Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 1 of 8 PageID #:8862
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 1 of 8 Page|D #28862
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`FM INDUSTRIES, INC.,
`
`Plaintiff,
`
`v.
`
`INC.,
`CITICORP CREDIT SERVICES,
`CITIGROUP,
`INC., CITIBANK (SOUTH
`DAKOTA), N.A., and LAW OFFICE OF
`ROSS GELFAND, LLC
`
`Defendants.
`
`\_/\._J\._J\_/\j"-_J\&\_/\—J
`
`Civil Action No.: 07 C 1794
`
`Suzanne B. Conlon, Judge
`
`MEMORANDUM OPINION AND ORDER
`
`BACKGROUND
`
`FIVII Industries, Inc. (“FMI”) is theclaimed owner of TUCANS, a computer software
`
`program used in the debt collection industry. TUCANS was developed by FM Ware Industries,
`
`Inc. (“FM Ware”), which dissolved in 2004. Michael Friedman was FM Ware’s president, and is
`
`presently FMI’s president and chief executive oflicer. Friedman, who is not an attorney, has
`
`participated in this lawsuit as a paralegal and law clerk for FMI’s attorney, Wayne Rhine, by
`
`typing Rl1ine’s draft pleadings, then filing FMI’s pleadings under Rhine’s electronic signature
`
`and his electronic filing password. Friedman is also chief financial officer of Friedman &
`
`Wexler, Rhine’ 3 law firm.
`
`Before the court are two post-judgment FMI motions belatedly challenging summaiy
`
`judgment rulings. In January 2008, FMI’s motion for partial summary judgment against
`
`defendant Law Office of Ross Gelfand, LLC (“Gelfand”) for copyright infringement was denied
`
`because of a genuine issue of material fact concerning FMI’s ownership of the TUCANS
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 2 of 8 PageID #:8863
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 2 of 8 Page|D #:8863
`
`copyright; its summary judgement motion for breach of contract against Gelfand was denied
`
`because FM1 failed to provide evidence that it suffered any damages. In March 2008, the
`
`summary judgment motions of defendants Citicorp Credit Services, Inc., Citigroup, Inc., and
`
`Citibank (South Dakota), NA. (“Citi defendants") were granted, inter alia, because FMI failed to
`
`raise a genuine issue ofmaterial fact that the Citi defendants knew of or participated in copyright
`
`infringement. FMI’s Rule 59(e) motion for reconsideration ofjudgment for the Citi defendants
`
`was denied in April 2008.
`
`All that remained for a bench trial was FMI’s claim for equitable and declaratory relief
`
`against Gelfand for copyright infringement. However, due to FMI’s failure to cooperate in
`
`preparing and submitting a joint final pretrial order, the surviving claim against Gelfand was
`
`dismissed with prejudice. Dkt. No. 455 (May 6, 2008). The court denied FMI’s motion to
`
`vacate the dismissal order because of its continued failure to submit ajoint final pretrial order
`
`and its bad faith in repeatedly failing to incorporate Gelfand’s materials and objections in FMI’s
`
`unilateral draft pretrial orders. Dlct. No. 495 (July 23, 2008). The day after FMI’s motion to
`
`reconsider the dismissal order was denied, FM1 filed the present motions challenging the January
`
`and March summary judgment rulings under Fed. R. Civ. P. 60(b) in an attempt to change the
`
`record with respect to four summary judgment motions resolved months earlier. Dlct. Nos. 496,
`
`498 (July 24, 2008). The Rule 60(b) motions conclusively lack merit, and reflect a continuing
`
`pattern of abusive litigation tactics.
`
`FlV.[[’s Partial Summary Judgment Motion
`
`FMI moves to vacate denial of its summary judgment motion on the copyright ownership
`
`issue, but does not challenge the basic insufficiency of its breach of contract claim. More than
`
`l\J
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 3 of 8 PageID #:8864
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 3 of 8 Page|D #:8864
`
`six months after the summary judgment ruling, FMI attempts to vacate tl1e ruling by introducing
`
`a document purportedly establishing its TUCANS ownership. FMI contends a transfer document
`
`proffered as an exhibit to its Rule 60(b) motion constitutes newly discovered evidence for relief
`
`from judgment under Rule 60(b)(2). However, it is clear fiom the motion that the document is
`
`newly created for purposes of litigation, not newly discovered evidence. FMI acknowledges that
`
`Friedman signed the document on February 19, 2008, a month after the summary judgment
`
`ruling; indeed, Friedman signed the document as president of FM Ware, a company that was
`
`dissolved four years earlier. Mot. at 2, Ex. A. FMI mischaracterizes the Friedman document as a
`
`mute pro tzmc transfer of the TUCANS copyright to memorialize the allegedly lost original.
`
`Nuns pro tzmc implies the retroactive effect of a document, not the creation of a new document
`
`purportedly memorializing a “lost” original seven years after claimed execution.
`
`Friedman’s transfer document was obviously created to change the summary judgment
`
`record after an adverse ruling. Moreover, FMI fails to make even a rudimentary showing that the
`
`Friedman document is admissible. The document is clearly inauthentic evidence of a transfer of
`
`the TUCANS copyright, nor does it purport to be a true and accurate copy of the alleged original.
`
`Foundation is also lacking. There is no evidence that FM Ware’s board of directors actually
`
`authorized the alleged original transfer agreement seven years ago, nor is there any evidence the
`
`dissolved company ratified the recently created version. The circumstances under which the
`
`Friedman document was created suggest the document is unreliable, as well as inauthentic and
`
`lacking foundation.
`
`FMI’s argument that the Friedman document is newly discovered evidence is frivolous;
`
`the document, created for this litigation, is not evidence at all. But even if the Friedman
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 4 of 8 PageID #:8865
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 4 of 8 Page|D #:8865
`
`document were deemed admissible, a disputed issue ofmaterial fact would remain as to whether
`
`there was a valid transfer of the TUCANS copyright from FM Ware to FMI. There are
`
`credibility and reliability issues concerning Friedmarfs various statements, and adverse
`
`inferences may be drawn from the absence of authorization or execution ofthe “lost” TUCANS
`
`agreement in FMI’s contemporaneous January 2001 board of directors minutes, as well as fiom
`
`the absence of the “lost” transfer document itself. See Memorandum Opinion at 2~3, 4-5, Dlct.
`
`No. 375 (January 14, 2008). Viewing the record in a light most favorable to Gelfand, a trier of
`
`fact could have reasonably resolved the TUCANS ownership issue in Gelfand’s favor. Summary
`
`judgment was inappropriate with or without Friedman’s document.
`
`Finally, FMI has failed to show that the extraordinary relief of vacating the order denying
`
`its summary judgment motion is in the interest ofjustice under Rule 60(b)(6).
`
`The Citi Defendants’ Summary Judgment Motions
`
`FMI moves to vacate the order granting the Citi defendants’ summaryjudgment motions.
`
`FMI seeks to file a new set of summaryjudgment responses four months after the motions were
`
`granted, invoking Rule 60(b)(l). FMI asserts that the wrong draft responses were initially filed
`
`due to counsel’s excusable neglect in failing to comply with the requirements of Local Rule 56.1.
`
`However,.the neglect specified in the present motion is not counsel’s, but rather the error is
`
`attributed to Friedman in his role as Rhine’s paralegal. FMI attempts to justify the mistake
`
`because Friedrnan’s mother-in—law was seriously ill during the period just before the filing
`
`deadline (which had been extended at FMI’s request). FMI explains that Friedman electronically
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 5 of 8 PageID #:8866
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 5 of 8 Page|D #:8866
`
`failed to file a response to another Rule 56.1 statement, and failed to file a Rule 56.1
`
`supplemental statement of facts.
`
`The court found FMI’s responsive pleadings were inadequate to raise a material issue of
`
`fact concerning the Citi defendants‘ knowledge of or participation in infiirigement of the
`
`TUCANS copyright. FMI fails to explain why Friedman, a non-lawyer, was delegated the
`
`responsibility of signing and filing FMI’s summary judgment responses under Rhine’s name
`
`during a period when Friedman was involved in a stressful family medical crisis. FMI has three
`
`attorneys ofrecord: Rhine, Mitchell Asher and William McGratl1. FMI fails to offer any
`
`explanation for the failure of any of its attorneys to supervise the final preparation and filing of
`
`responses to potentially dispositive motions. As the attorney who authorized his signature and
`
`electronic filing number to be used on court-filed documents, Rhine had a professional
`
`responsibility to review these pleadings before the wrong drafts were filed under his name and
`
`the wrong drafts were provided to the court.
`
`The unfortunate illness of Friedmarfs mother—in-law is immaterial to Rhine’s
`
`inexplicable failure to review court filings bearing his electronic signature. Rhine‘s neglect,
`
`particularly at a time when he knew his paralegal/law clerk/client had a family crisis, was not
`
`reasonable or excusable. There is no basis for vacating the summary judgment order under Rule
`
`60(b)(l). Pioneer InvesrmentcServs. Co. v. Brzmswz'ckA.s'socs., 507 U.S. 380, 388 (1993).
`
`It should be noted this is not the first time FMI has attempted to change its response to the
`
`Citi defendants’ summary judgment motions. Five days after Friedman’s erroneous filing and
`
`the day before the Citi defendants’ replies were due, FMI filed an emergency motion to correct
`
`its summary judgment responses. Dlct. No. 412 (February 24, 2008). FMl’s summaryjudgment
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 6 of 8 PageID #:8867
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 6 of 8 Page|D #:8867
`
`responses tendered in support of the emergency motion are materially different from the
`
`responses now proffered as me “final version." Compare Citi Defs. Rule 60(b) Resp, Ex. A and
`
`B (FMI’s Rule 56.1 statements; the present version has purported record citations for each
`
`statement, while the emergency motion version attached to the emergency motion only had three
`
`citations to the record).
`
`To compotmd the confusion repeatedly injected into the case, FMI also claims that its
`
`emergency motion and the courtesy copies supplied to the court were yet another “wrong"
`
`version of its summary judgment responses. The “mistaken” emergency motion also bears
`
`Rl1ine’s electronic signature. Dlct. No. 412. At the hearing on FM1’s emergency motion, Rhine
`
`failed to inform the court that the wrong version was filed, even after the court informed him
`
`FMI’s emergency Rule 56.1 supplemental statement of facts was unsupported and argumentative.
`
`Accepting FMl’s representation that both prior versions of its summary judgment responses were
`
`mistakes, Rhine’s inexcusable carelessness has caused proliferation of pleadings and needless
`
`expenditure of time by the court and the Citi defendants’ counsel. And it must be noted that
`
`FlVlI’s belated current version of its summary judgment responses includes exhibits lacking any
`
`foundation or indicia of admissibility or are immaterial. Several appear to be inadmissible
`
`hearsay. See, e.g., Ex. A (Friedman re-creation of purported transfer agreement); Ex. B (draft
`
`notices from Citigroup, Inc. purportedly evidencing its vicarious liability); Ex. C (unpaid
`
`invoices to Citicorp Credit Services, Inc. For TUCNET, not TUCANS); Ex. D (handwritten
`
`notes with hearsay introduction and interpretation). Like the predecessor summary judgment
`
`responses, FMI’s present new version is insufficient to raise a material issue of fact.
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 7 of 8 PageID #:8868
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 7 of 8 Page|D #28868
`
`Nor has any basis been provided for relief under Rule 60(b)(6). See Brandon 17. Chicago
`
`Bd. ofEduc, 143 F.3d 293, 295 (7th Cir. 1998) (if relief is sought on grounds of newly
`
`discovered evidence or excusable neglect, Rule 60(b)(6) is unavailable). Accordingly,
`
`clearly had no reasonable basis in law to pursue this motion under Rule 60(b)(6).
`
`SANCTIONS
`
`The Citi defendants request that sanctions be imposed on Rhine for vexatiously
`
`multiplying these proceedings by filing a baseless Rule 60(b) motion. 28 U.S.C. § 1927. As a
`
`sanction, the Citi defendants seek $2,694.60 in attorneys’ fees for the preparation of their
`
`response to the Rule 60(b) motion. The Citi defendants support the time spent and the
`
`preparers’ fee rates. Citi Defs. Rule 60(b) Resp. at Ex. D. Rhine does not contest the
`
`reasonableness of the fees sought. Rather, he relies on a magistrate judge’s conclusion he did not
`
`violate Rule 11 by authorizing Friedman to use his electronic signature and to file the summary
`
`judgment responses, even though the certificates of service misrepresented that Rhine filed and
`
`served FMI’s pleadings. The magistrate judge recommended that Rule 11 sanctions not be
`
`imposed because Friedman’s filing of the wrong summary judgment draft was a mistake. Dlct.
`
`No. 529 (Transcript of proceedings May 28, 2008). However, Rhine’s present baseless Rule
`
`60(b) motion and the Citi defendants’ request for sanctions under § 1927 were not before the
`
`magistrate judge. Rhine’s success in avoiding Rule 11 sanctions due to Friedman’s first
`
`misfiling of FMI’s summary judgment responses implicated narrow issues and a limited record.
`
`It is regrettable that Rhine did not heed the magistrate judge’s admonition that Rhine and
`
`Friedman were careless in filing pleadings. FIVII Reply at 3. In view of this history, Rhine’s
`
`pursuit of the present Rule 60(b) motion constitutes more than mere carelessness. Months after
`
`

`
`Case: 1:07-cv-01794 Document #: 532 Filed: 10/21/08 Page 8 of 8 PageID #:8869
`Case: 1:O7—cv—O1794 Document #: 532 Filed: 10/21/08 Page 8 of 8 Page|D #28869
`
`final judgment as to the Citi defendants, he has unreasonably and vexatiously multiplied these
`
`proceedings by pursuing a motion without legal or factual merit. The Jolly Group, Ltd. v.
`
`ll/Iedline Indus, Inc. 435 F.3d 717, 720 (7th Cir. 2006).
`
`CONCLUSION
`
`FMI’s Rule 60(b) motions are ill-considered attempts to change the summary judgment
`
`record and re-litigate four motions fully briefed and ruled on months ago. These baseless motions
`
`are wasteful to all concerned. FMI’s Rule 60(b) motions are denied. Sanctions in the amount of
`
`$2,694.60 are imposed on Wayne Rhine under 28 U.S.C. § 1927 for unreasonably and vexatiously
`
`multiplying these proceedings.
`
`ENTER:
`
`October 21, 2008
`
`Suzanne
`
`. Conlon
`
`United States District Judge