Joan Celia Lee v. POW Entertainment, Inc.

O [7] United States District Court [8] Central District of California [10] 11 JOAN CELIA LEE, Case No. 2:19-cv-08353-ODW(FFMx) 12 Plaintiff, 13 v. ORDER DENYING MOTION FOR 14 POW! ENTERTAINMENT, INC., and SANCTIONS [10] 15 DOES 1 through 10, 16 Defendants. 17 I. INTRODUCTION 18 Defendant POW! Entertainment, Inc., (“POW”) seeks to impose sanctions 19 against Plaintiff Joan Celia Lee (“JC”). (Mot. for Sanctions (“Mot.”), ECF No. 10.) 20 POW argues that JC’s amended complaint is not only frivolous, but also barred by the 21 doctrines of res judicata and collateral estoppel. For the reasons discussed below, the 22 Court DENIES POW’s Motion for Sanctions (“Motion”).1 (ECF No. 10.) 23 II. FACTUAL BACKGROUND 24 JC is the daughter and trustee for the estate of comic book author Stan Lee 25 (“Stan Lee”). (See First Am. Compl. (“FAC”) ¶ 1, ECF No. 18.) Stan Lee is 26 responsible for co-creating comic book characters such as Spider-Man, X-Men, Iron [27] 28 1 After carefully considering the papers filed in support of and in opposition to the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. 1 Man, and many others. (FAC ¶ 28). POW is a corporation claiming to own the 2 intellectual property rights to Stan Lee’s comic book creations. (FAC ¶¶ 3, 38–42.) 3 On February 14, 2020, JC filed her amended complaint against POW. (See 4 FAC.) The amended complaint seeks to enforce the terms of an agreement made in 5 1998 (“the 1998 Agreement”) between Stan Lee and Stan Lee Entertainment, Inc. 6 (“SLEI”). (FAC ¶¶ 10–14.) Specifically, JC contends that, under the terms of the 7 1998 Agreement, Stan Lee assigned full and complete title to his name, likeness, and 8 creator rights to SLEI forever. (FAC ¶¶ 30–31.) As such, JC seeks declaratory and 9 injunctive relief as to the ownership of Stan Lee’s intellectual property, name, and 10 likeness, and asserts a cause of action for cybersquatting in violation of 15 U.S.C. 11 § 1125(d). (FAC ¶¶ 47–80.) 12 POW, in response, seeks to impose sanctions against JC on the grounds that her 13 complaint is both frivolous and brought for an improper purpose. (Mot. 13–20.) 14 Consequently, POW served JC notice of its motion for sanctions using e-mail and 15 regular mail on November 11, 2019. (Mot. 2; Opp’n to Mot. (“Opp’n”) 7, ECF 16 No. 13.) On December 3, 2019, 22 days later, POW filed its motion with the Court. 17 (Opp’n 7.) 18 III. REQUEST FOR JUDICIAL NOTICE 19 POW requests the Court to judicially notice eighteen separate documents. 20 (Req. for Judicial Notice, ECF No. 10-1.) “[A] court may judicially notice a fact that 21 is not subject to reasonable dispute because it: (1) is generally known within the trial 22 court’s territorial jurisdiction; or (2) can be accurately and readily determined from 23 sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). 24 Additionally, a document may be incorporated by reference where neither party 25 disputes its authenticity and the pleading necessarily relies on the document. See 26 Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). 27 Exhibits 1–12, 14 and 15 are orders and fillings with other state and federal 28 courts that have a direct relation to the matters at issue here and are subject to judicial 1 notice. U.S. ex rel Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 2 244, 248 (9th Cir. 1992). However, when taking judicial notice of another court’s 3 record, a court may do so only for the existence of the document and not for the truth 4 of the facts therein. Lee v. City of L.A., 250 F.3d 668 , 690 (9th Cir. 2001); M/V Am. 5 Queen v. San Diego Marine Constr. Corp., 708 F.2d 1483, 1491 (9th Cir. 1983). 6 Exhibit 13 is a document registered with United States Patent and Trademark 7 Office (“USPTO”) and Exhibits 17 and 18 are documents filed with the Securities and 8 Exchange Commission (“SEC”). As information from the USPTO and the SEC “can 9 be accurately and readily determined from sources whose accuracy cannot reasonably 10 be questioned,” the Court may judicially notice the facts in those documents. Fed. R. 11 Evid. 201(b). 12 Finally, Exhibit 16 is the 1998 Agreement between Stan Lee and Stan Lee 13 Entertainment, Inc. As JC does not object or oppose to judicial notice of the contract 14 and cites to it in her complaint, the Court judicially notices the contract. 15 Accordingly, the Court GRANTS the request for judicial notice. 16 IV. LEGAL STANDARD 17 Federal Rule of Civil Procedure (“Rule”) 11 outlines procedural and substantive 18 requirements to guide whether a court should sanction an attorney. “[T]he central 19 purpose of Rule 11 is to deter baseless filings in district court and . . . streamline the 20 administration and procedure of the federal courts.” Cooter & Gell v. Hartmarx 21 Corp., 496 U.S. 384, 393 (1990). 22 Under Rule 11, the party moving for sanctions must serve the motion on the 23 opposing party pursuant to Rule 5 no less than twenty-one days before filing the 24 motion with the court. Fed. R. Civ. P. 11(c)(2). This strictly-enforced safe harbor 25 period allows the opposing party to withdraw or appropriately correct “the challenged 26 paper, claim, defense, contention, or denial” without penalty. Fed. R. Civ. P. 11(c)(2); 27 Holgate v. Baldwin, 425 F.3d 671 , 678 (9th Cir. 1986). If the opposing party fails to 28 remediate the concern, the moving party may file the motion with the court 1 “describ[ing] the specific conduct that allegedly violates Rule 11(b).” Fed. R. Civ. P. 2 11(c)(2). 3 Provided these procedural requirements are met, the court may sanction an 4 attorney under Rule 11 for filing a pleading or other paper that is “frivolous, legally 5 unreasonable, or without factual foundation, or is brought for an improper purpose.” 6 Estate of Blue v. Cty. of Los Angeles, 120 F.3d 982 , 985 (9th Cir. 1997); Fed. R. Civ. 7 P. 11 (b)(1–4). Nonetheless, “[i]f, judged by an objective standard, a reasonable basis 8 for the position exists in both law and in fact at the time that the position is adopted, 9 then sanctions should not be imposed.” Golden Eagle Distrib. Corp. v. Burroughs 10 Corp., 801 F.2d 1531, 1538 (9th Cir. 1986). 11 Imposing sanctions under Rule 11 “is an extraordinary remedy, one to be 12 exercised with extreme caution.” Operating Eng’r Pension Tr. v. A-C Co., 859 F.2d 13 1336, 1345 (9th Cir. 1988). As such, courts have “significant discretion” when 14 determining whether to award sanctions. See Fed. R. Civ. P. 11(b), Advisory 15 Committee Notes (1993 Amendment). 16 V. DISCUSSION 17 POW seeks sanctions against JC because it alleges her amended complaint is: 18 (1) frivolous; (2) made for an improper purpose; and (3) barred by the doctrines of res 19 judicata and collateral estoppel. (Mot. 13–20.) 20 A. Rule 11 Procedural Requirements 21 The party seeking sanctions must satisfy the Rule 5 requirements when serving 22 the opposing party with a motion for sanctions. Fed. R. Civ. P. 11(c)(2). Rule 5 23 provides several methods to effect service. For example, the moving party may serve 24 the opposing party using “electronic means that the person consented to in writing.” 25 Fed. R. Civ. P. 5(b)(2)(E). Alternatively, the moving party may mail its papers to the 26 last known address of the opposing party in which case “service is complete upon 27 mailing.” Fed. R. Civ. P. 5(b)(2)(C). [28] 1 When properly served, the opposing party has twenty-one days to withdraw or 2 correct its papers without penalty. Fed. R. Civ. P. 11(c)(2). If the moving party 3 serves the opposing party by mail, “3 days are added after the period would otherwise 4 expire.” Fed. R. Civ. P. 6(d). In other words, when a party moving for sanctions 5 serves the opposing party through mail, it must wait a total of twenty-four days before 6 filing its motion for sanctions with the court. This was the case in Yagman v. 7 Garcetti, when the district court denied the defendants’ motion for sanctions for 8 failure to strictly adhere to the twenty-four-day safe harbor after serving the opposing 9 party by mail. No. CV 14-5963-GHK (EX), 2015 WL 13374015 (C.D. Cal. Feb. 18, 10 2015). There, though the defendants filed their motion for sanctions with the court on 11 the twenty-fourth day, the court held that “doing so was premature because the safe 12 harbor did not expire until the end of the day.” Id. at *5. Thus, when a moving party 13 gives notice by mail to its opposition that it intends to seek sanctions, it must wait 14 until the twenty-fifth day before filing its motion with the court. See also Holgate, 15 425 F.3d at 678 (affirming sanctions when plaintiff’s attorney was given more than 16 twenty-one days to address the deficiencies in its claim.). 17 POW served its motion for sanctions on JC using two methods: e-mail and 18 regular mail. However, POW offers no record that JC consented in writing to receive 19 service via electronic means, such as e-mail. Consequently, POW’s e-mail service is 20 not considered a valid form of service. Fed. R. Civ. P. 5(b)(2)(E). 21 As for POW’s service by mail, POW failed to abide by the twenty-four-day safe 22 harbor period. POW served JC its motion for sanctions on November 11, 2019. Since 23 service was done by mail, three additional days must be added to the twenty-one-day 24 safe harbor period, totaling twenty-four days. Thus, the earliest POW could file its 25 motion for sanctions with the Court would be December 6, 2019, after the full twenty26 four-day safe harbor period concluded. Yagman, 2015 WL 13374015 at *5. Here, 27 however, POW filed its motion with the Court on December 3, 2019, only twenty-two 28 days after service was completed. POW, therefore, failed to add the additional three 1 || days for service by mail, as required by Rule 6(d). As the safe harbor provision is strictly enforced, the Court DENIES the motion for sanctions on this basis and 3 || declines to analyze the substantive requirements. 4| B. Attorney’s Fees 5 Next, JC requests attorney’s fees and costs for defending POW’s motion for 6 || sanctions. (Opp’n 23-24.) “If warranted, the court may award to the prevailing party 7 || the reasonable expenses, including attorney’s fees, incurred for the motion.” Fed. R. 8 || Civ. P. 11(c)(2).. However, Rule 11 “provides for sanctions, not fee shifting. It is 9 | aimed at deterring, and, if necessary punishing improper conduct rather than merely 10 || compensating the prevailing party.” U.S. ex rel. Leno v. Summit Const. Co., 892 F.2d 11 || 788, 791 n.4 (9th Cir. 1989); see Fed. R. Civ. P. 11(b), Advisory Committee Notes 12 | (4993 Amendment) (“[T]he purpose of Rule 11 sanctions is to deter rather than to 13 || compensate... .””) 14 Here, an award of attorneys’ fees to JC would contravene the intended purpose 15 || of Rule 11. Such an award would provide fee shifting and compensation, rather than 16 || deter and punish bad behavior. Although JC is the prevailing party on a procedural 17 || technicality, she fails to demonstrate how POW’s motion for sanctions lacks legal 18 || reasoning or factual basis. Accordingly, the Court declines to exercise its discretion 19 | and DENIES JC’s request to file a motion for attorney’s fees. 20 VI. CONCLUSION 21 For the reasons discussed above, the Court DENIES POW’s Motion for 22 | Sanctions. (ECF No. 10.) [23] 24 IT IS SO ORDERED 25 March 18, 2020 26 . ig Giedliod 28 OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE