terms of the 10 Protective Order, nor does it result in a waiver of the plaintiffs’ objection today.”).) 11 Indeed, even if blame could be assigned to both the Bradys and Grendene for the 12 disclosure in the joint discovery motion, the Protective Order allows disclosure where 13 information “becomes publicly known through no fault of the Receiving Party.” (ECF 14 No. 38, at 5.) Whatever the Bradys’ responsibility for the disclosure in the joint 15 discovery motion, at least some fault lies with Grendene because the language is 16 contained in Grendene’s portion of the motion. Accordingly, the Court finds that KMQ 17 violated the Protective Order in referencing confidential statements from the Bradys’ 18 daughter’s deposition. 19 As the Bradys have shown by “clear and convincing evidence” that KMQ failed 20 to comply with the protective order, the burden shifts to KMQ to show “why they were 21 unable to comply.” In re Bennett, 298 F.3d at 1069. KMQ makes no such showing. 22 Instead, KMQ admits that it “does not need any confidential information from the 23 Bradys to proceed with its claims” in the KMQ Action. (ECF No. 218, at 8.) As KMQ 24 concedes that the confidential information was not necessary to the KMQ Action, the 25 Court finds that KMQ failed “to take all reasonable steps” within its power to comply 26 with the Protective Order and thus holds KMQ in contempt pursuant to Rule 70(e). 27 Reno Air Racing Ass’n, 452 F.3d at 1130. The Court now turns to what the appropriate 28 sanction is for Grendene’s and KMQ’s noncompliance. -8- 3:12-cv-0604-GPC-KSC 1 B. Sanctions 2 As remedies for contempt, the Bradys request that: (1) the Court order the 3 dismissal of and payment of attorney fees for all four actions instituted by Grendene 4 and KMQ, and (2) the Court bar KMQ from “hav[ing] access to AEO information in 5 this action” because it has violated the Protective Order and is also now a party 6 opponent to the Bradys in the KMQ Action. (ECF No. 210-1, at 13–14.) Grendene does 7 not respond to the Bradys argument regarding AEO information. (See ECF No. 218, 8 at 15–20.) 9 As an initial matter, the Bradys have not shown that they suffered any damage 10 from KMQ’s and Grendene’s disclosure of confidential information and an award to 11 the Bradys is limited to “their actual loss for injuries which result from the 12 noncompliance.” In re Dual-Deck Video Cassette Recorder Antitrust Litigation, 10 13 F.3d 693, 696 (9th Cir. 1993). Thus the Court does not find it appropriate to interfere 14 with the actions initiated by Grendene and KMQ by either ordering a dismissal or 15 awarding attorney fees. However, the Court does find it appropriate to bar KMQ from 16 having access to information designated AEO in this case. This is an appropriate 17 remedy for KMQ’s violation of the Protective Order and will ensure future compliance 18 by KMQ.4 This remedy is also a sufficient sanction on Grendene as it will force 19 Grendene to rely more heavily on counsel other than KMQ. 20 C. Vexatious Litigants 21 The Bradys seek to declare KMQ and Grendene vexatious litigants and impose 22 pre-filing orders on them. (ECF No. 210, at 14.) Grendene has filed three lawsuits 23 against the Bradys and KMQ has filed one lawsuit against the Bradys. The Court finds 24 that this minimal number of lawsuits is insufficient to support a pre-filing order based 25 on the extreme nature of such a remedy. Molski, 500 F.3d at 1057. Moreover, the 26 Bradys cite no legal authority to support their argument that the four lawsuits are 27 4 Any concern that this could hinder Grendene’s ability to defend this case is 28 unwarranted as Grendene has other counsel in this case, namely Luedeka Neely Group, P.C., and is, of course, free to substitute other counsel. (See ECF No. 66.) -9- 3:12-cv-0604-GPC-KSC 1 meritless and respond to each action with one or two conclusory sentences as to why 2 that lawsuit lacks merit. (See ECF No. 210, at 15–16.) While these lawsuits may be 3 substantially related to this case, they do seek relief that is different from what 4 Grendene seeks to prevent the Bradys from obtaining in this case. Though KMQ’s 5 decision to institute a lawsuit against the party opponent of their client is somewhat 6 concerning, the Court finds that barring KMQ from accessing AEO information is a 7 sufficient remedy. The Court is also not convinced that Joanna Ardalan, the KMQ 8 agent whose purchase forms the basis of the KMQ Action and who is also a member 9 of the State Bar of California, “unambiguously” violated California Rule of 10 Professional Conduct 2-100 as her communications were with the Bradys’ daughter, 11 not the Bradys, and it is unclear whether she was representing Grendene as an attorney 12 or merely making a purchase on KMQ’s behalf. (ECF No. 210, at 6; see also ECF No. 13 68-4.) Accordingly, the Court DENIES the Bradys’ motion to declare KMQ and 14 Grendene vexatious litigants. 15 VI. CONCLUSION AND ORDER 16 For the reasons stated above, IT IS HEREBY ORDERED that: 17 1. The Bradys’ Motion for Contempt for Repeated Violations of Protective 18 Order, and to Declare Defendants Vexatious Litigants, (ECF No. 210), is 19 GRANTED as to holding KMQ and Grendene in contempt and DENIED 20 as to declaring KMQ and Grendene vexatious litigants; 21 2. KMQ and Grendene are held in contempt and KMQ is barred from 22 accessing information designated “Confidential – Attorneys’ Eyes Only” 23 pursuant to the Protective Order in this case, (see ECF No. 38, at 7–8); 24 and 25 3. The hearing set for May 1, 2015 is VACATED. 26 DATED: April 29, 2015 27 28 HON. GONZALO P. CURIEL United States District Judge - 10 - 3:12-cv-0604-GPC-KSC
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