Court Opinion

ID: 2737774
Source: CourtListenerOpinion
Date Created: 2014-09-29 13:02:24.995416+00
Date Added: 2024-06-11T09:52:17.519026
License: Public Domain

EFiled: Sep 26 2014 09:31AM EDT
                                                      Transaction ID 56092178
                                                      Case No. 9144-VCN
                               COURT OF CHANCERY
                                     OF THE
                               STATE OF DELAWARE
                                                           417 SOUTH STATE STREET
 JOHN W. NOBLE                                             DOVER, DELAWARE 19901
VICE CHANCELLOR                                           TELEPHONE: (302) 739-4397
                                                          FACSIMILE: (302) 739-6179

                                 September 26, 2014

Thomas E. Hanson, Jr., Esquire               David E. Wilks, Esquire
Morris James LLP                             Laina M. Herbert, Esquire
500 Delaware Avenue, Suite 1500              Wilks, Lukoff & Bracegirdle, LLC
Wilmington, DE 19801                         1300 N. Grant Avenue, Suite 100
                                             Wilmington, DE 19806

        Re:   Mitchell Lane Publishers, Inc. v. Rasemas
              C.A. No. 9144-VCN
              Date Submitted: September 15, 2014

Dear Counsel:

        Defendants Joseph Rasemas (“Rasemas”), Cynthia Rasemas (“Cynthia”),

and Purple Toad, Inc. (“Purple Toad” and collectively, with Rasemas and Cynthia,

the “Defendants”) have filed a Motion for Contempt and Sanctions against Plaintiff

Mitchell Lane Publishers, Inc. (“Mitchell Lane”) and Counterclaim Defendant

Barbara Mitchell (“Mitchell”). Defendants allege that Mitchell and Mitchell Lane

violated the Stipulation and Order for the Protection and Exchange of Confidential

Information entered on February 28, 2014 (“Confidentiality Order”)1 by

1
    Transaction ID 55074761.
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 2

summarizing, describing, disclosing, or characterizing Defendants’ confidential

discovery material to unauthorized third-parties. Defendants request the Court to

hold Mitchell and Mitchell Lane in contempt and impose sanctions by either

(i) denying Mitchell Lane’s pending application for injunctive relief, or

(ii) dismissing Mitchell Lane’s claims and entering judgment for Purple Toad on

its counterclaim. Defendants further request the award of expenses and fees for

their costs of discovery and bringing this motion.

                                I. BACKGROUND

          Defendants allege that, on at least three occasions, Mitchell disclosed

confidential     discovery   material   to   unauthorized   third-parties.   These

communications are summarized below.

     1.     A February 20, 2014 email to Heidi Holzapfel (“Holzapfel”), an

            employee of a Mitchell Lane distributor: “We are in discovery now and

            all the documentation that has been produced so far has been

            misappropriated from Mitchell Lane.” 2

2
    Defs.’ Mot. Ex. B.
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 3

     2.    An April 7, 2014 email to Daniel Kraus (“Kraus”), an editor at Booklist, a

           book review publication: “We now have all the proof that Purple Toad

           books began life from a Mitchell Lane design template. The Purple Toad

           books were even made on my company computers during work hours

           alongside of the Mitchell Lane books he was working on. I know you

           were one of the first people who noticed that Purple Toad books were

           clones of Mitchell Lane, so I wanted to give you an update on the case.”3

     3.    April 12, 2014 emails to Joanne Mattern (“Mattern”), one of Mitchell

           Lane’s freelance authors. Mitchell wrote, “I need to inform you of an

           unfortunate event. I just learned through Discovery that Purple Toad

           Publishing (Joe Rasemas) is planning to release a book about Lorde this

           year. Because of our lawsuit against them, I would not want to put your

           book in print now.”4 In a follow-up email, Mitchell wrote, “When I

           found out he is publishing that book, I had to move as far away from him

3
    Defs.’ Mot. Ex. C.
4
    Defs.’ Mot. Ex. E.
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 4

           as possible. He has copied my entire company. I can’t be seen copying

           his!”5

                            II. LEGAL STANDARD

      To establish civil contempt, Defendants must demonstrate that Mitchell

“violated an order of this Court of which [she] had notice and by which [she was]

bound.”6    Defendants bear the burden of establishing contempt by clear and

convincing evidence.7 If they produce such evidence, the burden shifts to Mitchell

to show a reason why she was unable to comply with the Confidentiality Order.8

      When a party has failed to abide by the Court’s orders, the Court “has broad

discretion to impose sanctions” that are “just and reasonable.”9 Before exercising

its discretion to award an entry of judgment, the Court must be satisfied that there

5
  Defs.’ Mot. Ex. D.
6
  TR Investors, LLC v. Genger, 2009 WL 4696062, at *15 (Del. Ch. Dec. 9, 2009),
aff’d, 26 A.3d 180 (Del. 2011) (quoting Arbitrium (Cayman Is.) Handels AG v.
Johnston, 1997 WL 589030, at *3 (Del. Ch. Sept. 17, 1997)).
7
  Id.
8
  Id.
9
   Gallagher v. Long, 940 A.2d 945, 2007 WL 3262150, at *2 (Del. 2007)
(TABLE).
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 5

was an “element of willfulness or conscious disregard of a court order.”10 In all

civil cases, a contempt determination must be “coercive or remedial” rather than

punitive.11

                                 III. ANALYSIS

A. The Emails to Holzapfel and Kraus Fail to Establish Contempt
   by Clear and Convincing Evidence

      Mitchell sent the relevant email to Holzapfel on February 20, 2014. The

Court entered the Confidentiality Order on February 28, 2014. Defendants cannot

establish, by any standard of proof, that Mitchell and Mitchell Lane had notice and

were bound to an order that did not exist at the time of Mitchell’s

communication.12 Regardless, Defendants had not begun document production as

of the time of the email.

10
   Id.
11
   TR Investors, 2009 WL 4696062, at *15.
12
   The Confidentiality Order does provide that “[t]he Parties agree to be bound by
the terms of this Stipulation pending the entry by the Court of this Stipulation, and
any violation of its terms shall be subject to the same sanctions and penalties as if
this Stipulation had been entered by the Court.” ¶ 21. However, the Court entered
its order on the same day that the parties filed the proposed order.
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 6

      Mitchell sent the contested email to Kraus on April 7, 2014, at 9:23 a.m.

Defendants’ responses to Mitchell Lane’s first set of requests for production were

served on Mitchell Lane’s attorney by email and hand delivery on April 4, 2014.13

Mitchell testified that her attorney received the disc containing Defendants’ first

production of documents on April 7, and she did not receive a copy of that

production until April 11, 2014.14 She further testified that she received a third-

party’s production on April 1, which suggested that a current Mitchell Lane

employee had relevant knowledge of Rasemas’ conduct at Mitchell Lane.15 Before

composing her April 7 email, Mitchell spoke to the current employee, who

informed her that Rasemas had created Purple Toad books on Mitchell Lane’s

computers using Mitchell Lane’s design templates.16 Mitchell claims that the

contents of her email to Kraus were based on the information she gathered from

her employee, instead of the documents received in Defendants’ production, which

she had not yet seen.

13
   Transaction ID 55250136.
14
   Pl.’s Opp. Mot. Ex. A ¶ 6.
15
   Pl.’s Opp. Mot. Ex. A ¶¶ 2-3.
16
   Pl.’s Opp. Mot. Ex. A ¶ 4.
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 7

         Mitchell’s explanation regarding her source of information for the second

email is at least as plausible as the Defendants’ claim that Mitchell improperly

disclosed confidential production material. Mitchell’s statements to Kraus were

general and did not describe or disclose any particular documents. The email

might have been considered a summary or characterization of Defendants’

document production if it were the case that Mitchell’s email could only have been

based on such production. However, the April 7 email does not establish by clear

and convincing evidence that Mitchell violated the Confidentiality Order.

B. The Emails to Mattern Do Not Warrant Sanctions

         Mitchell’s first April 12, 2014 to Mattern may have been a technical

violation of the Confidentiality Order. Pursuant to the Confidentiality Order, each

party has the right to designate discovery material as “Confidential” if that party

“reasonably believes in good faith that such Discovery Material contains non-

public, confidential, proprietary, or commercially sensitive information.”17

Mitchell and Mitchell Lane note that the fact that Purple Toad intends to publish a

17
     Confidentiality Order ¶ 1.
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 8

book about Lorde this year is currently publicly available on the internet.18

However, the record does not indicate whether this information was public when

Mitchell sent her emails on April 12, 2014. If the information was non-public at

the time, then Mitchell violated the Confidentiality Order by communicating

“Confidential” discovery material to an unauthorized third-person.

      However, in exercising its discretion to mold sanctions that are just and

reasonable, the Court “is obligated to use the least possible power adequate to the

end proposed.”19 When dealing with alleged civil contempt, sanctions should only

“be directed towards coercing compliance with the order being violated and

remedying the injury suffered by other parties as a result of the contumacious

behavior.”20

      In this case, Defendants have not suffered any real injury from Mitchell’s

technical violation. Mitchell’s email served merely to cancel Mitchell Lane’s

planned book on Lorde, and that book would have competed against Purple Toad’s

18
   Pl.’s Opp. Mot. ¶ 20.
19
   TR Investors, 2009 WL 4696062, at *18 n.74.
20
   Aveta Inc. v. Bengoa, 986 A.2d 1166, 1188 (Del. Ch. 2009).
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 9

version. Further, at least by now, the fact that Purple Toad is publishing a book

about Lorde is public knowledge.

      Sanctions do not appear necessary to induce Mitchell or Mitchell Lane to

abide by the Confidentiality Order. The April 12 emails to Mattern are the only

communications in the record that may have violated the order. The clear purpose

of Mitchell’s email was to provide an explanation to an author whose book

Mitchell was about to cancel.        The email was not a part of a pattern of

noncompliance that should be addressed by the Court.

      Since “[w]hether a party should be held in contempt is ultimately a matter

for the discretion of the court . . . [and t]he violation ‘must not be a mere technical

one, but must constitute a failure to obey the Court in a ‘meaningful way,’”21 the

Court will hold neither Mitchell nor Mitchell Lane in contempt, nor impose

sanctions. Defendants’ Motion for Contempt and Sanctions is denied.

21
  In re Indem. Ins. Corp., RRG., 2014 WL 31710, at *9 (Del. Ch. Jan. 2, 2014)
(quoting Dickerson v. Castle, 1991 WL 208467, at *4 (Del. Ch. Oct. 15, 1991)).
Mitchell Lane Publishers, Inc. v. Rasemas
C.A. No. 9144-VCN
September 26, 2014
Page 10

      IT IS SO ORDERED.

                                     Very truly yours,

                                     /s/ John W. Noble

JWN/cap
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