Castillo Grand, LLC v. Sheraton Operating Corporation

Filing 59

OPINION AND ORDER: Castillo does not provide evidence such that would disturb the Courts conclusion that the Bernstein affidavit constituted insufficient evidence to justify an award of sanctions. Accordingly, Castillos motion is denied. Sheraton mov es for attorneys fees incurred in responding to Castillos motion pursuant to 28 U.S.C. § 1927. Sheraton has not established that Castillo, in filing this motion for reconsideration, was acting in bad faith or for an improper purpose, and thus Sheratons motion is denied. (Signed by Judge Robert P. Patterson on 5/6/2011) Copies Faxed By Chambers. (jpo)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CASTILLO GRAND LLC
Plaintiff,
09 Civ. 7197 (RPP)
- against OPINION AND ORDER
SHERATON OPERATING CORPORATION,
Defendant.
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ROBERT P. PATTERSON, JR., U.S.D.J.
On January 16, 2011 Plaintiff Castillo Grand LLC (“Castillo”) moved for reconsideration
pursuant to Fed. R. Civ. P. 60(a), 60(b)(2) and Local Rule 6.3 of the December 23, 2010 Opinion
and Order of this Court granting Defendant Sheraton Operating Corporation’s (“Sheraton”)
motion for just costs pursuant to 28 U.S.C. § 1919 and denying Castillo’s motion for sanctions
under 28 U.S.C. § 1927. Sheraton filed an opposition brief on January 28, 2011 that included a
motion for sanctions against Castillo under 28 U.S.C. § 1927. For the reasons stated below,
Castillo and Sheraton’s motions are denied.
BACKGROUND
Castillo filed a Complaint against Sheraton in this Court in July 2006, alleging state law
claims and subject matter jurisdiction based on the diversity of parties pursuant to 28 U.S.C. §
1332. (See Complaint, Castillo Grand v. Sheraton Operating Co., No. 06 Civ. 5526 (July 21,
2006), ECF 1.) The Complaint alleged that this Court had subject matter jurisdiction “because
the parties in interest are of diverse citizenship, and because the amount in controversy is more
than $75,000.” (Compl. at ¶ 30.)
On July 8, 2009, this Court denied in part Sheraton’s Motion for Summary Judgment and
set the case down for trial on September 8, 2009. (See Opinion and Order, Castillo Grand v.

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Sheraton Operating Co., No. 06 Civ. 5526 (July 8, 2009), ECF 141.) On August 5, 2009,
Sheraton filed a Motion to Dismiss the original action for lack of subject matter jurisdiction on
the grounds that several of Castillo’s constituent members were New York citizens at the time
Castillo filed its complaint and therefore diversity jurisdiction did not exist. In response, Castillo
conceded that one of its constituent members was a New York citizen at the time Castillo filed
its complaint, and thus did not oppose Sheraton’s Motion to Dismiss.
On August 14, 2009, the Court entered an Order that i) found that it was without
jurisdiction over the original action because of the absence of complete diversity between the
parties as required by 28 U.S.C. § 1332; and ii) dismissed that action without prejudice. (See
Order, Castillo Grand LLC v. Sheraton, Operating Corp., No. 06 Civ. 5526 (August 14, 2009),
ECF No. 160.) Prior to the dismissal, counsel for Castillo by letter dated August 7, 2009
informed the Court that it intended to “cure” the jurisdictional defects and refile the case in
federal court, citing as authority City Grupo Dataflux v. Atlas Global Group L.P., 541 U.S. 567
(2004). (See also Court Conference, August 10, 2009, Tr. at 18-19.) Thereafter, by letters dated
August 11 and 14, 2009, Sheraton reiterated its position that any attempt by Castillo to alter its
citizenship would, if authorized, violate 28 U.S.C. § 1359, citing Second Circuit authority in
support of its position. On August 13, 2009, Sheraton filed a complaint asserting its
counterclaims against Castillo in Supreme Court, Westchester County.
On August 14, 2009, Castillo filed a new complaint against Sheraton in this court, which
contained almost identical claims. (Complaint, Castillo Grand LLC v. Sheraton Operating Corp.,
No. 09 Civ. 7197 (August 14, 2009), ECF 1.) On September 8, 2009, Sheraton filed a Motion to
Dismiss the new complaint for lack of subject matter jurisdiction because 1) complete diversity

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of citizenship between the parties did not exist at the time Castillo filed the new complaint and 2)
Castillo had manufactured federal diversity in violation of 28 U.S.C. § 1359.
On December 9, 2009, this Court issued an Opinion and Order dismissing the new action
for lack of subject matter jurisdiction and finding that Castillo’s reorganization was undertaken
to invoke the jurisdiction of the Court as contemplated by the plain language of Section1359 and
that “the law is clear in this circuit that transactions engineered by a party for the purpose of
creating federal diversity jurisdiction are precisely the sort of conduct prohibited by § 1359.” (09
Civ. 7197, 2009 WL 4667104 (S.D.N.Y. December 9, 2009).) The Court also found that
jurisdiction did not exist since the reorganization of New York members of the LLC had not
been completed when the new complaint was filed. Id. On April 28, 2010 the Second Circuit
issued a mandate dismissing the appeal.
On June 1, 2010, Sheraton moved for just costs pursuant to 28 U.S.C. § 1919, on the
grounds that Castillo filed a second action in this Court in violation of 28 U.S.C. § 1359, causing
Sheraton to incur legal fees and costs in moving for dismissal. Just costs include deposition and
subpoena-related costs among other “reasonable expenses incurred in litigating the jurisdiction
question.” FTSS Korea v. First Tech. Safety Sys., Inc., 254 F.R.D. 78, 80 (E.D. Mich. 2008).
Under certain circumstances, just costs awarded pursuant to Section 1919 can also include
attorneys’ fees. See Correspondent Serv. Corp., No. 99 Civ. 8934, 2004 WL 2181087 at * 15-16
(S.D.N.Y. 2004). On July 6, 2010, Castillo filed a brief in opposition to Sheraton’s motion that
asserted a cross-motion for sanctions against Sheraton under 28 U.S.C. § 1927 on the grounds
that Sheraton delayed the progress of the first action by invoking the Court’s diversity
jurisdiction in its counterclaims while simultaneously investigating, privately, whether the parties

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were in fact diverse, and that Sheraton hid its evidence of diversity defects from Castillo and the
Court until after its summary judgment motion was decided.
On December 23, 2010, this Court issued an Opinion and Order awarding costs and
attorneys’ fees to Sheraton under section 1919. The Court found that “counsel for Sheraton
made clear, prior to the filing of the new complaint, that Plaintiff would run afoul of Section
1359 if it attempted to reconfigure Castillo, LLC to manufacture diversity jurisdiction and that
any effort to do so would result in failure.” (Opinion and Order, Castillo Grand LLC v. Sheraton
Operating Corp., No. 09 Civ. 7197 (December 23, 2010), ECF 52 at 5.) In view of these
warnings, the Court found the imposition of costs and attorneys fees to be justified. The Court
also denied Castillo’s motion for sanctions, because Castillo failed to demonstrate that Sheraton
took actions to generate delays in the trial of this dispute in Westchester after the dismissal of the
first complaint. (Id.)
On January 16, 2011 Plaintiff Castillo Grand LLC (“Castillo”) moved for reconsideration
pursuant to Fed. R. Civ. P. 60(a), 60(b)(2) and Local Rule 6.3 of the December 23, 2010 Opinion
and Order of this Court granting Defendant Sheraton Operating Corporation’s (“Sheraton”)
motion for just costs pursuant to 28 U.S.C. § 1919 and denying Castillo’s motion for sanctions
under 28 U.S.C. § 1927. Sheraton filed an opposition brief on January 28, 2011 that included a
motion for sanctions against Castillo under 28 U.S.C. § 1927. Castillo filed a reply brief in
support of its motion for reconsideration and in opposition to Sheraton’s motion for sanctions on
February 18, 2011.

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DISCUSSION
I.

Reconsideration Under Rule 60

Federal Rule of Civil Procedure 60(a) states that “the court may correct a clerical mistake
or a mistake arising from oversight or omission whenever one is found in a judgment, order, or
other part of the record.” Grounds for such relief include, among others, mistake or “newly
discovered evidence, that, with reasonable diligence, could not have been discovered in time to
move for a new trial.” Fed. R. Civ. P. 60(b). Motions for reconsideration made pursuant to Rule
60 must set forth “concisely the matters or controlling decisions which counsel believes the court
has overlooked.” Local Civ. R. 6.3. “Reconsideration will generally be denied unless the
moving party can point to controlling decisions or data that the court overlooked—matters, in
other words, that might reasonably be expected to alter the conclusion reached by the court.”
Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). A motion for reconsideration
“may not be used to represent new facts, issues, or arguments not previously presented to the
court.” Steinberg v. Ericsson LM Tele. Co., No. 07 Civ. 9615, 2008 U.S. Dist. 29836 at *3
(S.D.N.Y. Apr. 11, 2008). “A motion for reconsideration is not a motion to reargue those issues
already considered when a party does not like the way an original motion was resolved.” Davey
v. Dolan, 496 F. Supp.2d 387, 389 (S.D.N.Y. 2009). For the reasons stated below, Castillo’s
motion is denied.
A. Reconsideration of the Award of Just Costs, Including Attorneys’ Fees, to
Sheraton Pursuant to 28 U.S.C. § 1919
Castillo’s first two arguments urge reconsideration of the award of just costs to Sheraton,
including attorneys’ fees, in the December 23 Opinion and Order.
Castillo first contends that the Court applied an incorrect legal standard in deciding to
award attorneys’ fees. This argument is unavailing. As the Court’s Order stated, an award of
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costs and attorneys’ fees was justified by the fact that “counsel for Sheraton made clear, prior to
the filing of the new complaint, that Plaintiff would run afoul of Section 1359 if it attempted to
reconfigure Castillo, LLC to manufacture diversity jurisdiction, and that any effort to do so
would result in failure. The plain reading of Section 1359 as well as case law supported
Sheraton’s warning.” (Order and Opinion at 5.) These circumstances were sufficient to justify
the imposition of attorneys’ fees on Castillo pursuant to 28 U.S.C. § 1919. See Correspondent
Serv. Corp., 2004 WL 2181087 at * 15-16.
Second, Castillo argues that the Court overlooked their objection to the reasonableness of
Sheraton’s fees, which was contained in a footnote on page 15 of their Memorandum in
Opposition to Sheraton’s Motion for Just Costs, and that therefore fees should not be awarded
without a hearing. (Pl.’s Mem. in Opp., 08 Civ. 7197, ECF No. 45 at 15 n.3.) The objections in
this footnote were general accusations that Defendant’s law firm overstaffed the case, improperly
billed in half-hour increments and inadequately described the work for which they were billing.
Castillo was given notice and a full and fair opportunity to respond to Sheraton’s itemized
request for fees and costs. Castillo’s objections to Sheraton’s request were made in a
perfunctorily in a footnote. These objections were not accompanied by supporting affidavits or
by the submission of Castillo’s counsel’s billing records during the same period to provide a
means of comparison.
The Court is not required to hold a hearing prior to the award of fees. In re Thirteen
Appeals Arising Out of the San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d 295, 303 (1st Cir.
1995). Defendant’s written submissions were sufficient for the Court to review the
reasonableness of the requested fees. As stated in the Opinion, the Court reviewed Defendant’s
request and supporting documents and found the requested amounts to be reasonable and in line

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with rates charged by law firms practicing in this District. No evidence has been presented that
would compel a contrary conclusion.
B. Reconsideration of the Denial of Castillo’s Motion for Sanctions Pursuant
to 28 U.S.C. § 1927
Castillo’s third and fourth arguments pertain to the Court’s denial of their motion for
sanctions against Sheraton. As a preliminary matter, the Court notes that the imposition of
sanctions pursuant to 28 U.S.C. § 1927 is discretionary, and depends upon a finding of bad faith.
Schoenberg v. Shapolsky Publishers, Inc., 971 F.2d 926, 935 (2d Cir. 1992) (citing Olivieri v.
Thompson, 803 F.2d 1265, 1273 (2d Cir.1986), cert. denied, 480 U.S. 918 (1987)).
In support of their motion to reconsider, Castillo first argues that Sheraton’s bad faith
conduct in the state court proceeding following the dismissal of the second federal complaint
caused the state court trial to be delayed from September 2009 to July 2010. The record makes
evident that no act or omission of Sheraton’s caused the trial to be delayed until July. Early in
the December 17, 2009 conference held before New York Supreme Court Justice Sheinkman,
Justice Sheinkman explained that he must schedule the trial for July in order to avoid conflict
with his pre-existing trial schedule. (Sheraton’s Mem. in Opp., Ex. 3 at 12-13.) Castillo also
argues that Sheraton inappropriately conducted further discovery in conjunction with the state
court proceeding. Supreme Court Justice Sheinkman exercised jurisdiction over pre-trial
discovery in the state court proceeding, and no evidence has been presented that suggests that
Sheraton took any actions contrary to Justice Sheinkman’s direction.
Castillo presents “newly discovered evidence” in the form of Sheraton’s Post-Trial
Memorandum filed on December 10, 2010 in the state court proceeding. Castillo contends that
this memorandum constituted a waste of judicial resources by raising exculpatory defenses that
were raised on Sheraton’s unsuccessful motion for summary judgment in this Court. (Castillo’s
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Mem. in Supp., Ex. C.) There is no impropriety in Sheraton raising their defenses as to the
contractual exculpatory clause in the state court proceeding, particularly in view of the fact that
Sheraton was expressly granted permission to do so by Justice Sheinkman. (February 5, 2010
Conf. Tr., Sheraton’s Mem. in Opp., Ex. 8, 1-4.)
Castillo’s remaining argument is a restatement of an argument made in its original motion
for sanctions, and accordingly it is disregarded on the motion to reconsider. Castillo argues that
the Court overlooked evidence set forth in the Bernstein Declaration that demonstrated that
Sheraton had concealed evidence of the lack of diversity between the parties from the
Court and Castillo. After review of the declaration, the Opinion and Order specifically addressed
the Bernstein Declaration and found that “the Bernstein affidavit was an insufficient basis for
[Castillo’s] conclusion of strategic suppression of evidence [of lack of diversity].” (Opinion and
Order at 5.) Castillo does not provide evidence such that would disturb the Court’s conclusion
that the Bernstein affidavit constituted insufficient evidence to justify an award of sanctions.
Accordingly, Castillo’s motion is denied.
II.

Sheraton’s Motion for Sanctions Pursuant to 28 U.S.C. § 1927
Sheraton moves for attorneys fees incurred in responding to Castillo’s motion pursuant to 28

U.S.C. § 1927. In this Circuit, the imposition of sanctions under 28 U.S.C. § 1927 is warranted
where “there is a clear showing of bad faith on the part of an attorney.” Shafii v. British Airways,
PLC, 83 F.3d 566, 571 (2d Cir.1996). Sheraton has not established that Castillo, in filing this
motion for reconsideration, was acting in bad faith or for an improper purpose, and thus
Sheraton’s motion is denied.

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IT IS SO ORDERED.
Dated: N ew York, New York
May~, 2011

Robert P. Patterson, Jr.
U.S.D.J.

Copies of this order were faxed to:
Todd Soloway

Pryor Cashman LLP

7 Times Square

New York, NY 10036-6569

[phone]

Fax: [phone]

William A. Brewer III

Bickel & Brewer

767 Fifth Avenue, 50th Floor

New York, NY 10153

[phone]

Fax: [phone]

James S. Renard

Bickel & Brewer

4800 Bank One Center

1717 Main Street

Dallas, TX 75201

[phone]

Fax: [phone]

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