Opinion
6:20-CV-1163-ADA-DTG
02-22-2024
WSOU INVESTMENTS, LLC d/b/a BRAZOS LICENSING AND DEVELOPMENT, Plaintiff, v. SALESFORCE, INC., Defendant.
HONORABLE ALAN D ALBRIGHT, UNITED STATES DISTRICT JUDGE
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE TO DENY DEFENDANT'S MOTION FOR SANCTIONS [ECF NO. 176]
DEREK T. GILLILAND UNITED STATES MAGISTRATE JUDGE
This Report and Recommendation is submitted to the Court pursuant to 28 U.S.C. § 636(b)(1)(C), Fed.R.Civ.P. 72(b), and Rules 1(f) and 4(b) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas, Local Rules for the Assignment of Duties to United States Magistrate Judges.
Defendant seeks Rule 11 sanctions that affect this case and a newer case-Case No. 6:23-cv-00046-ADA (W.D. Texas). ECF No. 176. After careful consideration of the briefs, arguments of counsel, and the applicable law, the undersigned RECOMMENDS that Defendant's Motion (ECF No. 176) be DENIED.
I. BACKGROUND AND ANALYSIS
Defendant seeks Rule 11 sanctions based on WSOU's Original Complaint in this case. ECF No. 176. Salesforce contends that the Complaint was facially deficient from the start. Rather than dismiss the Original Complaint, however, Salesforce contends that WSOU improperly litigated the Complaint for two years, opposed a motion to dismiss the Complaint, filed an entirely new case to correct the errors in the Complaint, and then voluntarily dismissed the Complaint. In addition to seeking attorney's fees and costs, Salesforce's request that this Court sanction WSOU by dismissing the current-already voluntarily dismissed-case and dismissing the entirely separate, newly-filed case. Id. at 3.
Because Defendant waited to bring this Motion until years after Plaintiff filed the Original Complaint, until years after briefing on Defendant's Motion to Dismiss was complete, and until months after Plaintiff voluntarily dismissed the current complaint, the Court recommends denial of Defendant's Motion.
The chronology of this case is important in understanding the Court's recommendation. As noted by Salesforce, WSOU filed the present lawsuit on December 18, 2020. ECF No. 1. On that same day, WSOU filed a separate lawsuit alleging infringement of a different patent. See WSOU v. Salesforce, Inc., Case No. 6:20-cv-1172-ADA-DTG, ECF No. 1 (W.D. Tex. 2020). On May 6, 2021, Defendant filed a motion to dismiss the Original Complaint. The parties completed briefing on that motion to dismiss in the summer of 2021. For a year and a half, the parties litigated this case engaging in claim construction and conducting fact discovery. Defendant never raised the issue of Rule 11 violations or sanctions during that time. Then, WSOU filed a new lawsuit on January 25, 2023, involving the same patent and a new infringement theoryTwo days later, WSOU voluntarily dismissed this case, which under the Federal Rules of Civil Procedure effectively terminated the case. ECF No. 161 (citing F.R.C.P. Rule 41(a)(1)(A)(i) and noting that Defendant had not answered or moved for summary judgment). In May 2023, Salesforce sent WSOU a copy of its planned Rule 11 Motion, and on June 21, 2023-nearly five months after WSOU voluntarily dismissed this case-Salesforce filed the present Rule 11 Motion. ECF No. 176. Salesforce's delay is fatal to its Motion.
WSOU Investments LLC v. Salesforce.com, Inc., Case No. 6:23-cv-00046-ADA (W.D. Texas).
Rule 11 exists to deter parties from bringing or pursuing baseless claims. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). It does so by providing a procedural mechanism for parties to identify baseless pleadings and to withdraw those pleadings before a motion is filed. Fed.R.Civ.P. 11(c)(2). Rule 11 requires a party to first serve-but not file-a motion for sanctions. The Rule permits the filing of the motion only if the challenged paper or claim is not withdrawn or corrected within the time required. Rule 11(c)(2). In this way, Rule 11 provides a party an opportunity to correct the allegedly offending conduct before court intervention. See Margetis v. Furgeson, 666 Fed.Appx. 328, 331-32 (5th Cir. 2016) (noting that Rule 11 creates a safe harbor for parties to withdraw or correct a challenged document and avoid sanctions); see also Askins v. Hagopian, 713 Fed.Appx. 380, 381 (5th Cir. 2018) (reversing an award of sanctions for failure to comply with the 21-day notice period). The advisory comments affirm that this safe harbor exists to allow correction of offending conduct and discourage parties from waiting until the conclusion of the case before raising their concerns. Fed.R.Civ.P. 11(c) advisory committee's note to 1993 amendment; see also Gen. Motors Acceptance Corp. v. Bates, 954 F.2d 1081, 1086 (5th Cir. 1992) (reversing sanctions under Rule 11 because the party waited until 33 months after the offending conduct to seek sanctions); Garcia v. Rauch-Milliken Int'l, Inc., No. 5-18-CV-01028-FB-RBF, 2020 WL 7495251 (W.D. Tex. Oct. 16, 2020) (denying Rule 11 sanctions in part because the motion for sanctions was served when it was impossible to take advantage of the safe harbor provision).
All the conduct Defendant complains about occurred long before Defendant filed its Motion for Sanctions. Plaintiff filed its Original Complaint on November 19, 2020. ECF No. 1. In response, Defendant filed a Motion to Dismiss on May 6, 2021, to which Plaintiff responded, and for which all briefing was complete by July of 2021. See ECF Nos. 20; ECF No. 25; ECF No. 26. Plaintiff voluntarily dismissed this case in January of 2023 and noted that Defendant had not yet answered or moved for summary judgment. ECF No. 161. As such, Plaintiff's voluntarily dismissal was effective upon filing. See Fed.R.Civ.P. 41(a)(1)(A)(i).
At no point during the intervening two years did Defendant threaten a Rule 11 motion for sanctions. Defendant did not serve its Motion for Sanctions on Plaintiff until May 2023, and did not file it until July 2023. ECF No. 176 at 7 & 176-3.
Defendant's delay in seeking Rule 11 sanctions prevented Plaintiff from taking advantage of Rule 11's safe harbor. Even assuming that Defendant's allegations are correct, there is no way for Plaintiff to correct the offending pleadings in this case. The complaint was filed over two years before Defendant filed its Motion. ECF No. 1 The briefing on the motion to dismiss, which Defendant complains about, was completed almost two years before Defendant's Motion. ECF Nos. 20, 25, & 26. This case was voluntarily dismissed five months before Defendant filed its Motion. ECF No. 161. Defendants delay in bringing its Motion prevents Plaintiff from withdrawing the offending pleadings as the case has been dismissed-which has the practical effect of dropping the offending pleadings.
While Defendant contends its Motion was timely filed because it was filed within five months of the new case with a new complaint, the Motion does not contend that the complaint in the new case is sanctionable. See ECF No. 176. Defendant contends that the new complaint asserted a new theory of infringement based in part on what Plaintiff learned in this case. Defendant does not contend, however, that the new complaint in the new lawsuit is subject to Rule 11 sanctions. Id. at 14-15. A review of the docket in that later-filed action shows that Defendant's have filed a motion to dismiss but have not sought sanctions in that case. See WSOU Investments, LLC v. Salesforce.com, Inc., Case No. 6:23-cv-00046-ADA (W.D. Texas). The Court is unaware of any authority that would permit Defendant to use a Rule 11 Motion in this case to collaterally attack a separate, later-filed case. Defendant has not identified any authority for such a sanction and the the Court is unaware of any.
Defendant's reliance on the Magnacross case is unpersuasive because the specific facts are very different from this case. While that case contained an allegation of cut-and-paste copying, the similarities end there. ECF No. 176 at 11-12 (citing Magnacross LLC v. OKI Data Americas, Inc., No. 3:20-cv-01959-M, 2022 WL 992595 (N.D. Tex. Mar. 31, 2022)). That case involved a response to a motion to dismiss where the response contained irrelevant arguments that were copied from a separate case and filed by a lawyer who admitted that he never read the response he signed. Id at *4. After the lawyer failed to provide the court with a sufficient explanation for the improper copying, the Court sua sponte awarded sanctions. Id at *4. Nothing in that case supports the award of sanctions months after a party voluntarily dismisses a case before the possibility of a Rule 11 motion is raised.
Defendant's reliance on Ruby Sands is also misplaced for two reasons. Ruby Sands LLC v. First National Bank Southwest, Case No. 2:16-cv-1305-JRG, 2017 WL 10257125 (E.D. Tex. Apr. 5, 2017). First, sanctions were imposed in that case before the case was dismissed. Id., at *1 (noting that the plaintiff's voluntarily dismissal contained a demonstrably false statement-that defendant had not answered or filed a motion for summary judgment). That demonstrably false statement prevented the dismissal from being effective and resulted in sanctions. Id. Second, the court relied on similar improper conduct and a prior warning to counsel in an earlier case as a basis for determining the conduct was more than mere inadvertence and therefore justified sanctions in the case before the court. Id., at *1-2. It did not use conduct in the case before the court to impose sanctions-such as striking a complaint-in a separate case not before the court. The Ruby Sands court also did not sanction the attorney for the first instance of improper conduct-which is what Defendant requests here. See id.; Ruby Sands, LLC v. American National Bank of Texas, Case No. 2:15-cv-1955-JRG, 2016 WL 3542430, at *5 (W.D. Tex. June 28, 2016) (dismissing the earlier case with prejudice in part because the complaint included copy-and-paste language from a different case and an unrelated patent).
Defendant's other authority does not support their request for sanctions either. In Davis v. Pest Management of Texas, Inc., the court noted at least three other cases where the plaintiff simply copied pleadings. Case No. 3:13-cv-00962-L, 2014 WL 2893275, at *3 (N.D. Tex. June 26, 2014). While the court noted that it believed form pleadings violated Federal Rule of Civil Procedure 11, it did not sanction anyone, but cautioned plaintiff's counsel and granted leave to amend the complaint. Id. Similarly the Hill case involved three pro se plaintiffs. Hill v. First Nat'l Bank Shares, No. 1:17-cv-0025-BL, 2017 WL 838267 (N.D. Tex. Mar. 2, 2017). One was an attorney who had previously surrendered his license to avoid disbarment and had been permanently prohibited from practicing law in Texas, and two were individuals that had allegedly given the former attorney their power of attorney for the case before the court. Id. While the complaint was described as “poorly drafted and most likely an attempt to cut-and-paste from a prior document,” the court allowed the two individuals to amend after reading Rule 11. Id. at *5. It was only the former attorney who faced the possibility of sanctions. Id. at *4-5. Neither of those cases awarded sanctions for the improper pleadings.
Considering the above authorities, had the Court found Defendant's Motion timely, it would still recommend denial. Plaintiff's Original Complaint contained what appeared to be some copy-and-paste errors. A review of the Complaint and the arguments reveals that the Complaint provided Defendant with sufficient notice of its claims. This is reinforced by Plaintiff's infringement contentions that build upon the allegations in the Complaint and that do not contain any alleged copy-and-paste errors. The Court is persuaded that while Plaintiff's Original Complaint could have been improved, it was not sanctionable. For the same reasons, the Plaintiff's opposition to Defendant's Motion to Dismiss was not sanctionable.
Finally, the Court is unable to find authority for using conduct occurring within one case as a basis for striking a separate lawsuit, in which no motion has been filed. The few cases cited by Defendant support the idea that the Court can consider past actions of a party or counsel when addressing a motion for sanctions filed in a later case. See Ruby Sands, 2016 WL 3542430; Davis, 2014 WL 2893275; Hill, 2017 WL 838267. But none of the authorities cited by Defendant-and none found by the Court-permit the use of a motion filed in an earlier case to allow the Court to collaterally attack a later filed case. The Court is not convinced that Defendant's Motion is the proper vehicle for attacking and requiring dismissal of the later filed case. As such, the Court recommends denial of that part of Defendant's requested relief as well.
II. CONLUSIONS
Given Defendant's failure to raise Rule 11 during the pendency of this lawsuit and Plaintiff's inability to withdraw or correct any allegedly offending pleadings in this case, the undersigned recommends that Defendant's Motion be DENIED as untimely. If the Court were to address the underlying merits of Defendant's Motion, the undersigned still recommends that Defendant's Motion be DENIED as failing to rise to the level of sanctionable conduct. It is the RECOMMENDATION of the United States Magistrate Judge to the United States District Judge that Defendant's Motion for Rule 11 Sanctions be DENIED.
III. OBJECTIONS
The parties may wish to file objections to this Report and Recommendation. Parties filing objections must specifically identify those findings or recommendations to which they object. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report. See 28 U.S.C. § 636(b)(1)(C); Thomas v Arn, 474 U.S. 140, 150-53 (1985); Douglass v. UnitedServs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc). Except upon grounds of plain error, failing to object shall further bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas, 474 U.S. at 150-53; Douglass, 79 F.3d at 1415.