# Head Kandy LLC v. McNeill

> District Court, S.D. Florida · October 16, 2024

URL: https://www.frixlaw.com/law-library/cases/10643952

## Case

- **Court:** District Court, S.D. Florida
- **Decided:** October 16, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO. 23-CV-60345-BECERRA/STRAUSS

HEAD KANDY, LLC,

Plaintiff,
v.

KAYLA MARIE MCNEILL,

Defendant.
/

ORDER
THIS MATTER comes before the Court upon Plaintiff’s Motion for Rule 11 Sanctions
(“Motion”) [DE 260]. The Honorable Jacqueline Becerra has referred the Motion to me to take
all necessary and proper action as required by law. [DE 265]. I have reviewed the Motion along
with the Response [267] and Reply [DE 273] thereto, and all pertinent portions of the record. For
the following reasons, the Motion is DENIED.1

1 I previously issued a Report and Recommendation [DE 271] regarding two motions to which this
Motion relates: Plaintiff’s Expedited Motion to Enforce the Preliminary Injunction and for an
Order to Show Cause (“Motion to Enforce”) [DE 199] and Defendant’s Motion to Partially Vacate
the Preliminary Injunction and Partial Motion to Dismiss (“Motion to Vacate”). [DE 214]. I
addressed those matters through a Report and Recommendation because the Motion to Vacate
related to the Court’s order of injunctive relief – a matter excepted from those that a magistrate
judge may “determine” under 28 U.S.C. § 636(b)(1)(A) – while the Motion to Enforce sought a
finding of civil contempt – falling within 28 U.S.C. §636(e)(6)(B). The instant motion is not
excepted from § 636(b)(1)(A), and thus is one that a magistrate judge may “determine.” Moreover,
it is not “dispositive of a party’s claim or defense” for purposes of Federal Rule of Civil Procedure
72. Plaintiff’s Motion does not specify what type of sanction it seeks. However, even if the Motion
sought dispositive relief, “‘if the magistrate judge does not impose a dispositive sanction,’ then the
order is treated as not dispositive under Federal Rule of Civil Procedure 72(a).” Sosa v. Carnival
Corp., No. 18-20957-CIV, 2018 WL 6335178, at *7 (S.D. Fla. Dec. 4, 2018) (quoting Gomez v.
Martin Marietta Corp., 50 F.3d 1511, 1519 (10th Cir. 1995)). Therefore, because I am not granting
a dispositive sanction, an Order, subject to objections and review under Rule 72(a)’s “clearly
erroneous or contrary to law” standard, is appropriate.
BACKGROUND
Plaintiff and Defendant have been embroiled in this highly litigious case for more than a
year-and-a-half. I have more fully summarized the facts and background information in previous
reports and recommendations. See [DE 133, 271]. Consequently, I provide a briefer summary of
facts germane to this Motion here.

On February 22, 2023, Plaintiff filed its initial Complaint alleging, inter alia, that
Defendant had committed breaches of restrictive covenants, including a non-disparagement
provision of her Executive Employment Contract. [DE 1] at ¶¶ 36, 41–42. On June 6, 2023,
Plaintiff filed an Expedited Motion for Preliminary Injunction, seeking to enforce restrictive
covenants, including the non-disparagement provision. [DE 47]. Defendant responded [DE 66],
and, on August 1, 2023, I held an evidentiary hearing. [DE 107]. On September 12, 2023, I issued
a Report and Recommendation recommending that the Motion for Preliminary Injunction be
granted [DE 133], which the Court adopted [DE 152] over Defendant’s objections [DE 134].
On March 13, 2024, Plaintiff filed its Motion to Enforce seeking relief and damages for

Defendant’s alleged violation of the Court’s preliminary injunction. [DE 199]. In response to
Plaintiff’s Motion to Enforce, Defendant argued, for the first time during this litigation, that the
non-disparagement provision in the Executive Employment Agreement between Plaintiff and
Defendant violated the National Labor Relations Act (“NLRA”), rendering the preliminary
injunction invalid. [DE 209]. A week after filing her response to Plaintiff’s Motion to Enforce,
Defendant filed her Motion to Vacate. [DE 214]. The Motion to Vacate contained the same
arguments Defendant raised in response to Plaintiff’s Motion to Enforce.
On April 12, 2024, I conducted an evidentiary hearing on Plaintiff’s Motion to Enforce.
[DE 229]. On April 16, 2024, (before Defendant filed her reply on the Motion to Vacate) Plaintiff
served the instant Motion on Defendant (pursuant to Fed. R. C. P. 11(c)(2)) and then filed it on
May 9, 2024. [DE 260]. The Motion raises the same arguments Plaintiff raised in its reply to its
Motion to Enforce and response to Defendant’s Motion to Vacate, charging that Defendant’s
attempt to apply the NLRA to this case is frivolous. On June 11, 2024, I submitted my report and
recommendation on Plaintiff’s Motion to Enforce and Defendant’s Motion to Vacate. [DE 271].2

I recommended denying Defendant’s Motion to Vacate and granting Plaintiff’s Motion to Enforce.
As to the Motion to Vacate, I found that Defendant was a managerial employee and thus subject
to a judicially-created exception to the NLRA’s protections. Id. at 14. As to the Motion to Enforce,
I found that Defendant had violated the Court’s preliminary injunction, and I recommended that
the Court award Plaintiff $26,794.66 in attorney’s fees and costs to compensate Plaintiff for the
expenses of efforts to enforce the preliminary injunction. Id. at 25. In determining the amount of
compensation to recommend, I considered the significant time and expense Plaintiff had incurred
in responding to Defendant’s Motion to Vacate and the corresponding arguments Defendant had
made against the Motion to Enforce. Id. at 24.

LEGAL STANDARD
Rule 11 is intended “to deter baseless filings in district court and thus streamline the
administration and procedure of federal courts.” Peer v. Lewis, 606 F.3d 1306, 1311 (11th Cir.
2010) (citation omitted). When an attorney signs and files a pleading (and other court papers), the
attorney is certifying, inter alia, that: “(1) the pleading is not being presented for an improper
purpose; (2) the legal contentions are warranted by existing law or a nonfrivolous argument to
change existing law; and (3) the factual contentions have evidentiary support or will likely have
evidentiary support after discovery.” Id. (citing Fed. R. Civ. P. 11(b)). Consequently, sanctions

2 The Court’s consideration of that Report and Recommendation remains pending.
may be imposed under Rule 11 “when a party files a pleading or motion that ‘(1) has no reasonable
factual basis; (2) is based on a legal theory that has no reasonable chance of success and that cannot
be advanced as a reasonable argument to change existing law; and (3) is filed in bad faith for an
improper purpose.’” Gulisano v. Burlington, Inc., 34 F.4th 935, 942 (11th Cir. 2022) (quoting
Johnson v. 27th Ave. Caraf, Inc., 9 F.4th 1300, 1314 (11th Cir. 2021)). .

In evaluating a motion for sanctions under Rule 11, a court must consider “(1) whether the
party’s claims are objectively frivolous, and (2) whether the person who signed the pleadings
should have been aware that they were frivolous.” Peer, 606 F.3d at 1311 (quoting Byrne v.
Nezhat, 261 F.3d 1075, 1105 (11th Cir. 2001)); see also Benedek v. Adams, 725 F. App’x 755, 761
(11th Cir. 2018) (“The standard used to evaluate an alleged violation of Rule 11 is ‘reasonableness
under the circumstances.’”) (quoting Worldwide Primates, Inc. v. McGreal, 26 F.3d 1089, 1091
(11th Cir. 1994)). “[S]anctions are warranted when [a party] exhibits a ‘deliberate indifference to
obvious facts.’” Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998). However, “they are not
warranted when [a party’s] evidence is merely weak but appears sufficient, after a reasonable

inquiry, to support a claim under existing law.” Id. (footnote omitted). Similarly, “the purpose of
Rule 11 is . . . not to deter novel legal arguments.” Id.
ANALYSIS
Plaintiff argues that Defendant’s Motion to Vacate is objectively frivolous because it was
based on legal arguments with no reasonable chance of succeeding, predicated on unsupported
facts, and was brought for an improper purpose. As stated earlier, Plaintiff’s arguments largely
mirror those in its reply to its Motion to Enforce and response to Defendant’s Motion to Vacate.
While I ultimately found that Defendant’s Motion to Vacate lacked merit and recommended it be
denied, it was not so frivolous or indicative of bad faith to warrant sanctions under Rule 11.
I. Reasonable Chance of Success of Legal Theories
A. Timeliness
Plaintiff first contends that Defendant’s Motion to Vacate had no reasonable chance of
success because its arguments are untimely. Specifically, Plaintiff emphasizes that the caselaw
Defendant primarily relies upon, McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023) and Big

Green Respondent & Kelsey Gray, an Individual Charging Party & Denver Newspaper Guild-
Commc’ns Workers of Am., Loc. 37074, Afl-Cio Charging Party, No. 27-CA-276068, 2023 WL
8873718 (Dec. 20, 2023), is not new and was readily available prior to the filing of the instant
litigation and before the Court entered the preliminary injunction. [DE 260] at 5. Plaintiff
consequently argues that Defendant could not seek to modify the preliminary injunction based on
arguments that were available at the time of the preliminary injunction hearing, citing cases
indicating that a court may only modify a preliminary injunction based on changed circumstances.
See, e.g., Hodge v. Dep’t of Hous. & Urban Dev., Hous. Div., Dade Cnty., Fla., 862 F.2d 859, 862
(11th Cir. 1989).

Plaintiff is correct that the primary authority for Defendant’s arguments was available well
before the preliminary injunction hearing. However, that fact did not create a waiver of the
argument and prevent Defendant’s Motion to Vacate from having a reasonable chance of success.
The cases to which Plaintiff cites about when a court can reconsider or modify an injunction refer
to changes in factual circumstances. But Defendant’s Motion to Vacate was based on a legal
argument that the contract provisions that the injunction enforced were unlawful to begin with.
The Court should not –– and cannot –– enforce an order or contract provision that is illegal. See
Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83 (1982) (“[A] federal court has a duty to determine
whether a contract violates federal law before enforcing it.”). Therefore, Defendant cannot waive
the defense of illegality of the contract. See Oscanyan v. Arms Co., 103 U.S. 261, 266–67 (1880);
I.U.B.A.C. Loc. Union No. 31 v. Anastasi Bros. Corp., 600 F. Supp. 92, 95 (S.D. Fla. 1984). The
Court cannot simply bury its head in the sand when Defendant proffers an allegation that the Court
would be imposing an illegal order, even if Defendant makes the allegation long after litigation
has commenced. Instead, the Court must take the allegation seriously, and the fact that Defendant

could have brought her arguments earlier did not eliminate a reasonable probability of their
success.
B. Applicability of Section 7 and McLaren

Defendant’s Motion to Vacate was premised on the idea that Section 7 of the NLRA widely
protects an employee’s right to speak about the conditions of employment, and that Section 8
prohibits interference with that right including (as discussed in McLaren and other authorities
Defendant cites) through broad non-disparagement provisions. Plaintiff argues that Defendant’s
motion was frivolous because this case has nothing to do with collective bargaining or union
organizing. Yet, while the NLRA is primarily aimed at protecting union organizing and collective
bargaining, the statutory language is not so limited and, as Defendant points out, Section 7 can
more broadly protect communications about conditions of employment.
Defendant’s reliance on McLaren and Big Green as well as a memorandum by the National
Labor Relations Board’s (“NLRB”) general counsel to argue that a non-disparagement
requirement like the one at issue here burdens communications protected by Section 7 is not
objectively frivolous either. Although my previous report and recommendation [DE 271]
discussed those three supporting materials, I did not fully discuss how they may be distinguishable

from the case at hand because I found that NLRA’s managerial exception applied, thereby
obviating the need for any further discussion on the matter. At the very least however, there are
some non-binding authorities, from a recent NLRB decision to the NLRB’s general counsel
memorandum, that apply McLaren’s holding to situations outside the context of a severance
agreement. See Challenge Mfg. Holdings, Inc., Respondent & Kahdeijra Lashay Gee, an
Individual Charging Party, No. 07-CA-286573, 2023 WL 2866336 (Apr. 10, 2023); Re: Guidance
in Response to Inquiries About the McLaren Macomb Decision, No. MEMORANDUM GC 23-

05, 2023 WL 3567920, at *4 (Mar. 22, 2023). As a result, while Defendant lacked concrete
binding authority (or substantial persuasive authority), there is at least some support for the theory
that Section 8 would prohibit non-disparagement provisions even outside the non-union, and non-
severance agreement, contexts. Therefore, Defendant’s argument for applying those concepts here
were not objectively frivolous.
C. Savings Clause

Nor was it frivolous to argue that the burden on Section 7 rights described in McLaren and
Big Green would apply here despite the savings clause in Defendant’s Executive Employment
Agreement. During the April 12, 2024, evidentiary hearing on Plaintiff’s Motion to Enforce, I
questioned Defendant on how the Executive Employment Agreement violates the NLRA when the
agreement contains a provision explicitly stating that it did not “restrict or impede [Defendant]
from exercising protected rights . . .including, without limitation, [Defendant’s] rights under the
National Labor Relations Act.” [DE 230–1] at 7. In her reply to her Motion to Vacate, Defendant
provided the Court with several non-binding NLRB decisions purporting to illustrate that general
disclaimers or “savings clauses” within employee agreements do not render an employer’s
otherwise impermissible prohibition lawful. See Entergy Nuclear Operations, Inc. & United Gov't

Sec. Officers of Am., Loc. 25, 367 NLRB No. 135 (May 21, 2019); Giant Eagle, Inc., 39 NLRB
AMR 31 (June 22, 2011); Tpi Iowa, LLC, Respondent & Douglas Vollers II, an Individual, No.
JD-93-16, 2016 WL 5340240 (N.L.R.B. Div. of Judges Sept. 22, 2016).
As I noted in my previous report and recommendation, I found that this argument was a
“close question, particularly given that the carve out is explicitly tied to the non-disparagement
provision, as opposed to being placed elsewhere among broader employment policies and is not

limited only to union votes.” [DE 271] at 10 n.7. Nonetheless, I found that the NLRA did not
apply to Defendant and did not decide the issue. Because the argument is a close call, and the
NLRB decisions cited in Defendant’s reply provide her some support, I cannot say that
Defendant’s claim was objectively frivolous.
D. Managerial and Supervisor Exceptions
Finally, Plaintiff argues that Defendant’s failure to recognize that she falls within the

supervisor and managerial exceptions to the FLSA renders her Motion to Vacate frivolous. I
ultimately found that the managerial exception applied to Defendant (without reaching the
supervisor exception). That finding, however, is not dispositive of whether her Motion to Vacate
was brought in bad faith or was objectively frivolous. Notably, application of these exceptions
requires a case-by-case approach with few bright-line rules. See N.L.R.B. v. Bell Aerospace Co.
Div. of Textron, 416 U.S. 267, 290 n.19 (1974); Waldau v. Merit Sys. Prot. Bd., 19 F.3d 1395,
1399 (Fed. Cir. 1994). While Defendant did not address the managerial exception in her reply to
the Motion to Vacate, failing to address one argument (out of at least five) is not grounds by itself
for awarding Rule 11 sanctions. Moreover, Defendant did address the “supervisor exception.”
And though these two exceptions are separate and distinct from one another, they do have

considerable overlap.
As Defendant did throughout her reply to the Motion to Vacate, she cited non-binding
authority to at least plausibly support her position regarding the supervisory exception. See [DE
248] at 8–9. Defendant argued that even if she was a supervisor, the NLRA’s protections still
applied to her because she was demoted from her supervisory position before being terminated
and because she was engaged in “concerted action for the mutual aid and protection of employees.”

As to the first argument (about the effects of what Defendant described as her demotion) neither
party sufficiently analyzed, or supported with case law, their assertions about how the alleged
demotion should or should not affect a non-disparagement agreement that Defendant accepted well
before the alleged demotion. As to the second argument, Defendant alleges she was helping report
sexual harassment against other coworkers.3 There are non-binding caselaw and secondary
sources that provide some support to her contention that the NLRA protects such an activity as a
supervisor. See N.L.R.B. v. Downslope Indus., Inc., 676 F.2d 1114, 1119–20 (6th Cir. 1982);
Steven C. Kahn, et al., Legal Guide to Human Resources § 4:31 (2024). Thus, Defendant’s
argument that the NLRA applies to her even as a supervisor is not objectively frivolous, and Rule

11 sanctions are not warranted.
II. Bad Faith
Plaintiff argues that Defendant brought her Motion to Vacate in bad faith, with the
improper purpose to obstruct the proceedings, subject Plaintiff to last-minute surprise, and evade
compliance with the preliminary injunction and the Executive Employment Agreement. In

3 Plaintiff argues that Defendant’s claims about sexual harassment and abuse towards her and other
employees are “outlandish” and lack any “competent or credible evidence in the record.” [DE 260]
at 11. Defendant’s counterclaims (filed after the Motion), and the contentious disputes that have
followed in the time since the Rule 11 Motion and Motion to Vacate were filed, illustrate that the
facts surrounding Defendant’s sexual harassment allegations are hotly contested. At the very least,
the Court is not in a position to determine the truth of those allegations at this stage, much less to
conclude that those allegations are so lacking in evidentiary support as to be frivolous.
addition to characterizing the Motion to Vacate’s arguments as frivolous (for the reasons discussed
above), Plaintiff points to the timing of the Motion to Vacate (coming only after Plaintiff had
sought to enforce the preliminary injunction) as evidence of Plaintiff’s obstructionist purpose.
Defendant responds that the Motion to Vacate was not brought for an improper purpose and is an
example of zealous advocacy brought based on developing authority.

The timing of Defendant’s Motion to Vacate puts her on dangerous ground. Defendant’s
delay in raising her arguments did not make them frivolous, effect a waiver, or eliminate any
chance of success, for the reasons described above. Yet Defendant continues to shut her eyes to
the fact that she could have – and should have – brought these arguments in response to the motion
for preliminary injunction almost a year before she filed her Motion to Vacate. Defendant’s
arguments in support of her Motion to Vacate relied upon cases that were decided prior to the
initiation of this litigation and before the motion for preliminary injunction. Defendant does not
provide any good explanation for failing to raise this issue earlier (whether in response to the
original motion for preliminary injunction or, curiously, in any way as part of her proposed answer

[DE 195–1] that she filed with her motion to stay in February before Plaintiff’s Motion to
Enforce).4 In short, the timing of the Motion of the Vacate could justify an inference of bad faith.
Moreover, Defendant’s failure to raise this issue earlier is not without consequences.
Allowing open-ended attacks on the preliminary injunction stymies the rest of the judicial
proceedings and only increases costs for both parties. And the timing of Defendant’s Motion to
Vacate – coming seemingly only in response to Plaintiff’s Motion to Enforce after Defendant had

4 She also does not appear to have included her NLRA theory as an affirmative defense in her
Answer filed on June 10, 2024, [DE 268] nor her Amended Answer [DE 337] despite raising other
arguments against the enforceability of the restrictive covenants.
(by my findings) violated the preliminary injunction — significantly increased the time and expense
required to address the Motion to Enforce (for both the Court and the parties).
Ultimately, because I find that Defendant’s arguments (while not meritorious) were not
frivolous, I decline to infer that the timing of the Motion to Vacate alone merits a finding of bad
faith. I also note that I included the added time and expense Plaintiff incurred in responding to the
Motion to Vacate in determining the amount of attorney’s fees Defendant should owe if the Court
adopts my Report and Recommendation and finds her in contempt. See [DE 271]. Thus, to the
extent that the timing of Defendant’s Motion to Vacate complicated the proceedings and harmed
Plaintiff, the sanction I have recommended addresses that harm. Therefore, I decline to further
order sanctions under Rule 11.
CONCLUSION
For the foregoing reasons, itis ORDERED AND ADJUDGED that Plaintiff's Motion for
Rule 11 Sanctions [DE 260] is DENIED.
DONE AND ORDERED in Fort Lauderdale, Florida this 16th day of October 2024.

United States Magistrate Judge

11

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10643952. Public record. Not legal advice.