Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-01555/USCOURTS-cand-5_04-cv-01555-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 28:1441 Petition for Removal

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

STEVEN M. HOFFER,

Plaintiff,

 v.

INTERNATIONAL BUSINESS

MACHINES CORPORATION, and DOE

DEFENDANTS 1 THROUGH 24,

Defendants.

 /

NO. C 04-01555 JW 

ORDER DENYING DEFENDANT

INTERNATIONAL BUSINESS

MACHINES CORPORATION'S MOTION

FOR SANCTIONS RE THIRD AMENDED

COMPLAINT 

I. INTRODUCTION

Plaintiff Steven Hoffer ("Hoffer" or "Plaintiff") filed suit against Defendant International Business

Machines Corporation ("IBM" or "Defendant"), alleging, inter alia, that Defendant fraudulently induced

Plaintiff to reveal his trade secrets and that Defendant misappropriated Plaintiff's trade secrets for its own

gain. Presently before this Court is Defendant's Motion for Sanctions re Plaintiff's Third Amended

Complaint. (See Defendant's Motion For Sanctions Re Third Amended Complaint, hereafter “Defendant's

Motion,” Docket Item No. 42.) The Court considered the parties' pleadings and found the matter to be

suitable for disposition without oral argument. See Civ. L. R. 7-1(b). Based upon all the papers filed to

date, the Court DENIES Defendant’s Motion for Sanctions. 
United States District Court

For the Northern District of California

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II. BACKGROUND

A complete background of this case may be found in the Court’s October 6, 2005 Order granting

Defendant’s Motion to Dismiss the Third Amended Complaint. (See Docket Item No. 51.) The facts that

are relevant to Defendant’s motion for sanctions begin on May 11, 2005, when this Court dismissed

Plaintiff's Second Amended Complaint ("SAC"), granting Plaintiff leave to amend his First, Second, Third,

Fourth, Fifth, Seventh, Eleventh, and Twelfth Causes of Action. Plaintiff amended his complaint and added

four additional causes of action without leave of this Court or by written consent of the adverse party. (See

Docket Item No. 38.) 

On October 6, 2005, the Court dismissed, with prejudice, Plaintiff's Third Amended Complaint

(“TAC”) because Plaintiff failed to plead his trade secrets claims with sufficient particularity. Additionally,

the Court dismissed Plaintiff's four additional causes of action because those causes of action were

improperly added. (See Docket Item No. 51.) For these reasons, Defendant seeks sanctions pursuant to

Rule 11 of the Federal Rules of Civil Procedure and or under 28 U.S.C. § 1927.

III. DISCUSSION

A. Defendant has failed to meet the procedural requirements for making a Rule 11 motion 

for sanctions.

Fed. R. Civ. P. 11 imposes upon attorneys and unrepresented litigants an affirmative duty to

conduct a competent and reasonable inquiry of the facts and of the law in advance of filing any court

papers. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). Accordingly, Rule 11 sanctions

are appropriate only if a party brings either a frivolous action or an action for an improper purpose, “such

as to harass or to cause unnecessary delay or needless increase in the cost of litigation.” FED. R. CIV. P.

11(b); see also Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990). However,

if the pleading “states an arguable claim,” sanctions are generally inappropriate. Stewart v. American Int'l

Oil & Gas Co., 845 F.2d 196, 201 (9th Cir. 1988). The court applies an objective standard to determine

whether sanctions are warranted under Rule 11. Id. (citing Townsend, 929 F.2d at 1362 (9th Cir. 1990)

(en banc)). 

However, before awarding Rule 11 sanctions, the Court must find that the procedure required by

Rule 11(c)(1)(A) has been followed. Barber v. Miller, 146 F.3d 707, 710 (9th Cir. 1998). Rule
United States District Court

For the Northern District of California

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11(c)(1)(A) provides that sanctions under this rule “... shall be served as provided in Rule 5, but shall not

be filed with or presented to the court unless, within 21 days after service of the motion (or such other

period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is

not withdrawn or appropriately corrected.” Fed. R. Civ. Proc. 11(c)(1)(A). This is often known as the

"safe harbor" provision. 

It is clear from the language of the rule that it imposes mandatory obligations upon the party seeking

sanctions to first give notice to the alleged offender. Thus, under the safe harbor provision of Rule 11, IBM

is required to serve its motion for Rule 11 sanctions on Hoffer at least 21 days before filing it with the

Court, to permit Hoffer the opportunity to withdraw the TAC. Fed.R.Civ.P. 11(c)(1)(A); see also, Retail

Flooring Dealers of Amer. v. Beaulieu of Amer., LLC, 339 F.3d 1146, 1150 (9th Cir. 2003). There is no

evidence that IBM served its Rule 11 motion on Hoffer twenty-one days before filing it with the Court. 

Defendant’s motion for sanctions under Rule 11 is procedurally defective, therefore, it is denied.

B. Defendant has failed to establish that Plaintiff’s Complaint was vexatious or made for the

purpose of harassment.

Title 28 U.S.C. § 1927 provides that "[a]ny attorney or other person admitted to conduct cases in

any court of the United States . . . who so multiplies the proceedings in any case unreasonably and

vexatiously may be required by the court to satisfy personally the excess costs, expenses and attorneys'

fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. Section 1927 sanctions are

appropriate when there is no obvious violation of the Federal Rules, but where, within the rules, the

proceeding is conducted in bad faith for the purpose of delay or increasing costs. In re Yagman, 796 F.2d

1165, 1187 (9th Cir. 1986), as amended by 803 F.2d 1085 (9th Cir. 1986), cert. denied by Real v.

Yagman, 484 U.S. 963 (1987).

"Section 1927 sanctions require a bad faith showing." West Coast Theater Corp. v. City of

Portland, 897 F.2d 1519, 1526 (9th Cir. 1990). Repeated filing of materially identical complaints despite

an adverse judgment is evidence of bad faith. Wages v. Internal Revenue Service, 915 F.2d 1230, 1235

(9th Cir. 1990). In order to impose sanctions under section 1927, the court must find that: (1) the attorney

multiplied the proceedings; (2) the attorney's conduct was unreasonable and vexatious; and (3) the conduct
United States District Court

For the Northern District of California

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resulted in an increase in the cost of the proceedings. B.K.B. v. Maui Police Dep't, 276 F.3d 1091, 1107

(9th Cir. 2002).

The Ninth Circuit has held that a pro se plaintiff may be sanctioned under section 1927. Wages,

915 F.2d at 1235-36. However, while the district court may impose Rule 11 sanctions against a pro se

litigant for filing a frivolous claim, the court must construe pro se pleadings liberally. See Haines v. Kerner,

404 U.S. 519, 520 (1972); Cook v. Peter Kiewit Sons Co., 775 F.2d 1030, 1037 n.13 (9th Cir. 1985). 

Moreover, courts have “sufficient discretion to take account of the special circumstances that often arise in

pro se situations.” FED. R. CIV. P. 11 advisory committee’s notes to the 1983 amendment. 

 Defendant contends that sanctions are proper under section 1927 because: (1) Plaintiff's amended

complaint did not materially differ from one which the Court has already dismissed; and (2) Plaintiff

continually disregarded the Court's rules and orders.

Defendant's contentions lack merit. Although Plaintiff’s TAC failed to allege protectable trade

secrets with particularity, it was materially different from Plaintiff's SAC. Plaintiff’s TAC included additional

facts in an attempt to support his trade secrets claims. Plaintiff attempted to explain the alleged trade

secrets more thoroughly, including listing what he believed to be the five trade secrets. Moreover, the

Court granted Plaintiff leave to amend his SAC. Though Plaintiff attempted to allege his “reverse passing

off” claim that the Court had twice dismissed with prejudice, this alone does not rise to the level of

vexatiousness under section 1927 considering the status of Plaintiff as a pro se litigant.

 The Court finds that Plaintiff’s TAC was not presented for “improper purposes,” such as

harassment or causing unnecessary delay or needless increase in the cost of litigation. Each time that the

Court dismissed Plaintiff’s Complaint, the Court gave Plaintiff leave to amend. Plaintiff amended his

Complaint by the Court’s invitation. Though his complaint was ultimately founded to be insufficient, it is

clear that this pro se Plaintiff did his best to articulate a cognizable claim. There is no evidence that

Plaintiff’s TAC was for the purpose of harassment or causing unnecessary delay to Defendant or the Court. 

Therefore, the Court denies Defendant's motion for sanctions under 28 U.S.C. § 1927. 

//
United States District Court

For the Northern District of California

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IV. CONCLUSION

For the foregoing reasons, Defendant's Motion for Sanctions Re Plaintiff's Third Amended

Complaint is DENIED.

Dated: October 31, 2005 /s/ James Ware 

JAMES WARE

United States District Judge
United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:

Charles K. Verhoeven charlesverhoeven@quinnemanuel.com

Irvin E. Tyan Irvintyan@quinnemanuel.com

Robert W. Stone robertstone@quinnemanuel.com

William Paul Schuck paulschuck@quinnemanuel.com

THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN MAILED TO:

Steven Hoffer

3827 Shasta Street, Suite B

San Diego, CA 92109

Dated: October 31, 2005 Richard W. Wieking, Clerk

By:__/s/ JW Chambers _______

Ronald L. Davis

Courtroom Deputy