Manipoun v. Dibela et al

Filing 114

ORDER Granting in part and Denying in part Defendants' Motion for Rule 11 Sanctions. Signed by Judge Anthony J. Battaglia on 8/11/2020. (jrm)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10
11
12

MERIDA MANIPOUN a.k.a. ANOMA
SENGVIXAY,

15
16
17

ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION FOR RULE 11
SANCTIONS

Plaintiff,

13
14

Case No.: 17-CV-2325-AJB-BGS

v.
LOU DIBELLA; CHRIS KELLY;
LINDA CARR; JAMES COX; SAN
DIEGO EUROPEAN MOTORCARS,
LTD. d/b/a ASTON MARTIN OF SAN
DIEGO; and DOES 1-20,

18

(Doc. No. 91)

Defendants.

19
20

Pending before this Court is a Motion for Rule 11 Sanctions filed by Defendants San

21

Diego European Motorcars, Ltd. d/b/a Aston Martin of San Diego and James Cox

22

(“Defendants”). (Doc. No. 91.) Oppositions were filed by Mr. VerStandig, (Doc. No. 102),

23

Mr. Obagi, (Doc. No. 105), Mr. Vining, Ms. Colt, and Plaintiff, (Doc. No. 103). For the

24

reasons set forth below, the Court GRANTS IN PART AND DENIES IN PART

25

Defendants’ Motion for Rule 11 Sanctions.

26

///

27

///

28

///
1
17-CV-2325-AJB-BGS

1

BACKGROUND

2

On May 7, 2016, Merida Manipoun (“Plaintiff”) participated in the “Dream

3

Machine,” a promotional event held at Viejas Casino and Resort (“Casino”). (Doc. No. 50-

4

1 at 4; Doc. No. 62-1 at 2–3.) Plaintiff was issued a “V Club Card” that garnered entries

5

into a drawing each time the V Club Card was used on the slot machine. (Id.) Plaintiff

6

“earned the opportunity” to participate in the drawing and was called on stage to select a

7

single envelope from various envelopes available. (Doc. No. 50-1 at 5.) Plaintiff picked an

8

envelope containing a certificate for an Aston Martin V8 Vantage (the “Car”). (Id.) The

9

Casino issued Plaintiff a Form 1099 indicating a $134,000 income, the suggested retail

10

value of the Car. (Id. at 6.)

11

On May 12, 2016, Mr. Dibella, the Casino’s manager, called Plaintiff to inform her

12

she would not be receiving the Car. (Doc. No. 1 ¶ 26.) Defendants assert the Casino

13

disqualified Plaintiff from the contest because she allowed her companion to use her V

14

Club Card to improperly gain entries into the drawing, which constituted a violation of the

15

contest rules. (Doc. No. 62-1 at 2.)

16

On November 16, 2017, Plaintiff sued Defendants and three other defendants for

17

fraud, conspiracy to defraud, breach of unfair competition, and breach of unilateral

18

contract. (Doc. No. 1.) Other defendants to this action were Lou Dibella, Chris Kelly, and

19

Linda Carr. (Id.) On May 10, 2018, Plaintiff voluntarily dismissed Defendants Dibella and

20

Carr from this litigation. (Doc. No. 31.) Defendants’ filed a motion to dismiss that was

21

subsequently denied on procedural grounds as it was untimely. (Doc. No. 54 at 3.) The

22

parties then began discovery. Magistrate Judge Skomal granted in part sanctions against

23

Plaintiff for Plaintiff’s failure to appear at her deposition and Plaintiff’s failure to respond

24

to certain requests for admissions. (Doc. No. 58.) Plaintiff sought leave to file an amended

25

complaint, however, this was denied as untimely. (Doc. No. 76.) Defendants then filed a

26

motion for order requiring Plaintiff to post an undertaking and a motion for summary

27

judgment. (Doc. Nos. 56, 62.) Plaintiff filed a motion to strike as her opposition to

28

Defendant’s motion for summary judgment. (Doc. No. 65.) Plaintiff then sought to file a
2
17-CV-2325-AJB-BGS

1

sur-reply, which the Court permitted. (Doc. No. 69.) The Court then held a hearing

2

regarding Defendants’ motion for summary judgment. Thereafter, the Court issued an order

3

granting Defendants’ motion for summary judgment. (Doc. No. 89.) Subsequently,

4

Defendants filed the instant motion for sanctions. (Doc. No. 91.)

5

LEGAL STANDARD

6

Rule 11 sanctions are warranted when a party files a lawsuit or motion that is

7

frivolous, legally unreasonable, without factual foundation, or is otherwise brought for an

8

improper purpose. Warren v. Guelker, 29 F.3d 1386, 1388 (9th Cir.1994). Complaints filed

9

in the face of previous dismissals involving the same legal issues or the same parties

10

warrant sanctions under Rule 11. See Harris v. Heinrich, 919 F.2d 1515, 1516 (11th

11

Cir.1990); Kurkowski v. Volcker, 819 F.2d 201, 204 (8th Cir.1987); Warren, 29 F.3d at

12

1390. When one party seeks sanctions against another, the Court must first determine

13

whether any provision of Rule 11(b) has been violated. Id. at 1389. A finding of subjective

14

bad faith is not required under Rule 11. See Smith v. Ricks, 31 F.3d 1478, 1488 (9th

15

Cir.1994) (“Counsel can no longer avoid the sting of Rule 11 sanctions by operating under

16

the guise of a pure heart and empty head”). Instead, the question is whether, at the time the

17

paper was presented to the Court (or later defended) it lacked evidentiary support or

18

contained “frivolous” legal arguments. Where such a violation is found, Rule 11 authorizes

19

sanctions against persons-attorneys, law firms, or parties-responsible. See Pavelic &

20

LeFlore v. Marvel Entm’t Gp., 493 U.S. 120, 110 S.Ct. 456, 107 L.Ed.2d 438 (1989);

21

Fed.R.Civ.P. 11(c)(2) (“If warranted, the court may award to the prevailing party the

22

reasonable expenses, including attorney’s fees, incurred for the motion.”).

23

Where such sanctions are sought by motion, Rule 11 contains a “safe harbor”

24

provision stating that a motion for sanctions may not be filed until 21 days after it is served.

25

See Fed. R. Civ. Pro. 11(c)(1)(A). This “safe harbor” gives the party subject to the Rule 11

26

motion 21 days to withdraw the offending pleading and thereby escape sanctions. See

27

Barber v. Miller, 146 F.3d 707, 711 (9th Cir.1998). The 21–day “safe harbor” period is an

28

absolute prerequisite (unless some other period is established by a court) to a motion for
3
17-CV-2325-AJB-BGS

1

sanctions brought by any party. This provision does not apply to bar court-initiated sanction

2

proceedings; however, the court must issue an order to show cause and there are restrictions

3

on the court’s sua sponte sanctions authority. See id.

4

DISCUSSION

5

Defendants seek sanctions under Rule 11 on the basis that this case is a “clear

6

example of an abuse of the judicial process.” (Doc. No. 91-1 at 8.) Furthermore, Defendants

7

argue that this was not a temporary lapse in judgment, but rather was prolonged because

8

Plaintiff pursued this case through summary judgment. (Id.) Defendants specifically

9

identify three instances of conduct that violated Rule 11: (1) Plaintiff’s Complaint, (2)

10

Plaintiff’s Motion for Leave to File Amended Complaint, and (3) Plaintiff’s Opposition to

11

Defendants’ Motion for Summary Judgment. (Id. at 9.)

12

A.

Request for Judicial Notice

13

Defendants request judicial notice of the Court’s docket in this matter as Exhibit 1.

14

Plaintiff, Mr. VerStandig, Mr. Obagi, Mr. Vining, and Ms. Colt do not oppose judicial

15

notice of these documents. However, the Court need not take judicial notice of the its own

16

docket or documents filed on the docket in this case. Henricks v. California Pub. Utilities

17

Comm’n, No. 17CV2177-MMA (MDD), 2018 WL 2287346, at *8 (S.D. Cal. May 18,

18

2018) (citing Asdar Grp. v. Pillsbury, Madison, & Sutro, 99 F.3d 289, 290 n.1 (9th Cir.

19

1996)) (finding moot Plaintiff’s request for the Court to take judicial notice of pleadings

20

filed on the docket in this case). Since this document is the Court’s docket in this case, the

21

Court DENIES AS MOOT Defendants’ request for judicial notice. (Doc. No. 91-2.)

22

B.

Safe Harbor Notice

23

Rule 11 contains a “safe harbor” provision that a motion for sanctions may not be

24

filed until 21 days after it is served. See Fed. R. Civ. Pro. 11(c)(1)(A). Here, Defense

25

counsel informed Plaintiff throughout the litigation that Defense counsel would be seeking

26

sanctions. On December 21, 2017 and January 24, 2018, Defense counsel informed Mr.

27

Obagi and Mr. VerStandig that Defense counsel believed there was no factual or legal basis

28

to proceed with this case. (Doc. No. 91-1 at 7.) On May 17, 2018, Defense counsel formally
4
17-CV-2325-AJB-BGS

1

served its Rule 11 “safe harbor” notice. (Id.) On August 29, 2018 and October 4, 2018,

2

Defense counsel informed Mr. Vining of the “safe harbor” notice. (Id.) On September 5,

3

2018, Defense counsel informed Ms. Colt of the “safe harbor” notice. (Id.) Accordingly,

4

Defense counsel has met the procedural requirement for Rule 11 sanctions.

5

C.

Sanctions Against Mr. VerStandig and Mr. Obagi

6

Plaintiff was originally represented by Mr. VerStandig and Mr. Obagi. (Doc. No.

7

102 at 5.) Out of the three pleadings Defendants allege create the basis for Rule 11

8

Sanctions, Mr. VerStandig and Mr. Obagi only represented Plaintiff for the complaint. The

9

complaint alleged claims of fraud, conspiracy to defraud, breach of unfair competition, and

10

breach of unilateral contract. (See generally Doc. No. 1.) Both Mr. VerStandig and Mr.

11

Obagi declare that they each investigated the facts alleged in the complaint prior to bringing

12

this suit. (Doc. No. 102 at 7, Doc. No. 105 at 5.) Mr. VerStandig and Mr. Obagi attest that

13

they reviewed evidence of the Casino’s promotion, reviewed the Form 1099 that was sent

14

to Plaintiff, verified the Casino’s promotions, and assessed the financial viability of the

15

promotions. (Doc. No. 102 at 8, Doc. No. 105 at 5–6.) These publicly available facts did

16

not reveal any inconsistencies or other problems to both Mr. VerStandig and Mr. Obagi.

17

(Id.) Defendants allege that Mr. VerStandig and Mr. Obagi failed to identify any

18

information from these other available sources that supported the claims against

19

Defendants.

20

Defendants sent a safe harbor version of a motion for sanctions in May of 2018.

21

Upon review of this letter, Mr. VerStandig and Mr. Obagi began to press the Plaintiff for

22

further assurances as to certain facts not verifiable in the public record. (Doc. No. 102 at 6,

23

Doc. No. 105 at 4.) Thereafter, while Plaintiff’s answers to interrogatories were being

24

worked on and Plaintiff’s deposition was nearing, Mr. VerStandig and Mr. Obagi “became

25

uncomfortable prosecuting the case any further.” (Id.) Both sought leave of the Court to

26

withdraw as counsel. (Id.) Accordingly, Mr. VerStandig and Mr. Obagi request that they

27

not be responsible beyond the scope of the complaint.

28

While Mr. VerStandig and Mr. Obagi did press Plaintiff for further assurances after
5
17-CV-2325-AJB-BGS

1

they received the safe harbor version of the motion, they are required to do this before

2

filing the complaint. Attorneys and parties are required to “think first and file later” and

3

“look before leaping.” See Stewart v. RCA Corp., 790 F.2d 624, 633 (7th Cir. 1986); Lied

4

v. Topstone Indus., Inc., 788 F.2d 151, 157 (3d Cir. 1986). Further, after they pressed

5

Plaintiff for further assurances, Mr. VerStandig and Mr. Obagi became uncomfortable.

6

However, it is unclear to the Court what information Plaintiff could have originally

7

provided to Mr. VerStandig and Mr. Obagi to support the allegations in the complaint.

8

Plaintiff’s claims were not legally supportable. Mr. VerStandig and Mr. Obagi should have

9

conducted the necessary research and investigation before filing this litigation. Had counsel

10

properly done so, it should have prevented the filing of this baseless lawsuit. Accordingly,

11

the Court GRANTS sanctions against Mr. VerStandig and Mr. Obagi.

12

D.

Sanctions Against Ms. Colt, Mr. Vining, and Plaintiff

13

First, Plaintiff’s counsel states that its arguments will be strengthened once Plaintiff

14

has the hearing transcript and can file a supplemental response. However, the transcript of

15

the hearing was attached to the Declaration of Joseph A. Gonella in support of Defendants’

16

motion for sanctions. (Doc. No. 91-9.) It is unclear if Plaintiff’s counsel read the motion

17

for sanctions. Furthermore, Plaintiff and Plaintiff’s counsel failed to appear at the Court’s

18

hearing on this matter on December 12, 2019.

19

Second, Plaintiff’s counsel states that they recall that the Court was willing to

20

consider that course of conduct established an objective contract under California law.

21

(Doc. No. 103-1 at 3–4.) The Court did consider the course of conduct argument in its

22

Order granting Defendant’s motion for summary judgment. (Doc. No. 89.) Further, Mr.

23

Vining presented this argument at the hearing, and the Court addressed it at the hearing.

24

(Doc. No. 91-9 at 19, 22.)

25

Further, Plaintiff’s counsel states that the Mr. Samouris led the Court to believe that

26

Plaintiff was lying about the 1099 Form. (Doc. No. 103-1 at 4.) However, this is not what

27

Mr. Samouris stated. Mr. Samouris explained that a 1099 Form was issued incorrectly, and

28

the Casino then issued a correction to the IRS. (Doc. No. 91-9 at 18.) Mr. Samouris did
6
17-CV-2325-AJB-BGS

1

state that Plaintiff was lying about paying taxes on the Car, but he did not state that she

2

was lying about the 1099 Form. (Id. at 19.) Mr. Samouris never stated that Plaintiff

3

submitted a fraudulent document to the IRS. However, this point simply does not matter.

4

The Casino issued the 1099 Form, not Defendants. Accordingly, the existence of the 1099

5

Form and whether Plaintiff paid taxes on the Car does not establish the existence of a

6

contract between Plaintiff and Defendants.

7

Additionally, Plaintiff’s counsel explains that the Court would not grant a

8

continuance of the hearing despite Ms. Colt’s car being stolen the morning of the hearing

9

on the motion for summary judgment. (Doc. No. 103-1 at 4.) However, Plaintiff’s counsel

10

never requested a continuance. Further, Plaintiff’s counsel did not contact the Court to

11

explain that they would be late for the hearing due to Ms. Colt’s car being stolen. Instead,

12

Plaintiff’s counsel simply showed up twenty-eight minutes late for the hearing.

13

Additionally, Plaintiff and Plaintiff’s counsel failed to appear for the hearing on this matter.

14

Plaintiff then argues that her attempt to file an amended complaint was not frivolous

15

because they had just recently discovered new evidence. (Doc. No. 103-1 at 5–6.)

16

However, this newly discovered evidence was a fact that was known to Plaintiff since the

17

start of this litigation. Furthermore, Plaintiff sought leave to amend after the discovery

18

cutoff date and had not been diligent throughout the discovery process.

19

Plaintiff then filed a response to Defendants’ motion for summary judgment, but

20

claimed it was in fact a new motion to strike. Plaintiff failed to obtain a hearing date from

21

the Court to file a new motion to strike. Plaintiff then sought leave to file a sur-reply to the

22

motion for summary judgment. The Court typically does not allow for a sur-reply, but

23

allowed it in this case due to Plaintiff’s claim that her response was a new motion to strike.

24

Plaintiff’s response to Defendants’ motion for summary judgment was not procedurally

25

proper and was also frivolous. After all of the extensive briefing, Plaintiff decided at the

26

hearing for the motion for summary judgment to abandon her claims of fraud, conspiracy,

27

and unfair competition. However, puzzling to the Court, Plaintiff argues in her response to

28

this motion that the Court erroneously granted the motion for summary judgment for fraud,
7
17-CV-2325-AJB-BGS

1

conspiracy, and unfair competition.

2

It is clear to the Court that the filing for an amended complaint, the opposition to

3

Defendant’s motion for summary judgment, and continuing to pursue this case to the

4

summary judgment stage were frivolous. There was absolutely no evidence to establish a

5

contract between Plaintiff and Defendants. Plaintiff throughout this entire litigation seems

6

to confuse Defendants with the Casino. Plaintiff and Plaintiff’s counsel continued to pursue

7

a baseless lawsuit. Mr. VerStandig and Mr. Obagi became uncomfortable prosecuting the

8

case further. Of concern to the Court is that Mr. Vining and Ms. Colt still do not express

9

this same sentiment.

10

Mr. Vining and Ms. Colt also attempted to extract a quick settlement from

11

Defendants with the threat of filing an amended complaint with “incendiary” allegations

12

that would attract the interest of the “news media.” (Doc. No. 107 at 3.) Now, Mr. Vining

13

states that he had undisclosed evidence to support Plaintiff’s case that was stolen from Ms.

14

Colt’s car the night before the hearing on the motion for summary judgment. The discovery

15

cut-off date was September 10, 2018. Plaintiff’s response to the motion for summary

16

judgment was due February 20, 2019. Further, Plaintiff has failed to provide any

17

description of this evidence to the Court in her response to the instant motion. It is unclear

18

to the Court what this undisclosed evidence would have been that was suddenly stolen the

19

night before the hearing that occurred over a year after the discovery cutoff date. The Court

20

finds Plaintiff and Plaintiff’s counsel behavior throughout the entire course of the litigation

21

to be inappropriate.

22

Accordingly, the Court GRANTS sanctions against Ms. Colt, Mr. Vining and

23

Plaintiff.

24

E.

Reasonableness of Fees Requested by Defendants

25

Mr. VerStandig and Mr. Obagi argue that Defendants fail to attach any billing

26

records for the attorneys’ fees sought and thus, makes it impossible to assess the

27

reasonableness and necessity of the fees incurred. (Doc. No. 102 at 14, Doc. No. 105 at

28

11.) Plaintiff, Mr. Vining, and Ms. Colt do not present such an argument.
8
17-CV-2325-AJB-BGS

1

“The moving party bears the burden of documenting the appropriate hours spent in

2

the litigation and submitting evidence in support of the hours worked.” Zest IP Holdings,

3

LLC v. Implant Direct Mfg., LLC, No. 10-CV-0541-GPC (WVG), 2014 WL 6851612, at

4

*6 (S.D. Cal. Dec. 3, 2014). After the moving party provides evidence of the hours billed,

5

the opposing party has the burden of submitting evidence “challenging the accuracy and

6

reasonableness of the hours charged or the facts asserted by the prevailing party in its

7

submitted affidavits.” Gates v. Deukmejian, 987 F.2d 1392, 1398 (9th Cir. 1992). Here, the

8

Court agrees with Mr. VerStandig and Mr. Obagi that Defendants failure to file any billing

9

records for the attorneys’ fees sought in their original motion made it difficult to assess the

10

reasonableness and necessity of the fees incurred. Defendants did attach this information

11

in their reply, but that did not provide Mr. VerStandig, Mr. Obagi, Mr. Vining, Ms. Colt,

12

and Plaintiff an opportunity to respond. Accordingly, the Court will not assess the

13

reasonableness of the fees requested by Defendants in this motion. The Court requests that

14

Defendants file a motion to address the fees sought within 30 days from the date of this

15

Order. Defendants must call the Court’s chambers to obtain a hearing date once Defendants

16

are prepared to file this motion.

17

CONCLUSION

18

Based on the foregoing, the Court GRANTS IN PART AND DENIES IN PART

19

Defendant’s motion for sanctions.

20
21

IT IS SO ORDERED.

22

Dated: August 11, 2020

23
24
25
26
27
28
9
17-CV-2325-AJB-BGS