(a) that Respondent’s motion for legal fees and costs (D.E. 64) be GRANTED IN PART with an award of costs in the amount of $85,000.00 pursuant to Fed.R.Civ.P. 65(a); and

(b) that Respondent’s motion for damages and sanctions (D.E. 65) be DENIED.

PROCEDURAL HISTORY

This case involves efforts made by plaintiff, State Farm Mutual Auto Insurance Company (“State Farm”), to collect on an $8.9 million judgment entered against Michael Giventer (“Giventer”) in the United States District Court for the Southern District of Texas in December 2001.

On January 27, 2002, State Farm registered the Texas judgment in this District with the filing of this case. The following day, this case was closed and no record activity occurred for the next eight years.

On November 2, 2010, State Farm reactivated the case by moving ex-parte for a temporary restraining order and appointment of a receiver to restrain three non-party companies, Agro-Energy Holdings, LLC; Agro-Energy Holdings International, Inc.; and Agro-Energy USA, Inc. (collectively “Agro” or “the Agro companies”), and a related fourth company (“Super Pellets”) from dissipating assets and/or destroying evidence on the belief that Agro and Super Pellets were involved in a fraudulent scheme orchestrated by Giventer to use these companies to hide and shield his assets from State Farm. State Farm based its ex-parte request for a TRO on allegations that Giventer had “his fingers all over Agro” and “acted as though he owned the enterprise which ... he does” together with his father-in-law Oleg Shvabsky and Jacob Gitman who operated and managed the Agro companies. Ex-parte motion, pg. 3. State Farm sought ex-parte relief based on Giventer’s history of hiding and destroying assets, as well as destroying evidence of his assets as set forth in its motion. State Farm supported its motion with an affidavit of its lead attorney, Neal H. Levin, Esq., who was retained by State Farm to collect on its judgment against Giventer and who had extensive knowledge of Giventer and his fraudulent activities particularly after entry of the State Farm judgment.

*2 On November 5, 2010, this Court conducted a hearing on State Farm’s ex-parte motion which was attended in person by State Farm’s local counsel, Charles H. Lichtman, Esq., and Neal Levin, by telephone. The Court advised counsel that it had read State Farm’s motion and Mr. Levin’s supporting affidavit but that it had significant concerns about the extraordinary relief being requested on an ex-parte basis. Among other things, the Court was concerned about the legal authority for the issuance of a temporary restraining order under the circumstances of this case, the lack of due process for the non-parties which would be restrained, the request for a court-appointed receiver, and the potential disruption to the business activities of Agro and Super Pellets should a TRO be entered. Counsel for State Farm assured the Court of its authority under F.R.Civ.P. 65 to grant the requested relief and suggested the appointment of a “forensic examiner” instead of a receiver who would merely duplicate the hard drives of Agro’s computer(s) and inventory the other business records of these companies. The Court agreed to grant this relief simply to preserve the status quo pending a further hearing with notice to Giventer, Agro, and the other non-parties. The Court made clear that it was granting this limited relief on the assurance that a TRO with the appointment of a forensic examiner to merely duplicate computer hard drives and inventory other Agro business documents would be the “least invasive process” to preserve the status quo pending a further hearing. The Court asked State Farm’s counsel to propose an order consistent with his rulings. State Farm’s attorneys confirmed their understanding of the Court’s decisions and committed to not overstate the proposed order.

Several hours later, State Farm’s attorneys submitted a proposed TRO to the Court which both incorporated and in certain respects, differed from the oral rulings made by the Court earlier that morning. Thus, the proposed order provided for the appointment of Richard A. Pollack as the “forensic custodian” charged with the limited task of imaging any and all computers found at the subject premises that stored ESI (electronically stored information) used by Giventer, Oleg Shvabsky, Jacob Gitman, Agro and Super Pellets, and taking a full and complete inventory of all business documents and other tangible things at the subject premises or other locations that Mr. Pollack determined to be used by Giventer, Gitman, Shvabsky, Agro or Super Pellets. Mr. Pollack was to be the “sole custodian” of all duplicated ESI and he was ordered to submit a full and complete report to the Court no later than November 12, 2010. The TRO also authorized Mr. Pollack to disclose to State Farm the names, addresses, and account numbers for any bank accounts found to exist on the subject premises to allow State Farm to contact such banks to advise of the TRO. No such disclosure authority had been requested by State Farm in either its written motion or at the hearing on its motion earlier that day. The TRO also provided that no bond was required from State Farm pursuant to Fed.R.Civ.P. 65(c) because “the Court [was] aware that State Farm [was] one of the largest insurers in the United States.” TRO, ¶4 (D.E. 13). Once again, no request had been made by State Farm for issuance of a TRO without a bond requirement.

On November 9, 2010, State Farm filed a motion to modify the TRO to allow “break order authority” for the United States Marshal should it be necessary to enter the premises by force. Once again, State Farm proposed a draft order for the requested relief which included a provision to allow “[State Farms'] representatives and attorneys” to enter the Agro premises along with the United States Marshal and the forensic custodian to execute the TRO. Inclusion of State Farm legal personnel had not been requested in the motion to modify. The Court entered the Order modifying the TRO (D.E. 17) on that same date.

On November 10, 2010, the TRO was executed by Richard Pollack, as forensic custodian, and his team at the Agro business premises in Bay Harbor, Florida. Mr. Pollack was accompanied by a team of accountants and other personnel from his office and spent over fourteen (14) hours at the location duplicating the ESI from all computer bases, and taking a complete inventory of all files, folders, and other documents found at that location. Mr. Pollack was accompanied by Laurie Weinstein, Esq., an attorney from State Farm’s local counsel (Berger, Singerman), and Luis Torres, a paralegal from that firm, who assisted in the execution of the TRO as explained below. Mr. Pollack filed a report with the Court concerning his activities on November 12, 2010.

On November 15, 2010, this Court conducted a further hearing on State Farm’s motion which was now attended by respondents, Agro, and Jacob Gitman, as owner, manager and operator of the Agro entities. At that hearing, the Court learned that Jacob Gitman had as many as fifteen businesses operating from the same location, many unrelated to the Agro companies, and that these unrelated businesses had been enjoined from certain business activities by the terms of the TRO. As a result, the Court entered an agreed order modifying the TRO and limiting its application to the Agro entities, Michael Giventer, and any other officers and agents of Agro. The modified TRO was extended by agreement of the parties pending an evidentiary hearing on a later date.

*3 On November 18, 2010, respondents filed a motion to dissolve the TRO contesting the legal basis on which it was sought, the lack of due process afforded the non-party respondents, and the manner in which the TRO was executed by the forensic custodian and his team. Respondents noted in particular that neither Jacob Gitman nor any of the Agro companies were judgment debtors to State Farm and that State Farm’s motion was replete with factual inaccuracies concerning the relationship between Michael Giventer, Jacob Gitman, and the Agro companies. Respondents sought the immediate dissolution of the TRO, and the right to request sanctions from State Farm due to its “heavy handed” and inappropriate conduct in this case.

On December 20, 2010, the Court conducted an evidentiary hearing on these matters and was advised by State Farm, for the first time, that it would not be seeking a preliminary injunction against Giventer or any respondent. During this hearing, the Court concluded that State Farm lacked both a legal basis and factual foundation for the position it had advocated and found that respondents had been wrongfully enjoined by the ex-parte TRO. The Court vacated that Order, with apologies to Jacob Gitman and his companies, and granted respondents' motion to dismiss while retaining jurisdiction to consider any later motion for fees, costs or other sanctions.

On January 18, 2011, respondents filed the instant motions for legal fees and costs and damages and other sanctions which are addressed herein.

FINDINGS OF FACT[1]

The two motions currently before the Court challenge the efforts and activities taken by State Farm and its counsel in seeking to collect on the judgment entered in State Farm’s favor against Michael Giventer in the amount of $8.9 million by the District Court for the Southern District of Texas in December 2001. In that action, the Court found that Giventer had submitted false insurance claims, laundered money, and destroyed evidence as well as other wrongdoing resulting in the Texas judgment. Giventer has never paid any portion of the multimillion dollar judgment to State Farm despite extensive efforts by State Farm and its attorneys to collect on that judgment.

On January 23, 2001, State Farm caused a certified copy of the final judgment entered in Texas to be filed and registered in this District. See Certification of Judgment (D.E. 1). This certification and registration resulted in the opening of this case which was immediately followed by an Order acknowledging the registration of the judgment and the closing of this case on January 24, 2001. State Farm took no further action in this case until the filing of its ex-parte motion for a TRO and appointment of a receiver on November 2, 2010.

Between 2001 and 2010, State Farm, through its counsel, investigated Giventer and his activities in Florida and elsewhere. Among other things, State Farm learned that Giventer and his wife, Julia Shvabskaya, lived in a rental apartment in South Florida. State Farm also learned that Giventer’s father-in-law, Oleg Shvabsky (“Oleg”), was a business associate of Jacob Gitman in Agro companies which were attempting to develop a process for alternative fuel development in the United States and Russia. State Farm, through its lead attorney, Neal H. Levin, Esq., investigated this business relationship between Gitman and Oleg Shvabsky to determine whether Giventer was involved in Agro perhaps using the alias “Michael Blanc.”

*4 In December 2009, Mr. Levin served a subpoena duces tecum upon Agro-Energy Holdings and took the deposition of Jacob Gitman in aid of execution of the Texas judgment. Mr. Gitman, appearing without an attorney, produced a number of subpoenaed documents including organizational records, corporate minutes, and other business records of the Agro companies. Gitman also testified that Agro-Energy Holdings was first started by Oleg Shvabsky before his involvement with the company. Gitman explained that he met Oleg Shvabsky in 2007 or 2008 when he (Oleg) was taking care of Michael Giventer’s children on the beach near their apartment in North Bay Village. Gitman learned that he and Giventer, together with their families, were living in the same apartment building at that time. Mr. Levin questioned Gitman about Giventer’s current whereabouts and contact information. Gitman refused to provide Giventer’s telephone number to Mr. Levin without a court order. Mr. Levin asked Gitman about other residences used by Giventer and the circumstances of their meeting.

Mr. Levin was particularly interested in Gitman’s business relationships with Oleg Shvabsky, the alternative fuels they were producing, and patents obtained or envisioned for this new product line. Gitman testified about Giventer’s role in this business venture, explaining that Gitman was paying for Giventer’s travel to the Ukraine for services he was providing to Agro there, Gitman also testified about compensation Giventer was receiving or expected to receive from Agro in the near future. Gitman testified that Giventer was presently making only a small amount from Agro but that he had agreed to provide services for a future salary, plus commissions and a percent ownership in the company. Gitman and Levin also discussed Robert Miller, an investment banker, who was attempting to find financing for Agro’s businesses but who had concerns due to Giventer’s legal problems in Texas and State Farm’s efforts to collect on its judgment. Gitman and Levin spoke amicably about these and other topics and had further meetings and communications over the next several months on these and related matters.

Mr. Levin also had discussions with Robert Miller about efforts he was making to find financing for Agro. Levin and Miller discussed State Farm’s judgment against Giventer which Miller considered a major obstacle to raising investment capital for Agro. Levin later communicated with Miller and expressed his opinion that Agro would never “see the light of day” due to Giventer’s involvement with the company and his legal problems with State Farm. Gitman knew that Miller ceased his efforts to raise capital for Agro because of Giventer’s legal problems and his association with the company. Gitman also knew that Giventer was a convicted felon and that State Farm was attempting to collect on its judgment against him. Nevertheless, Gitman did not disassociate himself from Giventer but instead continued to use him and his services in the Ukraine in an effort to begin an alternative fuel facility there.

In or about March 2010, Gitman was made aware that State Farm was considering legal action against Giventer, Gitman and the Agro companies. Mr. Levin sent Gitman a draft motion for a TRO very similar to the TRO later entered in this case. However, State Farm decided not to file that motion after Gitman advised that Agro was “practically dead” and was no longer in business. Sometime later, State Farm learned that Gitman and the Agro companies were again resuming business operations when additional patents and patent applications appeared online relating to the alternative fuel process. At that point, State Farm felt it needed to take legal action to prevent Giventer and Agro from moving assets and information overseas to the Ukraine. Fearful that Giventer would destroy documents and dissipate assets if given advance notice, State Farm moved ex-parte for the TRO.

On November 5, 2010, State Farm appeared through counsel at the ex-parte hearing on its motion for a temporary restraining order. State Farm’s motion was supported with numerous attachments detailing its extensive investigation of Giventer and his schemes to avoid any payment on the multimillion dollar judgment. State Farm’s motion was also supported with the affidavit of Neal Levin, its lead attorney, who outlined Giventer’s most recent involvement with Jacob Gitman, Oleg Shvabsky, and the Agro companies which were believed by State Farm to conceal assets belonging to Giventer including numerous patents related to the alternative fuel process being developed by Agro. Mr. Levin provided background information about Giventer over the past number of years relating to his “lavish lifestyle” with his ex-wife in Florida, his destruction of documents in a bankruptcy proceeding, his false testimony concerning his assets and wealth, and his use of the alias “Michael Blanc” without adequate explanation. Mr. Levin then focused on Giventer’s “operation” of the Agro companies which were described as “a new web of business entities utilized by Giventer to hide and shield assets” similar to an earlier fraudulent business venture. Levin identified Oleg Shvabsky as Giventer’s father-in-law and Jacob Gitman as “Giventer’s friend and business associate” who were both managers/members or officers/directors of Agro. State Farm’s motion describe Oleg Shvabsky as Giventer’s “shill” and Jacob Gitman as a “straw man” who were both being used by Giventer “to hide assets and shield his new business venture (Agro) from access to creditors.” Relying on these and other representations in State Farm’s motion and Mr. Levin’s affidavit, the Court entered a TRO appointing Richard Pollack as “forensic custodian” while limiting his authority to the duplication of computer databases on the Agro premises and the taking of a full inventory of Agro related business activities at the subject premises.

*5 On November 10, 2010, Richard Pollack and his team, together with the United States Marshal and a State Farm attorney and paralegal, arrived unannounced at the Agro business premises and commenced execution of the TRO. Mr. Pollack soon realized that his assigned tasks would be more extensive than anticipated due to the number of computers at the location and the “co-mingling” of Agro business records with those of unrelated non-Agro companies also operated from the premises. For this reason, Mr. Pollack called for additional assistance from his office and expanded his team to as many as ten examiners. This team then spent the next 14 hours duplicating every computer database found on site, including lap top computers and personal computer devices (“cell-phones”) taken from personnel working at this office location. Mr. Pollack and his team created an extensive inventory of every file, folder, and other documents found in file cabinets, desks, office shelves, and other locations at these offices. Laurie Weinstein, a junior associate of State Farm’s local counsel, was present throughout the day mostly to answer questions and to communicate with other State Farm attorneys concerning the execution process. Ms. Weinstein also reviewed the outside of file folders in the office and made notes concerning her observations. Luis Torres, a paralegal accompanying Ms. Weinstein, also assisted by helping prepare an inventory of files found in a file cabinet at the request of the forensic custodian late in the day. Mr. Pollack and his team worked quickly and efficiently in executing the TRO with the least amount of disruption as possible to the office personnel present that day. Nevertheless, office personnel were required to re-locate to the lobby area, particularly at first, when Mr. Pollack needed access to their computers.

At some point, Jacob Gitman arrived at the office and observed the activity of Mr. Pollack and his team. Later that afternoon, Gitman received an e-mail from Mr. Levin asking to talk. Gitman then called Levin and asked why this action had been taken against him. Levin explained that State Farm had spent a lot of money chasing Giventer and needed some kind of resolution. Gitman offered State Farm two of his four patents just to stop State Farm’s pursuit of Giventer through the Agro companies. No agreement was reached and the execution of the TRO continued for several more hours.

On November 11, 2010, the day after the execution, Levin sent Gitman an e-mail stating “we count six patents” and “looks like you moved some money to the Ukraine for the plant. What happened to that money?” Levin also asked Gitman whether a particular address in the Ukraine was “your place as well?” Richard Pollack, the forensic custodian, denied providing Levin with any information about patents or money transfers but admitted sending Levin a one page document listing an address for Giventer in the Ukraine and bank account names, account numbers and addresses for Agro as provided for in the TRO. Mr. Pollack also provided Levin with a copy of the driver’s licenses of the four persons working at the location the previous day. Mr. Pollack denied providing any other information to Levin, or anyone else, either orally or in writing, as did Laurie Weinstein and Luis Torres.

On November 12, 2010, Mr. Pollack filed a lengthy report concerning his activities in executing the TRO and his full inventory. Mr. Pollack acknowledged that he and his team were charged with the “limited project” of (1) imaging all computer-related devices that store ESI used by Giventer, Gitman, Oleg Shvabsky, Agro and Super Pellet; and (2) taking a full and complete inventory of all business documents and tangible things at the subject offices. Mr. Pollack did not limit his assignment to Agro-related business activities; and later acknowledged that he and his team essentially examined every computer file, business document, file folder and other document found at the location due to the “co-mingling” of Agro and non-Agro business operations there. Mr. Pollack also acknowledged that one attorney and one paralegal (Laurie Weinstein and Luis Torres) from Berger Singerman, accompanied his team, apparently at the request of the United States Marshal, and assisted with the inventory of one file cabinet and the tangible assets of the office due to time limitations. Mr. Pollack made no mention of communications with other State Farm attorneys during the execution of the TRO or his disclosure of any other information or documents to State Farm attorneys during or after execution of the TRO.

Soon after November 5, 2010, Gitman found it necessary to replace security settings and customer identification information in four telecom switches in New York and elsewhere, in addition to a network firewall and access control in his office for a total cost of $85,000.

ANALYSIS

*6 Respondents, in their two motions, seek to recover attorney’s fees and costs incurred in responding to and moving to dissolve the TRO entered without notice on November 5, 2010; damages resulting from the TRO to Jacob Gitman and the Agro companies; and sanctions against State Farm and its attorneys for actions taken in seeking an ex-parte restraint. Respondents seek this relief noting that the Court immediately dissolved the TRO for lack of a factual basis and legal foundation on December 20, 2010. Respondents raise numerous issues in these motions, each addressed below, including whether State Farm intentionally misled the Court concerning Giventer’s actual involvement (or lack thereof) in the Agro companies; State Farm’s submission of a proposed TRO and other orders containing provisions never requested by State Farm or granted by the Court; and State Farm’s inappropriate communications with the court-appointed forensic custodian resulting in violations of his authority and his misuse of information acquired during the execution of the TRO.

A. Respondents' Motion for Attorney’s Fees and Costs

Respondents first seek reimbursement of their legal fees and costs resulting from their having been wrongfully enjoined or restrained by the TRO. Respondents argue that State Farm sought an ex-parte TRO under Fed.R.Civ.P. 65 which the Court subsequently found was not appropriate under the circumstances of this case. Respondents also argue that State Farm misled the Court as to Giventer’s “ownership” and control of Agro which turned out to be unfounded and untrue. Respondents seek damages, costs and fees under Rule 65 (c) and pursuant to the Court’s discretionary authority to award attorneys fees “as part of Rule 65 damages” to affect justice between the parties.

Respondents' requests for attorney’s fees, costs and damages is based primarily on Rule 65(c) which provides, in pertinent part:

Fed.R.Civ.P. 65(c). Federal courts have routinely held that Rule 65(c) allows a party wrongfully enjoined to recover costs and damages incurred as a result of an unlawful restraint. See, e.g., State of Alabama, ex rel. Siegelman v. United States Environmental Protection Agency, 925 F.2d 385, 389 (11th Cir. 1991) (“an award of damages pursuant to an injunction bond rests in the sound discretion of the court’s equity jurisdiction”) (citing H & R Block, Inc. v. McCashin, 541 F.2d 1098, 1099 (5th Cir. 1976)), cert. denied, 430 U.S. 946 (1977); Coyne-Delany Co. v. Capital Dev. Bd. of Illinois, 717 F.2d 385, 391 (7th Cir. 1983) (“a prevailing defendant is entitled to damages on the injunction bond unless there is a good reason for not requiring the plaintiff to pay in a particular case”). Federal courts have also found that a party wrongfully enjoined is entitled to recover its damages and costs even where no security bond was required from the party seeking the injunction or temporary restraining order. See Monroe Division, Litton Business Systems, Inc. v. De Bari, 562 F.2d 30 (10th Cir. 1977)(the protection afforded by a security bond is not eliminated when the court relies on the financial strength of the party seeking the injunction in place of the security of a bond).

1. Attorney’s Fees

Based on Rule 65(c) and the above authority, the undersigned finds that respondents are entitled to their costs and damages resulting from their having been wrongfully restrained but not their attorney’s fees incurred in responding to the TRO and seeking its dissolution. The rule itself provides only for “costs and damages” sustained by the party wrongfully enjoined or restrained. Federal courts have consistently held that attorney’s fees and legal expenses spent by the injured party in resisting or appealing an injunctive restraint are not recoverable under Rule 65(c). See Powelton Civic Home Owner’s Ass'n., 284 F.Supp. 809, 840 (E.D. Pa. 1968) (citing cases). Respondent cite no case law in which attorney’s fees have been awarded to a party resisting or appealing a TRO and the undersigned has found no such case. Accordingly, the undersigned finds that respondents are only entitled to their damages and costs through the dissolution of the TRO under Rule 65(c).

2. Damages and Costs

*7 Respondents seek damages in the total amount of $648,000 resulting from their having been wrongfully restrained by the TRO between November 15 and December 20, 2010. Respondent lists their damages as follows:

In addition, Gitman seeks additional damages in an undetermined amount for his “lost reputation” with his neighbors and business associates resulting from the TRO and its execution at his office.

Reviewing these requested damages and costs, the discovery, depositions and hearing testimony of the parties relevant thereto, and applicable law, the undersigned finds that some but not all of these costs and damages are recoverable under Rule 65(c) Reaching the results below, the undersigned recognizes, first, that Rule 65(c) allows for the recovery of certain costs and damages “sustained by any party ... wrongfully restrained or enjoined” which is frequently limited by the security bond required posted by the applicant for such restraint. See Coyne-Delany, supra. However, the absence of a security bond does not defeat the request for damages from a wrongfully entered injunction particularly where no bond was required to be posted due to the “considerable assets” and financial strength of the applicant. See Litton Business Systems, Inc., 562 F.2d at 32. Recoverable damages under an injunction bond are those that arise from the operation of the injunction itself and not those occasioned by the suit independent of the injunction. Lever Brothers Co. v. Int'l Chemical Workers Union, Local 217, 554 F.2d 115, 120 (4th Cir. 1976); CVI/Beta Ventures, Inc. v. Customs Optical Frames, Inc., 893 F.Supp. 508, 525 (D. Md. 1995). The allowance of damages for wrongful issuance of an injunction should rest on equitable principles and, as a general rule, should be only those damages that were actual, necessary and the proximate result of the injunction during the time it was operative. Monolith Portland Midwest Co. v. R.F.C., 128 F.Supp. 824, 879 (S.D. Cal. 1955). The decision whether to award damages on an injunction bond, and the extent thereof, is within the discretion of the court and should be based on considerations of equity and justice. State of Kan. Ex Rel. Stephan v. Adams, 705 F.2d 1267, 1269 (10th Cir. 1983).

*8 Here, Jacob Gitman is the only party seeking damages under Rule 65(c) because no other respondent including the Agro companies suffered any damages as a result of the TRO. Reviewing his requested items, the undersigned finds that Gitman is entitled to actual expenses incurred in replacing the network firewall and access control devices in his office ($5,000) as well as the replacement costs for the securities settings and customer prefixes in four telecom switches owned by Gitman’s telecommunications companies ($80,000) which Gitman and his partners felt obligated to replace because they had been accessed during the execution of the TRO. While State Farm correctly notes that Gitman has failed to show any actual security breaches resulting from such access, and that no one other than the forensic custodian acquired passwords, security settings, or other confidential information which might jeopardize customer security, the undersigned finds that replacement of the network firewall, security settings and customer prefixes was a reasonable measure to take under the circumstances. Gitman has provided invoices for these expenses and has testified that he personally paid them at the request of his partners. Thus, these costs were actual, necessary and the proximate result of the wrongfully entered TRO despite the brevity of its restraint. Thus, the undersigned recommends reimbursement of these costs to Jacob Gitman in the total amount of $85,000.00.

Reviewing Gitman’s remaining costs and damages, the undersigned finds no factual or legal basis for any further recovery. Gitman’s estimate of $33,000 for time he and two of his employees spent after execution of the TRO in compiling documents for production to State Farm is more directly attributable to Gitman’s obligation to respond to State Farm’s motion to compel production of documents and/or in appealing the TRO -- neither of which are a recoverable basis under Rule 65(c). See Powelton Civile Homeowners Ass'n, 284 F.Supp. at 840. Stated simply, these costs to Gitman and his companies would have been incurred even apart from the TRO.

Similarly, Gitman has failed to establish that he lost $480,000 in future salary from VGM Telecom and Worldwide Aviation Group as an actual and proximate result of the TRO. While Gitman has testified that he was “forced” to resign immediately from both companies by his partners in those companies, Gitman’s explanation of why his resignations were required is inconsistent with his prior testimony and other evidence which indicates that Gitman retained these positions and/or authority within these companies even after his “resignations” as reflected on public documents filed with the State and his acknowledged check writing authority for both companies well after dissolution of the TRO. Moreover, Gitman has failed to convince the undersigned that any requested resignation was due to the TRO itself and not due to his association with Giventer which was not previously known to his partners before execution of the TRO. Finally, Gitman has failed to establish that he had a reasonable expectation of future salary from either VGM or Worldwide in amounts requested or that such salary was lost simply and solely because of the TRO. For these reasons, the undersigned recommends the disallowance of this damage item in its entirety.

Finally, the undersigned finds insufficient proof of a $50,000 costs or expense to Gitman as a result of his inability to make certain financial payments directed by his partners during the brief day period the TRO was a restraint on non-Agro companies. Again, Gitman has testified to this cost but offers no proof that such an expense was actually incurred or paid by him. The evidence is also confusing as to the cause of any such lost credit terms with a domestic bank -- particularly in light of evidence that the payments of invoices had been late on prior occasions which may have resulted in or contributed to this loss of credit. Finally, the undersigned questions whether damages in the amount requested resulted from the TRO itself rather than contributing factors such as lack of timely notice during the five day delay in payment attributable to the TRO. Lacking such proof, the undersigned recommends that the requested costs of $50,000 for “loss credit terms” also be denied.[2]

B. Respondents' Motion for Damages and Costs

*9 Respondents' motion for damages and costs, other than attorney’s fees and legal expenses, seeks financial recovery from both State Farm and its attorneys based on allegations of “wrongful certification” of the need for an ex-parte TRO, “gross” violations of the TRO by State Farm attorneys, and other misconduct by State Farm and its attorneys resulting in the wrongful issuance of the TRO and improper execution by the forensic custodian and his team. Respondents seek damages and sanctions for much of the same misconduct alleged in its motion for attorney’s fees and costs pursuant to 28 U.S.C. § 1927 and the Court’s inherent authority to sanction attorney misconduct as allegedly occurred in this case.

State Farm responds in opposition to this motion arguing that neither it or its attorneys acted improperly in seeking an ex-parte restraining order against Giventer, Agro, and related non-parties, or in executing the TRO in the presence of a State Farm attorney and paralegal. State Farm stresses the need for ex-parte relief in light of Giventer’s established history of avoiding payment of the Texas judgment, including his prior removal of assets and/or destruction of documentation of his assets on which the judgment could have been pursued, and the evidence establishing Giventer’s business relationship with Gitman and the Agro companies. While acknowledging the Court’s ruling dissolving the TRO for lack of a legal or factual basis, State Farm insists that it never willfully misled the Court in seeking injunctive relief, or in preparing orders for the Court’s review and signature, or in any other manner whatsoever.

Following referral of this motion by this Court, the undersigned conducted a preliminary hearing to identify the key issues raised therein, allow for any further discovery, if necessary, and to prepare for an evidentiary hearing. Thereafter, the undersigned listed the following issues of concern to the Court which were later addressed at the evidentiary hearing:

*10 See Court Order (D.E. 110) dated August 15, 2011.

The undersigned found that no additional discovery was necessary, in light of extensive discovery already completed on these issues, and noticed an evidentiary hearing for October 11, 2011. This evidentiary hearing actually commenced on October 12, 2011, and was continued on November 28, 2011, and January 9, 2012. Numerous witnesses were examined during this hearing, including Richard Pollack, the forensic custodian, Neal Levin, Esq. and Charles Lichtman, Esq., attorneys for State Farm; Laurie Weinstein, Esq., and Luis Torres, a lawyer and paralegal from State Farm’s local counsel, Berger, Singerman; Arthur Nunez, a witness to the execution of the TRO at Gitman’s offices; and Jacob Gitman.

Based on the testimony of these witnesses, their prior deposition testimony in advance of this hearing, the affidavits, exhibits, and other evidence admitted at the hearing, and the full record of this case, the undersigned finds as follows with respect to each of the issues listed above:

(1) The ex-parte motion for a TRO

Respondents object to the filing of an ex-parte motion for temporary restraining order on two grounds. First, respondents argue that State Farm, through its attorneys, misrepresented the relationship between Giventer and the Agro companies and the extent of his “ownership” and control over Agro. Second, respondents complained that State Farm failed to have a legal basis for the TRO, lacking authority in this circuit to make such a request under Rule 65(a), and by failing to certify “efforts made to give notice” to respondents “and reasons why it should not be required” as prerequisites for issuance of a TRO without notice. Respondents rely on the findings of the Court at the hearing on their motion to dissolve the TRO and the Court’s findings that the TRO was wrongfully entered largely due to the Court’s reliance on representations of Mr. Levin in his supporting affidavit concerning Giventer and his involvement in the Agro companies.

Reviewing this issue, and particularly the Court’s findings at the December 20 hearing at which time the TRO was dissolved, the undersigned finds that respondents have a legitimate complaint. Clearly, the affidavit of Mr. Levin describing Agro as a “new web of business entities utilized by Giventer to hide and shield assets and the argument in its motion that Giventer was an “owner” of Agro which he operated using Oleg Shvabsky, his father-in-law, as a “shill” together with Jacob Gitman as a “straw man,” was factually inaccurate and misleading to the Court. Similarly, the representation that Bob Miller, an investment banker attempting to raise funds for Agro, “only did business relating to Agro through Michael Blanc (a/k/a Giventer)” was an inaccurate statement strongly refuted by Mr. Miller at the December 20 hearing. These misrepresentations by State Farm and its attorneys coupled with the lack of any Eleventh Circuit authority supporting the issuance of an ex-parte TRO under the circumstances all support respondents' request for sanctions against State Farm and its attorneys in this case.

*11 Reaching the correct decision, however, the Court should consider the arguments made by State Farm and the context in which the TRO was requested on an ex-parte basis. State Farm’s motion accurately described its lengthy pursuit of Giventer and his assets and its attorneys were very familiar with his history of hiding assets, destroying documents, using others to cover his tracks, and his other nefarious activities in avoiding responsibility for the Texas judgment. State Farm’s attorneys diligently pursued Giventer in Florida and legitimately learned that Giventer had a relationship with Agro through his father-in-law (Oleg) and his business association with Jacob Gitman. In December 2009, State Farm took the deposition of Mr. Gitman in aid of execution of its judgment and learned from Gitman himself that Agro was using the services of Giventer in the Ukraine in exchange for reimbursement of his travel and living expenses, as well as a promise of a future salary and a percent ownership of Agro. While ownership and income from Agro never materialized, State Farm and its attorneys had good reason to believe that Giventer had an ongoing relationship with Gitman and the Agro companies and a significant interest and potential investment in Agro which might be reachable to satisfy a portion of the State Farm judgment. Thus, the undersigned concludes, on balance, that State Farm legitimately pursued Giventer by seeking an ex-parte TRO simply to preserve the status quo and to prevent Giventer from dissipating any assets he might have had in Agro at that time. While State Farm overstated Giventer’s role in Agro in seeking this relief, the undersigned cannot conclude that State Farm intentionally misled the Court in pursuing an ex-parte restraint.

(2) The proposed TRO

Respondents next argue that the TRO proposed by State Farm’s attorneys after the ex-parte hearing on November 5, 2010, did not comport with the actual decisions of the Court concerning the TRO it intended to enter; and provided for relief never requested from the Court in either its written motion or at the ex-parte hearing. Specifically, respondents note that the TRO proposed by State Farm’s counsel was not limited to the Agro entities, particularly with respect to monetary restrictions place on Gitman and his non-Agro companies which he operated from the same office; and that the TRO granted the forensic custodian the authority to disclose to State Farm counsel the names, addresses, and bank account numbers for any accounts found at Gitman’s offices so that State Farm could contact such financial institutions and serve them with a copy of the TRO. Respondents also complain that State Farm attorneys inserted a “no bond” requirement in the TRO despite the requirement of Rule 65(c) and without any finding by the Court that a security bond was not necessary due to State Farm’s size and financial status in the United States.

Reviewing this issue, the undersigned finds that the Court was very clear in its rulings and the limitations it intended for the TRO to be proposed by State Farm attorneys. Clearly, the Court intended to issue a TRO solely to preserve the status quo pending a further hearing attended by all parties. To this end, the Court appointed a “forensic custodian” who was charged with only two tasks: (1) imaging all computer-related devices that stored ESI related to the Agro companies, and (2) taking a full and complete inventory of all business documents related to Agro that were not contained in the office computers. The Court clearly expressed its reluctance to broadening this relief; and clearly intended this computer imaging and inventory to be limited to the Agro companies and their officers and agents. The Court never granted the forensic custodian authority to disclose any information to State Farm or its attorneys; and made no ruling with respect to a restraint on the transfer of funds by non-Agro companies. State Farm attorneys assured the Court that they understood its rulings, and promised to submit a proposed TRO consistent with the Court’s decisions.

Later that day, State Farm submitted a proposed TRO to the Court. Inexplicably, that proposed order contained provisions never discussed with or ordered by the Court; and granted the forensic custodian broad authority to search for, copy and inventory every computer device found on the premises (including personal cell phones and lap tops belonging to officer personnel) which resulted in the expansion of his team to as many as nine or ten persons who spent over 14 hours at the Gitman offices obtaining information on all of Gitman’s companies and not just the Agro entities. Thus, the simple task proposed by State Farm (suggesting a single person could accomplish this task in a matter of a few hours) became a lengthy, full-blown search for and review of every business record on the premises including those found in personal file cabinets and private databases on office computers. The forensic custodian was accompanied by one State Farm attorney, Laurie Weinstein (“to answer any questions”) and had access to State Farm counsel in both ChicAgro and Miami for any further help. The forensic custodian completed his tasks at midnight, employing State Farm personnel at one point to help inventory at least one file cabinet, and then provided State Farm with bank account information authorized at the very end of the TRO as well as additional information including an address for Giventer in the Ukraine and photocopies of drivers licenses of the office personnel present that day.

*12 Clearly, the proposed TRO drafted by State Farm counsel and submitted the same day as the ex-parte hearing, did not comport with the Court’s rulings and intent expressed unequivocally that same morning. Most seriously, the proposed TRO did not limit either the search for information or the restrictions on monetary transfers to the Agro companies. The proposed TRO also provided for disclosure of banking information by the forensic custodian to State Farm counsel which was never authorized by the Court. On November 15, 2010, the Court first learned of these problems and entered a modified TRO extending its duration but restricting its restraints to the Agro entities.

State Farm offers no acceptable explanation for proposing the original TRO which contained provisions never requested from or ordered by the Court. At best, State Farm attorneys suggest that they “tried their best” to be consistent with the Court’s directives and thought that the TRO was limited to the Agro companies. At worst, State Farm suggests that the Court could have removed any unwanted provisions if it found them to be inconsistent with its oral rulings. The undersigned finds either to be an unacceptable response particularly in view of counsels' assurances to the Court that they understood its rulings and would not deviate from the Court’s instructions. As a result of these deviations, the forensic custodian significantly expanded his tasks to include a search of every computer database and file folder found in Gitman’s offices and disclosed information to State Farm attorneys both authorized and unauthorized by the TRO.

(3) and (6) execution of the TRO

Respondents next complain that the TRO was improperly executed by the forensic custodian and his team resulting in unnecessary disruption to Gitman’s businesses and unauthorized access to business records for non-Agro companies and Gitman’s personal records including banking and medical information. Respondents argue that the forensic custodian arrived unannounced at the Agro offices accompanied by several deputy marshals and local police officers, and moved office personnel away from their work stations while spending the next fourteen hours (from 10:00 a.m. to midnight) accessing and imaging every computer device on the premises or in the possession of the office personnel causing disruption and interference to normal business activities.

The forensic custodian, Richard Pollack, testified at the evidentiary hearing conducted on this motion and fully discussed his activities. Mr. Pollack explained in detail the tasks he was assigned in the TRO and knew that his focus was the Agro companies, together with their “officers, agents and servants” as identified in the TRO. Mr. Pollack had previously discussed his appointment with State Farm attorneys who explained that Pollack should focus on business records of the Agro entities and their operatives. Mr. Pollack found, however, that the Agro-related records were largely co-mingled with non-Agro records so that his work was much more difficult and extensive than anticipated and required examination of every computer hard drive and paper file found in the office regardless of its label or location. Mr. Pollack also found it necessary to expand his team to nearly ten persons, some of whom arrived later that day. Mr. Pollack and his team attempted to do their work with the least disruption to normal office operations; but this still required asking office personnel to leave their desks or work stations for periods of time due to the need to access their computers. Mr. Pollack was also aware that Laurie Weinstein, a State Farm attorney, and Luis Torres, a paralegal from her office, were present at the time but they were not part of his team or supervised by him. Mr. Pollack did ask Luis Torres to assist him in taking inventory of one file cabinet late in the day due to the need to complete his work that day.

*13 The undersigned accepts Mr. Pollack’s testimony as true and finds that he properly executed the TRO and performed his assigned tasks as he understood them from the TRO. The undersigned also finds that Mr. Pollack had appropriate communications with State Farm’s counsel prior to the execution of the TRO in order to understand the situation at Gitman’s offices and prepare accordingly. Thus, the undersigned finds that Mr. Pollack acted independently and as an officer of the court in his role as forensic custodian in this case. Moreover, despite allegations of misconduct concerning disclosures made by Mr. Pollack to State Farm attorneys, the Court accepts his testimony as true that he conveyed only banking information, a Giventer address in the Ukraine, and photocopies of driver’s licenses of office personnel there that day.

(4) Participation of Laurie Weinstein and Luis Torres

Respondents' next concern is the presence and participation of a State Farm attorney, Laurie Weinstein, and paralegal, Luis Torres, at Gitman’s offices during execution of the TRO. Respondents note that this was never requested by State Farm in its motion; and that such participation violated the Court’s instructions and intentions for a limited intrusion into Gitman’s office merely to preserve the status quo. Respondents argue that office personnel observed both Weinstein and Torres examine file folders throughout the day as well as other documents in the office, and take notes from their observations. As a result, respondents believed that confidential information concerning its customers and other private concerns had been accessed by State Farm personnel which contributed to the decision to replace the computer firewall and other security equipment soon thereafter.

Reviewing this matter, the undersigned finds two separate areas of concern; namely, the authority for State Farm personnel to be present during the execution of the TRO, and then the activities undertaken by Laurie Weinstein and Luis Torres that day. Addressing the former, the undersigned finds that no request was ever made to the Court, in any written motion or at the November 5 ex-parte hearing, to have a State Farm attorney or other personnel accompany the forensic custodian to Gitman’s offices for the execution of the TRO. Also, no such authority or permission was given in the TRO itself. On November 9, 2010, several days after the ex-parte hearing, State Farm filed a motion to modify the TRO solely to request “break order language” for the U.S. Marshal should it be necessary to enter the premises with force. Again, no request was made for any State Farm attorney, paralegal, or other personnel to be present at execution. Nevertheless, the proposed order attached to the motion to modify provided that “.... the United States Marshal for the Southern District of Florida.... and those persons acting under their supervision, including Plaintiff’s representatives and attorneys, are further empowered to take all steps necessary to proceed in a lawful manner, including the reasonable use of force, and breaking and entering upon the Agro premises if necessary ...” in order to execute the TRO. See Order Modifying Temporary Restraining Order (D.E. 17) dated November 9, 2010 (emphasis added). Once again, the order proposed by State Farm’s counsel deviated from the relief requested from the Court. State Farm’s counsel had no adequate explanation for inserting such relief into the proposed order other than to testify that the United States Marshal had suggested the presence of an attorney when entry was made.

Having entered the premises on this authority, Laurie Weinstein and Luis Torres spent the day mostly observing the events that transpired and making their own observations and notes from file folders, documents on desk tops, and other locations. While respondents have no proof that either Weinstein or Torres actually participated in the execution in any other manner or obtained any sensitive information, their presence there that day is without adequate explanation and constitutes another example of State Farm’s questionable conduct in this case.

(5) Communications between the forensic custodian and State Farm counsel

*14 As already discussed, respondents complain that State Farm attorneys had frequent communication with Richard Pollack before, during and after the execution of the TRO, which resulted in his disclosure of bank names and other information immediately after completion of his execution. Respondents believe this calls into question whether Richard Pollack was acting independently as an officer of the Court or cooperated with State Farm attorneys beyond the limit of his authority. The record contains several e-mails from State Farm attorneys to Mr. Pollack prior to November 10 which suggest that State Farm took an active role in “preparing” Mr. Pollack for this court-assigned task. The record also establishes that Mr. Pollack sent State Farm counsel a list of bank accounts, bank addresses and Giventer’s address in the Ukraine during or after completion of his work. Nevertheless, the undersigned finds that Mr. Pollack was acting pursuant to his authority as he understood it under the TRO and made no unauthorized decisions with the exception of the Giventer address provided in the Ukraine. Clearly, Mr. Pollack knew to be on the lookout for information concerning Giventer’s whereabouts and did not question his authority to provide this to State Farm’s attorneys.

Respondents believe that Richard Pollock made additional disclosures of information to State Farm counsel concerning patents owned or applied for by Gitman or the Agro entities and recent monetary transfers made to foreign banks. Respondents based this belief on an e-mail and subsequent telephone conversation between Mr. Levin and Jacob Gitman the day of the execution and the following day. The record reveals that Mr. Levin did e-mail Gitman on November 10 (asking “had enough?”) and that he later asked Gitman about patents (“we count six patents”) and bank transfers in an e-mail sent to Gitman the following day. Mr. Pollack denies providing patent or monetary transfer information to the State Farm counsel despite evidence suggesting to the contrary. Mr. Levin insists that his count of “six patents” was based on an ongoing web search through the U.S. Patent Office and that his knowledge about money transfers came from an independent source in the Ukraine. The undersigned finds that this evidence is conflicting and suggestive of further improper conduct by someone present during the execution. Lacking further proof, however, the undersigned cannot identify the specific source of such impropriety.

(7) Communications between State Farm Counsel and Jacob Gitman

As noted above, the record contains several e-mails concerning communications between Mr. Levin and Mr. Gitman on and after the execution of the TRO. Mr. Levin first initiated this communication with Gitman on November 10, the day of execution, when he e-mailed Gitman and asked whether he had “had enough?”. Mr. Levin then spoke with Gitman by telephone and conveyed his belief that Gitman and/or Agro had six patents and recent monetary transfers outside the United States. At one point, Gitman offered to give State Farm two patents just to stop State Farm’s pursuit of Gitman and his companies.

While Mr. Levin’s conduct in communicating with Gitman is disturbing and raises serious concerns, the undersigned cannot find that Mr. Levin violated any Court Order or rule of conduct governing attorney behavior. Gitman was not yet represented by an attorney and he and Gitman had had many prior conversations over the proceeding months about these same matters. The fact that Gitman was disturbed by Mr. Levin’s continuous and aggressive pursuit of Giventer through the Agro companies is understandable but not surprising in the context of this case.

(8) Disruption to normal business activities

Respondents' final complaint focuses on the manner in which the forensic custodian and his team “invaded” his office and conducted their “raid” of its files and databases. The undersigned has addressed aspects of this concern above and restates that the forensic custodian attempted to execute the TRO with the least disruption possible to normal business operations that day. Mr. Gitman complains that he was not able to make certain financial payments due that day in light of the financial restrictions contained in the TRO. While this appears true, it does not constitute damages attributable to the wrongful execution of the TRO for reasons explained above.

*15 Having addressed these issues and made these findings, the undersigned next determines whether State Farm’s conduct or that of its attorneys warrants monetary or other sanctions in this case. Respondents seeks sanctions against State Farm’s counsel under 28 U.S.C. § 1927 for their unreasonable and vexatious conduct in this case which “multiplied” these proceedings from the outset and caused extensive damages to respondents despite the relatively short duration of the TRO. Alternatively, respondents asked the Court to exercise its inherent power to sanction both the State Farm and its attorneys for initiating these proceedings against Gitman and Agro in the first place without an adequate investigation of Giventer’s actual relationship to Agro, Gitman, and the other respondents.

Federal courts are authorized to impose sanctions against a party’s attorney under 28 U.S.C. § 1927 which provides:

28 U.S.C. § 1927. In Peterson v. BMI Refractories, Inc., 124 F.3d 1386 (11th Cir. 1997), this Circuit recognized that the plain language of the statute itself imposes three essential requirements for an award of sanctions under § 1927:

Id. at 1396. In this Circuit, an attorney multiplies proceedings “unreasonably and vexatiously” within the meaning of the statute only when the attorney’s conduct is so egregious that it is “tantamount to bad faith.” Amlong &Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 1239 (11th Cir. 2000) (citing Avirgan v. Hull, 932 f.2d 1572, 1582 (11th Cir. 1991)); see also Schwartz v. Millon Air, Inc., 341 F.3d 1220, 1225 (11th Cir. 2003) (“ ‘bad faith’ is the touchstone”). The phrase “unreasonably and vexatiously” demands an objective analysis of an attorney’s behavior so that § 1927 sanctions do not depend on malicious intent or purpose. Rather, sanctions under § 1927 are measured against an objective standard of conduct. Id. at 1291. In Schwarts v. Millon Air, supra, the Eleventh Circuit stated that sanctions are permissible “where an attorney knowingly or recklessly pursues a frivolous claim.” 341 F.3d at 1225.

Generally, a district court’s authority to issue sanctions for attorney misconduct under § 1927 is either broader than or equivalents as broad as the court’s authority to issue a sanction under its inherent powers. Amlong, 500 F.3d at 1239 (citing Cordoba v. Dillards, Inc., 429 F.3d 1169, 1178 n. 6 (11th Cir. 2005)). Thus, the court need only examine whether sanctions are appropriate under § 1927 where both grounds are advanced because a finding that sanctions are not warranted under § 1927 would necessarily preclude sanctions under the court’s inherent power. Id. Again, sanctions under either § 1927 or the court’s inherent authority require a finding of bad faith. Id. at 1259 (citingThomas v. Tenneco Packaging Co., 293 F.3d 1306, 1326 (11th Cir. 2002)).

Respondents recognize the requirements of § 1927 and argue that all three essential requirements have been met here. First, respondents contend that State Farm’s attorneys acted unreasonably and vexatiously in many ways including their filing of a misleading affidavit signed by a State Farm attorney which gave a false impression concerning Giventer’s extent of ownership and control of Agro, and the portrayal of Gitman as only a “straw man” or puppet of Giventer who was pulling all the strings. Respondents argue in particular that the statement in the TRO motion that Gitman did not become involved in Agro until after he meet Giventer; and Mr. Levin’s sworn statement in his affidavit that Bob Miller “confirmed that he only did business relating to Agro through Michael Blanc (a/k/a Giventer)” support their sanction request. Respondent correctly note that these representations were clearly wrong and that State Farm’s attorneys knew that they were untrue, or were at least reckless in advancing such statements in support of a TRO. Respondents then amplify their position with a long list of other misconduct by State Farm attorneys, as discussed above, which included the submission of draft orders, the attendance of a State Farm attorney and paralegal at Gitman’s offices during its execution, and a far more extensive “raid” of the office premises by the forensic custodian and his team than ever envisioned or authorized by the Court.

*16 Evaluating State Farm counsel’s conduct here, the undersigned finds it disturbing but not sanctionable under § 1927 or the Court’s inherent authority. While respondents correctly note, in hindsight, that the picture State Farm presented to the Court concerning Giventer’s role with Agro was inaccurate and misleading, that conduct must be viewed in the context of Giventer’s known conduct in the past in avoiding the Texas judgment and in light of the information State Farm counsel had about Giventer and his role with both Gitman and Agro after Gitman’s deposition in December 2009. The TRO entered by the Court was based on all the information and evidence presented to the Court about Giventer over many preceding years and not just on his most recent relationship with Agro and its principles. Mr. Gitman himself testified in late 2009 that Giventer was playing an active role in Agro -- largely looking for financing and facilities in the Ukraine. Gitman testified to an agreement reached with Giventer whereby Giventer would receive a salary plus a percent ownership in the company which State Farm reasonably, albeit inaccurately, portrayed as a more controlling interest in Agro than actually existed at the time of these proceedings. Likewise, State Farm erred in stating in its motion that Gitman’s involvement in Agro post-dated his meeting Giventer; and Mr. Levin mis-spoke in his affidavit concerning contacts between Bob Miller and Giventer concerning Agro.

While each of these factual inaccuracies are troubling and contributed to a false impression concerning Giventer’s ownership and control of Agro, the undersigned does not find objective bad faith or reckless misconduct by State Farm’s attorneys following the evidentiary hearing addressing each of these matters. Mr. Levin adequately explained his personal knowledge of Giventer and his use of other companies before Agro to hide assets and avoid execution on the Texas judgment. Gitman’s business relationship with Oleg Shvabsky and his later meeting with Giventer seemed more than coincidental and contributed at least a strong suspicion that Giventer was using Agro to conceal assets as he had done in the past. Thus, the undersigned concludes that neither State Farm nor its counsel knowingly lied to the Court or attempted to mislead the Court despite the limited role Giventer actually had with the Agro companies at the time of the TRO.

A primary area of concern here involves counsel’s submission of proposed orders, namely the TRO and a later modification, that added provisions not requested from or ruled on by the Court. The TRO itself, while clearly intended to be a limited grant of authority to the forensic custodian, added a disclosure provision of certain banking information to be given to State Farm counsel even prior to a further hearing. State Farm attorneys offered no adequate explanation for inclusion of such a provision in the TRO other than to suggest that it was consistent with an anticipated ruling on a separately filed motion to compel discovery in this same case. As a result, the forensic custodian disclosed the names of several banks, as well as an address for Giventer in the Ukraine together with copies of driver’s licenses of personnel at Gitman’s offices when the TRO was executed. Several days earlier, State Farm had requested modification of the TRO to provide “break order” authority for the U.S. Marshal but then proposed an order which allowed State Farm personnel to enter the offices with the forensic custodian without making such a request from the Court.

The submission of proposed orders which included relief not requested from or granted by the Court is a serious concern not fully resolved even after the evidentiary hearing. State Farm attorneys assured the Court that they understood the Court’s intention to enter a TRO with only limited authority for the forensic custodian merely to preserve the status quo pending further hearing. The proposed TRO extended that authority and allowed the forensic custodian to convey confidential banking information to State Farm attorneys. The modified TRO allowed State Farm attorneys and other personnel to participate in the execution of the TRO together with the forensic custodian. While the record reveals no significant activity by either the attorney or paralegal present at that time, the undersigned shares respondent’s concern over the submission of proposed orders not intended by the Court.

*17 Finding these and the other improprieties discussed above, the undersigned turns to the ultimate question, namely, whether State Farm counsel’s conduct was “unreasonable and vexatious” sufficient to warrant sanctions under § 1927. Answering these questions ultimately depends on whether counsel’s conduct was so vexatious and egregious that it was tantamount to bad faith and multiplied these proceedings. Once again, the Court must use an objective standard rather than the subjective intent of State Farm’s attorneys. See Hudson v. International Computer Negotiations, Inc., 499 F. 3d 1252, 1262 (11th Cir. 2007); Amlong & Amlong, 457 F.3d at 1140. A finding of bad faith is warranted where an attorney “knowingly or recklessly pursue[s] a frivolous claim” and turns on his objective conduct rather than his subjective intent. Hudson, 499 F.3d at 1262. Section 1927’s purpose is to deter frivolous litigation and abusive practices by litigants and to ensure that those who create unnecessary costs bear them. O'Rear v. American Family Life Assurance, Co. of Columbus, Inc., 144 F.R.D. 410, 413 (N.D. Fla. 1992). However, the court’s “power to impose sanctions under Section 1927 should be exercised ‘only in instances of serious and studied disregard for the orderly processes of justice.’ ” Jeralds v. City of Orlando, 194 F.Supp.2d 1305, 1312 (quoting Cruz v. Savage, 896 F.2d 626, 631-32 (1st Cir. 1990)). Section 1927 sanctions are considered penal in nature so that statute must be strictly construed. Roper v. Edwards, 815 F.2d 1474, 1478 (11th Cir. 1987).

Here, the record reflects that State Farm’s counsel acted aggressively and at times overzealously in pursuing Giventer and the State Farm judgment based on his known involvement with Gitman and the Agro companies. However, the record does not reflect, in the opinion of the undersigned, that any State Farm attorney acted in bad faith or with reckless disregard as required for sanctions under § 1927. The record of this case does not establish that State Farm filed the ex-parte motion without a good faith belief that Giventer likely had an ownership interest and assets in the Agro companies which, based on his pass misconduct, might have been secreted or removed from the jurisdiction of the United States courts had notice been given in advance of the requested restraint. Respondents do not contend, and the record does not establish, that State Farm pursued frivolous claims in this case or sought to obtain further injunctive relief once the TRO was executed; revealing, in the report of the forensic custodian, little apparent connection between Giventer and Agro. Also, no conduct by State Farm or its attorneys, after requesting the TRO and its execution on November 10, 2010, unnecessarily or vexatiously “multiplied” these proceedings which were dismissed six weeks later on December 20, 2010. Multiplication of proceedings through the filing of frivolous claims or other reckless misconduct on the part of the parties attorney is an essential requirement for sanctions under § 1927. Finally, any negligent action on the part of State Farm attorneys, in the proposing of orders or otherwise, or any subjective motive or intent on the part of State Farm or its attorneys to force Gitman and/or Agro into submission is not relevant to a § 1927 analysis which must be based on an objective standard of conduct of the “reasonable” attorney in the context of this case. While certain actions of State Farm counsel, as outlined above, fell beneath the standard of reasonableness in this brief case, the undersigned finds that such actions do not rise to the level of unreasonable and vexatious conduct resulting in the prolongment of this case.

SUMMARY

For all of the foregoing reasons, the undersigned recommends:

The parties may serve and file written objections to this Report and Recommendation with the Honorable Paul C. Huck, United States District Court Judge, within ten (10) days of the receipt. See 28 U.S.C. § 636(b)(1)(c); United States v. Warren, 687 F.2d 347, 348 (11th Cir. 1982), cert. Denied, 460 U.S. 1087 (1983); and Hardin v. Wainwright, 678 F.2d 589, 592 (5th Cir. Unit B. 1982); see also Thomas v. Arn, 474 U.S. 140, 153 (1985).