Inviron Technologies, Inc. v. Western States International, Inc. et al

Filing 49

ORDER DENYING Defendants' 40 Motion for Rule 11 Sanctions Against Counsel for Plaintiff, signed by District Judge Dale A. Drozd on 4/4/16. CASE CLOSED. (Marrujo, C)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

FOR THE EASTERN DISTRICT OF CALIFORNIA

10
11

INVIRON TECHNOLOGIES, INC.,

12
13
14
15

No. 1:15-cv-01643-DAD-JLT

Plaintiff,
v.
WESTERN STATES INTERNATIONAL,
INC. et al.,

ORDER DENYING DEFENDANTS’
MOTION FOR RULE 11 SANCTIONS
AGAINST COUNSEL FOR PLAINTIFF
(Doc. No. 40)

Defendants.

16
17
18

This matter comes before the court on defendants Western States International, Inc.

19

(―WSI‖) and Ingrid Aliet-Gass’s motion for sanctions against counsel for plaintiff Inviron

20

Technologies, Inc. (―Inviron‖) pursuant to Rule 11 of the Federal Rules of Civil Procedure. (Doc.

21

No. 40.) The court has considered the defendants’ arguments, and for the reasons set forth below,

22

denies the motion.

23
24

PROCEDURAL BACKGROUND
Plaintiff Inviron commenced this action for declaratory judgment on October 23, 2015.

25

(Doc. No. 1.) On December 21, 2015, defendants WSI and Aliet-Gass filed a motion to dismiss

26

plaintiff’s claims. (Doc. No. 25.) On December 28, 2015, defendants WSI and Aliet-Gass filed a

27

motion for attorney’s fees and costs. (Doc. No. 29.) That motion sought the imposition of

28

sanctions against plaintiff and its counsel, pursuant to both 28 U.S.C. § 1927 and the district
1

1

court’s inherent power to impose sanctions, for allegedly frivolous and bad-faith behavior related

2

to the filing of the complaint in this action. On February 9, 2016, defendants filed the instant

3

motion for sanctions, which seeks the award of sanctions against plaintiff’s counsel on

4

substantially similar grounds as advanced in support of defendant’s earlier motion for attorney’s

5

fees and costs. (Doc. No. 40.) In summary, defendants enumerate the following factual bases for

6

the imposition of sanctions:

7

(1)

8

Plaintiff’s counsel failed to articulate a reasonable basis for federal subject matter
jurisdiction over this action;

9

(2)

10

Plaintiff’s counsel represented defendant Riverwood Energy, LLC (―Riverwood‖)
in at least one other state court action since filing the complaint in this action;

11

(3)

Plaintiff served only a small fraction of parties named in the complaint, and

12

improperly named the Bureau of Land Management (―BLM‖) as a party to this

13

action, in an attempt to invoke subject matter jurisdiction;

14

(4)

Plaintiff’s counsel likely coordinated with other parties to (a) file the instant action

15

five weeks before the scheduled trial in state court for the related Riverwood case,

16

and (b) have defendant Jose Miguel Aguilar improperly remove that case from

17

state court (see Riverwood Energy, LLC v. W. States Int’l, Inc., No. 1:15-cv-

18

01736-DAD-JLT);

19

(5)

The notice of removal in the Riverwood case was procedurally and substantively
deficient;1 and

20
21

(6)

22

Plaintiff had no standing to pursue contract claims against defendants WSI and
Aliet-Gass because it has no privity of contract with either party.

23

(See id. at 2–6.)

24

/////

25

1

26
27
28

The court notes that the defendants in Riverwood did not move for the award of sanctions on
the basis that that action was improperly removed. The court expresses no opinion regarding
whether sanctions would have been imposed in that case had such a motion been made or whether
the state court may award sanctions following the remand of that action. The court states only
that it does not believe the award of sanctions in this action based upon allegations of an improper
removal of a separate action is authorized under Rule 11.
2

1

On March 7, 2016, the court granted defendants’ motion to dismiss this action for lack of

2

subject matter jurisdiction2 and denied defendants’ motion for attorney’s fees and costs. (Doc.

3

No. 45.) In its dismissal order, however, the court specifically retained jurisdiction to address this

4

motion for sanctions. (Id. at 4 n.4.)

5

LEGAL STANDARD

6

In relevant part, Rule 11 of the Federal Rules of Civil Procedure provides:

7

(b) Representations to the Court. By presenting to the court a
pleading, written motion, or other paper—whether by signing,
filing, submitting, or later advocating it—an attorney or
unrepresented party certifies that to the best of the person’s
knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances:

8
9
10

(1) it is not being presented for any improper purpose, such as
to harass, cause unnecessary delay, or needlessly increase the
cost of litigation;

11
12

(2) the claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for
establishing new law;

13
14
15

***

16

(c) Sanctions.

17

(1) In General. If, after notice and a reasonable opportunity to
respond, the court determines that Rule 11(b) has been violated,
the court may impose an appropriate sanction on any attorney,
law firm, or party that violated the rule or is responsible for the
violation.

18
19
20

Fed. R. Civ. P. 11.
―Rule 11 is an extraordinary remedy, one to be exercised with extreme caution.‖ In re

21
22

Keegan Management Co., Securities Litigation, 78 F.3d 431, 437 (9th Cir. 1996) (quoting

23

Operating Engineers Pension Trust v. A-C Co., 859 F.2d 1336, 1345 (9th Cir. 1988)). ―[T]he

24

central purpose of Rule 11 is to deter baseless filings in district court and . . . streamline the

25

administration and procedure of the federal courts.‖ Cooter & Gell v. Hartmarx Corp., 496 U.S.

26
27
28

2

On the same day, the court granted a motion to remand the Riverwood case to state court on
substantially similar grounds. See Riverwood, No. 1:15-cv-01736-DAD-JLT, Doc No. 21 (E.D.
Cal. Mar. 7, 2016).
3

1

384, 393 (1990). When a court examines a complaint for frivolousness under Rule 11, it must

2

determine both (1) whether the complaint is legally or factually baseless from an objective

3

perspective, and (2) whether the attorney conducted a reasonable and competent inquiry before

4

signing it. Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 2005). A nonfrivolous complaint

5

cannot be filed for an improper purpose. Townsend v. Holman Consulting Corp., 929 F.2d 1358,

6

1362 (9th Cir. 1990) (citing Zaldivar v. City of Los Angeles, 780 F.2d 823, 832 (9th Cir. 1986),

7

abrogated on other grounds by Cooter & Gell, 496 U.S. at 399–405).

8
9

DISCUSSION
Defendants move for the imposition of sanctions on grounds that plaintiff’s complaint

10

fails to comply with Rules 11(b)(1) and (2). (Doc. No. 40 at 7.) In particular, defendants argue

11

that ―all of the relief requested in Plaintiff’s Complaint is predicated on . . . an order against the

12

federal government agency the BLM.‖ (Id. at 8.) As an initial matter, while the complaint filed

13

by plaintiff in this action appears to seek mandamus relief from a federal agency, not all requested

14

relief depends thereon. For example, the complaint on several occasions seeks declaratory relief

15

as to the parties’ rights under state contract law. Such judgments would not require mandamus

16

relief against the BLM. Furthermore, neither plaintiff’s purported failure to serve its complaint

17

on the BLM nor its request for relief against the agency rises to the level of a Rule 11 violation.

18

The court does not find (as defendants do not present adequate evidence) that the issue of

19

sovereign immunity here is so clear that plaintiff’s inclusion of a federal agency in its complaint

20

amounts to sanctionable conduct. To the extent relief against a federal agency would have been

21

legally precluded, the court declines to find that plaintiff’s complaint is baseless—and therefore

22

frivolous—under an objective standard.

23

Moreover, insofar as defendants contend that their arguments in a motion to dismiss form

24

the basis of a Rule 11 violation (see id. at 7), the court similarly declines to impose sanctions.

25

While the court agreed that plaintiff’s complaint failed to confer subject matter jurisdiction, it did

26

so after noting and considering plaintiff’s good-faith—albeit unpersuasive—legal arguments.

27

The court also finds that the alleged claims in general are not legally or factually baseless from an

28

objective perspective.
4

1

Finally, because the complaint is nonfrivolous, the court declines to find that it was filed

2

for an improper purpose under Rule 11. Defendants allege a laundry list of questionable conduct,

3

by plaintiff’s counsel and several other parties to this action. While concerning if true, such

4

extrinsic misconduct is not considered for the purposes of sanctions under Rule 11. See Christian

5

v. Mattel, Inc., 286 F.3d 1118, 1131 (9th Cir. 2002) (―Rule 11 sanctions are limited to papers

6

signed in violation of the rule.‖) (internal quotations omitted). Accordingly, defendants’ motion

7

for sanctions is denied.3

8

ORDER

9

For the reasons set forth above,

10

1. Defendants’ motion for Rule 11 sanctions (Doc. No. 40) is denied; and

11

2. In light of the court’s order granting defendants’ motion to dismiss (Doc. No. 45), the

12

court directs the Clerk of the Court to enter judgment and close this action.

13
14
15

IT IS SO ORDERED.
Dated:

April 4, 2016
UNITED STATES DISTRICT JUDGE

16
17
18
19
20
21
22
23
24
3

25
26
27
28

The denial of this motion for imposition of sanctions should in no way be interpreted as this
court approving of the conduct of plaintiff’s counsel in this action. Plaintiff’s counsel filed no
opposition whatsoever to this motion. Similarly, plaintiff’s counsel filed an untimely, and plainly
inadequate, opposition to defendants’ motion to dismiss and for award of attorney’s fees and
costs. (See Doc. No. 45 at 1, n.1.) However, the quality of counsel’s performance is not what is
placed at issue by this motion. Rather, the question is whether the filing of the complaint was
frivolous, and this court cannot say that it was.
5