Universitas Educ., LLC v. Nova Grp., Inc.
| Decision Date | 30 September 2013 |
| Docket Number | No. 11 Civ. 8726 (LTS)(HBP),No. 11 Civ. 1590 (LTS)(HBP),11 Civ. 1590 (LTS)(HBP),11 Civ. 8726 (LTS)(HBP) |
| Parties | UNIVERSITAS EDUCATION, LLC, Petitioner, v. NOVA GROUP, INC., Respondent. NOVA GROUP, INC., Petitioner, v. UNIVERSITAS EDUCATION, LLC, Respondent. |
| Court | U.S. District Court — Southern District of New York |
On May 21, 2013, Magistrate Judge Henry Pitman issued a thorough and well reasoned Report and Recommendation (docket entry no. 252,1 the "Report") regarding the motion of Universitas Education, LLC ("Universitas"), pursuant to Federal Rule of Civil Procedure 11 for sanctions against Nova Group, Inc. ("Nova"), and its attorney Jack E. Robinson, III, Esq., for conduct during litigation of a renewed motion to dismiss both of the above captioned cases for lack of subject matter jurisdiction. (Docket entry no. 152.) TheReport recommends that Universitas' motion be granted with respect to both Nova and Mr. Robinson.
Timely objections to the Report were filed by both Nova and Mr. Robinson. Universitas filed responses to these objections. The Court has reviewed thoroughly these submissions. The relevant facts are set forth in the Report.
The Report recommends that Nova be sanctioned by being required to deposit the judgment amount, $30,181,880.30, with the Court; by being required to pay Universitas' reasonable attorney's fees incurred in bringing the motion for sanctions; and by being prohibited from filing further motions in these actions without prior court approval. The Report further recommends that Mr. Robinson be sanctioned by being required to pay Universitas' reasonable attorney's fees incurred in opposing the amended motion to dismiss, and that the Report serve as a written reprimand of Mr. Robinson.
In reviewing a report and recommendation, a district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C.S. § 636(b)(1) (LexisNexis 2012). In order to accept those portions of the Report to which no timely objection has been made, "a district court need only satisfy itself that there is no clear error on the face of the record." Carlson v. Dep't of Justice, No. 10 Civ. 5149, 2012 WL 928124, at *1 (S.D.N.Y. Mar. 19, 2012) (citation omitted). Where specific objections are made, the Court must make a de novo determination as to those aspects of the report. United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir.1997). "When a party makes only conclusory or general objections, or simply reiterates his original arguments, the Court reviews the Report only for clear error." Kozlow v. Horn, No. 09 Civ. 6597 (LTS)(RLE), 2012 WL 2914338, at *1 (S.D.N.Y. July 17, 2012) (). Any objections must be both specific and clearly aimed at particular findings by the magistrate judge so that no party is allowed a "second bite at the apple" by simply relitigating a prior argument. Camardo, 806 F. Supp. at 382 (citation omitted).
Although many of the objections filed by Nova and Mr. Robinson are repetitive or at least border on the frivolous, the Court has examined de novo each of the issues discussed below and has reviewed the remaining aspects of the Report for clear error.
In his objection, Mr. Robinson raises the specious argument that the Report is a nullity because Judge Pitman did not have authority to submit a report and recommendation to this Court regarding the sanctions because no formal referral had been made. A district judge "may . . . designate a magistrate judge to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations" for the disposition of civil motions. 28 U.S.C.S. § 636(b)(1)(B), (C) (LexisNexis 2012). However, such a designation need not be written. See United States v. B & D Vending, Inc., 398 F.3d 728, 732 (6th Cir. 2004) (); United States v. Clark, No. 06 MC 67, 2007 WL 5462413, at*4 (D. Conn. Sept. 25, 2007), adopted, 574 F. Supp. 2d 262 (D. Conn. 2008) (same). For clarity and the avoidance of any doubt, the Court hereby refers the sanctions motion, nunc pro tunc to May 21, 2013, to Judge Pitman for report and recommendation. Further, as Universitas notes, the report and recommendation process does not prejudice Mr. Robinson as it gives him the right to object to any conclusions and recommendations made by the magistrate, and the opportunity to obtain de novo review.
Mr. Robinson additionally argues that the Report improperly relies on hindsightin judging his alleged sanctionable behavior. A court must review behavior from the perspective of what would have been "objectively reasonable," given the circumstances at the time the signed court submission at issue was made in determining whether the submission is sanctionable under Rule 11. Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d 58, 64 (2d Cir. 2012). Generally speaking, a court should not rely upon facts unavailable to the parties at the time of the sanctionable conduct. See United States v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., AFL-CIO, 948 F.2d 1338, 1344 (2d Cir. 1991). In his motion to dismiss these cases, Mr. Robinson had argued that the court must consider the citizenship of the trust, Charter Oak Trust, in addition to Nova's citizenship to determine if it had diversity jurisdiction. In taking this position, Mr. Robinson argued that the longstanding rule that a trustee may sue on its own behalf had been overturned by the case Carden v. Arkoma Associates. 494 U.S. 185, 191-92 (1990). This Court denied the motion summarily, as baseless. The Second Circuit denied the subsequently-filed appeal summarily as well, holding that Mr. Robinson's argument was foreclosed by a more than 30-year old decision of the Supreme Court, Navarro Savings Association v. Lee, 446 U.S. 458 (1980). Universitas Educ., LLC v. Nova Grp., Inc., No. 12-3504, 513 F. App'x 62, 64 (2d Cir. 2013). Clearly, no hindsight was involved.2 TheCircuit's opinion and the Supreme Court precedent cited therein demonstrate that Mr. Robinson knew or should have known that his argument had no basis in law. Thus when the Second Circuit agreed with the order of this Court, id. at 63, which held that "Nova's motion [was] wholly without merit" (docket entry no. 161), it served only as further indication that the motion was frivolous and designed solely for an improper purpose at the time it was filed. The Report's reliance on the Second Circuit's summary opinion in recommending sanctions was not a judgment based on hindsight.
The Report also identifies further evidence that Mr. Robinson knew of the sanctionable nature of Nova's motion. For example, Judge Pitman warned Nova and Mr. Robinson that the motion was based on a reversal of Nova's earlier position on the issue of subject matter jurisdiction that conveniently happened only after Nova had lost its case on the merits. (Hr'g Tr. Sept. 19, 2012. at 7.) This warning should have given Mr. Robinson pause, and indeed it required that he conduct a thorough investigation into the merits of the motion. See, e.g., Barlow v. McLeod, 666 F. Supp. 222, 229 (D.D.C. 1986), aff'd, 861 F.2d 303 (D.C. Cir. 1988) (). After that warning, Mr. Robinson himself agreed that Nova's epiphany related to subject matter jurisdiction after it had lost on the merits "may be relevant to sanctions" (Hr'g Tr. Sept. 19, 2012. at 7), yet he still pursued the motion.
Mr. Robinson's bad faith is further evidenced in Nova's similarly convenient reversal of position with respect to federal question subject matter jurisdiction, where Nova asserted in moving to dismiss that ERISA did not preempt Universitas' state law claims in the underlying arbitration. Nova had taken precisely the opposite position in two earlier briefs.
Finally, the Court notes the importance of Nova's prior counsel's withdrawal of a motion to dismiss for lack of subject matter jurisdiction, under a Rule 11 notice filed by Universitas which questioned the frivolous nature of the pleading. The earlier motion raised the same arguments as the motion that Mr. Robinson filed. This Court warned Nova, and Mr. Robinson, of the potential penalties if it pursued the motion. The fact that Mr. Robinson knew or should have known of all of these facts, and the legal frivolousness of his motion before he signed it, indicates that his re-filing of the motion to dismiss was in bad faith and with a motive to delay, harass, or needlessly increase the cost of litigation.
The Court notes the inevitable risk that imposing sanctions in a suit may have a chilling effect on future litigation. See, e.g., Eastway Const. Corp. v. City of New York, 637 F. Supp. 558, 583 (E.D.N.Y. 1986), order modified on other grounds and , 821 F.2d 121 (2d Cir. 1987). The behavior at issue here is precisely the sort of conduct that Rule 11 was designed to chill. Cf. Davis v. Crush, 862 F.2d 84, 92 (6th Cir. 1988) (). The litigation behavior deterred here is convenient changes in legal position motivated by a desire to delay and make more costly, through meritless collateral attack, the collection of a validly entered judgment.
Mr. Robinson also argues that the Report has "overlook[ed] salient facts from the...
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