Calloway v. Marvel Entertainment Group, a Div. of Cadence Industries Corp.
| Decision Date | 12 August 1988 |
| Docket Number | D,Nos. 275,385,s. 275 |
| Citation | 854 F.2d 1452 |
| Parties | , 11 Fed.R.Serv.3d 1083 Northern J. CALLOWAY, individually and on behalf of LMN Productions, Inc., Plaintiff-Appellant, Cross-Appellee, v. The MARVEL ENTERTAINMENT GROUP, A DIVISION OF CADENCE INDUSTRIES CORPORATION, James Galton, Al Brodax, Michael S. Klein, Luis Quiros, the Shukat Company, Ltd., Scott Shukat and Peter S. Shukat, Esq., Defendants-Appellees, The Marvel Entertainment Group, a division of Cadence Industries Corporation, James Galton and Al Brodax, Defendants-Appellees, Cross-Appellants. The MARVEL ENTERTAINMENT GROUP, A DIVISION OF CADENCE INDUSTRIES CORPORATION, James Galton, Al Brodax, Michael S. Klein, Luis Quiros and LMN Productions, Inc., Third-Party Plaintiffs-Appellees, v. The SHUKAT COMPANY, LTD., Scott Shukat and Peter S. Shukat, Esq., Third-Party Defendants-Appellees, The Shukat Company, Ltd., and Scott Shukat, Third-Party Defendants-Appellees, Cross-Appellants, Pavelic & LeFlore (now dissolved), counsel at trial for plaintiff, Appellants- Cross-Appellees, Ray L. LeFlore, individually and as a partner of Pavelic & LeFlore (now dissolved), Appellant-Cross-Appellee. ocket 86-7752, 86-7754 and 87-7262. |
| Court | U.S. Court of Appeals — Second Circuit |
Radovan Pavelic, New York City, pro se for appellant-cross-appellee Pavelic & LeFlore (now dissolved).
Robert B. McKay, Santora & McKay, New York City, fordefendants-appellees, cross-appellants The Marvel Entertainment Group, James Galton and Al Brodax.
Norman B. Arnoff, New York City, (Linda K. Brockett, Rosilyn, Newman, Arnoff & Siskind, New York City, of counsel), for third-party defendant-appellee Peter S. Shukat.
Sol V. Slotnik, Pomerantz & Slotnik, New York City, for third-party defendants-appellees The Shukat Co., Ltd. and Scott Shukat.
I. Scott Bieler, New York City (E. Michael Bradley, Brown & Wood, New York City, of counsel), for defendant-appellee Luis Quiros.
Before FEINBERG, Chief Judge, NEWMAN and WINTER, Circuit Judges.
This appeal and cross-appeal require us principally to decide whether sanctions of
$200,000 were properly imposed under Rule 11, Fed.R.Civ.P., on an attorney, his firm and his client. We also address the question of whether sanctions may be imposed under 28 U.S.C. Sec. 1927 after a case has been settled and dismissed. The sanctioned attorney, Ray L. LeFlore, appeals from Judge Sweet's award of $50,000 in sanctions against him individually and $73,000 ($50,000 under Rule 11, $23,000 under Section 1927) against his now-dissolved law firm, Pavelic & LeFlore. LeFlore's former law partner, Radovan Pavelic, also appeals the award of $73,000 in sanctions against Pavelic & LeFlore, arguing that Rule 11 sanctions can be imposed only against the signer of a pleading or paper and not against the signer's firm. Judge Sweet also imposed sanctions against LeFlore's former client and the plaintiff in this case, Northern J. Calloway, of $100,000 under Rule 11 and $10,000 under 17 U.S.C. Sec. 505 (1982). Calloway's pro se appeal has been dismissed for failure to prosecute. A cross-appeal seeking to increase the amount of sanctions against LeFlore, his firm and Calloway has been filed by defendants-appellees, cross-appellants The Marvel Entertainment Group ("Marvel"), an animation and motion picture company that is best known for its comic books; James Galton, the president of Marvel; and Al Brodax, a consultant to Marvel (collectively "the Marvel defendants"). Judge Sweet's decisions are reported at 111 F.R.D. 637 (S.D.N.Y.1986) and 650 F.Supp. 684 (S.D.N.Y.1986).
Because an overview of the underlying litigation is essential to an understanding of the issues, we briefly summarize the proceedings before setting them out in detail. This acrimonious litigation involved scattershot allegations by the plaintiff of copyright infringement, defamation, civil conspiracy, tortious interference, misrepresentation, fraud, breach of fiduciary duty, forgery and document tampering. Calloway's action sought $11 million in compensatory damages and $33 million in punitive damages from: Calloway's two business partners, Michael S. Klein and Luis Quiros; his theatrical agent, Scott Shukat; his longtime attorney, Peter Shukat; and the Marvel defendants. The core issue was whether the Marvel defendants had infringed Calloway's copyright in a script for a proposed animated science-fiction movie musical, "The Skyrider."
Calloway's case was at all times very weak. A principal vulnerability stemmed from the fact that the original complaint had attached to it as exhibits photocopies of written contracts between Calloway and various defendants. These copies indicated on their face that Calloway had sold all his rights in "The Skyrider" to LMN Productions, Inc. ("LMN") and the authenticity of these copies was not challenged. Because LMN had transferred those rights to the Marvel defendants, their use of Calloway's copyrighted work could not constitute actionable infringement. The original complaint was dismissed on technical grounds, however, and an amended complaint was filed that denied that plaintiff had signed the agreements in question. Specifically, it alleged that Calloway's former attorney, Peter Shukat, had without Calloway's authorization or knowledge, "affixed a facsimile of plaintiff's signature to a series of documents." We will refer to this claim as "the facsimile claim." The facsimile claim was then successfully relied upon by Calloway to defeat a motion for summary judgment. The facsimile claim was, however, abandoned before trial but replaced by two new claims. In these claims Calloway admitted that he had signed the contracts. The first new claim alleged that the contracts had been altered by various means, including white-out, after they were signed. We will refer to this as "the white-out claim." The second new claim alleged that fraudulent misrepresentations by Peter Shukat caused Calloway to sign the contracts.
After a six-week trial, the jury returned a verdict for the defendants. The successful defense of this litigation cost the defendants over $900,000. They sought this amount in full in post-trial motions for sanctions against Calloway and his lawyers, LeFlore, who began this action on Calloway's behalf, and the firm of Pavelic & LeFlore, which had been formed in October We affirm the award of sanctions against LeFlore and his firm. Sua sponte, we reinstate Calloway's appeal with regard to Rule 11 sanctions. LeFlore and his firm had a blatant conflict of interest and should have withdrawn as Calloway's counsel in defending the motions for sanctions. Because of this representation, no argument was made on Calloway's behalf that LeFlore was solely responsible for pursuit of the facsimile claim, notwithstanding considerable evidence supporting that view. Nor was an argument made that even if sanctions should be imposed on Calloway, LeFlore and his firm should be jointly and severally liable for them. We vacate the Rule 11 sanctions against Calloway and remand for a determination of those issues. On remand the district court shall also determine whether, if the sanctions against Calloway are reduced, the lawyers should be liable for those sanctions from which Calloway is relieved. Finally, we reverse the sanctions imposed against Pavelic & LeFlore under 28 U.S.C. Sec. 1927 (1982).
1984 and represented Calloway thereafter. Pavelic & LeFlore continued to represent Calloway in defending the motions for sanctions notwithstanding an obvious conflict of interest. Judge Sweet granted the motions in part and imposed sanctions under Rule 11 for the pursuit of the facsimile claim. These amounted to $50,000 on LeFlore, and $50,000 on Pavelic & LeFlore. An additional $23,000 of sanctions was imposed on the firm under 28 U.S.C. Sec. 1927 for failure to accept a settlement offering full relief from Quiros. A separate judgment for sanctions in the amount of $110,000 was imposed on Calloway. Of this, $100,000 was imposed under Rule 11 and $10,000 under 17 U.S.C. Sec. 505, which authorizes an award of fees to a prevailing party in a copyright action. LeFlore and Pavelic appealed, and the Marvel defendants cross-appealed. Calloway filed a pro se appeal, but that appeal was dismissed for lack of prosecution.
Because LeFlore takes the astonishing position that he never advanced the facsimile claim, it is necessary to describe the parties and transactions underlying this litigation in what would otherwise be unnecessary detail. The plaintiff, Northern J. Calloway, is an actor best known for his role as David on the children's television program "Sesame Street." In 1979, Calloway became interested in developing a motion picture, "The Skyrider," that would combine animation, science fiction and music. Although Calloway had appeared in several movies, he apparently had no prior experience in film production, animation, merchandising or budgeting. Nor had he ever written a screenplay. Calloway's initial efforts to launch "The Skyrider" project consisted of writing songs in collaboration with a friend, Gavin Spencer, obtaining futuristic drawings from an artist, Sammis McLean, and hiring one David Roth, whom Calloway had met by chance at the Hayden Planetarium, to compose a brief story outline. Calloway also prepared a rough "presentation book," and, with the assistance of his agent, Scott Shukat, sought unsuccessfully to interest various motion picture companies in the project.
In December 1980, Calloway fortuitously met Luis Quiros, an insurance salesman, in the lobby of a Manhattan office building. Soon thereafter, Quiros introduced Calloway to Michael Klein, a dentist and Quiros's...
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