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United States District Court, S.D. California

December 22, 2005.

CAROL HATHAWAY, an individual and RAYMOND D. KITLAS, an individual, Plaintiffs,
MARGARET JANE YOUNG, an individual and JAMES PETER McILLWAIN, Defendants.

The opinion of the court was delivered by: JOHN HOUSTON, Magistrate Judge

Now before the Court are defendants' motions to dismiss and for sanctions. The motions have been fully briefed by the parties. After a thorough review of the pleadings presented, and for the reasons set forth below, this Court GRANTS defendants' motion to dismiss for lack of subject matter jurisdiction and DENIES defendants' motion for sanctions.


  I. Factual Background*fn1

  Thelma McIllwain ("Thelma") was married to James William McIllwain ("James") from 1958 to 1998. FAC ¶ 9. Plaintiffs Raymond D. Kitlas ("Kitlas") and Carol Hathaway ("Hathaway") (collectively "plaintiffs") are the adult natural children of Thelma from a prior marriage. Id. Defendant Margaret Jane Young ("Young") is Thelma and James' natural child. Id. ¶ 10. Defendant James Peter McIllwain ("McIllwain") is James' natural child from a prior marriage. Id.

  Thelma executed a will in 1996 that left her estate to all four children equally and contained no provision for her husband, James. Id. ¶ 11. Prior to the execution of Thelma's 1996 will, James and Thelma agreed that, should one spouse predecease the other, all jointly held assets would pass to the surviving spouse. Id. ¶ 12. Thelma passed away on January 13, 1998, predeceasing James. Id. ¶ 11. James executed a new will on February 17, 1998, which left the entire estate to McIllwain and Young, except for a separate monetary provision to Hathaway. Id. ¶ 17. Kitlas received nothing. Id. The estate was estimated to be worth approximately $496,000.00. Id. ¶ 18.

  2. Procedural History

  On September 30, 2002, plaintiffs filed a petition seeking relief from the terms of James' will in the California Probate Court. See Doc. # 16, Exh. 3. The petition contained two causes of action: quasi-specific performance of a contract to make a will and tortious interference with the right to inherit. See Defts' Req. for Jud. Not., Exh. 2. The probate court denied the petition in its entirety on November 25, 2003, finding the evidence presented "fails to establish that any agreement or understanding was reached between [James] and Thelma regarding the property." Defts' Req. for Jud. Not., Exh. 3. The probate court explained that "the evidence shows . . . Thelma understood exactly what . . . property was . . . affected by her Will, . . . that [James] would have complete control if he survived her and that she had choices available to her that would permit her to deal differently with that property, which she failed to do." Id. Plaintiffs' appeal of the probate court order was subsequently affirmed on March 22, 2004. See id., Exh. 4.

  Plaintiffs filed a complaint in this Court on November 10, 2004. Plaintiffs' first amended complaint, the operative pleading here, was filed on March 10, 2005. Defendants' motion to dismiss, seeking dismissal based on lack of subject matter jurisdiction or, alternatively, dismissal by abstention based on the "wise judicial administration" doctrine, was filed on April 27, 2005 and defendants' motion seeking the imposition of sanctions was filed on May 19, 2005. Defendants, on June 15, 2005, filed a supplement to their motion to dismiss, asserting failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure as an additional ground for dismissal. Plaintiffs' oppositions to both motions, including the supplement, was filed on June 30, 2005. Defendants filed reply briefs to plaintiffs' oppositions on July 7, 2005. The motions were subsequently taken under submission without oral argument. See CivLR 7.1 (d.1).


  1. Defendants' Motion to Dismiss

  Defendants move to dismiss plaintiffs' first amended complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, asserting this Court lacks subject matter jurisdiction over plaintiffs' claims.*fn2

  a. Legal Standard

  The federal court is one of limited jurisdiction. See Gould v. Mutual Life Ins. Co. of New York, 790 F.2d 769, 774 (9th Cir. 1986). As such, it cannot reach the merits of any dispute until it confirms its own subject matter jurisdiction. Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 93-94 (1998). "`Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.'" Id. (quoting Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1868)); see In re Mooney, 841 F.2d 1003, 1006 (9th Cir. 1988) ("Nothing is to be more jealously guarded by a court than its jurisdiction. Jurisdiction is what its power rests upon. Without jurisdiction it is nothing."), overruled on other grounds by Partington v. Gedan, 923 F.2d 686, 688 (9th Cir. 1991).

  Under Federal Rule of Civil Procedure 12(b)(1), the Court can dismiss a complaint for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). The plaintiff bears the burden of establishing subject matter jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994) (stating that the burden of establishing jurisdiction rests on the party asserting it). When considering a motion to dismiss under Rule 12(b)(1), the district court "is free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). "In such circumstances, `[n]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.'" Id. (quoting Thornhill Publishing Co. v. General Telephone & Electronic Corp., 594 F.2d 730, 733 (9th Cir. 1979)).

  The Rooker-Feldman doctrine provides that a federal district court may exercise only original jurisdiction and thus may not exercise appellate jurisdiction over state court decisions. See Rooker v. Fidelity Trust Co., 263 U.S. 413, 415-16, 44 S.Ct. 149, 150 (1923); Dubinka v. Judges of the Superior Court of California, 23 F.3d 218, 221 (9th Cir. 1994) (citing District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482-86 (1983);); see also 28 U.S.C. § 1257(a). "The purpose of the [Rooker-Feldman] doctrine is to protect state judgments from collateral federal attack. Because federal district courts lack power to hear direct appeals from state court decisions, they must decline jurisdiction whenever they are `in essence called upon to review the state court decision.'" Doe & Associates Law Offices v. Napolitano, 252 F.3d 1026, 1029 (9th Cir. 2001); see also Board of Trustees of Leland Stanford Junior University v. Modual A/C Systems, Inc., 54 F. Supp.2d 965, 969 (N.D.Cal. 1999) (noting that Rooker-Feldman doctrine derived from both federalism and comity) (citing Howlett v. Rose, 496 U.S. 356, 372-73 (1990)); Martin v. Wilks, 490 U.S. 755, 783 (1989).

  Federal courts "must give the same preclusive effect to a state court judgment that the judgment would be given in courts of the rendering state." Fielder v. Credit Acceptance Corp., 188 F.3d 1031, 1034 (8th Cir. 1999); 28 U.S.C. § 1738. In Rooker and Feldman, the United States Supreme Court "took this principle a step further and held that lower federal courts lack jurisdiction to review state court judgments." Fielder, 188 F.3d at 1034. To allow the district court to review a state court judgment "would be an exercise of appellate jurisdiction. The jurisdiction possessed by the District Court is strictly original." Rooker, 263 U.S. at 416. Thus, when this doctrine applies, lower federal courts dismiss particular claims, or an entire action, based on lack of subject matter jurisdiction. See, e.g., Worldwide Church of God v. McNair, 805 F.2d 888, 893 (9th Cir. 1986) (affirming district court's dismissal of an action for lack of subject matter jurisdiction under Rooker-Feldman); see also Fed.R.Civ.P. 12(b)(1) (authorizing the court to dismiss an action for lack of subject matter jurisdiction).

  The Rooker-Feldman doctrine also extends to bar lower federal courts from hearing claims that are "inextricably intertwined" with the claims adjudicated in the state court action. See Feldman, 460 U.S. at 482 n. 16; Fielder, 188 F.3d at 1034. One circuit court has explained that "[a] claim is inextricably intertwined under Rooker-Feldman if it `succeeds only to the extent that the state court wrongly decided the issues before it [or] if the relief requested . . . would effectively reverse the state court decision or void its ruling.'" Fielder, at 1034-35 (quoting Charchenko v. City of Stillwater, 47 F.3d 981, 983 (8th Cir. 1995)).

  b. Analysis

  Defendants argue that all of plaintiffs' claims are necessarily dependent upon a finding that an agreement existed. See Defts' Mot. to Dism. at 9-10. Thus, defendants appear to contend that plaintiffs' claims are barred under the Rooker-Feldman doctrine because their claims are "inextricably intertwined" with the state probate court's ruling that no agreement existed between James and Thelma concerning the disposition of the estate. See id.

  In their opposition, plaintiffs concede that their first cause of action for interference with contract must be dismissed for lack of subject matter jurisdiction. Opp. at 2. This Court, therefore, dismisses plaintiffs' first cause of action. However, plaintiffs disagree that their remaining claims: (1) interference with the right to inherit (second cause of action); (2) conspiracy to commit fraud (third cause of action); and (3) unjust enrichment (fourth cause of action), are barred.

  Plaintiffs point out that, even though the state petition alleged a claim for interference with the right to inherit, the parties agreed, prior to trial, that the claim would not be pursued. See Opp. at 2-3; Kitlas Decl., Exh. A. Thus, plaintiffs contend that their second cause of action for interference with the right to inherit was never litigated in the state court and, therefore, should not be barred here. Plaintiffs further contend that, because the state probate court did not determine the reasons behind Thelma's failure to take any actions in regards to the disposition of the estate, plaintiffs' conspiracy and unjust enrichment claims are "distinct and separate" claims from those litigated in the state probate court. Opp. at 4.

  Defendants, in reply, disagree with plaintiffs, pointing out that "[t]here is no distinction between plaintiffs' First Cause of Action [which plaintiffs concede should be dismissed] and the remaining causes of action because each is premised upon the alleged existence of a contract to make a will." Reply at 4. Defendants note that "[t]he primary allegation in the remaining causes of action is the alleged conspiracy `to conceal and avoid the contract with Thelma.'" Id. (quoting FAC ¶¶ 16, 17, 20, 21, 26).

  This Court agrees with defendants. In order for any of plaintiffs' three remaining claims to succeed, the finder of fact must necessarily determine that there actually was an agreement between Thelma and James, contrary to the state probate court's final determination in the state petition. This Court is unconvinced that the claims could succeed without such a finding. This Court finds that the success of plaintiffs' remaining claims depends on a finding "that the state court wrongly decided the issues before it." Feldman, 460 U.S. at 482 n. 16; Fielder, 188 F.3d at 1034-35. Based on the Rooker-Feldman doctrine, this Court finds subject matter jurisdiction is lacking over plaintiffs' remaining claims because the claims are "inextricably intertwined" with the claims adjudicated in the state probate court. Therefore, plaintiffs' remaining claims must be dismissed. 2. Defendants' Motion for Sanctions

  In a separate motion, defendants seek sanctions against plaintiff Kitlas alone pursuant to Rule 11 of the Federal Rules of Civil Procedure.

  a. Legal Standard

  Pursuant to Federal Rule of Civil Procedure 11, "[e]very pleading, written motion and other paper shall be signed by at least one attorney of record . . . or, if the party is not represented by an attorney, shall be signed by the party." Fed.R.Civ.P. 11(a). Rule 11(b) imposes a duty on attorneys or unrepresented parties, to certify by their signature that: (1) they have read the pleadings or motions they filed; (2) the pleading or motion is "not being presented for any improper purpose, such as to harass or to cause unnecessary dely or needless increase in the cost of litigation;" and (3) is "warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law." Fed.R.Civ.P. 11(b); Smith v. Ricks, 31 F.3d 1478, 1488 (9th Cir. 1994). The purpose of this rule is to curb baseless filings "which abuse the judicial system and burden courts and parties with needless expense and delay." Judin v. United States, 110 F.3d 780, 784 (Fed. Cir. 1997); Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 397-98 (1990).

  Rule 11 imposes an objective test. Paciulan v. George, 38 F.Supp.2d 1128, 1144 (N.D. Cal. 1999); see Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir. 1986), abrogated on other grounds, 496 U.S. 384 (1990). "The certification requirements of Rule 11 are violated `if the paper filed . . . is frivolous, legally unreasonable or without factual foundation, even though . . . not filed in subjective bad faith.'" Paciulan, 38 F.Supp.2d at 144 (quoting Zaldivar, 780 F.2d at 831). Under this approach, a pleading or motion is not "warranted by law" where no "`plausible, good faith argument can be made by a competent attorney' in support of the proposition asserted.'" Id. (quoting Zaldivar, 780 F.2d at 833). The Court can determine whether there was an improper purpose after reviewing the facts and the law. Id. Rule 11, however, is not intended to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories. Greenberg v. Sala, 822 F.2d 882, 887 (9th Cir. 1987). Courts have interpreted Rule 11 of the Federal Rules of Civil Procedure to prescribe sanctions only in the exceptional circumstance, where a claim or motion is patently unmeritorious or frivolous. Riverhead Sav. Bank v. National Mortg. Equity Corp., 893 F.2d 1109 (9th Cir. 1990). The key question in assessing frivolousness is whether a complaint states an arguable claim, not whether the pleader is correct in his perception of the law. Id. A frivolous filing is both (1) baseless and (2) made without a reasonable and competent inquiry. In re Keegan Management Co., Securities Litigation, 78 F.3d 431, 434 (9th Cir. 1996). Even manipulative pleadings which are neither frivolous nor improper are not always subject to Rule 11 sanctions. Baddie v. Berkeley Farms, Inc., 64 F.3d 487, 491 (9th Cir. 1995). "The Ninth Circuit has declined to impose sanctions where the complaint is not so lacking in plausibility as to make counsel's decision to certify it subject to sanctions under Fed.R.Civ.P. 11." Rachel v. Banana Republic Inc., 831 F.2d 1503, 1508 (9th Cir. 1987).

  b. Analysis

  Defendants contend that sanctions are warranted here because Kitlas filed the instant complaint for an improper purpose, "asserting unwarranted claims devoid of evidentiary support." Mot. for Sanctions at 8. Defendants argue that, notwithstanding the state court consistent refusal to find an agreement existed between James and Thelma concerning the disposition of the estate, Kitlas continues to vexatiously, and in conscious disregard to defendants' rights, re-litigate the question here in violation of Rule 11. Id. at 10. Defendants provide, as evidence in support of Kitlas' improper actions, a letter sent by Kitlas to defendants containing a proposed settlement that purportedly reveals Kitlas' improper purpose for filing the instant complaint. See id. at 10-11 (citing Klein Decl., Exh. 5). Kitlas objects to the use of the settlement letter as evidence, citing Federal Rule of Evidence 408.*fn3 See Opp. at 2; Obj. at 1-2. Noting that defendants provided a copy of the letter redacting the portions that outline the settlement proposal, Kitlas provided an unredacted version for the Court's review. See Kitlas Decl., Exh. C.

  Here, the letter sought to be considered as evidence was clearly presented for settlement purposes and, as such, violates Rule 408. Kitlas, however, contends that, even if the Court considers the letter as evidence, the letter "should be viewed in the context of the settlement proposal being made, rather than a statement of improper purpose." Opp. at 3.


In the challenged letter directed to defendants, Kitlas states, in pertinent part, that:
Since Mom wanted each of us to share in the estate, Carol and I will never just quit. In addition to the appeal, if we can't settle this, we will bring an action against you as individuals, claiming for starters, each of you have been unjustly enriched to our detriment. . . . Again, I am not threatening, I am just pointing out that whatever the outcome of the new case, ultimately there will be substantial additional time and expense involved . . . We will take the action outlined above, whatever the expense or outcome.
Klein Decl., Exh. 5; Kitlas Decl., Exh. C. Defendants claim that these statements indicate an improper motive because the actions he threatened to take were clearly barred by the adverse state court ruling. See Mot. for Sanctions at 10-11. Kitlas contends that "[t]he letter refers to the resolve and determination of both Plaintiffs to prevent the despicable fraud against their mother by their step-father, depriving her of the fruits of a lifetime of toil. The letter is no more than statement by Plaintiffs that they intend to pursue whatever legal remedies are available to prevent the unjust enrichment of defendants." Opp. at 3. Kitlas points out that the allegations contained in the complaint, with the exception of the first cause of action which plaintiffs conceded should be dismissed, were properly plead with sufficient basis in fact and law. Id. at 3-4.

  This Court agrees with plaintiffs. Even though the Court has found that the legal remedies plaintiffs seek in the instant complaint are unavailable to them, the allegations were properly plead and are not so implausible to warrant sanctions. Rachel, 831 F.2d at 1508. Plaintiffs are permitted to plead claims with minimal evidentiary support provided those claims are not so "baseless" or "lacking in plausibility" as to warrant sanctions. Id. Therefore, even considering the letter as proper evidence, this Court finds defendants' arguments unavailing and the imposition of sanctions unwarranted. CONCLUSION AND ORDER

  For the reasons set forth above, IT IS HEREBY ORDERED that:

  1. Defendants' motion to dismiss for lack of subject matter jurisdiction is GRANTED;

  2. The instant complaint is DISMISSED; and

  3. Defendants' motion for sanctions is DENIED.


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