The opinion of the court was delivered by: John A. Houston United States District Judge
ORDER DENYING DEFENDANTS' MOTION FOR AN AWARD OF ATTORNEY'S FEES [DOC. # 22] FOR LACK OF JURISDICTION
This Court previously granted the motion to dismiss for lack of subject matter jurisdiction filed by defendants Silver State Helicopters, LLC and Jerry Airola (collectively "defendants"). Defendants now seek attorney's fees pursuant to California Code of Civil Procedure § 1021, California Civil Code § 1717, and Nevada Revised Statute 18.010.
In a complaint filed June 12, 2006, plaintiffs brought claims for breach of contract, misrepresentation and fraud arising out of agreements entered into for helicopter training and certification. The complaint sought general damages in the amount of $56,000 to $75,000 for each plaintiff as well as punitive damages. Defendants filed a motion to dismiss for lack of subject matter jurisdiction, contending that plaintiffs had failed to demonstrate that the amount in controversy exceeded $75,000, as is required for diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). Noting that plaintiffs cannot aggregate their damages in order to meet the jurisdictional amount, this Court concluded that the jurisdictional amount had not been met and dismissed the action for lack of subject matter jurisdiction. Defendants then filed the present motion for attorney's fees, seeking to enforce attorney's fee provisions in certain of the plaintiffs' contracts. This Court found the motion suitable for adjudication without oral argument. See Civ. Local Rule 7.1(d.1).
As a preliminary matter, this Court must determine whether it has jurisdiction to award attorney's fees given that this action has been dismissed for lack of subject matter jurisdiction. Defendants cite the Eighth Circuit case of Walker v. Norwest Corp., 108 F.3d 158 (8th Cir. 1997) in support of their position that this Court does have jurisdiction to award attorney's fees. However, in Walker, the Eighth Circuit awarded fees pursuant to Rule 11 as a sanction for filing a lawsuit over which the court obviously lacked subject matter jurisdiction. The Ninth Circuit, like the Eighth Circuit, has recognized the propriety of imposing Rule 11 sanctions where a plaintiff files a complaint which it must have known was completely lacking a jurisdictional basis. See Montrose Chem.Corp. of California v. Am. Motorists Ins. Co., 117 F.3d 1128 (9th Cir. 1997). However, defendants do not seek attorney's fees pursuant to Rule 11; therefore, this Court's authority to sanction pursuant to Rule 11 is not at issue here.
Where attorney's fees are not sought as a sanction pursuant to Rule 11, the general rule is that a district court lacks jurisdiction to award attorney's fees where it lacks subject matter jurisdiction over the underlying action. See Skaff v. Meridien N. Am. Beverly Hills, LLC, ___ F.3d ____, 2007 WL 3197038 (9th Cir. November 1, 2007) ("A court that lacks jurisdiction at the outset of a case lacks the authority to award attorneys' fees"); see also Latch v. United States, 842 F.2d 1031, 1033 (9th Cir. 1988) ("As a general rule, if a district court has wrongfully exercised subject matter jurisdiction over a dispute, the appellate court must vacate the district court's decision, including any award of attorney's fees."); Smith v. Brady, 972 F.2d 1095, 1097 (9th Cir. 1992) (noting that "if the district court lacked jurisdiction over the underlying suit, 'it had no authority to award attorney's fees'") (citing Latch). Thus, for example, the Ninth Circuit in Branson v. Nott, 62 F.3d 287, 292-93 (9th Cir. 1995) held that because the district court lacked jurisdiction over the plaintiff's "purported" § 1983 claim, it also lacked jurisdiction to award attorney's fees pursuant to 42 U.S.C. § 1988. Similarly, the Ninth Circuit in Latch, applying this rule, vacated an award of attorney's fees to the plaintiffs after it determined that the district court lacked jurisdiction over the their tax suit. Finally, in In re Knight, 207 F.3d 1115 (9th Cir. 2000), the Ninth Circuit held that a "district court lacked any authority to award fees and costs under ERISA section 502(g)(1) . . . after finding that it lacked subject matter jurisdiction over the underlying action." Id. at 1119.
The one noted exception to this rule is where the attorney's fee statute itself "contains an independent grant of jurisdiction." Latch, 842 F.2d at 1033. Thus, the Ninth Circuit in California Ass'n of Physically Handicapped, Inc. v. FCC, 721 F.2d 667 (9th Cir. 1983) held that the district court erred in denying for lack of jurisdiction a motion for attorney's fees brought pursuant to § 505(b) of the Rehabilitation Act even though the district court lacked jurisdiction over the plaintiffs' substantive claims. Noting that the Supreme Court had construed the language of that section as demonstrating Congress' "intent to authorize civil suits in federal court solely to obtain an award of attorneys' fees for legal work done in administrative proceedings," Id. at 671, the Ninth Circuit concluded that § 505(b) contained an independent grant of jurisdiction that would allow the district court to award fees even though it lacked jurisdiction over the plaintiffs' substantive claims. Because there is no basis for construing either the California or the Nevada statutes as containing an independent grant of jurisdiction to this Court, this exception is inapplicable here. Although the cases cited, , involved lack of federal question jurisdiction rather than lack of diversity jurisdiction, and the attorney's fees were being sought pursuant to a federal statute rather than state law, the statement of law in these cases -- that a district court has no authority to award attorney's fees where it lacks jurisdiction over the underlying suit-- is sufficiently broad to preclude an award of fees here. Moreover, there is no principled basis for distinguishing the holdings of these cases. Accordingly, this Court concludes that these cases, as controlling authority, dictate the denial of the motion for attorney's fees for lack of jurisdiction.
The foregoing notwithstanding, this Court is aware that the Ninth Circuit in Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877 (9th Cir. 2000) held that the district court had jurisdiction to award attorney's fees under state law even though it lacked subject matter jurisdiction over the action. However, this Court concludes that Kona Enterprises, which was decided after Latch, Smith, and Branson, supra, and which failed to mention, let alone distinguish, these cases, is not controlling authority. Absent an intervening Supreme Court decision, a Ninth Circuit panel must follow Ninth Circuit precedent unless such precedent is distinguished; precedent may only be overruled by the Ninth Circuit sitting en banc. See In re Osborne, 76 F.3d 306, 309 (9th Cir. 1996); Miller v. Gammie, 335 F.3d 889, 892-93 (9th Cir. 2003); see also In re Watts, 298 F.3d 1077, 1084 (9th Cir. 2002) ("Panels may distinguish; they may question; they may deploy virtually any of the other verbs in the Shepard's vocabulary. But they may not overrule.") (O'Scannlain, J., concurring). Moreover, as explained in Hart v. Massanari, 266 F.3d 1155 (9th Cir. 2001):
A court confronted with apparently controlling authority must parse the precedent in light of the facts presented and the rule announced. Insofar as there may be factual differences between the current case and the earlier one, the court must determine whether those differences are material to the application of the rule or allow the precedent to be distinguished on a principled basis . . . . [I]f a controlling precedent is determined to be on point, it must be followed.
Id. at 1172. Here, Kona Enterprises did not distinguish but, rather, simply ignored Latch, Smith and Branson, which clearly fall within the definition of "apparently controlling authority." Because one panel cannot overrule another, and because Kona Enterprises failed to distinguish what appears to be controlling authority, this Court concludes it would be inappropriate to follow Kona Enterprises. See Jackson v. Scribner, 2007 WL 1532145, *4 n.11 (E.D. Cal. 2007) (concluding that when "faced with potentially conflicting controlling decisions of the Ninth Circuit," district courts should "follow the first"). Moreover, this Court notes that Kona Enterprises reached its holding by misconstruing the holding of one Ninth Circuit case and by relying on dicta in another.
Kona Enterprises cites Anderson v. Melwani, 179 F.3d 763, 765-66 (9th Cir. 1999) for the proposition that a district court sitting in diversity may award attorney's fees pursuant to state law despite a dismissal for lack of subject matter jurisdiction. However, the issue in Anderson was whether the district court erred in concluding that because the case had been dismissed on procedural grounds (for failure to join an indispensable party), the defendant was not a "prevailing party" under a contractual fee-shifting provision. Anderson concluded that, under the common law, a "prevailing party" includes one who "permanently defeats" a lawsuit, whether on the merits or on procedural grounds. The Ninth Circuit in Anderson did not consider or discuss the district court's authority to award attorney's fees given its lack of jurisdiction over the action but, rather, assumed the district court had jurisdiction to award fees if the defendant was deemed a prevailing party.
Kona Enterprises also relies on MacKay v. Pfeil, 827 F.2d 540 (9th Cir. 1987). In that case, the plaintiff appealed from a fee award based on the assumption that the Ninth Circuit would find that summary judgment had been improperly granted. Although the Ninth Circuit agreed that the grant of summary judgment was unwarranted, it did so not on the ground articulated by the district court but, rather, on the ground that the district court lacked jurisdiction over the action. Accordingly, it vacated the order granting summary judgment and remanded to the district court to dismiss the action for lack of jurisdiction. It also affirmed the district court's award of attorney's fees, stating without explanation or analysis that "[a]lthough we hold that summary judgment was improperly granted, the reasons for our holding do nothing to undermine the propriety of the award of attorney's fees." MacKay, 827 F.2d at 542 n. 3. The decision is devoid of language suggesting that the parties raised, or the Ninth Circuit considered, the issue of whether the district court had the authority to award attorney's fees in light of the Ninth Circuit's sua sponte determination that the district court lacked jurisdiction over the action. Where a panel does not actually decide a particular issue, its statements regarding the issue are dicta and are not controlling authority. United ...