HENRY PITMAN, Magistrate Judge.
By notice of motion filed on June 27, 2019 (Docket Item ("D.I.") 313), plaintiff moves pursuant to Fed.R.Civ.P. 56(h) to strike the declarations submitted by defendants in support of their motion for summary judgment and for sanctions, claiming that the declarations contain false and misleading statements and are not based on personal knowledge. By notice of motion dated July 11, 2019 (D.I. 317), defendants move to strike plaintiff's Rule 56(h) motion and for sanctions. I construe defendants' motion to strike as their opposition to plaintiff's 56(h) motion For the reasons stated below, plaintiff's motion is denied, and defendants' motion to strike and for sanctions is denied.
The facts underlying this litigation are set forth in my Report and Recommendation of even date. The reader's familiarity with those facts is assumed. My recitation of the facts here will be limited to those facts necessary to resolve the instant motions.
Ever since the matter was remanded in 2010 by the Honorable Laura Taylor Swain, United States District Judge, for further discovery, plaintiff has persisted in its contention that defendants have withheld from discovery the computer code that would demonstrate that defendants did, in fact, steal plaintiff's sequences when they tested ACE in late 1990's. Despite the total lack of evidence supporting this belief and despite attestations by defendants under penalty of perjury that all relevant code used by defendants has been produced, plaintiff continues to persist in its belief.
All the discovery issues concerning plaintiff's theory that defendants were withholding evidence have been previously litigated. On September 5, 2012 I held a protracted discovery conference in which plaintiff raised its claims that an affidavit submitted by Dr. Branislav Radak, a former vice president of defendant The Yield Book Inc. ("TYB") was not based on personal knowledge, that Dr. Radak had fabricated bogus codes to create 1,000 path sequences, that defendants withheld relevant computer code and that defendants surreptitiously ran computer code during the testing of ACE that stole plaintiff's sequences (Transcript of Proceedings Conducted on September 5, 2012 (D.I. 175) ("Sept. 5 Tr.") at 20, 38, 90; Plaintiff's Objection to the Magistrate Judge's Denial of Plaintiff's Application to Compel Production of the Yield Book Code and to Compel the Depositions of Robert Russell and Stewart Herman, dated Sept. 28, 2012 (D.I. 197) at 3, 5, 10-11 15). I rejected these contentions at the conference (Sept. 5 Tr. at 92, 95; Order dated Sept. 25, 2012 (D.I. 174)). Judge Swain subsequently rejected plaintiff's objections to my rulings (Order dated Feb. 8, 2013 (D.I. 214)).
After retaining its current counsel (plaintiff was previously represented by more than six sets of attorneys), plaintiff moved in 2018 pursuant to Fed.R.Civ.P 56(d) to defer consideration of defendants' summary judgment motion and to re-open discovery (Plaintiff's Notice of Motion and Motion under FRCP 56(d), dated Nov. 8. 2018 (D.I. 289)). I held oral argument on this motion on May 28, 2019 and denied the motion, finding, in principal part, that plaintiff was attempting to make the same arguments that it had unsuccessfully made in 2012 (Order dated May 28, 2019 (D.I. 312)).
Undeterred by its prior defeats, plaintiff has repackaged its claims of discovery misconduct and has now moved for sanctions pursuant to Rule 56(h), claiming that defendants have, in bad faith, filed false declarations and declarations that are not supported by personal knowledge in support of their motion for summary judgment. Specifically, plaintiff claims that the declarations of Dr. Branislav Radak, Dr. Nathaniel Polish (an expert retained by defendants for the purpose of this litigation) and Dr. Robert Russell contain false and misleading statements and are not based on personal knowledge. Defendants now claim that plaintiff's 56(h) motion is itself sanctionable as an improper motion for reconsideration of the Court's prior rulings.
Rule 56(h) authorizes a district court to impose "appropriate sanctions," including attorney's fees, against a party or counsel who submits "an affidavit or declaration under [Rule 56] in bad faith or solely for delay." Fed.R.Civ.P. 56(h). "[A]n order to pay expenses pursuant to Rule 56(h) requires a finding of `bad faith,' which courts have found only when the attorney's conduct is `egregious,' such as `where affidavits contained perjurious or blatantly false allegations or omitted facts concerning issues central to the resolution of the case.'"
Much of plaintiff's Rule 56(h) motion appears to have little or no connection to the legal requirements for an award of sanctions under Rule 56(h). For example, plaintiff spends several pages claiming, without any evidence, that its former counsel colluded with defense counsel. Although plaintiff's principal may have had disagreements with plaintiff's former counsel about how to litigate the case, those disagreements do not imply that the attorney is colluding with the other side. Moreover, even if I make the assumption that plaintiff's allegation of collusion is true, that does not demonstrate that any declarations submitted by defendants were submitted in bad faith or for the purpose of delay.
Nevertheless, read charitably, plaintiff appears to be asserting three bases for its Rule 56(h) motion: (1) defendants are guilty of discovery misconduct; (2) defendants' motion is groundless because plaintiff is entitled to prevail on the merits and (3) defendants have submitted declarations that are not based on personal knowledge and/or are false.
As to the first ground, defendants are largely correct in their contention that plaintiff is improperly seeking to reargue matters that were previously decided adversely to plaintiff. As noted above, plaintiff's claim of discovery misconduct was addressed as recently as the May 28, 2019 conference. There is no basis to revisit it again.
Plaintiff's contention that defendants' summary judgment motion is sanctionable because plaintiff is entitled to prevail on the merits fails because (1) I conclude that defendants are entitled to summary judgment for the reasons set forth in my Report and Recommendation of even date and (2) the putative "facts" that plaintiff now offers to demonstrate that it is entitled to prevail on the merits are not supported by any evidence. Plaintiff's more exorbitant assertions include the following:
If plaintiff's assertions were true, it might have a basis for a 56(h) motion. However, at best, plaintiff's assertions of "fact" are really just inferences that plaintiff has drawn, after viewing the evidence in the light most favorable to plaintiff. For example, contrary to in the third bullet point quoted above, there is no evidence that defendants instructed Dr. Radak to manufacture phony sequences; plaintiff merely surmises that is what occurred. Contrary to the fifth bullet point quoted above, defendants never admitted to plaintiff that they produced "phony" sequences in discovery. And in support of its sixth bullet point — that defendants "ordered Radak to write bogus code" — plaintiff cites a declaration from its principal. Plaintiff's principal could not possibly have first-hand knowledge of defendants' internal communications. Plaintiff's "factual" assertions do not come close to establishing that the affidavits and declarations defendants submitted in support of their motion for summary judgment were false or submitted in bad faith, for the purpose of delay or are perjurious.
The last ground for plaintiff's 56(h) motion is its contention that defendants submitted affidavits from three individuals that are either not based on personal knowledge, false or both. Again, plaintiff's contentions lack substance.
The case law addressing Rule 56(h) motion based on perjurious affidavits or declarations is sparse. However, one consistent principle in the cases that have granted relief under the Rule is clear proof that the declaration or affidavit is false, usually through admissions of untruthfulness or irreconcilably inconsistent statements from the declarant or affiant.
Conflicting declarations will not support an award of sanctions under Rule 56(h).
Plaintiff's motion does not come close to the clear demonstration of perjury necessary to warrant the imposition of sanctions under Rule 56(h).
Plaintiff first attacks the declaration of Dr. Radak, a former vice president of TYB and a former vice president within the MBS Term Structure Modeling department of Citigroup Global Markets, Inc. The declaration plaintiff attacks is a two-page declaration in which Dr. Radak confirms the completeness of defendants' production of TYB sequences in discovery; the complete text of Radak's declaration is set out below in a footnote.
In support of its claim that Radak's declaration was not based on personal knowledge, plaintiff cites two excerpts from Radak's deposition. In the first excerpt Radak testifies that it was his understanding that the mortgage research department and TYB produces a set of prices on a daily basis and that the results are checked on a daily basis to ensure that both groups are using the same prepayment and default model. Radak then goes on to admit that he does not have first-hand knowledge of the sequences actually used to generate these daily prices.
The fact that Dr. Radak does not personally know what sequences are used to generate the daily reports he described does not impugn the assertions in his declaration. His declaration identifies several sequences, and the fact that he may not have personal knowledge of the particular sequence used for a particular task does not imply that his attestation as to the completeness of defendants' document production is false.
Similarly, the fact that Dr. Radak did not have access to defendants' revision control system may raise questions as to how he knows the sequences produced by defendants were complete, but such questions are not proof of perjury and certainly not the clear proof of perjury necessary to warrant the imposition of sanctions under Rule 56(h). Given his position, it is possible that Dr. Radak has knowledge of the sequence used by defendants independent of the revision control system. In addition Radak was deposed on two occasions — in 2007 and 2012 —
Plaintiff's attack on the declarations of Dr. Polish is similarly flawed.
The closest plaintiff comes to attacking the bases for Dr. Polish's opinions is the following statement in its memorandum in support of its 56(h) motion: "The false statements in 1st Polish Decl are repeated in both 2nd and 3rd Polish Decls, even [though] they had been exposed during the
Even more troubling, in the course of arguing that Dr. Polish submitted false declarations, plaintiff itself misstates the content of one of Polish's declarations. Plaintiff states "In the 1st and 2nd Polish Decls, the `YB sequences' were defined as Decoy Seq II" (Pl. 56(h) Mem. at 7). As noted above, defendants have not submitted the second Polish declaration in support of their summary judgment motion. Thus, plaintiff's reference to that declaration is meaningless. The first Polish declaration refers to "Yield Book Numbers," but it contains no mention of "YB sequences" and it does not define anything as "Decoy Seq II" (
The balance of plaintiff's attack on Dr. Polish's declarations consist of nothing more than restatements of plaintiff's disagreements with the conclusions reached by Dr. Polish, supported by nothing more than the opinions of plaintiff's principal or one of plaintiff's experts. Plaintiff offers no prior inconsistent statements from Dr. Polish, nor does it offer any incontrovertible evidence that Dr. Polish lied (either knowingly or innocently) in his declarations.
Finally, plaintiff's claim that Dr. Russell's declaration is perjurious is the weakest of all. Dr. Russell was employed by Citigroup Global Markets, Inc. and its predecessor entity from 1993 through 2007; during his tenure, he worked primarily on computer code that related to mortgage-backed securities (Declaration of Robert A. Russell, dated Feb. 12, 2007, annexed as Ex. 6 to the Jedrey Declaration). In his declaration, Dr. Russell generally describes his employment and his personal involvement in the testing of the ACE sequences and emphatically denies that defendants misappropriated ACE or any aspect of ACE. Plaintiff does not deny Dr. Russell's personal involvement in the testing he describes; rather it merely claims that Dr. Russell's declaration is false and that Russell allegedly installed computer code on the computer that was being used to test ACE that enabled defendants to surreptitiously copy ACE (Pl. 56(h) Mem. at 11-12). All that plaintiff cites in support of this contention are declarations from plaintiff's experts who do not have first-hand knowledge of what occurred during defendants' testing of ACE. As explained above, such conflicts do not, as a matter of law, establish perjury. Again, even if plaintiff's declarations can be properly considered, they are insufficient, as a matter of law, to establish perjury.
Thus, plaintiff's 56(h) motion is really just a mixture of discovery arguments that have already been heard and rejected and argument that defendants' summary judgment motion should be denied. There is no evidence that defendants have knowingly submitted false evidence or that they made their motion to delay the proceedings. Accordingly, plaintiff's motion for sanctions under Fed.R.Civ.P. 56(h) is denied.
Defendants have responded to plaintiff's 56(h) motion by cross-moving to strike the motion and for sanctions pursuant to 28 U.S.C. § 1927 and the Court's inherent power.
Title 28 U.S.C. Section 1927 provides that
The imposition of sanctions under Section 1927 is appropriate "only when there is a finding of conduct constituting or akin to bad faith."
Before imposing sanctions under 28 U.S.C. Section 1927, a court "must find clear evidence that (1) the offending party's claims were entirely meritless and (2) the party acted for improper purposes."
An award of sanctions under the Court's inherent power also requires a finding that the offending party "acted in bad faith, vexatiously, wantonly or for oppressive reasons."
"[T]he only meaningful difference between an award made under § 1927 and one made pursuant to the court's inherent power is, as noted above, that awards under § 1927 are made only against attorneys or other persons authorized to practice before the courts while an award made under the court's inherent power may be made against an attorney, a party, or both."
"When a lower court sanctions a litigant for bad faith, the court must outline its factual findings with `a high degree of specificity.'"
Although plaintiff's 56(h) motion lacks merit, I conclude that sanctions under either Section 1927 or the Court's inherent power are not warranted. Plaintiff's 56(h) motion was motivated by its belief that it is entitled to prevail in this litigation, and not to vex or oppress defendants; although plaintiff's belief is misguided and its motion meritless, there is no clear evidence that the motion was not motivated by an improper purpose. The principal ground asserted by defendants in support of their sanctions motion is that plaintiff's 56(h) motion was actually an attempt to reargue discovery issues. However, even where a litigant has been advised that its contemplated motion for reconsideration was not likely to succeed, sanctions are inappropriate in the absence of evidence that will support specific findings supporting the conclusion that the motion was made for an improper purpose.
A motion's merit or lack of merit is a matter of degree, and plaintiff's 56(h) motion is closer to the red end of the arc than the green end. Nevertheless, plaintiff's motion is not so meritless that I can find that it constitutes clear evidence of an improper purpose. Thus, defendants' motion for sanctions is denied.
Accordingly, plaintiff's motion for sanctions pursuant to Fed.R.Civ.P. 56(h) is denied. Defendants motion to strike plaintiff's 56(h) motion and for sanctions is also denied. The Clerk of the Court is respectfully requested to mark Docket Items 313 and 317 closed.
SO ORDERED.
(Declaration of Branislav Radak, dated Sept. 1, 2007, annexed as Exhibit 31 to the Declaration of Nathaniel E. Jedrey, Esq. dated Apr. 5, 2013 ("Jedrey Decl.")). Radak's declaration was submitted in response to an Order I issued on August 31, 2007 to resolve a dispute concerning the completeness of defendants' document production. It was produced to plaintiff on September 7, 2007 (
(Transcript of Deposition of Dr. Branislav Radak, taken on Aug. 29, 2012 at 189-90, annexed as an exhibit to the Declaration of Peter J. Toren, Esq., dated June 25, 2019 (D.I. 313)).