682 F.3d 170 (2nd Cir. 2012), 10-4931-cv(L), Star Mark Management, Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd.

Docket Nº:10-4931-cv(L), 11-16-cv(XAP).
Citation:682 F.3d 170, 82 Fed.R.Serv.3d 1031
Opinion Judge:PER CURIAM:
Party Name:STAR MARK MANAGEMENT, INC., A New York Corporation, Great Mark Corporation, A New York Corporation, Jimmy Zhan, Individually and on Behalf of Star Mark Management, Inc. and Great Mark Corporation, aka Yi Q. Zhan, Plaintiffs, v. KOON CHUN HING KEE SOY & SAUCE FACTORY, LTD., A Company Organized under the Laws of Hong Kong, Defendant-Appellee-Cross-Ap
Attorney:Daniel P. Levitt, Esq., Scarsdale, NY, (Bing Li, Law Offices of Bing Li, LLC, New York, New York, on the brief), for Appellants. Joseph Thomas Roccanova, Yuen Roccanova Seltzer & Sverd P.C., New York, NY, for Appellee.
Judge Panel:Before: KATZMANN, CHIN, Circuit Judges, and ROSENTHAL, District Judge.[1]
Case Date:June 13, 2012
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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682 F.3d 170 (2nd Cir. 2012)

82 Fed.R.Serv.3d 1031

STAR MARK MANAGEMENT, INC., A New York Corporation, Great Mark Corporation, A New York Corporation, Jimmy Zhan, Individually and on Behalf of Star Mark Management, Inc. and Great Mark Corporation, aka Yi Q. Zhan, Plaintiffs,

Law Offices of Bing Li, LLC, Bing Li, Appellants-Cross-Appellees,

v.

KOON CHUN HING KEE SOY & SAUCE FACTORY, LTD., A Company Organized under the Laws of Hong Kong, Defendant-Appellee-Cross-Appellant.

Nos. 10-4931-cv(L), 11-16-cv(XAP).

United States Court of Appeals, Second Circuit.

June 13, 2012

Argued: Feb. 10, 2012.

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Daniel P. Levitt, Esq., Scarsdale, NY, (Bing Li, Law Offices of Bing Li, LLC, New York, New York, on the brief), for Appellants.

Joseph Thomas Roccanova, Yuen Roccanova Seltzer & Sverd P.C., New York, NY, for Appellee.

Before: KATZMANN, CHIN, Circuit Judges, and ROSENTHAL, District Judge.1

PER CURIAM:

In this case, the district court (Matsumoto, J. ) imposed sanctions of $10,000 in fees and costs pursuant to Fed.R.Civ.P. 11 against plaintiffs (collectively, " Star Mark" ) and their attorneys, Bing Li, Esq., and his firm, Law Offices of Bing Li, LLC (together, " Li" ), in favor of defendant Koon Chun Hing Kee Soy & Sauce Factory, Ltd. (" Koon Chun" ). Li appeals, contending that the district court erred in its application of Rule 11. Koon Chun cross-appeals, contending that the district court should have awarded substantially more than $10,000. Koon Chun also moves to sanction Li for filing a purportedly frivolous appeal. We affirm. We also deny the motion for additional sanctions.

BACKGROUND

In 2004, Koon Chun sued Star Mark in the Eastern District of New York for trademark infringement based on Star Mark's sale of counterfeit versions of Koon Chun's hoisin sauce, a sweet and spicy sauce used in Chinese cuisine both as an ingredient in cooking and as a condiment. The district court (Bianco, J. ) granted partial summary judgment to Koon Chun, finding Star Mark liable for trademark and trade dress infringement. See Koon Chun Hing Kee Soy & Sauce Factory, Ltd. v. Star Mark Mgmt., Inc., No. 04-CV-2293 (JFB)(SMG), 2007 WL 74304, at **8-11 (E.D.N.Y. Jan. 8, 2007). The parties proceeded to litigate the issues of willfulness and damages.

At a status conference in May 2007, Star Mark— represented by Li— asked for leave to amend its answer and add counterclaims seeking, inter alia, cancellation of Koon Chun's mark on the theory that Koon Chun's use of the word " hoisin" — which translates to " seafood" — was deceptive because the sauce did not contain seafood.

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The magistrate judge (Gold, J. ) 2 expressed skepticism about the proposed claims. He said that while he had no authority to prohibit Star Mark from filing a motion for leave to amend, he would consider imposing sanctions if the motion were made and he deemed sanctions appropriate. Star Mark elected not to file its motion and instead asserted the claims in a new lawsuit, this action below. Again, Li represented Star Mark.

The remaining claims in the first lawsuit were tried. The magistrate judge found that the Star Mark infringement was willful and awarded damages and costs. We affirmed. See Koon Chun Hing Kee Soy & Sauce Factory, Ltd. v. Star Mark Mgmt., Inc., 409 Fed.Appx. 389 (2d Cir.2010).

In the meantime, the parties proceeded with the litigation of this action. On January 9, 2008, Koon Chun's counsel sent Li a letter requesting that Star Mark withdraw the complaint and threatening to file a Rule 11 motion. Attached to the letter was a proposed Rule 11 notice of motion, which listed six grounds for Koon Chun's assertion that the lawsuit was frivolous. Although the notice of motion referred to a memorandum of law and two affidavits, no such documents were attached to the notice of motion. The letter, however, contained citations to legal authorities.

Star Mark did not withdraw the complaint. Koon Chun moved for judgment on the pleadings dismissing the complaint pursuant to Fed.R.Civ.P. 12(c) and for sanctions under 28 U.S.C. § 1927 and Rule 11. The new notice of motion listed four grounds for Koon Chun's assertion that the lawsuit was frivolous. Three of these grounds were among the six listed in Koon Chun's earlier notice of motion, attached to the letter sent to Li. The fourth ground— no evidence of fraud— was part of the request for sanctions under § 1927. In a thorough and carefully-considered memorandum and order filed September 8, 2009, the district court (Matsumoto, J. ) granted both motions. Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., No. 07-CV-3208 (KAM)(SMG), 2009 WL 2922851 (E.D.N.Y. Sept. 8, 2009). The district court granted the motion for sanctions under Rule 11, not under § 1927. Id. at *15.

The district court referred the issue of the amount of fees and costs to the magistrate judge, who recommended an award against Star Mark and Li of $105,037.02 in fees and costs. In an order filed September 30, 2010, the district court accepted and adopted the magistrate judge's recommendations, but reduced the award to a total of $10,000 for fees and costs " based upon the showing of financial hardship by plaintiffs and their attorney." Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., No. 07-CV-3208 (KAM)(SMG), 2010 WL 3924674, at *6 (E.D.N.Y. Sept. 30, 2010). Koon Chun moved for reconsideration, and the district court denied the motion by order entered November 23, 2010.

These cross-appeals followed.

DISCUSSION

We discuss (1) Li's appeal from the district court's imposition of sanctions, (2) Koon Chun's cross-appeal as to the amount of the sanctions awarded, and (3) Koon Chun's motion to sanction Li for filing a purportedly frivolous appeal.

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I. The Appeal

In his appeal, Li raises two principal issues: (a) whether the service of an informal warning letter with a notice of Rule 11 motion, as opposed to a formal motion, satisfies the safe harbor requirement of Fed.R.Civ.P. 11(c)(2); and (b) whether the district court abused its discretion in concluding that plaintiffs' claims were frivolous.

We review an...

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