Suber v. VVP Services, LLC

Background

Karen M. Suber moved under Federal Rule of Civil Procedure 60(b) for relief from the court’s October 4, 2023 Memorandum and Order. She also argued that the court had wrongly rejected her claim that the Defendant Companies—VVP Services, LLC, Vision Venture Partners, LLC, and Vision Esports, LP—waived attorney-client privilege over Exhibit 24. Separately, Defendants moved for sanctions against Suber and her attorney, and Suber cross-moved for sanctions against Defendants and their attorneys.

Rule 60(b) Motion

Rule 60(b)(1) allows a court, in its discretion, to grant relief from a final judgment or order because of mistake, inadvertence, surprise, or excusable neglect. The court said this relief is extraordinary and that Suber had not met her burden.

Suber argued that the earlier privilege ruling was legal error because the Defendant Companies are limited liability companies. The court held that the rule assigning a corporation’s attorney-client privilege to the corporation itself also applies to limited liability companies. Officers, directors, employees, and shareholders do not automatically hold that privilege personally.

The court further explained that an officer or director may lack authority to waive a company’s privilege when acting individually rather than for the company. The undisputed facts showed that Fox was preparing to bring his own lawsuit against Defendants when his personal attorney disclosed Exhibit 24. The court therefore found that Fox was acting in his personal capacity, not on behalf of the Defendant Companies, and that the disclosure was not an authorized waiver of their privilege. The court said that even if the disclosure did not violate the companies’ operating agreements, that fact alone did not make it an authorized waiver.

The court also rejected Suber’s argument that Defendants’ statements should not have been credited. It said it had considered declarations from both sides and that Suber had not substantiated her allegations of misrepresentation. The court concluded that Suber had not identified exceptional circumstances warranting relief from the October 4, 2023 order.

Sanctions Motions

Defendants sought sanctions under 28 U.S.C. § 1927 and the court’s inherent authority. Section 1927 permits sanctions against an attorney who unreasonably and vexatiously multiplies court proceedings. The court’s inherent authority permits sanctions against a party, an attorney, or both when conduct lacks a colorable basis and was undertaken in bad faith, such as for harassment or delay.

The court stated that Suber’s Rule 60(b) motion failed to meet the demanding standard for relief, but it was not prepared to find that she brought the motion for an improper purpose or in bad faith. The court therefore denied Defendants’ sanctions motion. It cautioned that continued baseless and inflammatory accusations against Defendants, or repetition of arguments already rejected, could warrant sanctions in the future.

The court characterized Suber’s cross-motion for sanctions as frivolous because there was no basis to find that Defendants acted in bad faith or without a colorable basis. It nevertheless denied that motion as well.

Disposition

Judge Alison J. Nathan denied Suber’s Rule 60(b) motion. The court also denied Defendants’ motion for sanctions and Suber’s cross-motion for sanctions. The order resolved docket entries 186, 188, and 191.