In re Polyurethane Foam Antitrust Litig.

• Decision Date: 19 November 2015
• Docket Number: Case No. 1:10 MD 2196
• Parties: In re Polyurethane Foam Antitrust Litigation This document relates to: Direct Purchaser Class
• Court: U.S. District Court — Northern District of Ohio

165 F.Supp.3d 664

In re Polyurethane Foam Antitrust Litigation This document relates to: Direct Purchaser Class

Case No. 1:10 MD 2196

United States District Court, N.D. Ohio, Western Division.

Signed November 19, 2015

MEMORANDUM OPINION AND ORDER IMPOSING SANCTIONS

JACK ZOUHARY

, UNITED STATES DISTRICT JUDGE

Introduction

The Direct Purchaser Class moves for Rule 11 sanctions against Objector Michael Narkin (Doc. 1743), and Narkin moves for sanctions against Class Counsel (Doc. 1800).

Sanctions are appropriate because Narkin is not a class member, he could not reasonably believe that he is a class member, and he maintains his Objection for an improper purpose. To deter Narkin and those like him, Narkin shall pay Ten Thousand Dollars ($10,000) to the Class. This Court denies Narkin's Cross-Motion as frivolous.

Standard of Review

Federal Civil Rule 11(b)(1)–(3)

provides that “[b]y presenting to the court a pleading, written motion, or other paper ... an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances” the filing (1) is not presented for an improper purpose, (2) the legal contentions are “warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law,” and (3) the factual contentions presently have evidentiary support or will have such support upon further investigation. “If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation.” Id. (c)(1). The sanction “must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated,” and if a sanctions award is prompted by a party motion, may include “the prevailing party['s] ... reasonable expenses, including attorney's fees, incurred for the motion.” Id. (c)(2); see also id. (c)(4). A district court retains jurisdiction to impose Rule 11 sanctions after a notice of appeal has been filed. See

Val

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Land Farms, Inc. v. Third Nat'l Bank in Knoxville , 937 F.2d 1110, 1117 (6th Cir.1991).

“In this Circuit, the test for whether Rule 11

sanctions are warranted is whether the conduct for which sanctions are sought was reasonable under the circumstances.” Salkil v. Mount Sterling Twp. Police Dep't , 458 F.3d 520, 528 (6th Cir.2006) (quotation marks omitted). This test is an objective standard. See

Jackson v. Law Firm of O'Hara, Ruberg, Osborne & Taylor , 875 F.2d 1224, 1229 (6th Cir.1989). “The plaintiff is impressed with a continuing responsibility to review and reevaluate his pleadings and where appropriate modify them to conform to Rule 11.” Merritt v. Int'l Ass'n of Machinists & Aerospace Workers , 613 F.3d 609, 626 (6th Cir.2010) (quotation marks and alterations omitted).

The Rule 11

standard “takes into account the special circumstances that often arise in pro se situations[. But] pro se filings do not serve as an impenetrable shield, for one acting pro se has no license to harass others, clog the judicial machinery with meritless litigation, and abuse already overloaded court dockets.” Patterson v. Aiken , 841 F.2d 386, 387 (11th Cir.1988) (quotation marks omitted). Narkin is a former attorney. See

Larsen v. Trader Joe's Co. , 2014 WL 3404531, at *7 n. 5 (N.D.Cal.2014). A person with his formal legal training is held to a higher standard than the typical, lay pro se litigant. See

Matsumaru v. Sato , 521 F.Supp.2d 1013, 1016 (D.Ariz.2007).

Direct Purchasers gave Narkin adequate notice of their primary grounds for sanctions—that Narkin cannot reasonably believe he is a class member (Doc. 1743-1 at 13–14; Doc. 1819 at 2–3), and that he maintains his Objection for an improper purpose (Doc. 1743-1 at 18–19; Doc. 1819 at 3). Narkin had ample opportunity to respond to both arguments (Docs. 1800 & 1843). Further, Direct Purchasers complied with Rule 11

's safe-harbor provision (see Doc. 1743-8).

Discussion

Background . In November 2014, this Court preliminarily approved the Direct Purchaser Class settlements with Leggett & Platt and the Carpenter Defendants, totaling $147.8 million, as well as a notice plan to inform Class members of the settlement (Docs. 1391 & 1406). Narkin filed the Objection in February 2015 (Doc. 1475-6). He closed his Objection by declaring “under penalty of perjury, that [he] purchased carpet cushion and/or underlay and polyurethane pads from defendants during the class period” (id. at 4). In granting final settlement approval, this Court overruled the Objection as frivolous, in part because Narkin provided no proof he was a class member (Doc. 1534 at 11).

Narkin filed a notice of appeal from that decision without paying the appeal filing fee. The Sixth Circuit told Narkin to seek leave from this Court to proceed in forma pauperis (“IFP”) (Case No. 15-3481, Doc. 1 at 1). Absent permission from a court of appeals, 28 U.S.C. § 1915(a)(3)

bars a litigant from taking an appeal in forma pauperis “if the trial court certifies in writing that [the appeal] is not taken in good faith.” Because only class members have standing to object to a class settlement or to appeal final approval, Narkin could do neither. Class Counsel argued this Court should condition any grant of pauper status on a showing by Narkin that he was a class member (Doc. 1678 at 4–5). Agreeing with Class Counsel, this Court ordered Narkin to support any subsequent IFP application with proof of his class membership (Doc. 1701) (May 19 Order). On June 29, twenty-four days after the Sixth Circuit's deadline for doing so, Narkin filed his IFP Application (Doc. 1775), attaching a document allegedly proving his class membership (id. at 5).

Except the attachment proved the opposite. Narkin attached a June 2008 “Carpet Contract,” issued by “Seller: Costco Wholesale,” covering the cost of installing carpet and underlay in Narkin's Eugene, Oregon home (id. ). None of the Defendants appear on the contract. Because the Direct Purchaser settlement classes include only those persons or entities who purchased slabstock or underlay directly from a Defendant or co-conspirator (see Doc. 1379-4 at 3), Narkin had inadvertently proven he was not a class member.

That same day, counsel for the Direct Purchaser Class received notice of Narkin's filing and “called the number listed as Mr. Narkin's daytime phone number in his in forma pauperis motion at approximately 4:20 PM EDT[. Counsel] spoke with a man who identified himself as Michael Narkin” (Doc. 1819-1 at ¶ 3). Counsel then explained to Narkin that Costco Wholesale was not a Defendant in this case, “so Mr. Narkin was an indirect purchaser,” not a Class member, and therefore lacked standing to object to the settlements (id. at ¶ 4). Narkin replied that the Carpet Contract listed a second company as the “actual seller,” but Counsel explained that the second company likewise was not a Defendant or co-conspirator (id. ). Counsel asked Narkin to withdraw his Objection and his appeal (id. at ¶ 5).

Mr. Narkin responded that he might consider withdrawing his objection and appeal, but only if Plaintiffs were willing to provide him ‘something additional.’ When I asked him what that meant, he said that he was ‘just open to something additional.’ Mr. Narkin then said that he ‘could not get more specific’ because he was ‘nailed down in previous situations' when he asked for ‘something specific’ from class counsel.

Counsel thanked Narkin and ended the call.

About ten minutes later, Narkin phoned Counsel, who recounts the call in a sworn Declaration (id. at ¶¶ 7–8).

Mr. Narkin proposed that the ‘additional benefit’ he offered on our previous call be a contribution to ‘a charity I do work for.’ I asked what type of contribution he was seeking and he said, ‘something not totally de minimis.’ He also said that, given the settlements at issue here, Plaintiffs could ‘afford to be somewhat generous.’ He also stated that he believed Plaintiffs' counsel made some filings in which they admitted they ‘inflated’ the case lodestar. He said that, if Plaintiffs' counsel made a payment to his charity, ‘all of that would go away.’

In response to these statements, I told him that Plaintiffs' counsel disagree with his assertions regarding [an] inflated lodestar. I asked Mr. Narkin for more information about the charity he mentioned. Mr. Narkin claimed that it was a ‘501(c)(3) charity’ and confirmed in response to my question that he was on the managerial board of the charity. However, despite my further questions, he would not confirm whether or not he had authority over how the charity distributed its funds, including to its managers.

This Court denied Narkin's IFP Application on July 8 (Doc. 1807 at 2–3).

Narkin Cannot Reasonably Believe He Has Standing to Object to the Settlements. When pressed by this Court to provide proof of his class membership, and after being told once by this Court and repeatedly by Direct Purchasers that he was not and plausibly could not be a class member, Narkin offered only the Carpet Contract, which does not even mention a Defendant or a co-conspirator. Only firms or persons who purchase flexible foam directly from Defendants or a co-conspirator are members of the Direct Purchaser settlement classes. Despite repeat opportunities to do so—in support of the Objection, in response to the Motion for Sanctions, and in his IFP Application—Narkin has never presented legitimate proof of his class membership.

And it is entirely implausible that any such proof exists (see Doc. 1701 at 2). The overwhelming majority of Defendants' products would have no use to someone such as Narkin. That is because Class members purchase large slabstock buns or underlay rolls from Defendants. Class members then further refine the buns or rolls and incorporate the foam into...