If Hope is demanding a trial by jury then he and his lawyers must be pretty confident of a win. I really think Zaza and co should pay up now and get on with running the company, rather than running it into the ground.
JT tend to agree…this thing has more twists and turns remaining!
Well one good thing about this morning Eyes. Check out the LVCG results
Looks like we are heading for a full trial.
In terms of Hope requesting for a Jury Trial, to me I think this is procedural; even if they didn’t want it, they have little option because the case has been brought by FRR and the Judge does not have the power to dismiss as we are the ones that have demanded for a Jury trial. Equally, Hope may have got a significant boost from Judge Seeborg’s summary for denying FRR’s Preliminary Injunction.
Whatever the case, FRR’s Legal Team have got their work cutout if they are going to turn this around at trial.
Is there a smoking gun? Are FRR deliberately holding back their disclosure for the Jury Trial? Who knows.
Equally puzzling is why carry on fighting a legal case, which on the face of it, looks weak? Why put in a tender bid for one of the largest gas fields off Ukraine when there is little money?
On a positive note, and purely speculative on my part, perhaps the farmout agreement has already been signed but not with another FRR entity but with BP and hence their increased activities in Georgia recently?
Time to stay patient and back Zaza and his team (for now).
Have to say I tend to agree with those who suggest the whole thing is tactical now. As I have opinioned before there were three objectives here.
One - get Hope off the board - job done. Two - protect the asset - looks like job done at least for now. Three - create the timeline that might allow other things to happen - we will only know if this was successful when a certain fat lady sings.
We are mere spectators here - but I have to say the Ukraine piece is both intriguing and puzzling. Either completely delusional or perhaps a sign of true genius. One or the other.
I think there’s a highly political dimension also with US backing either directly or indirectly FRRs modus operandi.
Not really sure if that’s a good idea tbh. He’s already accusing the Iranians of planting those mines in the gulf. If he gets Europe to stop buying Russian oil then we could be heading for a possible military intervention such as Crimea. Nothing is beyond the Russians if provoked and there isn’t much to stop them marching into Georgia or any of the previous soviet states
Post by Regdik.
I have to agree with Seymore and Devex but add the following.
Step back and look at the whole and not the individual document.
By Demanding a CC by jury is Hope now accepting that FRR have out played him and locked away payment for up to 12 months by claiming solvency.
Hope in his emails indicated FRR could be in a different place SP very quickly
So is a major about to announce a buy-in/JV that would transform FRR finances.
Stepping back and looking at Outrider a small company itself shows that FRR are a significant item on their asset sheet so expected revenues that did not come (Loan or fire sale). This must be hurting as they are paying lawyers to fight this case (may in time get FRR to pay).
So Hope will get is 30M in 12 months and now see’s FRR doing a deal and now wants damages in court as FRR are soon to be in the money. He has 2 judges say that the FRR claim is poor legally so why not get a slice by claiming damages!
If not why go ahead as he could just fight the asset move and claim the lot as FRR would be a busted flush. Hope has seen what has been put before the court in full we have not. So not to unhappy at this news at it seems Hope think that FRR is going to have money soon and he needs it.
From Dave73 on LSE
Russia’s Deputy Foreign Minister Grigory Karasin and Special Representative of the Georgian Prime Minister for Relations with Russia Zurab Abashidze met in Prague on June 13. The sides discussed various issues related mainly with trade, economy, humanitarian and cultural aspects of bilateral relations.
Grigori Karasin said before the meeting that Russia is concerned about possible accelerated membership of Georgia in NATO. According to him, it will affect the country’s relations with Russia.
“US Secretary of State Mike Pompey has openly stated that Georgia’s NATO membership should be accelerated. To our mind, this will have catastrophic effects on our relationship”, Deputy Foreign Minister of Russia stated.
Prime Minister’s Special Representative for Relations with Russia Zurab Abashidze responded to the statement made by Karasin about Georgia’s NATO membership.
“Russia should not talk about NATO-Georgia relations in a threatening tone”, Zurab Abashidze said.
Abashidze believes that NATO-Georgia relations are the country’s sovereign choice and no one has rights to dictate or change its diplomatic course.
“Our relations with NATO and other international organizations, this is our sovereign right, sovereign choice. This is totally unacceptable for us when Russia’s representatives make some statements in a threatening tone,” Zurab Abashidze stated.
Georgia wanting more US investment , well you have it just bloody support it , how about a tax rebate for starters
Pyrotechs view on LSE.
"PRAYER WHEREFORE, PREMISES CONSIDERED, Defendants respectfully pray for judgment as follows: 1. Plaintiffs take nothing by virtue of this action, and that judgment be rendered in favor of Defendants or, upon consent by Defendants, that this action be dismissed with prejudice to re-filing.’
This for me is that OMF are requesting that when judgement is made that there is no appeal process - that they want to stop the stalling by FRR.
I do not believe winning the court battle is the aim here, i said a few weeks back, this was carefully orchestrated so that hope felt he could or should resign from the board. Then we get loan, income or deal to pay Hope off. Yes due to court action it costs a lot more, but better than what Hope was planning for us.
So far the plan is working, Hope resigned so unable to block financial deals, now we have time to get a deal struck to pay him off. I suspect we will be liable for all legal costs too.
This for me would be a huge win"
Still no mention of FRR in the Cayman Gazette as posted by IVY from the LSE
Just a thought but has anybody emailed the liquidators to ask them about the DOS? As shareholders I’m sure we’re legally entitled to at least ask if the declaration has been accepted as if the assets were wound up we would be entitled to any “left overs”.
Contact for enquiries:
Name: Kelsey Still
Telephone: +1 345 743 6830
No mention of FRR in the latest Caymans Court Listings so the solvency declaration looks like it’s still holding!
Not sure eyes, best thing to do is call Mr. Still which is what I’ll do on Monday morning. I don’t see why it would be sensitive information and as a shareholder (part owner of the company) I’m entitled to know what the liquidators are up too.
TSBS mail reply from the Liquidators
they wont tell us anything about liquidation as we dont hold shares in frcc latest reply
I refer to your email to my colleague, *****
Unfortunately as you are not a shareholder of Frontera Resources Caucasus Corporation (In Voluntary Liquidation), we cannot discuss the liquidation with you. As noted previously we suggest that you liaise directly with Frontera Resources Corporation.
Have to say Taffy52 on LSE is a bit of a hero. So the next blow for blow response appears rebutting/explaining the last lot. Largely technical in reality but effectively saying the Caymans actions had been dropped by mutual agreement and that in reality there was no overlap.
A couple of interesting points though. First stating that discovery is ongoing, and that events continue to move along. I was particularly taken by this one: “Some of the reasons for the change in venue are privileged and cannot be disclosed to the Court for that reason”
It is difficult to think what the reasons might be regarding change in venue - would it be possibly different disclosure rules re the US? But then you would say it - so has to be commercial of some sort. Any thoughts?
The full transcript here:
At the Court’s invitation, Plaintiffs respectfully submit their response to the Court’s concerns that sanctions could be warranted for Plaintiff’s failure to inform the Court of the now-concluded prior action in the Cayman Islands (the “Caymans Action”) among some of the parties to this action.
As a preliminary matter, undersigned counsel would like to emphasize his statements at oral argument that there was no intent to mislead the Court, nor was there an intent that the Court would rule on the temporary restraining order without notice to the defendants. Viewed from the Court’s perspective, undersigned counsel understands the Court may be distrustful of counsel’s motives, but the reason for the omission was a matter of counsel’s perspective and interpretation of the relevant local rules, and inadvertence regarding the Court’s view of the materiality of an inconclusive prior action. (See Declaration of William DeClercq (“DeClercq Decl.”), ¶ 2). Counsel extends sincere apologies to the Court for any inconvenience or misdirection.
This Court has observed that “Rule 11 sanctions are appropriate if an action has been brought for an improper purpose, the claims are not warranted by existing law or the extension of the law, or the allegations lack evidentiary support. Sanctions, however, are an extraordinary remedy, one to be exercised with extreme caution. They should be reserved for rare and exceptional cases where the action is clearly frivolous, legally unreasonable or without legal foundation, or brought for an improper purpose.” Organic Consumers Ass’n v. Sanderson Farms, Inc., 2018 U.S. Dist. LEXIS 56150, *3, 2018 WL 1586142, citing and quoting Fed. R. Civ. P. 11(b) and Operating Eng’rs Pension Tr. v. A-C Co., 859 F.2d 1336, 1345 (9th Cir. 1988) [observing, “while plaintiffs’ counsel ideally could have been more transparent in both the FAC and the opposition to Sanderson’s motion to dismiss regarding the USDA’s position on the testing data it had provided, their reliance on the USDA’s data was not without a reasonable basis.”] Plaintiffs respectfully ask the Court to find their position here had a reasonable basis.
PLAINTIFFS’ BRIEF TO THE COURT IN OPPOSITION TO ISSUANCE OF SANCTIONS
A. Timing of the Actions, and Notice of the TRO to Defendants It may help the Court in this sanctions inquiry to consider a clarification with respect to the timeline of events and the notice provided to Defendants. Plaintiffs filed the original Complaint (Dkt. 1) in this matter over the weekend, e-filed on the evening of April 14, 2019, with the understanding that the prior action would be voluntarily dismissed at the beginning of the business day, April 15, in the Cayman Islands. In other words, the two actions overlapped by a few hours, admittedly.
To be clear, the prior action was discontinued entirely on April 15, 2019, before the commencement in earnest of this action: before the summons was issued, before service was attempted, and before the case initiation papers were accepted by the Court. (DeClercq Decl., ¶ ¶ 2-4). The Court may also wish to consider that the original Complaint filed on April 14, 2019, sought only monetary damages; it did not seek injunctive relief of any sort. (Dkt. 1; DeClercq Decl., ¶ 5) In other words, the injunction has dissolved in the Cayman Islands action when it was dismissed, on April 15, 2019, before Plaintiffs asked this court for injunctive relief. This gap in the timeline might be relevant to the Court’s analysis, because in the interim, additional, new events occurred that Plaintiffs sought to enjoin. Notice of the original complaint was to be achieved through service of process since no injunctive relieve was originally contemplated in tis action. (DeClercq Decl., ¶ 4). Some of the reasons for the change in venue are privileged and cannot be disclosed to the Court for that reason. Some of the business reasons and more obvious venue-selection reasons are understandable. (Id., ¶ 6).
As indicated at oral argument, the United States court system is more familiar to Plaintiffs, who are based in the United States; Plaintiffs are based in the United States, its witnesses, documents, and corporate attorneys are located in the United States, and the laws of the United States are understood by its citizens. Importantly, the key Defendant in this action, Stephen Hope, resides in the Northern District of California, and therefore is amenable to service of process, deposition, and appearances in this Court. Plaintiffs’ counsel maintains offices in Los Angeles and San Francisco and therefore the venue makes good business sense. (Id.).
The Summonses (Dkt. 5) were issued by the Court on April 16, 2019, after the process of dismissal of the Caymans Action was completed, and the injunctions dissolved as a result. For this reason, as this case was getting underway, it did not make sense to file a Notice of Related case because (a) the Caymans Action was concluded; (b) the Caymans Action was not in the United States; and © Local Rule 3-13 seems to refer to pending actions within the federal or state courts of this country, since it states: “Whenever a party knows or learns that an action filed or removed to this district involves all or a material part of the same subject matter and all or substantially all of the same parties as another action which is pending in any other federal or state court…” (emphasis added).
Based on the language of Rule 3-13, counsel may have had a reasonable basis to concluded that, even if there were some overlapping issues and overlapping parties between the cases, an action in the Cayman Islands (i.e., not in the United States) was not within the ambit of the rule, particularly since the rule contemplates coordination of actions, etc., which would have been impracticable if not impossible here. The Court’s point, at oral argument, is well-taken, to the extent that this action involves a material part of the prior action and at least some of the same parties. When viewed from the Court’s perspective, rather than the practitioner’s, the Court’s concerns are of course understandable.
This action seeks relief based upon Steven Hope’s inherently conflicted loyalties, as a Board member of the Plaintiffs, acting on behalf of and in favor of the interests of a senior secured creditor. Plaintiffs have alleged breaches of fiduciary duty because Mr. Hope disapproved of a variety of funding transactions, rather than abstaining from matters that impacted his position as a creditor, concerning additional lending activity.
This action has alleged that Mr. Hope failed to act in the best interest of the Plaintiffs and failed to take action to protect Plaintiff’s value as a going concern, as Plaintiffs allege he was duty-bound to do. Plaintiffs allege in this action Mr. Hope acted to protect his security interest, to the detriment of Plaintiffs, and opposed decisions, using his effective veto power, to block actions that could have assisted Plaintiffs. In addition, the Outrider defendants are parties as they are alleged to have aided and abetted Mr. Hope in favoring his own financial interests. (See Dkt. 1.)
Some of these issues were, admittedly, raised in the prior action based on the facts as they were known to Plaintiffs at that time, and some facts and allegations are not yet able to be proven, since discovery has not commenced. After the Cayman Islands action had been dismissed, and while Plaintiffs were still in the process of hiring a process server in the San Francisco area, Plaintiffs received a copy of the Enforcement Notice from Maples dated April 17, 2019. (See Dkt. 6-1; DeClercq Decl. ¶ 8). Receipt of this Enforcement Notice and the ensuing wave of irreparable harm it triggered forced Plaintiffs to reconsider their strategy in this matter. (Id.) Mr. Hope’s (alleged) actions, in April 2019, directing MaplesFS to commence enforcement and (allegedly) directing FTI, in April/ May 2019, to commence “voluntary” liquidation at the same time Mr. Hope still held a seat on the Board of Directors and still had access to all of Plaintiffs’ most important information, was a paramount concern. (Dkt. 6-1)
These new (alleged) breaches of fiduciary duty, starting April 17, 2019, when Mr. Hope still was a Board member, offered after the prior lawsuit was dismissed, formed new allegations in a new complaint and a new request for relief that was never at issue in the Cayman Islands action, as it had been dismissed before MaplesFS was appointed by Mr. Hope or his agents. (Id.) Ultimately, Plaintiffs realized that their best option to attempt to minimize the harm was to amend the Complaint and seek interlocutory injunctive relief based on the new breaches of duty that Plaintiffs believe were caused by Mr. Hope, while he was still a director. (DeClercq Decl., ¶ 9).
Because the Enforcement Notice triggered a broad array of powers that Plaintiffs believe were (and possibly still are) being directed and orchestrated by Mr. Hope, and which Plaintiffs believe are destructive to the going concern value of Plaintiffs, it was incumbent on undersigned counsel to act quickly to amend the complaint and seek to protect the client from further irreparable harm, if possible. (Id.).
Under the press of a client emergency, counsel must select the most salient facts and the ones that counsel believes are legally relevant and persuasive. Because the Cayman Islands action was inconclusive and involved an older set of facts, with different parties, there was no issue- or claim-preclusive effect and from counsel’s perspective, little if any reason to revisit that action. (See Id. at ¶¶ 9 & 13(3)). The omission therefore was not unwarranted. (Id. at ¶ 9.)
Based on counsel’s understanding of fast-moving facts, which at that time were changing daily, Plaintiffs revised the original complaint and filed their First Amended Verified Complaint for Injunctive Relief and Damages (the “Amended Complaint”) (Dkt. 6) at 6:35 p.m. PST on April 24, 2019. (Id., ¶ 10). At that point in time, the Caymans Action had been dismissed for nine days, and was entirely concluded new facts were evolving and there was a new basis for relief. Plaintiffs’ Notice of Motion and Motion for Temporary Restraining Order (the “Motion for TRO”) (Dkt. 9) at 2:45 p.m. PST on April 25, 2019.
On the first page of text of the Motion for TRO, Plaintiffs stated the following to this Court: Counsel for Plaintiffs intend to provide Defendants with notice of the instant Motion via personal service on Defendant Hope (who is also the registered agent for the corporate Defendants) and via email pursuant to Local Rule 65-1(b). Plaintiffs intend to personally serve Mr. Hope and/or email to him this Notice of Motion and Motion for Temporary Restraining Order and the corresponding documents by the close of business on Friday, April 26, 2019. Dkt. 9, p. 2 (emphasis added)).
The original moving papers sought emergency relief but did not request ex parte relief without notice. At 1:59 p.m. PST on April 26, 2019, a paralegal at the offices of Plaintiffs’ counsel emailed to Mr. Hope copies of: the Amended Complaint; the Motion for TRO; the Memorandum of Points and Authorities in Support of Plaintiffs’ Motion for TRO (Dkt. 10); and the Court’s Order Regarding Briefing Schedule (the “April 26th Order”) (Dkt. 15) in which the Court set May 2, 2019 as the earliest date for Defendants to have to submit documents to the Court. (DeClercq Decl., ¶ 11).
In addition to Mr. Hope, this email was also sent to Mr. Cornwell, a Houston-based attorney whom Plaintiffs suspected would arrange for California counsel for Defendants. (Id.). In its Order Denying Motion for Preliminary Injunction (Dkt. 42), the Court stated that Plaintiffs “sought the issuance of temporary injunctive relief with no notice to Defendants.” (Dkt. 42, p. 5).
But, as described above, Plaintiffs provided notice of the Motion for TRO to Defendants and Mr. Cornwell in the precise manner set forth in their submission to this Court. (DeClercq Decl., ¶ 12).
In its April 26th Order, the Court did not instruct Plaintiffs to do otherwise, and the Court did not correct Plaintiffs for this proposed manner of notice at that time. (See Dkt. 15). Plaintiffs had no intention of seeking relief without giving defendants notice and an opportunity to be heard, did not request relief be issued without notice, and would have agreed to a stipulated briefing schedule. (DeClercq Decl., ¶ 12). B.
Compliance with Local Rule 3-13 Local Rule 3-13(a) states: Notice. Whenever a party knows or learns that an action filed or removed to this district involves all or a material part of the same subject matter and all or substantially all of the same parties as another action which is pending in any other federal or state court, the party must promptly file with the Court in the action pending before this Court and serve all opposing parties in the action pending before this Court with a Notice of Pendency of Other Action or Proceeding. (L.R. 3-13(a) (emphasis added)). Here, the Cayman Islands action was in a different country and has not been pending since April 15, 2019.
During the June 6 hearing before this Court, and in its Order Denying Motion for Preliminary Injunction, this Court was very concerned that Plaintiffs failed to comply with Rule 3-13(a) by not notifying the Court of the Caymans Action in the Amended Complaint or the Motion for TRO. (See Dkt. 42, p. 5).
As officers of the Court, and as a matter of common courtesy, it pains Plaintiffs’ counsel that this Court believes that they attempted to deceive the Court or Defendants. (DeClercq Decl., ¶ 2). By no means was that the intention of Plaintiffs’ counsel, and they apologize sincerely that this is the impression their filings provided. (Id., ¶ 2). Plaintiffs’ counsel reviewed Rule 3-13 prior to filing the pleadings in this action and did not believe that disclosure of the Caymans Action was necessary. (Id., ¶ 13).
In addition to information protected by the attorney-client privilege, Plaintiffs’ counsel considered the following:
(1) The Caymans Action was dismissed without prejudice on the morning Monday, April 15. The Amended Complaint in this action was not filed until after-hours on April 24, and the Motion for TRO was not filed until the following afternoon. Therefore, the Caymans Actions had not been “pending” for nearly 10 days. (The Caymans Action was technically pending for several hours after Plaintiffs filed their original Complaint, but that version only sought monetary damages, and the Caymans Actions was dismissed a full day prior to the Court even issuing the Summonses associated with the original Complaint).
(2) The Caymans Action was neither pending nor recently dismissed “in any other federal or state court.” It was an action in the Cayman Islands, which is not covered by Rule 3-13.3) None of the interim rulings in the Caymans Actions have any preclusive effect. Regardless, while the Caymans Court commented in one order about the perceived merits of certain causes of action, the same judge cautioned that he believed that “Plaintiffs’ appeal against that decision had realistic prospects of success….” (See Dkt. 23-11 ¶ 54).
And, (4) Mr. Hope and the other defendant in the Caymans Action were represented only by lawyers based in the Cayman Islands, with no known presence in the United States. (Id.) Had Plaintiffs’ counsel believed Plaintiffs were required to inform the Court of the Caymans Action, they would have ensured that the requisite notification was provided. (Id., ¶ 14).
Plaintiffs’ counsel believes that plaintiff complied with Rule 3-13, based on counsel’s interpretation of the Rule’s language and purpose, and did not intentionally withhold information from the Court that counsel believes could have or should have impacted the Court’s rulings.
The Court may very well disagree, even strongly, with counsel’s interpretation of the rule and the obligation to disclose even information not covered by the rule, but the omission was not for any improper purpose, was not unwarranted by existing law, or extension of the law, and/or without evidentiary support. (Id., ¶ 14).
Reasonable minds can differ, and Plaintiff’s counsel is of a different view than the Court, in good faith. Respectfully, neither Plaintiffs nor their counsel should be sanctioned for interpreting a Local Rule differently from the Court because there is no basis to conclude that Plaintiff’s position and conduct “are legally or factually baseless or that this is one of the rare circumstances where the extraordinary remedy of sanctions is appropriate.” See Organic Consumers Ass’n, supra, at *6.
CONCLUSION For the foregoing reasons, Plaintiffs respectfully request that the Court not impose sanctions on Plaintiffs or their counsel. DATED: June 14, 2019 Respectfully submitted, TAYLOR ENGLISH DUMA LLP /s/ William DeClercq William DeClercq SBN 240538
Good post Devex. Just one point to note though as suggested over on LSE. It would seem that DISCOVERY has not commenced as yet. I think this is important. No real evidence has been presented so far hence the dismissive judgements. See excerpt from court doc below.
Mr. Hope acted to protect his security interest, to the detriment of Plaintiffs, and opposed decisions, using his effective veto power, to block actions that could have assisted Plaintiffs. In addition, the Outrider defendants are parties as they are alleged to have aided and abetted Mr. Hope in favoring his own financial interests. (See Dkt. 1.) Some of these issues were, admittedly, raised in the prior action based on the facts as they were known to Plaintiffs at that time, and some facts and allegations are not yet able to be proven, since discovery has not commenced.
Document 47 posted. Transcript courtesy of Taffy52 on the other board.
I. INTRODUCTION Plaintiffs Frontera Resources Corporation (“FRC”) and Frontera International Corporation (“FIC”) (collectively “Plaintiffs”) and their counsel, submitted a brief as to why sanctions should not issue in response to the Court’s instructions at a hearing on whether a preliminary injunction should issue. (Dkt. 46.)
Having considered their response and their explanation at the preliminary injunction hearing, sanctions are awarded against Plaintiffs and their counsel as set forth below.
II. BACKGROUND Plaintiffs filed this action on April 14, 2019. (Dkt. 1.) Shortly thereafter, on April 25, they submitted an ex parte application for a temporary restraining order (“TRO”) against Defendants Stephen Hope, Outrider Management, LLC, and Outrider Onshore, LP (collectively “Defendants”). (Dkt. 10.)
Before Defendants had been served with the complaint or otherwise received notice of the TRO application, Plaintiffs sought an order requiring that Defendants:
(1) “be enjoined from directly or indirectly violating or further violating the fiduciary duties and duty of loyalty that Mr. Hope owes to FRC, including by moving forward with any of the actions that may flow from the Enforcement Notice;” and
(2) be enjoined from directly or indirectly interfering with Plaintiffs’ prospective economic relations.” (Id. at 13.) Plaintiffs did not disclose, in either the TRO application or a separate notice, of a pending action in another court that involved a material part of the same subject matter and substantially all of the same parties as are present in this lawsuit.
It was not until Defendants filed their opposition to Plaintiffs’ TRO application that the Court first became aware of such an action in the Cayman Islands. (Dkt. 23.) In October 2018, Plaintiffs brought suit in the Grand Court of the Cayman Islands against Hope, Outrider Master Fund, L.P. (“OMF”), and MaplesFS Limited (“Maples”) seeking an injunction restraining those parties from enforcing any rights under the Equitable Mortgage. (Dkt. 23-8, Cornwell Decl., Ex. E.)
The court granted the ex parte injunction the same day. (Id.) Subsequently, in January 2019, the court discharged the injunction based on its conclusion that Plaintiffs’ case had “no real prospect of success and/or fails to raise a serious question to be tried.” (Dkt. 23-10, Cornwell Decl., Ex. G at ¶ 47(b).) While Plaintiffs’ appeal was pending, they filed this lawsuit on April 14, apparently withdrawing from the Cayman Islands action the next day. (Dkt. 31-1, Nicandros Reply Decl., Ex. B.)
Plaintiffs were instructed to file a reply brief addressing Defendants’ arguments, which gave Plaintiffs their first chance to account for their failure to disclose the pending Cayman Islands action. (Dkt. 26.) Plaintiffs refused to acknowledge their failure, instead dismissing Defendants’ arguments about the Cayman Islands action as “red herrings.” (Dkt. 31 at 7.)
Curiously, Plaintiffs attached documents from the Cayman Islands action that confirmed the action was still pending when the initial complaint was filed in this lawsuit in support of their reply brief. (See Dkt. 31-1, Nicandros Reply Decl., Ex. B.) In denying the TRO application, the Court noted it was troubling that Plaintiffs failed to disclose the existence of that pending action. (Dkt. 32.)
The matter was set for a hearing regarding whether a preliminary injunction should issue for June 6, 2019, and the parties were given leave to file supplemental briefing. (Id.)
Instead of using the supplemental briefing as a second chance to accept responsibility for their failure to disclose (particularly in light of the fact that the Court noted it had found such failure to be a cause of considerable concern), Plaintiffs chose to double down on their disclaimer.
In their motion for a preliminary injunction, Plaintiffs made the disingenuous argument that they thought the Cayman Islands action was irrelevant to this case and that if Defendants disagreed they would so inform the Court. (Dkt. 36 at 12 n.1.) Thus, in addition to their failure to disclose, Plaintiffs’ failure to take responsibility for the required disclosure exacerbated their dereliction of their duty of candor to this Court.
Plaintiffs’ third opportunity to acknowledge their duty to disclose came at the preliminary injunction hearing. Plaintiffs’ counsel was put on notice that the Court was considering whether to sanction him for his conduct and gave him a chance to explain his actions before considering the merits of the motion. Plaintiffs’ counsel once more declined to accept full responsibility, instead expanding upon his nonsensical arguments for why he thought he was under no obligation to disclose the pending Cayman Islands action when he filed the initial complaint in this case. Nonetheless, he was accorded an additional week to file an optional brief for why sanctions should not be imposed.
In his final brief, Plaintiffs’ counsel again argues that he believed disclosure of the Cayman Islands action was not necessary, this time reasoning it was a pending action in a foreign court, as opposed to a federal or state court of the United States, a response which remains both disappointing and wholly inadequate.
III. DISCUSSION The Court possesses the inherent power to dismiss an action sua sponte “to achieve the orderly and expeditious disposition of cases.” Link v. Wabash R.R. Co., 370 U.S. 626, 629-33 (1962). That authority includes “the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 44-45 (1991)).
Additionally, the United States Code authorizes sanctions against counsel for multiplying proceedings in a case unreasonably and vexatiously. 28 U.S.C. § 1927. Finally, Local Rule 1-4 authorizes sanctions for failure by counsel to comply with any of the Court’s local rules.
The Cayman Islands action involved many of the same issues and requests for relief as does this case and Plaintiffs’ contention that the related action bore no material relevance to this case is laughable. Plaintiffs’ conduct constitutes a gross failure to disclose, particularly when seeking the most powerful remedy the Court can provide: injunctive relief with a request that prior notice not be provided to the Defendants. Given that the Cayman Islands court noted Plaintiffs had failed to present serious questions going to the merits, their attempt to engage this Court’s equitable powers by keeping it in the dark as to the other lawsuit as a desperate attempt to take another shot at securing an injunction is a serious abuse of the judicial process. It also serves to multiply proceedings in a case unreasonably and vexatiously.
Finally, it violates Local Rule 3-13(a) requiring notice of pendency of other actions. Plaintiffs’ counsel makes the tenuous argument that Local Rule 3-13(a) requires only disclosure of pending actions in federal or state courts and does not cover foreign court actions. The rule’s full context, however, reveals its intended spirit. Disclosure is required of any action which involves “all or a material part of the same subject matter and all or substantially all of the same parties,” such that, if necessary, the cases can be coordinated to “avoid conflicts, conserve resources and promote an efficient determination of the action.” L.R. 3-13(a), (b)(3). Such policy is served by requiring disclosure of foreign court actions and is not limited to disclosure of American ones.
The failure to disclose and the repeated failures to accept responsibility for the nondisclosure warrant sanctions. Therefore, the Court sanctions Plaintiffs and their counsel, jointly and severally, in the amount of $1,000.1
Payment shall be remitted to the Court within 30 days of this ruling. Plaintiffs and their counsel shall file a declaration attaching proof of payment no later than July 19, 2019.
IT IS SO ORDERED. Dated: June 19, 2019 ______________________________________ RICHARD SEEBORG United States District Judge
You absolutely cannot make this stuff up!
If it wasn’t so ridiculous it would be laughable
Hope is off the board
Poisson rouge? I think so!
Is that seriously a sanction of $1,000.1 ??? . In the scheme of things the amount IS laughable