DR Distribs., LLC v. 21 Century Smoking, Inc.
DR Distribs., LLC v. 21 Century Smoking, Inc.
2019 WL 13063223 (N.D. Ill. 2019)
June 6, 2019
Johnston, Iain D., United States Magistrate Judge
Summary
The Court granted the motion to stay and the motions to withdraw, but required the defendants to search for and produce any ESI associated with the GoDaddy account, including emails, documents, text messages, Snapchat messages, and Slack messages. A status hearing was set for 8/20/2019 to discuss the possibility of resolving the case.
Additional Decisions
DR DISTRIBUTORS, LLC, Plaintiff,
v.
21 CENTURY SMOKING, INC., and BRENT DUKE, Defendants,
and
21 CENTURY SMOKING, INC., Counterclaimant,
v.
DR DISTRIBUTORS, LLC, et al., Counterdefendants
v.
21 CENTURY SMOKING, INC., and BRENT DUKE, Defendants,
and
21 CENTURY SMOKING, INC., Counterclaimant,
v.
DR DISTRIBUTORS, LLC, et al., Counterdefendants
No. 12 CV 50324
United States District Court, N.D. Illinois, Western Division
Filed June 06, 2019
Counsel
Brian M. Gaynor, Nicoll Davis & Spinella LLP, Paramus, NJ, Robert Charles von Ohlen, Jr., Robert C. von Ohlen & Associates, Lake Forest, IL, Anthony J. Davis, Pro Hac Vice, Santomassimo Davis LLP, Parsippany, NJ, for Plaintiff.Michael Irving Leonard, Leonard Trial Lawyers LLC, Chicago, IL, for Counterclaimant.
Michael Irving Leonard, Leonard Trial Lawyers LLC, John G. Bisbikis, Prospect Law LLP, Chicago, IL, Salam Bruce Salam, Kevin B. Salam PC d/b/a Law Offices of Kevin Salam, Chicago, IL, for Defendants.
Brian M. Gaynor, Nicoll Davis & Spinella LLP, Paramus, NJ, for Counterdefendants CB Distributors, Inc., Carlos Bengoa.
Brian M. Gaynor, Nicoll Davis & Spinella LLP, Paramus, NJ, Robert Charles von Ohlen, Jr., Robert C. von Ohlen & Associates, Lake Forest, IL, Anthony J. Davis, Pro Hac Vice, Santomassimo Davis LLP, Parsippany, NJ, for Counterdefendant DR Distributors, LLC.
Johnston, Iain D., United States Magistrate Judge
ORDER
*1 This is the way the world ends.
Before the Court are five related motions by the defendants: a motion to stay briefing a motion for sanctions after the recent revelation of yet another source of potentially responsive documents that has not yet been searched [298], and four separate motions to withdraw by defense counsel because of a break down in the attorney-client relationship in light of the document revelation, [300], [303], [305] and [307].
Over the understandable objection of the plaintiff/counterdefendants (“plaintiffs”), the Court reluctantly grants the motion to stay [298]. The Court acknowledges the argument by plaintiffs’ counsel during the motion hearing on 6/4/2019 that the stay will further delay this case. However, given the defendants’ obligation to produce responsive documents and the plaintiffs presumed desire to obtain them, the time needed to search for the e-mails or documents maintained in the Cloud associated with the defendant's GoDaddy account, review those materials for responsiveness and privilege, and produce them to the plaintiffs will already cause delay.
In addition, delay will also attend the withdrawal of defense counsel. The decision whether to allow counsel to withdraw is within the sound discretion of the district court. Washington v. Sherwin Real Estate, Inc., 694 F.2d 1081, 1087 (7th Cir. 1982). When counsel feels unable to adequately continue representing the client, and the client does not oppose the motion to withdraw, allowing withdrawal is not an abuse of the court's discretion. Id. at 1087-88. In support of the motions to withdraw by attorneys Thomas Leavens, Travis Life, Steven Shonder, Peter Stamatis, and Peter Strand, counsel have stated that the attorney-client relationship is “irrevocably impaired” and that a conflict of interest arose as a result of the recent discovery of more potentially responsive documents. Attorney Heather Liberman seeks to withdraw because she long ago left her former firm and her failure to move to withdraw at the time was an oversight [307]. Given defense counsel's belief that they can no longer represent the defendants, and defendant Brent Duke's presence at the motion hearing and lack of any objection by him or the attorney who accompanied him (who has not appeared in this case), and in an exercise of its discretion, the Court grants the motions to withdraw, [300], [303], [305] and [307].
However, counsel's obligations do not end with their withdrawal. Counsel's knowledge about the production of documents (or, more accurately, the lack thereof) and information in this case will be relevant to further proceedings on the pending motions for sanctions, as well as other possible proceedings, including contempt of court (both civil and criminal) and counsel may find themselves subpoenaed to testify (in granting the motion to withdraw the Court is mindful that one attorney is no longer within 100 miles of the Northern District of Illinois, and so it granted her motion trusting that she would appear to defend herself if subpoenaed). In addition, “a district court retains jurisdiction to impose sanctions after the proceeding in which the sanctionable conduct occurred has ended.” Martinez v. City of Chicago, 823 F.3d 1050, 1056 (7th Cir. 2016) (citing Cooter & Gell Hartmax Corp., 496 U.S. 384, 395-6, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990)); see also Adams v. Lever Bros. Co., 87 CV 9037, 1991 U.S. Dist. LEXIS 13065, at **17-19, 39-40 (N.D. Ill. Sept. 16, 1991) (sanctions imposed on attorney based on conduct that occurred before his withdrawal).
*2 Meanwhile, the motion for sanctions [294] remains entered and continued, as the Court wants to know more about the production before proceeding. Status hearing is set for 8/20/2019 at 1:30PM. Counsel and the parties must appear in person, except for Ms. Liberman, who may appear telephonically. 21 Century Smoking, Inc. can only appear through counsel. Williams v. National Housing Exchange, Inc., 110 F. Supp. 2d 694, 698 (N.D. Ill. 2000). The Court fully expects that Mr. Duke will have engaged counsel by then, and if not, explain in detail the efforts he made to obtain counsel. By 8/13/2019 the defendants shall submit a written report on (1) the status of the search for responsive e-mails and other documents from the GoDaddy account stored in the Cloud; (2) what investigation has been done into whether any e-mails or documents associated with the GoDaddy account were lost, destroyed, not preserved, or spoliated and the results of that investigation including the extent of documents that are no longer available; and (3) the anticipated date of production of the GoDaddy account materials. Additionally, the Court expects to be fully informed as to whether other devices, including but not limited to cell phones or legacy systems have been searched, as well as whether other modes of electronic communications have been searched; for example, text messages, Snapchat messages or Slack messages as opposed to just emails have been searched.
Upon reflecting on the events reported in this case over the past week, the Court makes the following observations about where matters appear headed. If the plaintiffs succeed on the motion for sanctions including an award of attorneys’ fees (which already exceed $880,000), it is not clear what if any portion of the award they would collect. Meanwhile, sanctions could include dismissal of the defendants’ counterclaim, leaving the defendants with no chance collecting against the plaintiffs while still subject to possible liability to the plaintiffs including a monetary sanction. The Court assumes that Mr. Bengoa is in the business of business, not litigation, particularly litigation that might result in a meaningless, unrecoverable monetary judgment. So, the Court intends to discuss with the parties during the 8/20/2019 status hearing the benefits of working to resolve this case, an agreement that could decide who gets use of the disputed mark in exchange for freeing the parties and their counsel from further sanctions proceedings, the time and expense involved in restarting fact discovery (including the appointment of a special master at defendants’ expense), the need for any new counsel to focus considerable effort to become acquainted with 7 years of zealous litigation spanning over 300 docket entries, and possible satellite litigation relating to the multiple failures to preserve or produce responsive ESI.
CONCLUSION
For the reasons given, the Court grants the motions to stay [298] and to withdraw [300], [303], [305], and [307]. The clerk is directed to terminate the appearances of Thomas Leavens, Heather Liberman, Travis Life, Steven Shonder, Peter Stamatis, and Peter Strand, though counsel are advised that their obligations to the Court and this case do not end with their withdrawal. Status hearing set for 8/20/2019 at 1:30PM. Counsel for the parties, the parties, and counsel who have been allowed to withdraw must appear in person, except Ms. Liberman. This means that everybody who was in court for the presentment of the motions to withdraw and the motion to stay must personally appear in court on 8/20/19 at 1:30 PM, but Ms. Liberman may appear telephonically. It would be advisable for an attorney or representative of Diamond State Insurance to be present as well. The Court observed Diamond State's counsel in the courtroom on 6/4/19. By 8/13/2019 the defendants shall file a written report on the status of the search for additional documents associated with the GoDaddy account, including the investigation into any missing documents, as detailed in this order. Counsel should anticipate and be prepared to stay to at least 5:00 PM.