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G.G. Marck and Associates, Inc. v. Peng

United States District Court, N.D. Ohio, Western Division

March 29, 2018

G.G. Marck & Associates, Inc., Plaintiff,
v.
James Peng, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          JACK ZOUHARY U.S. DISTRICT JUDGE

         Pending before this Court is Plaintiff's Motion for Sanctions for Defendants' Breach of Settlement Agreement in the 2005 case (Doc. 531), and Defendants' Motion to Dismiss in the 2017 case (Doc. 9). Both Motions are opposed (2005 case, Doc. 533; 2017 case, Doc. 14). The 2005 and 2017 cases have been consolidated for pretrial purposes. This Order will address each Motion in turn.

         Background

         The prolonged and tortured history of this case has been thoroughly explored elsewhere. See, e.g., G.G. Marck & Assocs., Inc. v. Peng (Marck III), No. 13-3015 (6th Cir. Sept. 3, 2013); G.G. Marck & Assocs., Inc. v. N. Am. Inv., Corp. (Marck II), 465 F. App'x 515, 516-17 (6th Cir. 2012); G.G. Marck & Assocs., Inc. v. Peng (Marck I), 309 F. App'x 928, 929-31 (6th Cir. 2009). This Court briefly outlines the relevant facts below.

         This action began in September 2005, when Marck filed a Complaint alleging Defendants committed various trademark and unfair competition violations (2005 case, Doc. 1-1 at 1-14; Doc. 1-2 at 22-23). The following month, the parties reached a settlement agreement and read its key points into the record (2005 case, Docs. 10, 16). But the dispute revived when the parties attempted to memorialize their agreement in writing. The parties spent the next eight years litigating the terms and enforceability of their agreement.

         In January 2013, the district court entered a Settlement Agreement and Mutual Release of All Claims (2005 case, Doc. 431-1) and Final Order for Permanent Injunction (2005 case, Doc. 432). Defendants' appeal of that Order concluded in September 2013. Marck III, No. 13-3015 (6th Cir. Sept. 3, 2013). The parties agree Defendants complied with the essential terms of the agreement by December 2, 2013 (2005 case, Doc. 531 at 2). With the completion of the final Special Master Report in June 2017, this dispute seemed finally near its end.

         But in August 2017, Marck filed a Motion for Sanctions (2005 case, Doc. 531). Marck asks this Court to exercise its inherent powers and order Defendants to pay the entirety of Marck's attorney fees and costs incurred between December 15, 2005 and December 2, 2013 (id. at 2). During this period, Marck contends it was “forced” to incur additional legal expenses because of Defendants' “bad faith, . . . vexatious and wanton, and . . . oppressive” failure to timely comply with the essential terms of the settlement agreement (id.). Defendants deny materially beaching the agreement, or acting in bad faith. Further, Defendants argue that many of Marck's allegations of misconduct “have already been addressed and rejected by this Court or the Court of Appeals, and others have already been sanctioned and satisfied” (2005 case, Doc. 533 at 6). Thus, they cannot be raised again “under the different legal standard of ‘inherent powers'” (id. at 7).

         While the Motion for Sanctions was pending, Marck filed a new Complaint seeking damages for the alleged breach of the settlement agreement (2017 case, Doc. 1). Marck filed an Amended Complaint that same day (2017 case, Doc. 4). The facts alleged in the Amended Complaint are almost identical to those in the Motion for Sanctions. Marck also seeks the same relief: $ 1, 073, 172.97 in attorney fees (id. at 14). Defendants moved to dismiss the Amended Complaint on three grounds: (1) Marck's claims are barred by the six-year statute of limitations for oral contracts; (2) Marck fails to state a plausible breach of contract claim because it fails to allege it performed its duties under the contract; and (3) Marck's claims are barred by res judicata (2017 case, Doc. 9 at 8-19).

         Discussion

         A. Motion for Sanctions (2005 Case)

         Under the American Rule, parties are ordinarily required to bear their own attorney fees. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247-70 (1975). But “federal courts recognize several exceptions to this general rule.” Jones v. Cont'l Corp., 789 F.2d 1225, 1228-29 (6th Cir.1986). Here, Marck requests this Court order Defendants to pay over a million dollars in attorney fees under its “inherent powers” to levy sanctions.

         This Court may sanction a party under its inherent powers if it finds that the party “acted in bad faith, vexatiously, wantonly, or for oppressive reasons, or when the conduct was tantamount to bad faith.” United States v. Llanez-Garcia, 735 F.3d 483, 492 (6th Cir. 2013) (citation omitted). These inherent powers “must be exercised with restraint and discretion.” Id. (citation omitted). “Because [a] court's inherent power to impose sanctions is discretionary, [a] court is not required to sanction a party or attorney even if it has determined that some wrongdoing has occurred.” Murray v. City of Columbus, 534 F. App'x 479, 485 (6th Cir. 2013). And “[w]hile district courts are required to articulate a basis for awarding sanctions, nothing requires them to explain their reasons for not ordering sanctions.” Runfola & Assocs. v. Spectrum Reporting II, Inc., 88 F.3d 368, 375 (6th Cir. 1996).

         Under certain circumstances, a party's attempt to repudiate or alter the terms of a settlement agreement may justify an award of attorney fees to the party who, as a result, must expend resources to enforce or defend the agreement. E.g., Jaynes v. Austin, 20 F. App'x 421, 427 (6th Cir. 2001). But “bad faith cannot underlie every disagreement over the actual terms of a settlement” or its enforceability. Tocci v. Antioch Univ., 967 F.Supp.2d 1176, 1202 (S.D. Ohio 2013). See also McCormick v. Brzezinski, 2010 WL 1463176, at *6 (E.D. Mich. 2010). To justify an award of attorney fees under its inherent powers, this Court must find “something more, ” showing Defendants acted with an improper purpose. See Jordan v. City of Detroit, 595 F. App'x 486, 488-89 (6th Cir. 2014); Metz v. Unizan Bank, 655 F.3d 485, 489 (6th Cir. 2011); Tocci, 967 F.Supp.2d at 1202.

         Marck fails to demonstrate that additional sanctions are warranted in this case.

         First, the record casts doubt on Marck's assertion that “the Court of Appeals and this Court have already found . . . through clear and convincing evidence that Peng repeatedly breached the settlement agreement” (Doc. 531 at 16). In 2009, the district court found Defendants materially breached the settlement by failing to obtain Anna Peng's release (Doc. 331 at 12, 14-15). But the Sixth Circuit questioned this conclusion in both Marck I and Marck II. In Marck I, 309 F. App'x at 932 n.1, the Sixth Circuit observed:

[T]he precise reason Marck sought the separate release is far from comprehensible. According to Marck, Ms. Peng's refusal to sign that separate mutual release caused the entire settlement to fail. But Marck does not explain why this term was so important . . . . Why her signature should be required on a separate mutual release of claims is thus a mystery, ...

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