J. Walter Thompson P.R., Inc. v. Latin Am. Music Co.

• Decision Date: 14 January 2019
• Docket Number: Civil No. 17-1094 (FAB)
• Citation: 355 F.Supp.3d 110
• Parties: J. WALTER THOMPSON PUERTO RICO, INC., Plaintiff, v. LATIN AMERICAN MUSIC COMPANY, INC., et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

355 F.Supp.3d 110

J. WALTER THOMPSON PUERTO RICO, INC., Plaintiff,

v.LATIN AMERICAN MUSIC COMPANY, INC., et al., Defendants.

Civil No. 17-1094 (FAB)

United States District Court, D. Puerto Rico.

Signed January 14, 2019

Patricia Rivera-MacMurray, Hernandez Mayoral Law Office, San Juan, PR, for Plaintiff.

Jelka L. Duchesne, Puerto Rico Corporate Services, Katarina Stipec-Rubio, Adsuar Muniz Goyco Seda & Perez Ochoa PSC, San Juan, PR, Kelly D. Talcott, Pro Hac Vice, The Talcott Law Firm PC, Sea Cliff, NY, Robert Penchina, Pro Hac Vice, Ballard Spahr LLP, Barry I. Slotnick Pro Hac Vice, Frank D'Angelo, Pro Hac Vice, Loeb & Loeb LLP, New York, NY, for Defendants.

OPINION AND ORDER

BESOSA, District Judge.

Before the Court is Peer International Corporation of Puerto Rico ("Peer International")'s motion for attorney's fees, costs and sanctions. (Docket No. 66.) The Court referred Peer International's motion to a magistrate judge for a Report and Recommendation ("R & R"). (Docket No. 68.) For the reasons set forth below, the R & R is GRANTED IN PART and DENIED IN PART . Peer International's motion for attorney's fees, costs and sanctions is GRANTED.

I. Background

Walgreens Company ("Walgreens") commissioned J. Walter Thompson Puerto Rico ("Walter Thompson") to produce a marketing campaign for the 2016 Christmas season. (Docket No. 1 at p. 3.) Walter Thompson procured a license from music publisher Peer International to use "Llegó la Navidad" by Raúl Balseiro ("the composition"). Id. at p. 2. Peer International issued the license to Walter Thompson for a $5,500.00 fee. Id. After the marketing campaign aired throughout Puerto Rico, defendants Latin American Music Company, Inc. ("LAMCO") and ACEMLA de Puerto Rico, Inc. ("ACEMLA") informed Walgreens that they possessed exclusive rights to the composition. Id. at pp. 2–3.¹

To resolve competing claims of ownership regarding "Llegó la Navidad," Walter Thompson filed an interpleader complaint pursuant to Federal Rule of Civil Procedure 22. (Docket No. 1.) In addition to answering the interpleader complaint, LAMCO and ACEMLA set forth copyright infringement claims against Walter Thompson, Peer International, and Walgreens. (Docket No. 14.) Peer International moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). (Docket No. 52.) The doctrine of collateral estoppel compelled this Court to grant Peer International's motion for judgment on the pleadings. J. Walter Thompson P.R., Inc. v. Latin Am. Music. Co., 308 F.Supp.3d 611 (D.P.R. 2018) (Besosa, J.).

Because LAMCO and ACEMLA's copyright infringement claims are frivolous, the Court issued an Order to Show Cause pursuant to Federal Rule of Civil Procedure 11 (" Rule 11"). J. Walter Thompson P.R., Inc., 308 F.Supp.3d at 618. Rule 11 provides that:

By 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 claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.

Fed. R. Civ. P. 11(b)(2). Jelka L. Duchesne ("Duchesne"), Ibraham Latiff-Carrasquillo (Latiff"), Robert Penchina ("Penchina"), and Kelly D. Talcott ("Talcott") appeared on behalf of LAMCO and ACEMLA. (Docket Nos. 10, 13, 30 and 32.) The Court ordered each attorney:

to submit individual filings addressing (1) whether LAMCO and ACEMLA claimed to own "Llegó la Navidad," (2) on what basis counsel filed documents to the Court representing that LAMCO and ACEMLA own "Llegó la Navidad," and (3) why the Court should not impose sanctions pursuant to Rule 11.

J. Walter Thompson P.R., 308 F.Supp.3d at 618. Only Talcott failed to comply with the Court's Order to Show Cause. (Docket Nos. 58–60.)

Peer International moved for sanctions against LAMCO and ACEMLA pursuant to 28 U.S.C. section 1927 (" section 1927"). (Docket No. 66 at p. 24.) The Court referred Peer International's motion "for a report and recommendation on attorney's fees and sanctions." (Docket No. 68.) The Order to Show Cause, however, remained before the Court.

The magistrate judge recommended that (1) LAMCO and ACEMLA pay $107,181.00 in attorney's fees, and (2) that the Court forgo the imposition of sanctions. (Docket No. 78.) Peer International does not object to the magistrate judge's recommendation concerning the award of attorney's fees. (Docket No. 80 at p. 5.)² Consequently, the Court ADOPTS the magistrate judge's recommendation that LAMCO and ACEMLA pay $107,181.00 in attorney's fees. (Docket No. 78 at p. 13.) Peer International does object, however, to the magistrate judge's recommendations regarding sanctions. (Docket No. 80 at p. 6.) According to Peer International, the magistrate judge "issued recommendations regarding the Court's Order to Show Cause ... under Federal Rule of Civil Procedure 11, ... not regarding Peer's motion for sanctions under 28 U.S.C. § 1927." Id. The Court agrees.

I. Standard of Review

A district court may refer a pending motion to a magistrate judge for a R & R. See 28 U.S.C. § 636(b)(1)(B) ; Fed. R. Civ. P. 72(a) ; Loc. Rule 72(b). Any party adversely affected by the R & R may file written objections within fourteen days of being served with the magistrate judge's report. Loc. Rule 72(d). See 28 U.S.C. § 636(b)(1). A party that files a timely objection is entitled to a de novo determination of "those portions of the report or specified proposed findings or recommendations to which specific objection is made." Sylva v. Culebra Dive Shop, 389 F.Supp.2d 189, 191-92 (D.P.R. 2005) (García-Gregory, J.) (citing United States v. Raddatz, 447 U.S. 667, 673, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980) ). Failure to comply with this rule precludes further review. See Davet v. Maccarone, 973 F.2d 22, 30-31 (1st Cir. 1992).

In conducting its review, the Court is free to "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636 (a)(b)(1) ; Álamo Rodríguez v. Pfizer Pharmaceuticals, Inc., 286 F.Supp.2d 144, 146 (D.P.R. 2003). The Court may accept those parts of the R & R to which the parties do not object. See Hernández-Mejías v. Gen. Elec., 428 F.Supp.2d 4, 6 (D.P.R. 2005) (Fusté, J.) (citation omitted).

II. Peer International Moved for Sanctions Pursuant to 28 U.S.C. Section 1927, Not Federal Rule of Civil Procedure 11

The Order to Show Cause and the motion for sanctions are distinct. The Court invoked Rule 11. J. Walter Thompson P.R., Inc., 308 F.Supp.3d at 618. Peer International cited section 1927. (Docket No. 66.) The Court's referral for an R & R concerned Peer International's motion for sanctions, requiring the magistrate judge to analyze LAMCO and ACEMLA's actions pursuant to section 1927. (Docket No. 68.) The R & R, however, is devoid of any reference to section 1927. (Docket No. 78.) Accordingly, the R & R is clearly erroneous because the magistrate judge misapplied the law. See Le Blanc v. B.G.T. Corp., 992 F.2d 394, 400 (1st Cir. 1993) (remanding action in part because "the magistrate judge applied a different, incorrect legal standard"); Winthrop House Ass'n v. Brookside Elm Ltd. Partners, 451 F.Supp.2d 336, 348 (D. Conn. 2005) ("Because these issues were beyond the scope of the referral [to the magistrate judge], this court finds that the better approach is to decline to adopt the recommendations as to these issues in their entirety."). The Court REJECTS the magistrate judge's R & R regarding the imposition of sanctions. The Court finds that sanctions against counsel are appropriate pursuant to Rule 11 and section 1927, in addition to the granting of attorneys' fees to Peer International by LAMCO and ACEMLA.

A. Federal Rule of Civil Procedure 11

A frivolous lawsuit may result in sanctions, such as an award of attorney's fees. Fed. R. Civ. P. 11(c). Courts employ an objective standard in determining whether a litigant and his or her attorney reasonably commenced and litigated a cause of action. See Cruz v. Savage, 896 F.2d 626, 630 (1st Cir. 1990) (affirming the imposition of sanctions pursuant to Rule 11 because "plaintiffs' attorney's litigation of this claim was ‘a vexatious time consuming exercise which bore no fruit.’ "); Nyer v. Winterthur Int'l, 290 F.3d 456, 462 (1st Cir. 2002) (affirming the imposition of sanctions pursuant to Rule 11, because "no attorney, particularly relying on this apportionment argument, could reasonably have believed that the facts of this case could sustain a claim against [the defendant]"). While the imposition of Rule 11 sanctions does not require a finding of bad faith, a showing of at least culpable carelessness is required. Citibank Global Mkts., Inc. v. Santana, 573 F.3d 17, 32 (1st Cir. 2009). Sanctions pursuant to Rule 11"must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated." Fed. R. Civ. P. 11(c)(4). Ultimately, the "imposition of sanctions is a judgment call." Kale v. Combined Ins. Co., 861 F.2d 746, 758 (1st Cir. 1988).

B. 28 U.S.C. section 1927

Section 1927 provides that an attorney "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 imposition of sanctions pursuant to section 1927 does "not require a finding of subjective bad faith." Cruz, 896 F.2d at 631. Vexatious conduct encompasses behavior that is "harassing or annoying, regardless of whether it is intended to be so." Id. Counsel subject to sanctions "evince a studied disregard of the need for an orderly judicial process, or add up to a reckless breach of the lawyer's obligations as an officer of the court." Lamboy-Ortiz v....