Young Again Products, Inc. v. John Acord

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1481
YOUNG AGAIN PRODUCTS, INCORPORATED, A Maryland Corporation,
Plaintiff - Appellee,
v.
JOHN ACORD, a/k/a John Livingston; MARCELLA ORTEGA, d/b/a
Young Again Nutrients, d/b/a Young Again Nutrition,
Defendants - Appellants.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:03-
cv-02441-RWT)
Argued: October 26, 2011 Decided: December 23, 2011
Before WILKINSON, MOTZ, and DUNCAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Duncan wrote the
opinion, in which Judge Wilkinson and Judge Motz concurred.
ARGUED: Joe Alfred Izen, Jr., Bellaire, Texas, for Appellants.
Mark A. Freeman, FREEMAN & FREEMAN PC, Rockville, Maryland, for
Appellee. ON BRIEF: Thomas R. Freeman, FREEMAN & FREEMAN PC,
Rockville, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
DUNCAN, Circuit Judge:
This appeal arises from the district court’s entry of
default judgment in the amount of $3,832,832 against John Acord
and his mother, Marcella Ortega (collectively, the
“Appellants”), pursuant to Federal Rules of Civil Procedure
16(f) and 37(b)(2)(A)(vi). In addition to appealing the default
judgment, Acord appeals the district court’s earlier award of
Rule 11 sanctions against him in the amount of $24,357 and the
order incarcerating him for civil contempt for his refusal to
pay that amount. For the reasons that follow, we affirm. We
find that Appellants were adequately put on notice as to the
consequences of their actions, and that their intransigence
warranted no lesser sanctions.
I.
A. The Complaint and Counterclaims
On August 20, 2003, Young Again Products, Inc. (“Young
Again”) filed a complaint in the U.S. District Court for the
District of Maryland against Acord and Young Again Nutrition
(“Nutrition”) 1 for trademark and copyright infringement, as well
1
There is some dispute about the proper name of the
company, and the different courts involved in this case have
alternated between Young Again Nutrition, see Young Again
(Continued)
2
as breach of contract and other state-law claims. 2 Acord and
Nutrition filed a motion to dismiss for lack of personal
jurisdiction and for improper venue. In the alternative, they
sought a transfer of venue to the Southern District of Texas.
The court denied the motion, holding, in pertinent part, that
venue was proper because the contract at the center of this
dispute was entered into in Maryland and because Appellants’
company purposefully directed Internet traffic into and made
sales in Maryland. Young Again Prods., Inc. v. Acord, 307 F.
Supp. 2d 713, 718 (D. Md. 2004).
Young Again filed a motion for a preliminary injunction to
enjoin Appellants from using Young Again’s trademarks, the name
of Young Again’s president, Roger Mason, and Mason’s copyright-
protected works. The court granted Young Again’s motion on
March 25, 2005. Thereafter, on March 29, 2005, Acord filed
counterclaims against Young Again and Mason for, inter alia,
Prods., Inc. v. Acord, 307 F. Supp. 2d 713, 714 (D. Md. 2004),
and Young Again Nutrients, LLC, see Acord v. Saenz, 2009 U.S.
Dist. LEXIS 77274 at *1 (S.D. Tex. 2009). Acord operated this
company with Ortega.
2
Although once friends, Appellants and Young Again pursued
a scorched-earth policy for resolving this dispute and are now
embroiled in litigation nationwide. Several previous decisions
have set forth the history of their disagreement. See Young
Again Prods., Inc., 307 F. Supp. 2d at 714, Dodart v. Young
Again Prods., Inc., 2006 U.S. Dist. LEXIS 72122 (D. Utah 2006),
Saenz, 2009 U.S. Dist. LEXIS 77274.
3
libel, defamation, and tortious interference with Appellants’
business. Young Again filed an amended complaint on May 26,
2004 naming Ortega as an additional defendant.
B. Young Again’s Motions to Enforce the Injunction
On April 16, 2004, Young Again filed its first motion to
enforce the preliminary injunction and for contempt against
Acord, alleging that he was continuing to use Young Again’s
trademarks and Mason’s name, despite the injunction.
Thereafter, on May 25, 2004, the parties entered into a consent
injunction in which Appellants agreed to cease using Young
Again’s trademarks and Mason’s name, both parties agreed to
refrain from making disparaging remarks about the other, and
Mason agreed not to interfere in Appellants’ business in any
way. 3 Although it declined to sanction Appellants, the district
court ordered Appellants to pay Young Again’s “costs and
attorneys’ fees of $1,831.50 incurred in connection with [Young
Again’s] Motion To Enforce.” J.A. 418.
Young Again filed a second motion to enforce and for
contempt on Jun 21, 2004. This time, Young Again alleged that
3
At oral argument, Appellants alleged that the consent
injunction was something other than an agreement in an effort to
discredit the district court’s actions. We disagree. Through
the consent injunction, the parties voluntarily agreed to bind
themselves to certain court-enforced norms of behavior for the
duration of the litigation.
4
Appellants violated the May 25 consent injunction by sending a
memorandum to their distributors that Young Again had not
approved and that contained derogatory remarks about Mason.
Although the district court found that Appellants’ distribution
of the unilaterally prepared memorandum did not violate the
express terms of the consent injunction, it warned them that the
memorandum was “neither in form nor in substance what the court
contemplated would have been sent in accordance with the
applicable provision of the Consent Injunction.” J.A. 509. On
August 5, 2004, the district court entered an order instructing
the parties to work together to draft a notice to the
Appellants’ distributors explaining that they were permanently
enjoined from using certain trademarks.
As the litigation lurched forward, Young Again sought to
have the district court reconsider its August 5th order and both
parties moved to extend the discovery deadline. In an August
24, 2004 order, the district court denied Young Again’s motion
to reconsider, but since the parties had not agreed on a notice
to Appellants’ distributors, did specify the notice that
Appellants had to send to their distributors. The court also
granted the joint motion to extend discovery deadlines, but in
bolded, underlined, and italicized text, warned the parties that
“no further extensions will be granted.” J.A. 523.
5
On September 3, 2004, Young Again filed its third motion to
enforce and request for an “order to show cause why [Appellants]
should not be held in contempt for willful violation of the
injunction and the decrees of this court, and for expenses,
including attorney’s fees.” J.A. 526. Appellants responded
that they had not received proper notice of the violations.
Acord also submitted a declaration explaining how he and
Nutrition had “used [their] best efforts to remove all of the
Young Again Products goods from the Internet web sites operated
by Young Again Nutrition” in order to comply with the
injunction. Young Again maintained that the ongoing violations
were too blatant to be oversights. J.A. 555-58.
At a hearing on November 9, 2004, the court “reluctantly”
denied Young Again’s motion because Appellants did not have
sufficient notice to correct the alleged violation. J.A. 3556.
The court stated that it was “not exactly pleased with
[Appellants’] approach to compliance with this injunction.”
J.A. 3555. The court complained that Appellants were “playing
the bubble game, pushing a bubble down one place that pops up in
another.” J.A. 3556. The court contemplated sanctions but
noted instead that it did not
think, though, because of the freshness of this
particular aspect of non-compliance to the injunction
that [it] can start imposing sanctions today, but--and
it may very well be that if there’s additional
6
discovery that a serious violation could be addressed
if this is not redressed immediately by the defendant.
J.A. 3557-58. The court continued:
But at this stage, with the record as limited as it is
in developing the degree to which the [Appellants
have] been circumventing the letter or the spirit of
this injunction, I’m not prepared to enter sanctions
today, but I will make certain that it’s loudly and
clearly on this record that I view the parameters of
the existing injunction as more than adequate to
address activities of the type that appear to have
been identified in the hearing today.
J.A. 3558-59. The court stated that the Appellants had “seven
days to fix this problem” and that “if this stuff continues to
happen then we will be back here and we will be talking about
imposing sanctions, because I just don’t think that this can go
on any further.” J.A. 3559.
The court’s November 12 order reiterated the frustration it
expressed at the hearing. It stated that the court found that
the Appellants’ compliance had been “less than exemplary” and
that “any failure by the [Appellants] to conform their on-line
activities to the requirements of the consent injunction within
seven days . . . may result in the levying of civil penalties
against the [Appellants].” J.A. 621.
Appellants ignored this seven-day deadline. On November
19, 2004, Young Again filed its fourth motion to enforce and
request for sanctions. The court held another hearing on
February 3, 2005 to determine whether the Appellants or third-
7
parties not under the Appellants’ control were responsible for
the continued misuse of Young Again’s intellectual property.
Although concerned that some of the ongoing noncompliance was
not innocent, but was the product of “‘wink, wink; nod, nod’
relationships with some of the[] so-called retail customers,”
the court declined to impose sanctions. J.A. 3384. The court
was nonetheless clear in its warning to the Appellants:
I want to make sure that the [Appellants do not] feel
real good about what I’m saying. I’m saying that when
I get better information that presumably will come
from deposition--live testimony from somebody from an
internet search engine that indicates that through
some devious means that this court’s injunction has
been violated, they better rue the day that I find out
. . . everybody can hear it loud and clear. If it
turns out games have been played with search engines
and relationships with other people are not what
they’re claimed to be and this whole thing is a sham
to get around your marks and your consent injunction,
then they better start moving some money around to be
able to respond for it.
On the other hand, I need to be reasonably confident
when I’m using the contempt powers of the court that
I’m reasonably precise about it. And as I said, I see
a lot of smoke in front of me.
J.A. 3384 (emphasis added). The court then addressed
Appellants’ counsel, Lawrence E. Laubscher, 4 directly saying, “I
want to make sure . . . your client hears loud and clear that
4
We depart from our usual practice of treating counsel’s
acts as acts of their clients in this case both because
Appellants attempt to blame the default judgment on Laubscher,
and because Acord decided to proceed pro se for the latter part
of this litigation.
8
I’m not happy with how fast there was compliance with some
aspects of this injunction.” J.A. 3386. The court closed the
hearing by reiterating that sanctions were coming if it
discovered that Appellants had flouted the injunction. The
court did not rule on Young Again’s motion at this hearing.
C. The Discovery Process
The discovery process progressed slowly at best. On April
15, 2005, Young Again filed its first motion to compel
Appellants to produce documents. Although the parties reached
an agreement resolving this first discovery dispute, the court
had to intervene repeatedly.
The court originally planned to rule on Young Again’s
fourth motion to enforce and request for sanctions after the
completion of discovery on June 1, 2005. When the discovery
deadline was extended into 2006, however, the court denied the
motion without prejudice, citing Congress’s “disapprobation of
stagnant motions that remain pending for an abnormally long
time.” J.A. 909.
In the middle of discovery, on April 24, 2006, Laubscher
moved to withdraw from representation of Acord and the court
granted his motion. 5 On July 7, 2006, Young Again filed a second
5
In his May 23, 2009, Motion to Withdraw from representing
Ortega, discussed below, Laubscher explained that he withdrew
(Continued)
9
motion to compel, this time alleging that the defendants were
improperly designating all documents they produced as
“confidential, attorneys[’] eyes only.” J.A. 998-99.
The court finally decided Young Again’s July 7, 2006,
motion on June 19, 2007. The court explained that it had spent
28 hours reviewing documents only to find that many were blank,
consisted of advertisements, or otherwise lacked any
confidential information, much less information warranting the
“attorneys’ eyes only” designation. J.A. 1043-44. The order
noted that Laubscher “conceded that he has not reviewed all of
the electronically stored documents because of the volume of the
records,” yet he let Acord, who was ostensibly proceeding pro
se, designate them “attorneys’ eyes only.” J.A. 1043-44. The
court struck Appellants’ designation.
D. The Rule 11 Sanctions
Not having an attorney did not deter Acord from vigorously
litigating. In an email, he characterized his own conduct as
“filing numerous motions to quash, discovery requests on Mason,
and other actions that will hopefully deplete his war chest.”
J.A. 1106A.
from representing Acord and Young Again Nutrition after he was
denied payment of $75,537.70 for services and disbursements.
10
On December 7, 2007, Acord filed a pro se motion to
enforce, requesting sanctions against Young Again, and seeking
to dismiss the suit against him. In response, Young Again moved
for sanctions against Acord under Federal Rule of Civil
Procedure 11, stating that the purpose of Acord’s motion was
harassment and delay. On August 28, 2008, the district court
denied Acord’s motion, finding that he came before the court
“with, at best, unclean hands” and that his motion was “utterly
devoid of any merit whatsoever.” J.A. 2174. At a hearing on
November 17, 2008, the district court ruled on Young Again’s
motion and ordered sanctions assessed against Acord in the
amount of $24,357. The court found that his motion “was filed
for an improper purpose of harassment, causing unnecessary
delay, and/or needlessly increasing the costs of litigation, and
that his pleading contained numerous factual allegations without
evidentiary support.” J.A. 2306.
Both Laubscher and Acord were present at the November 17,
2008, hearing. In addition to sanctioning Acord, the court
scheduled a jury trial in the case and imposed a strict pretrial
schedule for the parties to follow. The court told the parties:
“[Y]ou need . . . to read our rule on pretrial procedures. I
take that very seriously . . . [T]he pretrial preparation
process is one that involves a significant level of joint
endeavor with people operating in good faith with each other and
11
not playing around.” S.J.A. 118-19. The court instructed the
parties to submit a pretrial order by March 2, 2009.
E. The Default Judgment
Despite the court’s admonition about the need for the
parties to cooperate and the local rules governing the pretrial
process, Ortega did not respond to Young Again’s efforts to make
pretrial arrangements. Instead, Laubscher waited until one
business day before the filing deadline for the pretrial order,
a Friday, to begin emailing his proposals. Even then, he failed
to attach anything to his email. The next Monday, he waited
until 4:20 pm on the filing date to forward the remainder of his
proposed joint pretrial order. Laubscher complained that Young
Again’s counsel did not notify him that the attachment was
missing or respond to his emails on Saturday. Laubscher later
testified that he had repeatedly attempted to contact Ortega but
that she never responded, so he proceeded without guidance from
his client. In any event, Laubscher's belated filing left no
time for the parties to negotiate the order. As a result, Young
Again did not incorporate any material from Ortega into its
order.
On March 2, 2009, Young Again filed a motion for default
judgment against Acord, alleging that he failed to communicate
in preparing for pretrial and that he had failed to pay the
sanctions assessed against him. On March 17, 2009, Young Again
12
filed a motion for default judgment against Ortega, alleging
that she too had failed to participate in the pretrial process.
On March 19, 2009, the court sent the parties the following
reminder about the pretrial proceedings:
The Court wishes to remind the parties of the pretrial
conference and hearing on all pending motions
scheduled for Monday, March 23, 2009, at 2:00 p.m. At
that time, the Court intends to hear argument on all
pending motions--Paper Nos. 247, 256, 258, and 259.
The Court notes that Paper No. 259 was filed on
3/17/09. If Defendant Ortega wishes to respond to
that motion, she is directed to file a response by
March 20, 2009, at 4:00 p.m.
Despite the informal nature of this ruling, it shall
constitute an Order of the Court, and the Clerk is
directed to docket it accordingly.
J.A. 2602 (emphasis in original). Relevant to this appeal,
Paper No. 256 is Young Again’s motion for default judgment
against Acord; Paper No. 258 is Young Again’s motion for
sanctions and civil contempt against Acord; Paper No. 259 is
Young Again’s motion for default judgment against Ortega.
At the scheduled pretrial hearing on March 23, 2009, the
court heard extensive testimony about the failure of Appellants
to cooperate in the pretrial process. Laubscher admitted that
he knew that Appellants missed the deadline to comment on the
pretrial order, but having not received any instructions from
Ortega he made the 4:20 pm filing in an effort to preserve her
rights. He maintained that Ortega wanted to defend the case,
but the court disagreed. The court stated that it was
13
“attributing what took place in this case directly to Marcella
Ortega” and that he could not fault her counsel, Laubscher,
because “it’s clear[] his indifference to his obligations . . .
are because he was in effect disabled by his client from being
able to perform the obligations that he had to this court.”
J.A. 3329. Acord admitted that he had no excuse for his failure
to participate in the pretrial process other than “it just
boggles my mind and I don’t know how to do it. I don’t have an
attorney up here.” J.A. 3305.
The court found that both Acord and Ortega had failed to
participate meaningfully in the litigation and granted default
judgment against them in the amount of $3,832,832.40. 6 The court
also dismissed Acord’s counterclaims.
At that same hearing, Laubscher requested and was granted
permission to withdraw from his representation of Ortega, citing
Ortega’s failure to communicate with him or pay him since
November 2008. The record contains three letters from Laubscher
to Ortega dated December 29, 2008, February 23, 2009, and March
4, 2009, explaining his need for direction during the pretrial
process. The first two letters also gave Ortega notice that he
would withdraw as counsel if not paid. The third informed
6
The court based this number on the report of Young Again’s
expert, which estimated the revenue lost as a result of
Appellant’s infringement. It also included contract damages and
attorneys’ fees.
14
Ortega that she was in violation of their Representation and Fee
Agreement and that Laubscher would be moving to withdraw under
Local Rule 101.2 for nonpayment of fees and “failure to
cooperate in your defense.” J.A. 2871. Laubscher also emailed
Acord about his inability to continue representing Ortega
without payment.
F. Acord’s Incarceration
The court ordered Acord to pay the sanctions against him--
or explain the financial circumstances that rendered him unable
to pay--within thirty days of March 25, 2009. Acord did
neither. Consequently, the court ordered him to appear at a
hearing on July 7, 2009, to show cause why he should not be held
in civil contempt and incarcerated. Acord moved for a
continuance but the district court denied his motion. Acord
failed to appear as ordered. On August 6, 2009, the district
court held Acord in contempt and ordered him incarcerated until
he purged himself of the contempt. 7
7
Acord filed a petition for habeas corpus in the Southern
District of Texas claiming that his continued incarceration
violated his Due Process rights because he was unable to pay the
sanction and thereby purge himself of the contempt. He also
claimed that producing the documents requested by the Maryland
district court would violate his Fifth Amendment privilege
against self incrimination. The Southern District of Texas
found neither argument persuasive and denied his motion. Saenz,
2009 U.S. Dist. LEXIS 77274, at *11-30.
(Continued)
15
II.
Appellants claim that the district court abused its
discretion when it entered default judgment for $3,832,832.40
against them. In addition, Acord argues that the district court
abused its discretion when it awarded Young Again sanctions
pursuant to Federal Rule of Civil Procedure 11. Acord also
appeals the district court’s order holding him in civil contempt
for failure to pay the sanction. Finally, Appellants claim that
the district court erred in its March 14, 2004, order finding
that venue in the District of Maryland was proper and denying
their request to transfer venue. We will consider each issue in
turn.
A.
We turn first to the default judgment. This court reviews
for abuse of discretion a district court’s grant of sanctions
under Rule 37, including the imposition of a default judgment.
Anderson v. Found. for Advancement, Educ. and Emp’t of Am.
Indians, 155 F.3d 500, 504 (4th Cir. 1998). “In the case of
default, the range of discretion is more narrow than when a
court imposes less severe sanctions.” Hathcock v. Navistar
Acord did not pay the sanction, and was therefore not
released, until November 17, 2009.
16
Int’l Transp. Corp., 53 F.3d 36, 40 (4th Cir. 1995) (internal
quotation marks omitted).
1.
The district court imposed a default judgment on the
defendants pursuant to Rules 16(f) and 37(b)(2)(A)(vi) based
primarily on their failure to participate in the pretrial
process. Under Rule 16(f)(1),
[o]n motion or on its own, the court may issue any
just orders, including those authorized by Rule
37(b)(2)(A)(ii)-(vii), if a party or its attorney:
(A) fails to appear at a scheduling or other pretrial
conference;
(B) is substantially unprepared to participate--or
does not participate in good faith--in the conference;
or
(C) fails to obey a scheduling or other pretrial
order.
Fed. R. Civ. P. 16(f)(1). Rule 37(b)(2)(A)(ii)-(vii) lists a
variety of sanctions, including “prohibiting the disobedient
party from supporting or opposing designated claims,” “striking
pleadings in whole or in part,” “staying further proceedings
until the order is obeyed,” “dismissing the action or proceeding
in whole or in part,” and “rendering a default judgment against
the disobedient party.” Fed. R. Civ. P. 37(b)(2)(A)(ii)-(vi).
We have previously upheld default judgment as a sanction for
discovery abuses under Rule 37. See Anderson, 155 F.3d at 504-
05. We see no reason to treat misconduct during the pretrial
17
process as different from misconduct during the discovery
process. See Newman v. Metro. Pier & Exposition Auth., 962 F.2d
589, 590-91 (7th Cir. 1992) (holding that failure to participate
in the pretrial process is a ground for default judgment).
Recognizing the seriousness of the imposition of default
judgment, we have instructed district courts to apply a four
part test when determining appropriate sanctions under 37(b):
“(1) whether the noncomplying party acted in bad faith; (2) the
amount of prejudice his noncompliance caused his adversary . .
.; (3) the need for deterrence of the particular sort of
noncompliance; and (4) the effectiveness of less drastic
sanctions.” Mut. Fed. Sav. and Loan Ass’n v. Richards & Assoc.,
Inc., 872 F.2d 88, 92 (4th Cir. 1989) (citing Wilson v.
Volkswagen of Am., Inc., 561 F.2d 494, 503-05 (4th Cir. 1977)).
In Mutual Federal Savings and Loan Association, we noted that
the Wilson factors balance a “district court's desire to enforce
its discovery orders” and a “party’s rights to a trial by jury
and a fair day in court.” 872 F.2d at 92.
We emphasize, however, that our review of the district
court’s determination is a deferential one, in recognition that
“it is the district court judge who must administer (and
endure)” the proceedings. Lee v. Max Int'l, LLC, 638 F.3d 1318,
1320 (10th Cir. 2011); see also id. (advising appellate courts
not “to draw from fresh springs of patience and forgiveness”).
18
This court has “emphasized the significance of warning a
defendant about the possibility of default before entering such
a harsh sanction.” Hathcock, 53 F.3d at 40. However, in a
similar context--the failure to prosecute a case--the Supreme
Court has said “[n]or does the absence of notice as to the
possibility of dismissal or the failure to hold an adversary
hearing necessarily render such a dismissal void.” Link v.
Wabash R.R., 370 U.S. 626, 632 (1962). Indeed, in the context
of sanctions for abuse of discovery, the Supreme Court has
warned that appellate courts “tend[] . . . to be heavily
influenced by the severity of outright dismissal as a sanction .
. . But here, as in other areas of the law, the most severe in
the spectrum of sanctions . . . must be available to the
district court.” Nat'l Hockey League v. Metro. Hockey Club, 427
U.S. 639, 642-43 (1976).
2.
Appellants Acord and Ortega argue that the district court
abused its discretion when it entered the default judgment
because it did not properly apply the Wilson factors and did not
warn them that it was considering entering default judgment.
Although the district court did not expressly articulate these
factors, we will nevertheless uphold a default judgment when it
is clear from the record that the district court did not abuse
its discretion. See Mobil Oil Co. de Venezuela v. Parada
19
Jimenez, 1993 U.S. App. LEXIS 4648 at *8 (4th Cir. March 9,
1993) (unpublished). In analyzing the Wilson factors on these
facts, we find such clarity here.
a.
First, the record reflects a pattern of noncompliance
suggesting bad faith. See Mut. Fed., 872 F.2d at 93. The
district court was repeatedly compelled to admonish the
Appellants, even after it warned them that it was going to take
the pretrial process “very seriously.” J.A. 118. Appellants
made no effort to acknowledge their obligations. 8 Acord did not
even attempt to prepare for pretrial proceedings, filed
meritless motions and made little, if any, effort to comply with
the district court's injunctions. He described his litigation
strategy as “hopefully deplet[ing] [Mason's] war chest.” J.A.
1106A.
While Ortega’s behavior may have been less egregious than
Acord’s, it nevertheless manifested an identical posture of
resistance. Moreover, her efforts to pin the blame on her
former attorney are unpersuasive. The record contains three
letters from Laubscher to Ortega, as well as emails from
Laubscher to Acord, in which Laubscher explains that he needs
8
We previously upheld default judgment after a mere 13
months of “subterfuge.” Mut. Fed., 872 F.2d at 94. Here,
Ortega has disregarded the court for nearly 6 years.
20
both Ortega’s cooperation and payment for his services.
Laubscher continued to represent Ortega even after warning that
he was going to withdraw if his date for payment came and went.
Moreover, we have previously upheld a district court’s entry of
default judgment against defendants who so failed to communicate
with their attorney that their attorney withdrew from the
representation. Home Port Rentals, Inc. v. Ruben, 957 F.2d 126,
132 (4th Cir. 1992). On these facts, we cannot interpret
Ortega’s continued disregard for the district court as anything
other than bad faith.
b.
Turning to the second Wilson factor, we believe there was
prejudice here. The district court specifically explained that
Appellants’ noncompliance prejudiced Young Again:
The concern that I have as a judge trying to try a
case is that I can’t try cases fairly to both sides if
I don’t have . . . meaningful participation in the
significant endeavors required to go to trial and to
comply with the pretrial rules of this court. Those
rules are designed to provide for a fair trial.
J.A. 3329. Moreover, we note that this is an intellectual
property case in which Appellants allegedly continued to use
Young Again’s property despite injunctions to the contrary.
Given the impermanence of the internet, over which Appellants
traded Young Again’s work, each day of delay is a day over which
evidence of the original infringement may degrade. Moreover,
21
Acord himself stated that his goal was to force Mason to
“deplete his war chest” defending this litigation. J.A. 1106(A)
c.
With respect to the third Wilson factor, we have previously
found that “stalling and ignoring the direct orders of the court
with impunity” is “misconduct” that “must obviously be
deterred.” Mut. Fed., 872 F.2d at 93. Appellants’ behavior can
only be described as ignoring the court’s orders, even when the
court took additional, non-required steps to ensure that they
were aware of their obligations. For example, on March 19,
2009, the court sent a memorandum to the parties “to remind
[them] of the pretrial conference and hearing.” J.A. 2602. As
discussed above, Ortega refused to participate in the pretrial
process with her attorney, despite the district court's orders.
Instead, she left her attorney to make last minute filings aimed
at preserving her rights, in consequence of which the case could
not efficiently move forward. Acord obstructed proceedings by
making frivolous filings while ignoring mandatory filings. We
find this conduct, especially when taken with their other sloppy
tactics, such as their overuse of the “Attorneys’ Eyes Only”
designation, to be precisely the kind of behavior that courts
need to deter.
22
d.
Turning to the fourth Wilson factor, since Acord and Ortega
showed no interest in taking the steps necessary to defend this
case, we see no effective lesser sanction. Looking first at
Acord, the court had already issued sanctions under Rule 11 to
no avail. Acord’s statement that he did not participate in the
pretrial process because it “boggles [his] mind” further
suggests that lesser sanctions would be futile. J.A. 3305.
Acord could have hired an attorney, but chose not to, then
sought to effectively excuse himself from proceedings due to his
pro se status. While we are sympathetic to the challenges faced
by pro se litigants, we cannot exercise that sympathy unless
they at least try to participate. 9 And although the district
court could indeed have imposed monetary sanctions against
Ortega in the first instance, given the pattern of resistance in
which she engaged in concert with Acord, we cannot say that the
district court abused its discretion in entering the default
judgment against them both.
9
Acord claims that he intended to participate in the
pretrial proceedings by adopting Ortega’s pretrial submissions
but he did not seek to do so until the pretrial hearing, well
after the filing deadline. This is too late. The district
court set deadlines, which he ignored.
23
3.
Appellants argue that default judgment is improper because
the district court did not warn them of the possibility of
default judgment. As an initial matter, we believe that the
court’s March 19, 2009, memorandum to the parties in which it
said that it planned to rule on Young Again’s motions for
default judgment, gave Appellants notice that default judgment
was a possibility.
While it is true that the district court did not explicitly
warn Appellants that it would definitely enter a default
judgment at the March 23 hearing, we find that they surely had
constructive notice that it might: the district court had
expressed its displeasure about poor compliance with the
injunctions; 10 Young Again had repeatedly sought sanctions and
the district court said it was on the verge of sanctioning
Appellants several times; 11 the district court then said that it
took the pretrial process very seriously, even sending
Appellants a memorandum telling them that it was going to rule
on Young Again’s motions for default judgment, and yet
10
For example, on August 3, 2004, the district court stated
that Appellant’s compliance with the injunctions was “neither in
form nor substance what the court had contemplated.” J.A. 509.
11
For example, on November 9, 2004, the district court
explicitly contemplated sanctions saying, “I just don’t think
that this can go on any further.” J.A. 3559.
24
Appellants still took no steps to participate in this pretrial
process. See Adams v. Trs. of the N.J. Brewery Emps. Pension
Trust Fund, 29 F.3d 863, 871 (3d Cir. 1994) (finding that a
party “had adequate opportunity to defend itself against
dismissal without such formal notice” where the other party had
moved for sanctions). Although the district court could have
provided more specific notice of default, it certainly made the
intent to act on its displeasure manifest.
While we believe that Ortega had sufficient notice of the
possibility of default, it is even clearer that Acord did. On
at least two additional occasions the district court warned
Acord that it was unhappy with his behavior. The first was the
May 25, 2004, hearing at which the court departed from the
traditional American rule of each side paying its own costs and
ordered Acord to pay Young Again’s costs and fees related to its
first motion to enforce. 12 The second warning was the imposition
of Rule 11 sanctions. For the foregoing reasons, we hold that
the district court provided sufficient notice to support its
entry of default judgment against Acord and Ortega.
12
Ortega was not yet a party in the case when the district
court entered this order.
25
4.
Appellants contend that the award of $3,832,832.40 was
improper. We disagree. The district court took this sum from
Young Again’s expert Richard S. Hoffman, whose report described
Young Again’s damages from Appellant’s infringement, and which
Young Again included as an exhibit in its pretrial submissions.
Appellants never objected to this report either during the March
23, 2009, hearing, during which Young Again presented it as
evidence, or during the pretrial process during which the
Appellants were supposed to be cooperating with Young Again.
Appellants now contend that the report was hearsay and claim
that the district court is relying on the statements of lawyers,
which “are not evidence.” Appellant’s Br. 54. Federal Rule of
Civil Procedure 26(a)(3)(B) dictates that a party waives any
objections to pretrial disclosures unless it raises them within
14 days. Since Appellants failed to object to the report within
14 days, they have waived any objections. Accordingly, we find
that the district court did not abuse its discretion when it
awarded Young Again the sum specified in its expert’s report.
B.
We now turn to Acord’s contention that the district court
erred when it entered Rule 11 sanctions against him and that it
committed further error when it order him incarcerated for
failure to pay these sanctions. Rule 11 provides that a court
26
may sanction a party for “presenting to the court a pleading,
written motion, or other paper . . . presented for any improper
purpose, such as to harass, cause unnecessary delay, or
needlessly increase the cost of litigation,” or for making
factual contentions without evidentiary support. Fed. R. Civ.
P. Rule 11(b). We review the imposition of Rule 11 sanctions
for abuse of discretion. In re Bees, 562 F.3d 284, 287 (4th
Cir. 2009). We review a district court’s civil contempt order
for abuse of discretion. 13 Ashcraft v. Conoco, Inc., 218 F.3d
288, 301 (4th Cir. 2000).
13
Young Again argues that we lack jurisdiction to decide
this issue since it was not explicitly included in the notice of
appeal. We disagree. Rule 3 of the Federal Rules of Appellate
Procedure requires a notice of appeal to “designate the
judgment, order, or part thereof being appealed.” Fed. R. App.
P. 3(c)(1)(B). This court “liberally construe[s] Rule 3(c)’s
requirements concerning the sufficiency of the notice of appeal
to avoid technical impediments to appellate review.” In re
Spence, 541 F.3d 538, 543 (4th Cir. 2008) (internal quotation
marks omitted). “[A]n error in designating the issue appealed
will not result in a loss of appeal as long as the intent to
appeal a specific judgment can be fairly inferred and the
appellee is not prejudiced by the mistake.” Hartsell v. Duplex
Prods., Inc., 123 F.3d 766, 771 (4th Cir. 1997) (citation
omitted). Whether an appellee is prejudiced is determined by
considering “whether the appellee had notice of the appeal and
an opportunity to fully brief the issue.” Id. We have
previously held that arguing the merits of an improperly
designated issue in an opening brief is sufficient to put the
opposing party on notice. See, e.g., id.; Canady v. Crestar
Mortg. Corp., 109 F.3d 969, 974-75 (4th Cir. 1997).
27
1.
The district court imposed sanctions both because it found
that the purpose of Acord’s motion was to harass, delay, and
increase the costs of litigation and because his motion
“contained numerous factual allegations without evidentiary
support.” J.A. 2306. Acord disagrees with the district court’s
assessment of his motion and contends that the allegations were
true and that the motion was necessary to prevent Mason from
defaming Acord. Acord points to no evidence in the record to
support this contention.
Furthermore, this does not appear to be a case like In re
Bees, in which we found the imposition of Rule 11 sanctions to
be reversible error because the erroneous factual assertions in
the sanctioned party’s filings were isolated, inadvertent, and
in good faith. 562 F.3d at 288. Instead, the district court
found Acord’s motion to be “utterly devoid of any merit
whatsoever,” and Acord has not presented any argument on appeal
that contradicts this assessment. J.A. 2174. On these facts,
we cannot find that Acord’s meritless motion and other misdeeds
were inadvertent lapses, or otherwise in good faith. For these
reasons, we find that the district court did not abuse its
discretion when it sanctioned Acord.
28
2.
The district court held Acord in contempt on August 6,
2009, when he skipped a hearing that the district court ordered
him to attend after he failed to pay the Rule 11 sanctions
within thirty days of March 25, 2009. To establish civil
contempt, a movant must demonstrate: “(1) the existence of a
valid decree of which the alleged contemnor had actual or
constructive knowledge; (2) . . . that the decree was in the
movant's ‘favor’; (3) . . . that the alleged contemnor by its
conduct violated the terms of the decree, and had knowledge (at
least constructive knowledge) of such violations; and (4) . . .
that [the] movant suffered harm as a result.” Ashcraft, 218
F.3d at 301 (citation omitted). All of these elements are
clearly established here. The court assessed sanctions in the
amount of $24,357.00 against the defendant on November 17, 2008.
Acord had knowledge of these sanctions, and he not only violated
the district court’s order to pay, but also failed to appear at
the show cause hearing regarding his civil contempt and
incarceration. He harmed Young Again both by delaying payment
and by continuing to delay the proceedings. In light of these
flagrant violations, we hold that the district court did not
abuse its discretion when it held Acord in civil contempt.
29
C.
Finally, we turn to the sole non-sanctions issue in this
appeal. Appellants claim that the district court erred in its
March 14, 2004, order finding that venue in the District of
Maryland was proper and denying their request to transfer. We
review the district court’s denial of a motion to transfer venue
for abuse of discretion. Saudi v. Northrop Grumman Corp., 427
F.3d 271, 275 (4th Cir. 2005).
We begin by noting that venue is a personal privilege of
the defendant that may be waived. Leroy v. Great W. United
Corp., 443 U.S. 173, 180 (1979). Acord filed his motion to
transfer before Young Again amended its complaint to include
Ortega. Therefore, Ortega waived her objection to the venue
when she admitted venue was proper in her answer to Young
Again’s amended complaint and thereby failed to object to venue
in the district court. See Sucampo Pharm., Inc. v. Astellas
Pharma, Inc., 471 F.3d 544, 549 (4th Cir. 2006) (“Because a
motion under Rule 12(b)(3) is a disfavored 12(b) motion, a
defendant will have to raise the forum selection issue in her
first responsive pleading, or waive the clause.”); United States
v. Stewart, 256 F.3d 231, 238 (4th Cir. 2001) (“If an objection
to venue is not raised in the district court, the issue is
waived on appeal.”).
30
As to Acord, we find that venue in the District of Maryland
was proper under 28 U.S.C. § 1391(b)(2), which states that venue
is proper in “a judicial district in which a substantial part of
the events or omissions giving rise to the claim occurred, or a
substantial part of property that is the subject of the action
is situated.” Young Again argues that it entered into an
agreement with Acord and Nutrition to resell its products. When
ruling on Acord’s motion, the district court found that it “must
accept for purposes of this motion, the contract between the
parties, which underlies the breach of contract claim, was
entered into in Maryland, and Internet traffic was directed into
Maryland and resulted in sales. Therefore, venue is proper in
Maryland.” Young Again, 307 F. Supp. 2d at 718.
Acord has not contested the district court’s finding that
the parties formed the contract in Maryland. Indeed, Appellants
now rest their venue argument entirely on the claim that Young
Again was not a Maryland corporation in good standing when it
filed the original complaint. Since Acord has waived any
argument that the parties did not enter into the contract in
Maryland, and the injury to Young Again--both from the breach of
contract and the intellectual property claims--has occurred in
Maryland, we hold that the district court did not abuse its
discretion in holding that venue is proper in Maryland. Cf.
CIENA Corp. v. Jarrard, 203 F.3d 312, 318 (4th Cir. 2000)
31
(finding venue to be proper in the district where the injury
caused by the breach of contract would be felt); Du-Al Corp. v.
Rudolph Beaver, Inc., 540 F.2d 1230, 1233 (4th Cir. 1976)
(finding venue to be proper in the district in which partial
performance occurred and where steps to form the contract were
taken).
III.
For the reasons discussed above, we find that the
Appellants’ bad faith throughout this litigation process was
sufficiently egregious to justify the extraordinary sanctions
imposed on them. Accordingly, we hold that the district court
did not abuse its discretion.
AFFIRMED
32