Mitchell Lane Publishers, Inc. v. Rasemas

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
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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
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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).
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C.A. No. 9144-VCN
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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
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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.
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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.
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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).
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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)).
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IT IS SO ORDERED.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Register in Chancery-K