Free Reply - District Court of Arizona - Arizona

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Ray K. Harris, # 007408 FENNEMORE CRAIG, P.C. 3003 N. Central Ave., Suite 2600 Phoenix, AZ 85012-2913 (602) 916-5414 Edward R. Garvey, admitted pro hac vice GARVEY McNEIL & McGILLIVRAY 634 W. Main Street, Suite 101 Madison, WI 53703 (608) 256-1003 Attorneys for Defendants Harlem Globetrotters Int' Inc., l, Harlem Globetrotters International Foundation, Inc., and Mannie L. & Catherine Jackson UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA No. CV-04-0299 PHX DGC and CV-04-1023 PHX DGC DEFENDANT HARLEM GLOBETROTTERS INTERNATIONAL, INC., HARLEM GLOBETROTTERS INTERNATIONAL FOUNDATION, AND MANNIE L. & CATHERINE JACKSON' S REPLY TO THE NEAL PLAINTIFFS' RESPONSE TO DEFENDANTS'MOTION FOR SANCTIONS UNDER FED. R. CIV. P. 11

12 MEADOWLARK LEMON, et al., 13 14

Plaintiffs, vs. HARLEM GLOBETROTTERS

15 INTERNATIONAL, INC., et al.; 16 17 18 HARLEM GLOBETROTTERS 19 corporation, 20 21 22

Defendants.

INTERNATIONAL, INC., an Arizona Counterclaimant, vs. MEADOWLARK LEMON, a married man, Counterdefendant.

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Defendants Harlem Globetrotters International, Inc. ("HGI"), Mannie & Catherine Jackson, and the Harlem Globetrotters International Foundation, Inc. ("HGIF" or "the Foundation"), collectively, "HGI Defendants," submit this reply to Plaintiff Curly Neal et al.' s
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("the Neal Plaintiffs'") response to the HGI Defendants' motion for sanctions (Neal Resp., Doc 238). For the reasons stated below, and pursuant to Fed. R. Civ. P. 11(b)(2) and (3), the Neal Plaintiffs have not submitted an adequate response to the HGI Defendants' motion, and sanctions should be exacted against Plaintiffs for naming the Jacksons and the Foundation as defendants. (HGI Sanctions Mem., Doc 216.) In this brief, the HGI Defendants will not respond to Plaintiffs' wild and irresponsible accusations of "concealment" and "misrepresentation."1 (E.g., Neal Resp., Doc 238, at 7.) Ironically, Plaintiffs excoriate HGI' counsel for unprofessional conduct (id.), while at the same s time copying, nearly verbatim, HGI' discussion of Fed. R. Civ. P. 11 in their sanctions brief s (compare HGI Sanctions Mem., Doc 216, at 2-3, with Neal Resp., Doc 238, at 8-9). HGI also objects to Plaintiffs' use of unauthenticated documents, and therefore inadmissible evidence, to support their response to Defendants' motion. Sony Computer Entm' Am., Inc v. Great Am. t Ins. Co., 229 F.R.D. 632, 634 (N.D.Cal. 2005) (granting motion to compel where respondents failed to support their allegation of privilege with admissible evidence). These documents,2 and all facts relying thereon, should be disregarded. The HGI Defendants also note that the Neal Plaintiffs' response to their sanctions motion was untimely pursuant to LRCiv 7.2(c) and Fed. R. Civ. P. 6; it should have been filed on November 17, 2005, yet was not filed until November 21, 2005. ARGUMENT Plaintiffs contend that an adequate factual basis existed for them to name Mannie & Catherine Jackson in this suit, as well as the Foundation. Yet this contention is entirely undercut

Most of these accusations related to the HGI' change of corporate registration and sale to HG Holdings, Inc. HGI s notes that these issues were resolved by a conference call with the Court on November 17, 2005, where counsel for HGI stated that had Plaintiffs' counsel contacted them before the call, HGI would have stipulated to amending the complaint to substitute HGI of Nevada. Counsel for HGI still have not received a proposed stipulation and order from Plaintiffs in this matter. 2 Exhibits A, B, C, F, G, K, L, M, O, P, Q, R, S, V, and W are unauthenticated. Furthermore, counsel for HGI did not receive copies of the documents Plaintiffs have attempted to file under seal (Exhibits A, B, M, and O) as well as Exhibit G.

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by Plaintiffs' failure, in their own summary judgment motion, to allege a separate factual and legal basis for liability against these defendants. (Neal SJ Mot., Doc. 75; see also HGI Resp to Neal SJ Mot., Doc 265, at 3.) In other words, the Neal Plaintiffs now attempt, in their response to the HGI Defendants' sanctions motion, to make the showing they should have made in their motion for summary judgment. As Plaintiff Lemon pointed out in his sanctions response, a sanctions motion is not the proper venue to test the sufficiency of a claim, and Plaintiffs' efforts should be rejected. Nonetheless, the HGI Defendants address the substance of Plaintiff Lemon' s claims, and establish that sanctions are proper against the Neal Plaintiffs and their counsel. I. MANNIE JACKSON.

Plaintiffs cite numerous unsupported and irrelevant facts regarding the purported liability of Mannie Jackson, Catherine Jackson, and HGIF. It is unclear on what basis Plaintiffs allege liability against Mr. Jackson: as an HGI employee, shareholder, or corporate officer. Yet Plaintiffs have not obtained and cited facts sufficient to show Mr. Jackson could be liable under any of these theories, and their too-late efforts to find facts now are insufficient to protect them from sanctions. Plaintiffs do not and cannot cite facts sufficient to support personal liability against Mr. Jackson related to the claims in this case. They do not show that he profited individually from the Globetrotters FUBU License Agreement ("the License Agreement"); therefore, he cannot be held liable as an HGI employee. Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., et al., 772 F.2d 505, 519 (9th Cir. 1985); Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., et al., 886 F.2d 1545, 1555 (9th Cir. 1989). Plaintiffs contend that "Mr. Jackson' liability is . . . not a s function of piercing the veils of his alter ego corporations," though they would need to make precisely this showing to hold Mr. Jackson liable as a shareholder. United States v. Bestfoods, et al., 524 U.S. 51, 61-62 (1998) (citing cases). Finally, Plaintiffs have not alleged and shown any facts that would make Mr. Jackson liable as a corporate officer of HGI. As even the cases Plaintiffs cite (and selectively quote) acknowledge: "corporate officers and shareholders are

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generally shielded from personal liability." Holley v. Crank, 258 F.3d 1127, 1133-34 (9th Cir. 2001) (finding exception to this rule in civil rights cases). "Courts have . . . consistently stated that a corporate executive will not be held vicariously liable [for torts], merely by virtue of his office." Murphy Tugboat Co. v. Shipowners & Merchants Towboat Co., 476 F. Supp. 841, 854 (N.D.Cal. 1979) (finding corporate officer not personally liable), aff' 658 F.2d 1256, 1257 (9th d, Cir. 1981), cert denied, 455 U.S. 1018 (1982); see also Brink v. First Credit Res., 57 F. Supp. 2d 848, 862 (D.Ariz. 1999) (finding corporate officers violated Fair Debt Collection Practices Act because they "materially participated" in illegal debt collection activities). In other words, Plaintiffs cannot simply assert Mr. Jackson' position as CEO of the Globetrotters to show s individual liability against him as a corporate officer. Rather, they must show that he participated in, approved, or ratified conduct which is "inherently unlawful." Murphy Tugboat, 476 F. Supp. at 852-53. Plaintiffs have not done so. Rather, they have supplied a laundry list of patently unsupported, irrelevant, and inapposite facts that do not show liability against Mr. Jackson. (Neal Resp. at 5-6.) Some of the "facts" are simply incorrect, i.e. that Mr. Jackson is "100% owner of HGI" and that he signed the License Agreement. (E.g., Jackson Aff., ¶ 1, Doc 204 (stating that Mr. Jackson is employee, CEO, and a shareholder of HGI); Syracuse Aff., ¶ 10, Doc 208 (stating that Mike Syracuse signed the License Agreement.)) Some facts lack any evidentiary support at all, such as the allegation that Mr. Jackson sent letters to Plaintiffs regarding the division of money to the Foundation. (Neal Resp. at 6 (cited document is missing from Neal' supporting documents filed with the Court).) Further, HGI' corporate status, s s whether FUBU "personally" relied on Mr. Jackson' representations, and who Mr. Jackson' s s daughter works for are all clearly irrelevant to Mr. Jackson' personal liability. Even s participating in negotiations for the License Agreement is completely inapposite to whether Mr. Jackson might be personally liable in this case. The License Agreement, and negotiations therefore, are not "inherently unlawful," particularly where HGI possessed or believed in good

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faith it possessed the rights to use Plaintiffs' names and likenesses. (HGI' SJ Statement of s Facts ¶ 4, Doc 196 (citing Jackson Dep., Doc 196, at 55-57, 229-30, 276).) This situation is not even a "close case," and does not approach Transgo, Inc. v. Ajac Transmission Parts Corp., cited by Plaintiffs, where a jury found the defendant corporate officer had directly engaged in a civil conspiracy to copy plaintiff' products. 768 F.2d 1001, 1021 (9th Cir. 1985) (finding, inter s alia, defendant had provided plaintiff' confidential pricing structure and customer list to s infringing producer, and advised producer on packaging); see also Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (finding liability where corporate officer himself made actionable statement); Murphy Tugboat, 267 F. Supp. at 853-54 (finding no liability against CEO despite direct involvement in improper purchase and knowledge and ratification of improper company practices). The fact that Plaintiffs have titled this section of their brief "Mannie Jackson' Direct or Vicarious Liability" shows that even they do not have a s clear-cut theory of why Mr. Jackson may be personally liable. (Neal Resp., Doc 238, at 5-6.) Plaintiffs' claim against Mr. Jackson personally is not well-grounded in fact and would not have been asserted by a reasonable attorney. Further, no reasonable attorney would have continued to name Mr. Jackson, since it has become increasingly apparent that he has no personal liability in this case. That GTFM, LLC' corporate officers were not named as s defendants suggests that naming Mr. Jackson and his wife was simply intended to harass. Sanctions are due against Plaintiffs and their counsel under Fed. R. Civ. P. 11(b)(2) and (3). II. CATHERINE JACKSON.

The grounds for naming Catherine Jackson are even more far-fetched than for Mr. Jackson. Clearly, Ms. Jackson is not involved in the facts of this case or the business or ownership of HGI, as her affidavit and deposition make clear. (E.g., C. Jackson Aff., Doc 216.) Plaintiffs try to invent a role for her in this case, as when they say she saw clothing with hangtags bearing Plaintiffs' names at TJ Maxx and Marshall' and in Mannie Jackson' closet. (Neal Resp. at 5.) s, s

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But the deposition cite actually shows that Ms. Jackson could not say with certainty whether the tags bore Plaintiffs' names in either case. (C. Jackson Dep. at 24, Plaintiffs' Ex E, Doc 238.) Even if they did bear Plaintiffs' names, simply seeing the tags, especially in a public place, is not a well-grounded reason for naming Catherine Jackson as a defendant. Plaintiffs also state "it is still uncertain whether Ms. Jackson is an equitable owner (if not a legal one") of HGI," and that "[i]t is noteworthy" that Ms. Jackson stated in her deposition at one point that "we didn' t even own the company back then." (Neal Resp., Doc 238, at 3.) Not only is this an extremely thin reed to hang a case on, but if Plaintiffs found Ms. Jackson' statement so "noteworthy," s they should have followed up on it in deposition. They did not. Plaintiffs further criticize Ms. Jackson for knowing nothing about the Foundation but have not established why Ms. Jackson has any interest in doing so, given that she is not an officer, director, or otherwise involved in the Foundation. (C. Jackson Aff., ¶ 4, Doc 216.) Clearly, Ms. Jackson is not personally liable in her own right, despite Plaintiffs' legal gymnastics to make it so. Any liability predicated on her marriage to Mannie Jackson and Arizona' community property state status is obviated by Mr. Jackson' own apparent lack of s s personal liability. Plaintiffs obviously lack a factual and legal basis for naming Mr. Jackson, and sanctions are due against Plaintiffs and their counsel under Fed. R. Civ. P. 11(b)(2) and (3). III. THE FOUNDATION

Even Plaintiffs seem to recognize that their claim against the Foundation is baseless. Their only statement supporting this claim is as follows: "Plaintiffs' theory was that, given the royalties paid to the Foundation directly and the evidence that its officer and director had committed various torts, the Foundation was vicariously liable for Mannie Jackson' actions as s well as an indirect infringer of Plaintiffs' marks." (Neal Resp., Doc 238, at 6.) Plaintiffs of course offer no legal or factual support for these statements, which the Court should reject outof-hand. In fact, the documents Plaintiffs filed with their response directly contradict Plaintiffs' allegations: for example, a cursory look at the (unauthenticated) Foundation corporate filings

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shows that Mr. Jackson is not an officer and director of the Foundation. (Neal Resp., Ex. C, Doc 238.) Further, Defendants are aware of no legal theory which renders a non-profit corporation an "indirect infringer" when it has received funds related to an allegedly infringing product. Plaintiffs do not now, have never, and cannot assert a legal or factual basis for naming the Foundation as a defendant to their Lanham Act and common law claims. Again, sanctions are due against Plaintiffs. CONCLUSION For the reasons stated above, the HGI Defendants respectfully request the Court to enter sanctions under Fed. R. Civ. P. 11 against Plaintiffs and their counsel and award the HGI Defendants their reasonable costs and attorneys fees associated with Plaintiffs' violations. Dated this 29th day of November, 2005. By: s/ Edward R. Garvey _ Edward R. Garvey GARVEY McNEIL & McGILLIVRAY 634 W. Main St. #101 Madison, WI 53703 Attorneys for Defendants Harlem Globetrotters Int' Inc. and Harlem l, Globetrotters Int' Foundation l Mannie L. & Catherine Jackson Ray Harris FENNEMORE CRAIG, P.C. 3003 N. Central Ave., Suite 2600 Phoenix, AZ 85012-2913 Attorneys for Defendants Harlem Globetrotters Int' Inc. and Harlem l, Globetrotters Int' Foundation l Mannie L. & Catherine Jackson

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CERTIFICATE OF SERVICE 1. I hereby certify that on November 28, 2005, a true and correct copy of the attached document was electronically transmitted to the Clerk' Office using the CM/ECF System for s filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Edward R. Garvey ­ [email protected] Safia A. Anand ­ [email protected] Florence M. Bruemmer ­ [email protected], [email protected] Joel Louis Herz - [email protected], [email protected] Ira S. Sacks ­ [email protected] Anders Rosenquist, Jr. ­ [email protected] Clay Townsend ­ [email protected], [email protected] Robert W. Goldwater, III ­ [email protected] 2. I hereby certify that on November 28, 2005, a true and correct copy of the attached document was sent via U.S. Mail, postage paid thereon, to the following parties, at the addresses listed: Keith R. Mitnik Morgan Colling & Gilbert PA 20 N. Orange Ave., Suite 1600 Orlando, FL 32802 s/ Melody Tolliver

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