THOIP v. The Walt Disney Company

1:08-cv-06823 | S.D.N.Y. | Jan 20, 2009

Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 1 of 15 UNITED STATES msTRICT CoURT g gay i_:g,§.gf SOUTHERN DISTRICT OF NEW YORK _______________________________________________________ X THOIP (a Chorion Limited Company), OPINION AND ORDER Plaintiff, - against - 08 Civ. 6823 (sAs) THE WALT DISNEY COMPANY, Defendant. _______________________________________________________ X SHIRA A. SCHEINDLIN, U.S.D.J.: Plaintiff THOIP moved to disqualify Pasquale A. Razzano from representing defendant The Walt Disney Company (“TWDC”) in this trademark infringement action. This motion is now moot as TWDC voluntarily retained substitute counsel, O’l\/lelveny & Myers, and consented to the withdrawal of Razzano and his law firm, Fitzpatrick, Cella, Harper & Scinto. However, pursuant to 28 U.S.C. § 1927 and this Court’s inherent powers, THOIP seeks attomey’s fees and costs incurred in connection with its motion for disqualification F or the following reasons, l find that Razzano and his firm are responsible for THOIP’s fees and costs, in an amount to be determined after this Court reviews the relevant time sheets and attorney affidavits Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 2 of 15 I. BACKGROUND A. Corporate Structure Razzano’s conflict of interest arises from his existing attorney-client relationship with both THOIP’s parent company, Chorion Limited (“Chorion”), and THOIP’s affiliate, The Copyrights Group Ltd. (“Copyrights Group”). THOIP is a wholly-owned subsidiary of Chorion which, in tum, is a wholly-owned subsidiary of Planet Acquisitions Holdings Limited (“PAHL”).l Copyrights Group is another wholly-owned subsidiary of PAHL,2 thus making THOIP and Copyrights Group sister corporations Although separate corporate entities, the operations of Chorion, THOIP and Copyrights Group are completely integrated For example, Chorion’s legal department also supervises the legal affairs of THOIP and Copyrights Group.3 B. Copyrights Group’s Intellectual Property Rights Copyrights Group is the licensing agent and exclusive licensor of trademark, copyright and other rights for merchandise relating to various famous ‘ See l l/Zl/OS Declaration of Robert Crossley, Director of Legal and Business Affairs for Chorion (“Crossley Decl.”), 1]1] 2-3. 2 See id. ll 4. 3 See id. 1 5. Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 3 of 15 literary properties4 With respect to most of the properties represented, Copyrights Group has the right to: (l) negotiate and grant licenses to manufacturers and others for the use of the represented properties ; (2) maintain the artistic integrity of the properties; and (3) develop strategies to increase merchandising income from the properties on a long-term basis.5 Copyrights Group also has the right to develop and maintain a trademark program for the protection of the represented properties6 ln return for these services, Copyrights Group retains a substantial portion of the royalties generated by the licenses.7 C. Razzano’s Representation of Copyrights Group For many years, Razzano has provided various legal services, including trademark prosecution and litigation, for Copyrights Group and its licensed properties8 Razzano is aware that Copyrights Group’s legal department is fully integrated with those of Chorion and THOIP.9 Razzano represents 4 See id. 11 6. 5 See id. 6 See id. 7 See id. 8 See id. ‘H 10. 9 See l l/20/08 Declaration of David Llewellyn, counsel in Chorion’s Legal and Business Affairs Department (“Llewellyn Decl.”), 11 3 (“I am employed 3 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 4 of 15 Copyrights Group with respect to trademarks directly owned by Copyrights Group as well as trademarks for which Copyrights Group is the exclusive agent and licensor.10 Razzano has consistently sent invoices to Copyrights Group for his services and has accepted payments from Chorion for those services.11 ln fact, Razzano’s law firm has coordinated directly with Chorion’s accounting department to secure payment for services rendered12 The same Chorion attorneys who work with THOIP’s outside counsel in this litigation also work with Razzano in connection with his trademark work for Copyrights Group.13 ln this capacity, these attorneys have shared sensitive information and business strategies with Razzano.14 F or example, David Llewellyn, an attorney in Chorion’S Legal Department, disclosed various legal and business strategies used by Chorion, including trademark registration and by Chorion, but my responsibilities include providing legal services for various of Chorion’s subsidiaries and affiliates, including THOIP and . . . []Copyrights Group[].”). 10 See id. W 5, 7. 11 See id. 11 4. 12 See id. ll 7. 13 See Crossley Decl. ‘H l4. 14 See id. Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 5 of 15 licensing strategies, to Razzano.15 These strategies are not specific to Chorion but are also employed by other PAHL companies, including THOIP.16 Thus, there is the legitimate concern that Razzano’s knowledge of Chorion’s legal and business strategies could be used againt THOIP to TWDC’s advantage in the instant litigation D. Razzano’s Representation of TWDC On November 6, 2008, THOIP’s counsel in this action (Moses & Singer) forwarded to Llewellyn TWDC’s first document request, which was signed by Razzano.17 The next day, Llewellyn informed Moses & Singer that Razzano currently represents Chorion and Copyrights Group in connection with various trademark matters.18 Moses & Singer sent Razzano a letter, dated November 7, 2008, advising him of the conflict and demanding that he cease representing TWDC.19 The Director of Legal & Business Affairs for Chorion, 15 See Llewellyn Decl. 11 l3. 16 See id. 11 See id. 11 l4. 18 See id. 1° See l l/7/08 Letter from Paul l\/l. Fakler to Razzano, Ex. l to the Declaration of Paul Fakler (“Fakler Decl.”), a partner at Moses & Singer, at 2 (“Now that Chorion has placed you on actual notice of the conflict and its refusal to waive, we expect that you will promptly withdraw your representation of 5 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 6 of 15 Robert Crossley, also sent Razzano a letter dated November 7, 2008, protesting his representation of TWDC.20 Crossley’s letter admonishes Razzano as follows: We are very suprised that your firm has accepted to act for Disney in this matter. We are also puzzled that your conflict searches did not discover that THOIP is a Chorion company, particularly given your personal knowledge of Chorion and the fact that the amended complaint clearly states that THOIP is a Chorion Limited company.21 Razzano responded to both Crossley and Moses & Singer with a letter dated November ll, 2008.22 In that letter, Razzano refused to acknowledge any conflict of interest He claimed that Copyrights Group was not his client and that his firm’s “actual clients” were the nominal owners of the trademarks for which Copyrights Group is the exclusive licensing agent.23 l was asked, through Copyrights, to do similar types of trademark work for Paddington & Co. in connection with the Paddington Bear character. As with my representation with [Frederick Wame & Co.], here Paddington & Co., the Disney in this matter.”). 20 See ll/7/08 Letter from Crossley to Razzano, Ex. l to the Crossley Decl. (“We have been advised by Moses & Singer that your firm has a clear conflict of interest in acting for Disney. We have not granted your firm a waiver to act on Disney’s behalf and neither will we grant such a request if it is sought.”). 21 rd. 22 See Ex. 2 to the Crossley Decl. 23 See id. at 2. Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 7 of 15 owner of the marks was the client, not Copyrights Recently, of course, Copyrights was acquired by Chorion. Since then l have continued to interact with representatives of Chorion as l had in the past with Copyrights, i.e., Chorion was simply the licensing agent for two companies, Wame and Paddington, who were this firm’s actual clients. . . . l did not then and do not now consider Chorion a client of our firm and have had no contact with THOIP or its intellectual property. Nor have l received any confidential information of Chorion or of THOIP, as a result of that or any other contacts24 Razzano thus disavowed ever representing Copyrights Group in connection with any trademarks owned by Copyrights Group.25 Paul Fakler, a partner at Moses & Singer, pressed the issue further when he verbally confronted Razzano with the fact that Razzano had indeed represe nted Copyrights Group in connection with its own trademark26 After investigating his representation of Copyrights Group, Razzano admitted that he represe nted Copyrights Group in connection with at least two trademark registrations27 Despite this admission, Razzano claimed that his representation of 24 25 26 27 Id. See Fakler Decl. 11 2. See id. 11 3. See l l/l2/08 e-mail from Razzano to Fakler, Ex. l to the Fakler Decl. 7 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 8 of 15 Copyrights Group ended when its most recent registration issued in 2003.28 Razzano’s latest position is belied by Razzano’s letter to Llewellyn, dated August 6, 2008, notifying Llewellyn that the Copyrights Group’s Logo Registration was coming up for renewal in January 2009.29 ln that letter, Razzano offers to prepare the necessary paperwork on behalf of Copyrights Group.30 E. The Pre-Motion Conference A telephonic court conference was scheduled for November l7, 2008, to address the conflict of interest issue raised by THOIP. ln advance of that conference, and pursuant to my lndividual Rules, THOIP’s counsel submitted a pre-motion letter to this Court and sent a copy to Razzano. THOIP’s pre-motion letter, which is dated November l4, 2008, sets forth the relevant facts and governing law in support of its motion to disqualify Razzano from representing TWDC. The letter is detailed and quite persuasive 28 See Fakler Decl. 11 4. See also id., Ex. l (“We do not appear to have done any substantive work directly for Copyrights, as a client, since the last of these two registrations issued and certainly not since Copyrights was acquired by Chorion.”). 29 See 8/6/08 Letter from Razzano to Llewellyn, Ex. 4 to the Llewellyn Decl. 311 See id. (“Please let me know if this mark is still in use and whether you want to file the Declaration of Use to keep it in effect. . . . l will then prepare the necessary Declaration.”). Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 9 of 15 On November l7, 2008, after hearing both parties’ positions on the disqualification issue,31 l urged Razzano to voluntarily withdraw in light of the obvious conflict of interest An expedited briefing schedule was set at plaintiffs request, with moving papers due Friday, November 21, 2008.32 l instructed Razzano that if he decided to voluntarily withdraw, he should notify THOIP as soon as possible so that it would not have prepare and file unnecessary motion papers.33 Razzano stated that he would discuss the matter with TWDC as soon as possible and anticipated having an answer the next day, Tuesday, November l8, 2008. THOIP did not receive any word from Razzano or TWDC that Tuesday.34 Accordingly, THOIP’s attorneys began working on the motion and continued working through the week.35 THOIP filed its motion papers at approximately l:OO p.m. on Friday, November 21 , 2008.31’ Unbeknownst to 31 Razzano and Fakler were both on the call. 32 See Reply Declaration of Paul Fakler 11 2. 33 See id. 34 See id. 11 3. 33 See id. 11 4. 36 See id. 11 6. Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 10 of 15 Fakler, however, Razzano had left him a voicemail at 10112 a.m. that Friday.37 ln his message, Razzano informed Fakler that TWDC had decided to retain new counsel but he did not know which of several attorneys TWDC would select.38 Fakler did not get this message until after the motion papers were filed.39 Thus, Razzano’s eleventh hour notice failed to timely resolve the issue and avoid the current fee request. II. LEGAL STANDARD THOIP bases its fee request on 28 U.S.C. § l927 (“section l927”), entitled “Counsel’s liability for excessive costs,” which provides: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof 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 attomeys’ fees reasonably incurred because of such conduct.40 The Second Circuit has interpreted section l927 as authorizing the imposition of 37 See id. 33 See id. 39 Given the time difference with London, THOIP’s motion had to be susbstantially finished by Thursday evening. See id. 11 4. Accordingly, it would have made little difference if Fakler received Razzano’s message at the time it was sent. 411 28 U.S.C. § l927. 10 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 11 of 15 sanctions only “when there is a finding of conduct constituting or akin to bad faith.”41 ln other words, sanctions under section 1927 are warranted “when the attomey’s actions are so completely without merit as to require the conclusion that they must have been undertaken for some improper purpose such as delay.”42 In addition to the Statutory authority under section l927, this Court also has the inherent power to impose attomey’s fees “when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons . . . [or] if a court finds that a fraud has been practiced upon it.”43 “These powers are governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.”44 This inherent power “serv[es] the dual purpose of vindicating judicial authority without resort to the more drastic sanctions available for contempt of court and making the prevailing party whole for expenses caused by his opponent’S 41 Sakon v. Andreo, 119 F.3d 109" date_filed="1997-07-14" court="2d Cir." case_name="John Alan Sakon v. Loren Andreo">119 F.3d 109, 114 (2d Cir. l997). 43 ln re 60 East 80th Street Equitl`es, Inc., 218 F.3d 109" date_filed="2000-07-10" court="2d Cir." case_name="In Re: Jerasimos Papapanayotou, Esq., Jerasimos Papapanayotou, Esq. v. Jeffrey Sapir, Esq., as Chapter 7 Trustee">218 F.3d 109, 115 (2d Cir. 200()) (quoting United States v. International Bhd. of Teamsters, 948 F.2d 1338" date_filed="1991-11-08" court="1st Cir." case_name="United States v. International Brotherhood of Teamsters">948 F.2d 1338, 1345 (2d Cir. 1991) (quotation marks omitted)). 43 Chambers v. NASCO, lnc., 501 U.S. 32" date_filed="1991-08-02" court="SCOTUS" case_name="Chambers v. Nasco, Inc.">501 U.S. 32, 45-46 (1991) (quotation marks and citation omitted). 44 Ia’. at 43 (quotation marks and citation omitted). ll Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 12 of 15 obstinancy.”45 III. DISCUSSION Here, Razzano was put on notice of the conflict of interest as early as November 7, 2008, when Fakler sent him a letter demanding his withdrawal as TWDC’c counsel. ln response, Razzano sent THOIP and its counsel a letter dated November ll, 2008, in which he states: When Disney first contacted us about the THOIP action, we saw Chorion’s name on the complaint and advised Disney of the above facts. Members of our Management Committee also considered whether there would be a conflict and concluded that since Chorion is not our client and, like us, is simply providing professional services to common clients, there is no conflict because our common clients are not involved in this lawsuit. We stand by that conclusion.46 THOIP’s counsel dispelled Razzano’s erroneous point of view in its painstakingly detailed pre-motion letter. If this were not enough, at the pre-motion conference, 1 personally encouraged Razzano to voluntarily withdraw and to do so promptly. Although Razzano initially anticipated having an answer the next day, Tuesday, November 18, 2008, he waited until Friday, November 21 , 2008, the date the motion was due, to inform THOlP’s counsel that he was withdrawing 43 Ia’. at 46 (quotation marks and citation omitted). 46 Ex. 2 to the Crossley Decl. at 2. 12 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 13 of 15 Razzano immediately reported the results of the pre-motion conference to in-house counsel for TWDC.47 According to Razzano, TWDC thereafter took their discussion under advisement and began to identify and retain new counsel.48 Although TWDC may not have known which new attorney it would hire, there is no doubt that both Razzano and TWDC knew that Razzano would withdraw well before the filing date of THOIP’s motion.49 Under these circumstances, Razzano was obligated to either inform THOIP of his intention to withdraw or request that the motion be adjoumed. Razzano’s decision to withhold information of his withdrawal from THOIP until the actual filing date is inexplicable. This unwarranted behavior, in direct contravention of this Court’s instructions, was undertaken in bad faith and requires an award of attomey’s fees.50 Such award is made pursuant to section 1927 and, altematively, this 41 See 11/28/()8 Declaration of Pasquale A. Razzano 11 5. 43 See id. 11 7. 49 See id. 1 6 (“1 suggested, and we discussed whether, in view of the parties’ expressed desire to try to resolve the case expeditiously through mediation with Magistrate Judge Gorenstein, it would be better for both parties for me to withdraw and TWDC select new counsel.”). 311 See, e.g., Life Fitness, Inc. v. Sears, Roebuck and Co., No. 88 C 263, 1988 WL 37835, at * 2 (N.D. lll. Apr. 21, 1988) (fmding plaintiff’s law firm liable for defendant’s attomey’s fees pursuant to section 1927 where law firm initially refused to withdraw, forcing defendant to file a motion for disqualification, and then voluntarily withdrew after defendant’s counsel spent over fifty hours 13 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 14 of 15 Court’s inherent power.51 The amount of such award, however, cannot yet be determined Plaintiff’ s counsel is hereby directed to submit, by January 26, 2009, the relevant time sheets and attorney affidavits Because Razzano and his firm are liable for any amount awarded,52 they may oppose plaintiff’ s submission by January 30, 2009. The Clerk of the Court is directed to close this motion (Document # 11). SO ORDERED: Dated: New York, New York January 20, 2009 preparing and filing the motion). 31 The standard for awarding fees under section 1927 and the Court’s inherent power is the Same. See Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986). 32 TWDC is not liable for any fees awarded. See United States v. International Bhd. of T eamsters, Chaujj“eurs, Warhousemen and Helpers of America, AFL-CIO, 948 F.2d 1338, 1345 (2d Cir. 1991) (“[A]wards pursuant to § 1927 may be imposed only against the offending attomey; clients may not be saddled with such awards.”). 14 Case 1:08-cv-06823-SAS Document 35 Filed 01/20/09 Page 15 of 15 - Appearaiices - For Plaintiff: Paul M. Fakler, Esq. Moses & Singer LLP 405 Lexington Avenue New York, NY 10174 (212) 554-7800 For Defendant: Dale M. Cendali, Esq. OMelveny & Myers LLP Times Square Tower 7 Times Square New York, NY 10036 (212) 326-2000 Former Counsel: Pasquale A. Razzano, Esq. Fitzpatrick, Cella, Harper & Scinto 30 Rockefeller Plaza New York, NY 10112 (212) 218-2100 15