China Energy Corporation v. Alan T.Hill et al

Filing 334

ORDER denying 299 Motion for Attorney's Fees and Related Expenses. Signed by Judge Miranda M. Du on 9/29/2015. (Copies have been distributed pursuant to the NEF - KR)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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CHINA ENERGY CORPORATION,

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Plaintiff,
v.

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ORDER
(Motion for Attorney’s Fees and Related
Expenses – dkt. no. 299)

ALAN HILL, et al.,
Defendants,

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ELENA SAMMONS AND MICHAEL
SAMMONS,

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Third-Party Plaintiffs,
v.

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CEDE & CO., THE DEPOSITORY
TRUST COMPANY, AND COR
CLEARING
Third-Party Defendants

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Case No. 3:13-cv-00562-MMD-VPC

I.

SUMMARY

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Before the Court is Third-Party Defendant COR Clearing, LLC’s (“COR”) Motion

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for Attorney’s Fees and Related Expenses, seeking fees and costs against Plaintiff

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China Energy Corporation (“CEC) (“Motion”). (Dkt. no. 299). The Court has also

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reviewed CEC’s opposition (dkt. no. 312) and COR’s reply (dkt. no. 315).1 For the

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following reasons, the Motion is denied.

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The Court recently granted CEC’s former counsel’s request to withdraw. (Dkt. no.
333.) This decision does not affect the Court’s ruling on the Motion, which was fully
briefed before CEC’s counsel filed their motion to withdraw.

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II.

BACKGROUND

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The facts giving rise to this action are recited in the Court’s previous Orders. (See

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dkt. nos. 226, 269.) The Court will summarize only the facts and procedural history that

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are pertinent to COR’s Motion.

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CEC asserts two claims against Plaintiffs. The first claim seeks a declaration that

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certain shareholders — including Third-Party Plaintiffs Elena Sammons and Michael

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Sammons (“the Sammons”) — had not properly dissented to a stock split. (Dkt. no. 2-1

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at 5-7.) The second claim is an alternative request for a “fair value determination” that

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before the stock split, CEC’s stock was worth $0.14 per share. (Id. at 7-8.)

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The Sammons filed a Third-Party Complaint against COR and other third party

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defendants (together, “Third-Party Defendants”). (Dkt. no. 128.) They allege that the

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Third-Party Defendants had vitiated their ability to dissent to CEC’s stock split. (Id. ¶¶ 19,

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25, 33-36.) The Sammons allege that, in so doing, the Third-Party Defendants had

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breached a contract, their fiduciary duties, and were negligent. (Id. ¶ 41.) If, as CEC

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requests, this Court declares that the Sammons failed to dissent to CEC’s stock split, the

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Sammons request a declaratory judgment specifying that, but for the Third-Party

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Defendants’ errors, the Sammons would have properly dissented to CEC’s stock split.

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(Id. at 11-12.)
COR moved for dismissal of the Sammons’ third party claim, which this Court

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denied. (Dkt. nos. 161, 226.)

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CEC then moved for partial summary judgment on their first claim, contending

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that the Sammons failed to comply with NRS § 92A.440 because they submitted an

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untimely dissent, and because they improperly demanded payment in a foreign currency.

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(Dkt. no. 71 at 4-5, 4 n.6.) The Court denied summary judgment, finding that CEC’s

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Dissenters’ Rights Notice failed to comply with NRS § 92A.430 because it did not set a

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date for stockholders’ responses. (Dkt. no. 269.)

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Pursuant to the parties’ stipulation, the Court dismissed CEC’s first claim. (Dkt.

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no. 297.) COR then moved for an assessment of fees and related costs against CEC.

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(Dkt. no. 299.)

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III.

DISCUSSION

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“In an action where a district court is exercising its subject matter jurisdiction over

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a state law claim, so long as ‘state law does not run counter to a valid federal statute or

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rule of court, and usually it will not, state law . . . giving a right [to attorney’s fees], which

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reflects a substantial policy of the state, should be followed.’” MRO Commc’ns, Inc. v.

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Am. Telephone & Telegraph Co., 197 F.3d 1276, 1281 (9th Cir. 1999) (quoting Alyeska

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Pipeline Serv. Co., 421 U.S. at 259 n.3). COR relies on NRS § 92A.500(2)(a)2 as the

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authority under Nevada law for assessment of attorney’s fees and related costs against

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CEC.

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Section 92A.500 of the Nevada Revised Statute provides that in a proceeding to
determine fair market value,
2. The court may also assess the fees and expenses of the counsel
and experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if the
court finds the subject corporation did not substantially comply with the
requirements of NRS 92A.300 to NRS 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by NRS 92A.300 to NRS 92A.500,
inclusive.

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NRS § 92A.500(2)(a). COR contends that assessment of fees and expenses is

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appropriate because the Court found that CEC did not substantially comply with NRS §

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92A.430, and that it falls within NRS § 92A.500(2)(a)’s definition of “parties.” CEC

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counters that NRS § 92A.500(2)(a) limits recovery to “all dissenters.” (Dkt. no. 312 at 3.)

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CEC claims entitlement to attorney’s fees under NRS § 92A.500, which contains
5 subsections. It is apparent that CEC relies on subsection 2 because it quotes from this
subsection. (Dkt. no. 299 at 4.)
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In reply, COR argues that the term “respective parties” encompasses third parties. The

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Court disagrees.

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Section 92A.500(2) gives the court discretion to assess fees and expenses as

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follows: (a) “[a]gainst the subject corporation and in favor of all dissenters” or (b)

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“[a]gainst either the subject corporation or a dissenter in favor of any other party” where

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the court found arbitrary or vexatious conduct. NRS § 92A.500(2). COR is seeking an

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assessment of fees and expenses under subsection (a), which is only available to “all

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dissenters.” Third parties such as COR are not entitled to assessment of fees and

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related costs under NRS § 92A.500(2)(a).

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IV.

CONCLUSION

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The Court notes that the parties made several arguments and cited to several

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cases not discussed above. The Court has reviewed these arguments and cases and

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determines that they do not warrant discussion or reconsideration as they do not affect

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the outcome of the Motion.

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It is ordered that COR Clearing, LLC’s (“COR”) Motion for Attorney’s Fees and
Related Expenses (dkt. no. 299) is denied.
ENTERED THIS 29th day of September 2015.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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