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
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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
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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.”).
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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
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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
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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
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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
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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
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- 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