Rodriguez et al v. Service Employees International Union Local 87 et al

Filing 117

ORDER by Judge Joseph C. Spero granting 78 Motion to Dismiss; denying 80 Motion for Sanctions; and dismissing Plaintiffs' complaint with prejudice. (jcslc1, COURT STAFF) (Filed on 10/12/2011)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MAXIMA C. RODRIGUEZ, ET AL., 8 Plaintiffs, 9 SERVICE EMPLOYEES INTERNATIONAL, ET AL., 11 For the Northern District of California United States District Court 10 v. 12 Defendants. ___________________________________/ No. C-10-01377 JCS ORDER GRANTING MOTION BY PLAINTIFFS FOR VOLUNTARY DISMISSAL AND DENYING DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO FED. R. CIV. P. 11(c), 28 U.S.C. §1927, COURT’S INHERENT POWER [Docket No. 78, 80] 13 14 15 16 I. INTRODUCTION Plaintiffs in this action are union members who asserted claims under the Labor Management 17 Relations Disclosure Act (“LMRDA”) based on alleged impropriety by Defendant Service 18 Employees International Union Local 87 (“Local 87”) and several individual officers of the Local 87 19 in connection with ratification of a collective bargaining agreement. The parties consented to the 20 jurisdiction of a magistrate judge, pursuant to 28 U.S.C. § 636(c). After some of Plaintiffs’ claims 21 survived a motion to dismiss and some discovery had occurred, Plaintiffs decided that they did not 22 want to go forward with the lawsuit. According to their counsel, Arlo Uriarte, Plaintiffs could no 23 longer afford to prosecute the action and were not willing to risk the possibility that they might be 24 held liable for Defendants’ attorneys’ fees and/or costs if they did not prevail at trial. Accordingly, 25 Plaintiffs bring a motion seeking dismissal of the action pursuant to Rule 41(a)(2) of the Federal 26 Rules of Civil Procedure (“the Motion for Voluntary Dismiss”). Defendants do not oppose the 27 dismissal of the action but argue that the dismissal should be with prejudice and that they are 28 entitled to an award of costs. In addition, Defendants bring a sanctions motion seeking an award of 1 attorneys’ fees under Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927 and the 2 Court’s inherent power (“Motion for Sanctions”). 3 The Court finds that the Motions are suitable for determination without oral argument and 4 therefore vacates the hearing scheduled for October 21, 2011 at 9:30 a.m. For the reasons stated 5 below, the Court GRANTS Plaintiff’s Motion to for Voluntary Dismissal. The Court DENIES 6 Defendants’ Motion for Sanctions. 7 II. BACKGROUND Motion for Dismissal1 8 A. 9 In the Motion for Dismissal, Plaintiffs seek a voluntary dismissal of their claims pursuant to Rule 41(a)(2). According to Plaintiffs’ counsel, Arlo Uriarte, the main reason Plaintiffs wish to 11 For the Northern District of California United States District Court 10 dismiss the action is their concern that if they do not prevail they will be held responsible for 12 Defendants’ attorneys’ fees and/or costs. Declaration of Arlo Uriarte in Support of Plaintiffs’ 13 Motion for Voluntary Dismissal (“Uriarte Motion Decl.”); see also Amended Declaration of Mario 14 Suarez (“Suarez Amended Decl.”) (stating that he is on disability leave from his job as a janitor, 15 where he earns an hourly wage of $18.25, and that has no real estate assets or savings); Declaration 16 of Carolina Rodriguez (“Rodriguez Decl.”) (stating that she is on disability leave from her job as a 17 janitor, where she earns an hourly wage of $18.25, and that she has no assets or savings); 18 Declaration of Elsa Acevedo (“Acevedo Decl.”) (stating that she works as a janitor and earns an 19 hourly wage of $18.75 and has no disposable income); Declaration of Olga Loaiza (“Loaiza Decl.”) 20 (stating that she was cleared to return from disability leave to her position as a janitor in May 2011 21 but that her supervisor and Olga Miranda have not allowed her to return to her former position and 22 therefore she currently has no income). 23 Defendants do not oppose dismissal of the case but assert that the dismissal should be with 24 prejudice and further, that they should be awarded their costs. According to Defendants, dismissal 25 with prejudice is appropriate in this case because: 1) the case was “flimsy” from the outset; 2) 26 1 27 A summary of Plaintiffs’ claims and allegations can be found in the Court’s November 23, 2010 Order granting in part and denying in part Defendants’ motion to dismiss. See Docket No. 66. 28 2 1 Plaintiffs’ request for dismissal came only after Defendants elicited testimony from the Plaintiffs 2 that would have allowed Defendants to prevail on summary judgment; 3) Plaintiffs’ conduct resulted 3 in excessive delay and subjected Defendants to great expense. With respect to their request for 4 costs, Defendants assert that Rule 54(d) mandates an award of costs where, as here, plaintiffs 5 dismiss an action at a point when the defendant likely would have prevailed. To the extent that 6 courts may decline to award costs under exceptional circumstances, Defendants assert, there are no 7 such circumstances here. 8 In their Reply brief, Plaintiffs stipulate to dismissal of the action with prejudice but assert 9 that where a dismissal under Rule 41(a)(2) is with prejudice an award of costs is not appropriate. Plaintiffs reject Defendants’ assertion that their claims were baseless or that they necessarily would 11 For the Northern District of California United States District Court 10 have lost on summary judgment. Rather, they argue that they litigated in good faith to protect their 12 rights as union members. 13 B. 14 Defendants assert that sanctions, in the form of their attorneys’ fees and costs, should be Motion for Sanctions 15 awarded against Plaintiffs and their attorney under Rule 11 of the Federal Rules of Civil Procedure, 16 28 U.S.C. § 1927 and the Court’s inherent powers. Defendants assert that sanctions are warranted 17 because: 1) Plaintiffs did not have a factual or legal basis for their claims and did not withdraw or 18 amend them after Defendants sent Plaintiffs a 21-day safe-harbor letter in May 2010 or after 19 Defendants filed a motion for sanctions and a motion to dismiss; 2) Plaintiffs did not comply with 20 discovery deadlines, including responses to interrogatories and requests for admissions, and delayed 21 the litigation by failing to agree to scheduled deposition dates and cancelling some depositions at the 22 last minute, causing Defendants to incur penalty charges from translators and court reporters in the 23 amount of $1800; and 3) Plaintiffs’ request for voluntary dismissal is motivated by an awareness 24 that Plaintiffs are unlikely to prevail on their claims. See Declaration of Peter Haberfeld in Support 25 of Motion for Sanctions Pursuant to Fed. R. Civ. P. 11(c), 28 U.S.C. § 1927, Court’s Inherent Power 26 (“Haberfeld Motion Decl.”), ¶¶ 4-8. 27 28 3 1 Plaintiffs respond that sanctions should not be awarded because Plaintiffs’ claims were not members during the union internal hearings that preceded this action as well as the fact that some of 4 Plaintiffs’ claims survived Defendants’ motion to dismiss. Plaintiffs further assert that Defendants’ 5 Motion for Sanctions was brought for an improper purpose, namely, to pressure the plaintiffs in 6 another action (one of whom is also a plaintiff in this case) to dismiss that action. See Declaration of 7 Arlo Uriarte in Support of Plaintiffs’ Reply Memorandum re Plaintiffs’ Motion for Voluntary 8 Dismissal (“Uriarte Reply Decl.”), ¶ 6 (stating that on July 11, 2011, he received a letter from 9 Defendants’ counsel offering to waive all costs and fees in this action if the plaintiffs in Gomez v. 10 SEIU, Case No. 10-1888 RS, U.S. District Court for the Northern District of California, dismissed 11 For the Northern District of California frivolous and were asserted in good faith, as is shown by declarations and testimony from union 3 United States District Court 2 that action). Plaintiffs do not address Defendants’ contention that Plaintiffs failed to comply with 12 discovery deadlines; Mr. Uriarte does state in his declaration, however, that “[a]ny penalties 13 incurred by Mr. Haberfeld regarding the translator is of his own making and choosing. If such is the 14 condition of his translator then it is suggested he find more reasonable translators.” Uriarte Reply 15 Decl., ¶ 4. 16 III. 17 18 19 ANALYSIS A. Whether Costs Should Be Awarded as a Condition of Dismissal 1. Legal Standard Federal Rule of Civil Procedure 41(a)(2) allows the court, at the plaintiff’s request, to 20 dismiss an action “on terms the court considers proper.” Fed. R. Civ. P. 41(a)(2). The decision to 21 grant or deny a motion pursuant to Rule 41(a)(2) is within the sound discretion of the trial court and 22 may be reviewed only for abuse of that discretion. Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 23 (9th Cir.1980). “A district court should grant a motion for voluntary dismissal under Rule 41(a)(2) 24 unless a defendant can show that it will suffer some plain legal prejudice as a result.” Smith v. 25 Lenches, 263 F.3d 972, 975 (9th Cir.2001) . Although the Ninth Circuit has held that Rule 41(a)(2) 26 does not provide an independent source of authority for imposing sanctions, see Heckethorn v. 27 Sunan Corp., 992 F.2d 240, 242 (9th Cir.1993), where there is an independent source of authority 28 4 1 for such an award, courts have discretion to award fees and/or costs as a condition of dismissal 2 under Rule 41(a)(2) where the dismissal is without prejudice. See Westlands Water Dist. v. United 3 States, 100 F.3d 94, 96 (9th Cir.1996). 4 It is less clear whether an award of fees or costs is appropriate where a dismissal under Rule 5 41(a)(2) is with prejudice. In Chavez v. Northland Group, the court explained that this question has 6 not been resolved in the Ninth Circuit: 7 8 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 In Heckethorn, because the court held that Fed.R.Civ.P. 41(a) (2) does not provide an independent basis for sanctioning attorneys, it left open the issues of “whether a district court can impose conditions under Fed.R.Civ.P. 41(a)(2) when the dismissal is with prejudice. Id. at 242-43. Although it does not appear that the Ninth Circuit has resolved the issue, other federal courts have concluded that the payment of fees and costs ordinarily should not be imposed as a condition for voluntary dismissal with prejudice. Burnette v. Godshall, 828 F.Supp. 1439, 1443 (N.D.Cal.1993) ( “Since the ... cause of action has been dismissed with prejudice, costs and attorney fees cannot be awarded to Defendants because there is no future risk of litigation,” but noting that sanctions could still be imposed under Fed.R.Civ.P. 11); see also Gonzalez v. Proctor and Gamble Co., 2008 WL 612746 at * 3 (S.D.Cal.2008) (“A plaintiff faced with the imposition of attorneys' fees and costs as a condition of voluntary dismissal may request that the action be dismissed with prejudice to avoid payment.”); Steinert v. Winn Group, Inc., 440 F.3d 1214, 1222 (10th Cir.2006) (“if the dismissal is with prejudice, attorney fees may be imposed under Rule 41(a)(2) only in ‘exceptional circumstances.’ ”). However, these courts have held that, in the case of a voluntary dismissal with prejudice, costs and fees may be imposed under “exceptional circumstances” or pursuant to Fed.R.Civ.P. 11. 2011 WL 317482, at * 4 (D.Ariz., Feb. 1, 2011). 17 2. Application of the Law to the Facts 18 The Court finds that the approach described in Chavez is sound and therefore denies 19 Defendants’ request for costs as a condition of dismissal pursuant to Rule 41(a)(2) on the basis that 20 Plaintiffs have stipulated to dismissal with prejudice and this case is not exceptional. Further, as 21 discussed below, the Court concludes that Defendants are not entitled to sanctions under Rule 11. 22 23 24 B. Whether the Court Should Award Sanctions 1. Legal Standard a. Rule 11 25 Rule 11 of the Federal Rules of Civil Procedure states, in relevant part, as follows: 26 (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 27 28 5 1 unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: 2 3 (1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; 4 (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; 5 6 (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and 7 8 Fed. R. Civ. P. 11(b). Rule 11 further provides that the court may impose sanctions upon attorneys 11 For the Northern District of California (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information. 10 United States District Court 9 or parties “[i]f, after notice and a reasonable opportunity to respond, the court determines that 12 subdivision (b) has been violated....” When evaluating whether sanctions should be imposed under 13 Rule 11, courts conduct “a two-prong inquiry to determine (1) whether the complaint is legally or 14 factually baseless from an objective perspective, and (2) if the attorney has conducted a reasonable 15 and competent inquiry before signing and filing it.” Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 16 2005) (internal citation omitted). When imposing sanctions under Rule11, the court is also obligated 17 to describe the conduct determined to constitute a violation of the rule and explain the basis for the 18 sanction imposed. Fed. R. Civ.P. 11(c)(6). 19 20 21 22 23 b. 28 U.S.C. § 1927 A court may impose sanctions against an attorney under 28 U.S.C. § 1927, which provides as follows: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct. 24 25 28 U.S.C. § 1927. “[T]he term ‘vexatious’ has been defined as ‘lacking justification and intended 26 to harass.’” Terrebonne, Ltd. of California v. Murray, 1 F.Supp.2d 1050, 1055 (E.D. Cal.,1998) 27 (quoting Overnite Transp. Co. v. Chicago Ind. Tire Co., 697 F.2d 789, 795 (7th Cir.1983)). 28 6 1 Sanctions may be imposed under § 1927 where there is a finding of bad faith or recklessness. See 2 Lahiri v. Universal Music & Video Distribution Corp., 606 F.3d 1216, 1219 (9th Cir. 2010). 3 c. Inherent Powers 4 A district court has the inherent power to impose sanctions on counsel who “willfully 5 abuse[s] judicial processes.” Roadway Express, Inc. v. Piper, 447 U.S. 752, 766. The imposition of 6 sanctions under the court’s inherent power requires a finding that counsel’s conduct “constituted or 7 was tantamount to bad faith.” Id. at 767. A court’s inherent powers “are governed not by rule or 8 statute but by the control necessarily vested in courts to manage their own affairs so as to achieve 9 the orderly and expeditious disposition of cases.” Chambers v. NASCO, Inc., 501 U.S. 32, 43 11 For the Northern District of California United States District Court 10 (1991). Chambers, 501 U.S. at 43, 111 S.Ct. at 2132. 2. Application of the Law to the Facts 12 Having carefully reviewed the submissions of the parties, the Court declines to award 13 sanctions against Plaintiffs. First, Plaintiff’s claims were not obviously baseless at the outset of the 14 action. To the contrary, the action survived Defendants’ motion to dismiss as to at least some of 15 Plaintiff’s claims. Further, the testimony and evidence from the internal Union proceeding provided 16 Plaintiffs’ counsel with a sufficient factual basis for filing the action under Rule 11. Second, the 17 Court does not find that Plaintiffs’ counsel acted recklessly or in bad faith so as to warrant the 18 imposition of sanctions under § 1927. Although the evidence in the record suggests that Plaintiffs’ 19 case may have been weak, it is not so obvious that Defendants’ would have prevailed that the Court 20 can conclude that Plaintiffs’ counsel multiplied the proceedings in continuing to litigate the action 21 beyond the motion to dismiss stage of the case. Nor does the Court find that counsel’s failure to 22 comply with discovery deadlines – or even counsel’s failure to provide advance notice before 23 canceling depositions – rose to the level of conduct that was intended to harass and thus vexatious. 24 Similarly, the Court declines to impose sanctions under its inherent power because Defendants have 25 not established that Plaintiffs or their counsel acted in bad faith. 26 27 28 7 1 2 IV. CONCLUSION For the reasons stated above, Plaintiffs’ Motion for Dismissal is GRANTED. Defendants’ 3 Motion for Sanctions is DENIED. The action is dismissed with prejudice, pursuant to Rule 41(a)(2) 4 of the Federal Rules of Civil Procedure, with the parties to bear their own fees and costs. 5 IT IS SO ORDERED. 6 7 Dated: October 12, 2011 8 JOSEPH C. SPERO United States Magistrate Judge 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8

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