N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
U.S.A. DAW GS, INC .,

Pla i ntiff-Appe lla

nt, C HR ISTOPHER

HELLM IC H, Appe lla nt,
v. C R OC S, INC .; KIM LAW R IE; ERIK R UFER ; KELLY GR

AY, De fe nda n ts-Appe lle e s. No. 19-16296 D.C . No. 2:17-c v-02054-JC M -NJK
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Distric t of Ne v a da Jam e s C . M aha

n, Distric t Judge , Pre siding Subm i tte d Oc tobe r 9, 2020 ** Portla nd, Ore gon 

# FIL ED
MAY27 2021 M OLLY C. DW Y E R, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.

* * The pa

ne l una nim ously c onc lude s this c a se is suita ble for de c ision without ora l a

rgum e nt. Se e Fe d. R . App. P. 34(a )(2).B e fore : PAEZ a nd R AW LINSON, C irc uit Judge s, a nd ANTOON, *** Distric t Judge
. U.S.A. Da

wgs, Inc
. and its a

ttorne y C hristophe r He llm ic h (c olle c tive ly , Dawgs) a ppe a l the distric t c ourt’ s orde r im posing sa nc t ions a ga inst the m

unde r R ule 11 of the Fe de ra l R

ule s of C ivil Proc e dure (R ule 11). W e re vie w“ a ll a spe c ts of a distric t c ourt’ s R

u le 11 de t e rm i nation” for a buse of disc re tion. C

oote r & Ge ll
v . Hartmarx

C orp. , 496 U.S. 384, 405 (1990); se e also Re tail Flooring De ale rs of Am., Inc . v . Be aulie u of Am., LLC , 339 F.3d 1146, 1150 (9th C ir. 2003). A distric t
c ourt a buse s its disc re tion whe n its ruling re s ults from “ an e rrone ous vie w of the la w” or “ a c le arly e rrone ous a sse ssm e nt of the e vide nc e .” C oote r , 496 U.S. a

t 405;
se e a lso Re tail Flooring, 339 F.3d a t 1150. 1. R ule 11 a uthoriz e s sa

n c tions for ple a dings “

pre se nte d for a

ny im prope r purpose ” or for c la im s not “ warrante d by e xisting la w or by a nonfrivolous a

rgum e nt for e xte nding, m odify ing, or re ve rsing e xisting la w or for
e sta blishing newla

w.” Fe d. R . C iv. P. 11(b)(1), (2). These c ond prong c ove rs

“ frivolous” filings: “ a

shortha nd tha t this c ourt ha s use d to de note a filing tha t is both ba se le ss a

nd m a d e without a

re a sona ble an d c om

pe te n t inquiry .” Tow n se nd v

. Holman C

onsulting C

orp. , 929 F.2d 1358, 1362 (9th C ir. 1990), as ame nde d Apr.

* * * The Honora

ble John Antoon II, Unite d Stat e s Distric t Judge for the M iddle Distric t

of Florida , sitting by

de s igna tion. 210, 1991. “ Distric t c ourts ha ve broa d fa c t-finding powe rs in this a re a to whic h
a ppe lla te c o urts m

ust a c c ord gre a t de fe re nc e . . . .” Id. at 1366 (c ita tion omitte d). He re , the distric t c ourt did not a buse its disc re t ion in finding Da wgs’ s c la im s frivolous. Da

wgs a l l e ge d tha

t a n e m ploy e e of C roc s, Inc . (C roc s) ille ga lly
a c c e sse d Da wgs’ s c onfide ntia l inform ation re ga rding a n upc om ing sa le of Da

wgs’ s shoe s on the online store , Zulily , whe re C roc s wa s sc he dule d to se ll c om pe ting shoe s. B e fore Dawgs file d suit, howe v e r, Zulily e xpla ine d

to Da w gs, se ve ra l tim e s, tha t suc h inform ation wa s re a dily ava ila ble to a ll ve ndors through the “Ne w Tom orrow” fe a ture of the Zulily we bsite an d through other m e ans. Zulily a lso
e xpla ine d to Da

w gs how it c ould c onfirm those fa c ts. Thus, a

re a sona ble inquiry would ha ve re ve a le d tha

t C roc s did not a c c e ss Da wgs’ s sa le s inform at ion through ille g a l m e ans. It wa s unre a s ona ble for Dawgs to a ssum e othe rwise in light of Zulily ’ s ve rifia

ble e xpla nation a nd a b se nt a ny e vide nc e of duplic ity
. The distric t c ourt a l so a c te d within its disc re tion in finding tha

t Da w gs brought this la

w s uit for a

n im prope r purpose : to ga in le ve ra g e ove r anothe r la wsuit be twe e n

Da wgs a nd C roc s in C olora do. In this c a se , Da wgs se nt a le tte r to C roc s, thre a t e ning a

“ dram a tic inc re a se in litiga tion c osts” if the pa

rtie s did not
re a c h a globa l se ttle m e nt. Da

wgs dismisse d this a c tion whe n no se ttle m e nt wa s
re a c he d. Im

porta ntly , “ [a ] lthough the

‘ im prope r purpose ’ and ‘ frivolousne ss’
3inquirie s a

re se pa rate and distinc t, the y

will ofte n ove rla

p sinc e e vide nc e be aring on frivolousne ss or non-frivolousne ss will often be highly probative of purpose .” Tow nse nd , 929 F.2d a

t 1362. 1 The frivolousne ss of Da wgs’ s c l a im s in this c a se thus unde rsc ore s the la

wsuit’ s im

prope r purpose . 2. W e re

je c t Da wgs’ s a rgum e nt tha

t C roc s did not m

i tiga te dam a ge s by providing e xc u lpatory

e vide nc e –na

m e ly , proof tha

t the y did not ille ga lly

a c c e ss Dawgs’ s inform a tion. Zulily pre se nte d Da

wgs with the

m e ans by

whic h to ve rify Zulily ’ s e xpla

nat ion tha t C roc s did not e nga ge in wrongdoing. The onus wa s not on C roc s to providee xc ulpa tory e vide nc e or suffe r a

la wsuit; ra the r, it wa s on Dawgs to c onduc t a

c om pe t e nt inquiry

into whe the r the re wa s a

n obje c tiona

bly
re a s ona ble ba sis for its suspic ions. Se e , e .g., Tow nse nd , 929 F.2d a t 1366. 3. W e disa gre e with Da wgs’ s c onte ntion tha

t the distric t c ourt c a l c ulate d the s anc tions a

m ount–$37,500 a

ga inst Da wgs a nd $12,500 aga inst He llm ic h–by im prope rly m ultiply ing the am o unt a

nothe r c ourt sa

nc tione d Da

w g s in a n unre late d
c a se by four. The distric t c ourt did no suc h thing. Although the c ourt m e ntione d that the award wa s four tim e s the pre vious a ward, tha t re m ark wa s m e re l y

an obse rvation. The distric t c ourt a c tua lly arrive d at the sa nc tions a m ount by

1 In light of this ruling, we ne e d not a ddre ss whe t

he r sa nc tions we re a ppropria te unde r 28 U.S.C
. § 1927 or thedistric t c ourt’ s inhe re nt powe r. 4signific antly re duc ing C roc s’ s re que s te d a ward of $224,466.80 in a ttorne y s ’ fe e s
and $77,388.70 in c osts. AFFIRM E D
.

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