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DH Holdings, LLC v. Meridianlink

August 23, 2010

DH HOLDINGS, LLC, PLAINTIFF,
v.
MERIDIANLINK, INC., DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly United States District Judge

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge

Defendant MeridianLink, Inc. has moved the Court to impose sanctions upon plaintiff DH Holdings, LLC (DHH) and its counsel, Edward Zaknoen and Joseph Zaknoen of the law firm of Zaknoen and Zaknoen LLC, pursuant to Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, and the Court's inherent authority. For the reasons stated below, the Court denies MeridianLink's motion.

Facts

On September 8, 2008, DHH sued MeridianLink in this District for patent infringement. The case was assigned to Judge Charles R. Norgle. On May 5, 2008, Judge Norgle entered a default judgment against MeridianLink based on its failure to respond to the complaint. On November 17, 2009, DHH took action in the Central District of California, where MeridianLink is apparently located, to enforce the default judgment. MeridianLink asked the California court to vacate the judgment, claiming it had not been served with the complaint and summons in the Illinois suit. On April 9, 2010, a judge in the Central District of California vacated the default judgment, finding that service had been ineffective.

A few days later, on April 14, 2010, MeridianLink filed its own action in the Central District of California, seeking a declaratory judgment of non-infringement and invalidity of DHH's patent and damages based on alleged antitrust violations and unfair competition. The next day, April 15, DHH filed the present suit. It made essentially the same allegations that it had made in the 2008 case before Judge Norgle. On the same day, April 15, DHH also filed a motion asking Judge Norgle to reopen the 2008 case.

On April 28, 2010 and May 6, 2010, DHH's counsel spoke with MeridianLink's counsel and suggested that both parties stay their pending actions or at least agree to extend the time both parties had to respond to the complaints. MeridianLink's counsel declined DHH's proposal and instead agreed only to give DHH an additional ten days to respond to MeridianLink's California action.

On June 3, 2010, Judge Norgle granted DHH's motion to reopen the 2008 case. The next day, June 4, 2010, MeridianLink moved in the present case for imposition sanctions against DHH and its counsel. MeridianLink argued that sanctions are warranted because DHH wasted the court's and the parties' resources and participated in forum and judge-shopping by pursuing two identical cases in the Northern District of Illinois at the same time.

On June 8, 2010, one day after DHH received notice of Judge Norgle's approval of its motion to reopen the 2008 case, DHH filed a notice of voluntary dismissal in the present case. The Court entered a dismissal order on June 10, 2010. MeridianLink's motion for sanctions remains pending.

Discussion

1. Rule 11

Rule 11 provides that an attorney's signature on a filing certifies, among other things, that the filing is "not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation." Fed. R. Civ. P. 11(b)(1). Determination of whether a party or attorney acted with an improper purpose is based on an objective standard. See Brown v. Federation of State Medical Boards, 830 F.2d 1429, 1436 (7th Cir. 1987). When, however, the suit is objectively colorable -- as is the case here -- a court may consider subjective bad faith or malice.

Id.; Szabo Food Serv., Inc. v. Canteen Corp., 823 F.2d 1073, 1083 (7th Cir. 1987). See also, Alpern v. Lieb, 38 F.3d 933, 935-36 (7th Cir. 1994) (Rule 11's "improper purpose" clause has both objective and subjective components).

This lawsuit duplicated the 2008 suit before Judge Norgle, and it was the flip side of MeridianLink's suit in California. Based on these facts, MeridianLink contends that DHH's purpose was to run up ...


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