dracht motion for sanctions 01sep2015

7/23/2019 Dracht Motion for Sanctions 01SEP2015

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Case No.2:13-cv-02488-BRO-SHMEMORANDUM

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P p D. Drac t SBN [email protected] M. Petersen (pro hac vice)[email protected] W. Hardin (pro hac vice)[email protected]

Fabian & Clendenin215 South State Street, Suite 1200Salt Lake City, UT 84151-0210Telephone: (801) 531-8900

T omas G. Fo ey, Jr., SBN [email protected] Curtis, SBN [email protected] P, Karczag, SBN [email protected] Bezek Behle & Curtis, LLP

15 West Carrillo StreetSanta Barbara, CA 93101Telephone: (805) 962-9495

Attorneys or P a nt s Dana Bost c ,Anita Vasko, Judi Trotter, BeverlyMolnar, and Chester Cote

IN THE UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

DANABOSTICK, a Californiacitizen, et al.,

PLAINTIFFS,

vs.

HERBALIFE INTERNATIONAL

OF AMERICA, INC., a Nevada

Corporation, et al.,

DEFENDANTS.

Case No.:2:13-cv-02488-BRO-SH

MEMORANDUM IN SUPPORT OF

PLAINTIFFS MOTION FOR

SANCTIONS AGAINST

OBJECTORS

Hon. Beverly Reid OConnell

Hearing Date: October 5, 2015

Time: 1:30 p.m.

Courtroom: 14

Complaint filed: April 8, 2013

Case 2:13-cv-02488-BRO-SH Document 169-1 Filed 09/01/15 Page 1 of 22 Page ID#:4823
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TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................................................................. 3

I. INTRODUCTION .............................................................................................. 1

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY .................. 4

III. APPLICABLE LAW ...................................................................................... 4

A.Federal Rule of Civil Procedure 11........................................................... 4

B.28 U.S.C. Section 1927 ................................................................................ 6

C.Central District Civ. L.R. 83-7 ................................................................... 7

D.The Courts Inherent Power ...................................................................... 8

IV. ARGUMENT .................................................................................................. 9

A.Objectors Make Frivolous Arguments. ..................................................... 9

1. Objectors Motion Repeats Rejected Arguments..............................10

2. Objectors Present No Newly Discovered Evidence...........................11

3. Objectors Motion Points to No Clear Error.................................12

B.Objectors Make Improper Use Of A Motion For Reconsideration.....13

C.Counsel for Objectors are Unreasonably and Multiplying this

Proceeding. ......................................................................................................14

D.Objectors Willfully, Recklessly, and With Gross Negligence Failed toConform to the Local Rules. .........................................................................15

V. CONCLUSION ...............................................................................................15

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TABLE OF AUTHORITIES

CASES

Anjelino v. New York Times Co. (3d Cir. 1999),

200 F.3d 73 ............................................................................................................................... 6

Brignoli v. Balch Hardy & Scheinman, Inc. (S.D.N.Y. 1990),735 F.Supp. 100 ........................................................................................................................ 7

Business Guides, Inc. v. Chromatic Communications Enterprises, Inc. (9th Cir.

1989),892 F.2d 802 ....................................................................................................................... 5, 15

Caisse Nationale de Credit Agricole v. CBI Industries, Inc. (7th Cir.1996),

90 F.3d 1264, 1270 ................................................................................................................. 10

Campion v. Old Republic Home Prot. Co.,No. 09CV748JMA NLS (S.D.Cal.

May 20, 2011),2011 WL 1935967, at *1 ........................................................................................................ 12

Chambers v. NASCO, Inc. (1991),

501 U.S. 32 ........................................................................................................................... 8, 9

Conn v. Borjorquez (9th Cir. 1992),

967 F.2d 1418 ........................................................................................................................... 5

Estate of Blue v. County of Los Angeles (9th Cir. 1997),120 F.3d 982 ............................................................................................................................. 5

Faysound Ltd. v. United Coconut Chemicals, Inc. (9th Cir.1989),

878 F.2d 290 ........................................................................................................................... 10

Figueroa v. Gates, Case No. CV00-4158-ABC (BQRx) (C.D. Cal. Nov. 15,

2002),

2002 WL 31572968, *3 ............................................................................................................ 8

Frederick S. Wyle Professional Corp. v. Texaco, Inc. (9th Cir.1985),

764 F.2d 604 ........................................................................................................................... 11

G.C. &K.B. Invs., Inc. v. Wilson (9th Cir. 2003),

326 F.3d 1096 ..................................................................................................................... 6, 13

Hopwood v. State of Texas (5th Cir.2000),236 F.3d 256 ........................................................................................................................... 12

In re Dixie Farms Market, 28 Fed.Appx. 673 (9th Cir.2002),2002 WL 24573 ...................................................................................................................... 10



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In re Greco, 118 B.R. 658 (D.Hawai'i 1990),

2002 WL 24573 ...................................................................................................................... 10

In re Keegan Mgmt. Co. Sec. Litig.\\) (9thCir. 1996),78 F.3d 431 ........................................................................................................................... 6, 9

Lipsig v. Natl Student Mktg. Corp.(D.C. Cir. 1980),663 F.2d 178 ............................................................................................................................. 9

Margolis v. Ryan (9thCir. 1998),

140 F.3d 850 ............................................................................................................................. 6

Mark Indus., Ltd. V. Sea Captains Choice, Inc.(9thCir. 1995),

50 F.3d 730 ............................................................................................................................... 9

Mays v. Colvin,No. 1:13CV00904SKO (E.D.Cal. Dec. 8, 2014),

2014 WL 6893825, at *3 ........................................................................................................ 13

MGIC Indem. Corp. v. Moore (9thCir. 1991),952 F.2d 1120 ..................................................................................................................... 7, 10

Moreno v. Baca, Case No. CV00-07149-ABA (CWx) (C.D. Cal. Feb. 8, 2002),2002 WL 246767, *4 ................................................................................................................ 8

Operating Engineers Pension Trust v. A-C Company (9th Cir. 1988),

859 F.2d 1336 ........................................................................................................................... 5

Optyl Eyeware Fashion Intl Corp. v. Style Cos., Ltd. (9thCir. 1985),

760 F.2d 1045 ........................................................................................................................... 6

Oto v. Metropolitan Life Ins. Co. (7th Cir.2000),

224 F.3d 601 ........................................................................................................................... 12

Perfect 10, Inc. v. Giganews, Inc., No. CV 11-07098-AB SHX (C.D. Cal. Mar. 6,

2015),

2015 WL 1746406 ........................................................................................................ 1, 10, 12

Salstrom v. Citicorp Credit Servs. Inc. (9thCir. 1996),

74 F.3d 183 ......................................................................................................................... 7, 14

Sch. Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc. (9th Cir.1993),

5 F.3d 1255 ......................................................................................................................... 3, 11

Sch. Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc. (9th Cir.1993),

5 F.3d 1255 ............................................................................................................................... 3

Trentacosta v. Frontier Pac. Aircraft Indus., Inc. (9th Cir.1987),813 F.2d 1553 ......................................................................................................................... 11



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U.S. v. Westlands Water Dist. (E.D.Cal.2001),

134 F.Supp.2d 1111 ................................................................................................................ 11

United States v. Navarro (E.D.Cal.1997),

972 F.Supp. 1296 .................................................................................................................... 11

Waltman v. International Paper Co. (5th Cir.1989),

875 F.2d 468 ........................................................................................................................... 11

Young v. City of Providence (1stCir. 2005),

404 F.3d 33 ............................................................................................................................... 6

STATUTUES

28 U.S.C.

1927................................................................................................................................... 6, 14

Fed. R. Civ. P.

11..................................................................................................................................... 4, 5, 6

11 Advisory Committee Notes............................................................................................... 14

RULES

U.S.D.C., Cal. CD, Local Rule

R 7-18........................................................................................................................................ 9

R 83-7.................................................................................................................................... 7, 8



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1 Case No.2:13-cv-02488-BRO-SHMEMORANDUM

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I. INTRODUCTION

Objectors, Elvia Acosta, Silvia C. Arias, Sabas Avila, Miguel

Calderon, Felipe Colon, Elizabeth Correa, Maria Cutzal, Juana Estala,

Jose G. Garcia, Valentina Leon, Rossina Martinez, Gilberto Melchor

Sanchez, Yader A. Pastran, Susana Perez, Eric Rodensky, Jose Tafoya,

Olivia Torres, Julia Ulloa, Martil Palma Vallecillo, and their counsel,

recklessly and in bad faith, have moved for Reconsideration of this

Courts Final Judgment and Order of Dismissal that is frivolous,

redundant, and for an improper purpose in clear contravention of the

requirements of Local Rules 7-3, 7-6, and 7-18 and Federal Rule of Civil

Procedure 59.

A motion for reconsideration under Rule 59 seeks an

extraordinary remedy that is appropriate under only three strictly-

limited circumstances: (1) discovery of new evidence that could not with

reasonable diligence have been discovered earlier; (2) a change in

controlling law contravenes the decision at issue; or (3) clear error,

meaning the decision must be dead wrong.Perfect 10, Inc. v.

Giganews, Inc., No. CV 11-07098-AB SHX, 2015 WL 1746406, at *3

(C.D. Cal. Mar. 6, 2015).Objectors lacked any objectively reasonable

basis for contending that any of these necessary factors applied.

Objectors star piece of new evidence was a hearsay email

purporting to show that class notice emails sent in December 2014

nearly six months before the motion hearingwere captured by classmembers spam filters. This evidence is inherently not new, as it

concerns notices sent long before objections were due. Moreover, for the

spam issue to have any possible bearing on the adequacy of the class

notice, the issue would have been common enough that it would have

been easily discoverable in a timely fashion. While bad faith is not

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necessary to justify imposition of sanctions, it is difficult to imagine how

Objectors could in good faith have believed that evidence of widespread spam

filtering of emails was not discoverable many months earlier, when the emails

were sent. Indeed, Objectors motion does not even arguethe so-called

evidence was not discoverable. Furthermore, courts in this Circuit have

addressed spam emails in the context of class action notice and have still

found notice to be adequate.1

Objectors do not cite any changes in controlling law that would justify

their motion. Indeed, Objectors cite no new law at all (controlling or otherwise)

post-dating the final approval hearing. Indeed, they ignore critical Ninth Circuit

decisions approving the things they challenge.

Objectors pretend to argue clear error, but their motion fails to

articulate any objectively reasonable basis for such an assertion. As discussed

below, clear error is not mere disagreementObjectors could not file a

motion for reconsideration contending clear error without having a good faith

basis for contending that the Courts Order clearly violated controlling law or

made a clear mistake of fact. Objectors motion argues neither. It cites no

controlling law contravening the Courts decisionat times it relies solely on

secondary sourcesand while disagreeing how facts should be weighed, it cites

no mistakes of fact, much less clear ones that would render the Courts decision

dead wrong.

While Objectors lack of any objectively reasonable basis fo r their

motion is in itself sufficient to justify sanctions, their behavior surrounding thefiling, and the context in which it was filed, further demonstrate why sanctions

are appropriate here. Objectors knew that in filing their frivolous motion they

would be delaying the distribution of millions of dollars of relief to class

1Because Objectors withdrew their arguments based on new evidence, Plaintiffsstrike thosearguments by strikethrough from this memorandum.



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members. Objectors also evaded one of this Districts key tools for

reducing unnecessary motion practice: Objectors failed to comply with

Local Rule 7-3. Objectors did not even notify the parties of their

intention to file the motion, never mind meet and confer about it. Under

these circumstances, and given the utter failure of the motion to articulate

a proper basis for its filing, it is reasonable to conclude that the motion

was filed to create delay and perhaps publicitynothing more.

Motions for reconsideration are often given particular attention by

courts in the Ninth Circuit because of the potential for their misuse and

abuse. SeeSch. Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc. , 5

F.3d 1255, 126263 (9th Cir.1993)(reviewing for an abuse of discretion

and setting forth requirements for reconsideration). Objectors motion

aptly shows why; their motion simply expresses disagreement with this

Courts decision and treats it as though the judgment were an opponent s

brief, the rationale of which was subject to refutation or rehashing, rather

than, as a judicial decision. The motion, presents no basis on which it

could, or should be granted and is a frivolous exercise in futility.

Rule 11 of the Federal Rules of Civil Procedure grants this Court

discretion to impose sanctions against a party and its counsel for filing a

motion that isfrivolous(factually or legally), or brought for an improper

purpose. ObjectorsMotion for Reconsideration implicates both grounds

because it represents nothing more than a blatant attempt to re-argue the

merits of their initial objections. The motion was not filed under anyascertainable rule or provision and therefore is not warranted by existing law

or by a good faith argument for the extension, modification, or reversal of

existing law.

By rehashing legal arguments already rejected by the Court and slyly

attempting to insert additional evidence that could have been introduced in

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their initial objection, Objectorsand their counsel have brought the motion

frivolously and to harass Plaintiffs (and derivatively, the Court) and delaying the

the time for appeal of the final judgment and needlessly increasing the cost of

litigation. Plaintiff respectfully requests an Order imposing sanctions on Objectors

and their counsel.

II.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This matter came on for a final approval hearing on May 11, 2015.

During that hearing and after, the Court considered the Stipulation of

Settlement, as amended, and all oral and written objections, briefs, and

comments received regarding the proposed Settlement, including briefs

submitted and argument made by Objectors, and reviewed the entire record.

By order dated May 14, 2015, the Court: (a) granted the partiesSecond

Stipulation to Amend the Settlement Agreement; (b) granted plaintiffs Motion

to Increase the Awards to Business Opportunity Claimants; (c) granted

PlaintiffsMotion for Final Approval of Class Action Settlement; and (d)

granted in part Plaintiffscounsels Motion for AttorneysFees and Expenses.

By order dated June 17, 2015, the Court ordered the Final Judgment and

Order of Dismissal.

On July 15, 2015, the last possible day to file a motion under Rule 59(e),

and two days before the time for appeal expired, Objectors filed their Motion

for Reconsideration and memorandum in support.

III.

APPLICABLE LAW

A.

Federal Rule of Civil Procedure 11Federal Rules of Civil Procedure11(b) and 11(c) permit the Court to impose

sanctions upon parties and their attorneys for the improper use of motions.1To

1Local Rule 11-9 similarly provides: The presentation to the Court of frivolous motions or opposition to motions. . .

subjects the offender at the discretion of the Court to the sanctions of L.R. 83-7. Central District of California, Local

Rule 11-9. Therefore, each reference to Fed.R.Civ.P. 11 shall necessarily incorporate the provisions of C.D. Cal. L.R.

11-9.



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justify sanctions under Federal Rule of Civil Procedure 11, the moving party

must show that the non-moving party or its counsel presented a pleading,

written motion, or other paperwhich was presented (1) to harass or to

cause unnecessary delay or needless increase in the cost of the litigation;or

(2) is legally insupportable, or (3) the factual allegations contained or denied

lack evidentiary support (even after opportunity for further investigation).

Fed. R. Civ. P. 11(b).

Under Rule 11, there are basically three types of submitted papers

which warrant sanctions: (1) factually frivolous (not well grounded in

fact); (2) legally frivolous (not warranted by existing law or a good faith

argument for the extension, modification, or reversal of existing law); and

(3) papers interposed for an improper purpose.Business Guides, Inc. v.

Chromatic Communications Enterprises, Inc., 892 F.2d 802, 808 (9th Cir.

1989)(citing Fed. R. Civ. P. 11). Rule 11 also requires that a reasonable

prefiling inquiry be conducted into the law and facts. It also requiresjudges

to impose sanctions for any violation of the rules standards while allowing

judges considerable discretion in the choice of what sanction is appropriate.

Id.

The Court may impose sanctions under Rule 11 against the attorneys,

law firm, or partieswith violated Rule 11(b) or [who] are responsible for

the violation.Fed.R.Civ.P. 11(c). Rule 11 requires the imposition of

sanctions when a motion is frivolous, legally unreasonable, or without

factual foundation, or is brought for an improper purpose.Conn v.Borjorquez, 967 F.2d 1418, 1420 (9th Cir. 1992),citingOperating

Engineers Pension Trust v. A-C Company, 859 F.2d 1336, 1344 (9th Cir.

1988).

Frivolous filings are those that are both baseless and made without a

reasonable and competent inquiry.Estate of Blue v. County of Los Angeles,

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120 F.3d 982, 985 (9th Cir. 1997)(citations and internal quotations omitted). The

standard governing both the improper purpose and frivolous inquiries is objective.

The subjective intent of the movant to file a meritorious document is of no

moment. The standard is reasonableness. The reasonable man against which

conduct is tested is a competent attorney admitted to practice before the district

court.G.C. &K.B. Invs., Inc. v. Wilson, 326 F.3d 1096, 1109 (9th Cir. 2003)

(citations and internal quotations omitted).

The available sanctions include payment of the non-movant partys

reasonable attorneysfees and other expenses incurred as a direct result of the

violation. Fed.R.Civ.P. 11(c)(2). This includes an award of attorneys fees and

costs incurred in bringing the Rule 11 motion itself. SeeMargolis v. Ryan, 140

F.3d 850 (9thCir. 1998)(so noting).

Sanctions under Rule 11 do not require a showing of bad faith. SeeYoung

v. City of Providence, 404 F.3d 33 (1stCir. 2005)(no bad faith requirement for

sanctions under Rule 11);Anjelino v. New York Times Co., 200 F.3d 73, 100

(3d Cir. 1999)(Rule 11 does not require a finding of bad faith).

B.

28 U.S.C. Section 1927

Any attorney who so multiplies the proceedingsin any case

unreasonably and vexatiouslymay be required by the court to satisfy

personally the excesscosts, expenses, and attorneysfees reasonably incurred

because of such conduct.28 USC 1927(Section 1927) (italics added). To

justify the imposition of sanctions under Section 1927 , the moving party must

show intent, recklessness, or bad faith.Optyl Eyeware Fashion Intl Corp. v.Style Cos., Ltd., 760 F.2d 1045, 1048 (9 thCir. 1985).This standard has been

interpreted in the Ninth Circuit such that proof of intent to harass is not

required to assess sanctions under Section 1927 for the reckless assertion of a

frivolous position, although such evidence is an element where counsels

position is non-frivolous, but pursued in a reckless manner.In re Keegan

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Mgmt. Co. Sec. Litig., 78 F. 3d 431, 436 (9 thCir. 1996).

In evaluating the existence or nonexistence of recklessness or bad

faith, the Court may look at the cumulative effect of counsel s actions to

infer motive and purpose for counsels conduct. InSalstrom v. Citicorp

Credit Servs. Inc., 74 F.3d 183 (9thCir. 1996):

The [trial] court made its finding of bad faith on the basis of three

factors: the number and length of the pleadings, the timing involved

in many of the filings, and the substance of the claims asserted.

Id. at 185.The sanctioned lawyer argued on appeal that no one factor would

justify a finding of bad faith. However, the Ninth Circuit found:

It was the combination of these factors, converting a simple

straightforward debt collection action into a full-fledged assault,

that prompted the court to impose sanctions.Id.

Under the express terms of Section 1927, sanctions may only be

awarded against counsel -- not counsels client. However, the statute has

been interpreted to include counsels law firm, and the individuallawyers.Brignoli v. Balch Hardy & Scheinman, Inc., 735 F.Supp. 100,

102 (S.D.N.Y. 1990);but seeMGIC Indem. Corp. v. Moore, 952 F.2d

1120, 1122 (9thCir. 1991) (open issue).

C. Central District Civ. L.R. 83-7

The Court also has the authority under its own Local Rules to

impose sanctions against a party or counsel for violation of the Local

Rules. Central District L.R. 83-7 provides:

The violation of or failure to conform to any of these Local Rules

may subject the offending party or counsel to:

(a) monetary sanctions, if the Court finds that the conduct was

willful, grossly negligent, or reckless;

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(b) the imposition of costs and attorneys fees to opposing counsel,

if the Court finds that the conduct rises to the level of bad faith

and/or a willful disobedience of a court order; and/or

(c) for any of the conduct specified in (a) and (b) above, such other

sanctions as the Court may deem appropriate under the

circumstances.

See,Figueroa v. Gates, Case No. CV00-4158-ABC (BQRx), 2002 WL

31572968, *3 (C.D. Cal. Nov. 15, 2002)(awarding attorneys fees under L.R.

83-7);Moreno v. Baca, Case No. CV00-07149-ABA (CWx), 2002 WL 246767,

*4 (C.D. Cal. Feb. 8, 2002)(imposing sanctions payable to the Court and

awarding attorneys fees to moving party under Rule 11, L.R. 83-7, and Section

1927).

D. The Courts Inherent Power

The Court also has the inherent power to impose sanctions against both

attorneys and parties for bad faith. These powers are governed not by rule or

statutes but by the control necessarily vested in courts to manage their ownaffairs so as to achieve the orderly and expeditious disposition of a case.

Chambers v. NASCO, Inc.,501 U.S. 32, 43 (1991).

The Court may exercise its inherent power regardless of whether the

conduct in question warrants sanctions under Section 1927 or other rules and

statutes. These other mechanisms, taken alone or together, are not substitutes

for the inherent power, for that power is both broader and narrower than other

means of imposing sanctions.Id. at 46-48.For example, the Courts inherent

power is broader than Rule 11 in that is reaches all litigation conduct, not

merely filing papers; it is broader than Section 1927 because it reaches parties,

not just counsel.

However, the Courts inherent power is also narrower than Section 1927

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because it requires a more stringent test of bad faith,i.e., actions

committed vexatiously, wantonly, or for oppressive reasons.

Chambers, 501 U.S. at 45-46.Unlike Section 1927, mere recklessness is

not enough; a specific finding of facts which constitute or are tantamount

to bad faith is required.In re Keegan,supra, 78 F. 3d at 436.

Nevertheless, where a litigant is substantially motivated by

vindictiveness, obduracy, or mala fides, sanctions can be awarded even

if the underlying claim itself is colorable.Mark Indus., Ltd. v. Sea

Captains Choice, Inc.50 F.3d 730, 732 (9 thCir. 1995)(quotingLipsig v.

Natl Student Mktg. Corp.,663 F.2d 178, 181 (D.C. Cir. 1980)).

Finally, the Courts inherent authority extends to intentional delay

or disruption of the litigation.Chambers, 501 U.S. at 4546.

IV.

ARGUMENT

Objectorsmotion is frivolous, redundant, and made for an improper

purpose. As detailed in Plaintiffs and Defendants Opposition to the Motion for

Reconsideration, which arguments are incorporated here, Objectors motion makes

arguments that could have been raised previously or were already raised and

rejected by this Court. None of the arguments Objectors have raised are based

upon evidence that was previously unavailable or upon a change in applicable law.

Objectors have not only violated L.R. 7-18 but have also directly violated it by

repeating arguments made in their original opposition. Sanctions should be

imposed on Objectors and their counsel for submitting their frivolous and patently

improper Motion for Reconsideration thereby squandering the Courts time andforcing Plaintiff to expend unnecessary time and resources.

A. Objectors Make Frivolous Arguments.

A motion for reconsideration is frivolous where it (1) simply repeats

the movants earlier arguments, (2) fails to show that something material

was overlooked or disregarded, presenting previously unavailable evidence

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dracht motion for sanctions 01sep2015

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