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South Shore Ranches, LLC v. Lakelands Company

January 15, 2010


The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge


Before the Court is Defendant's Amended Motion for Sanctions under 28 U.S.C. § 1927 and the Court's inherent authority. For the reasons that follow, the motion will be granted.


On December 12, 2005, Plaintiffs as seller and Lakelands as buyer entered into a contract for the sale of 1,947 acres of real property located in Tuolumne County, California. At some point in the transaction process, the sale broke down and steps to undergo arbitration began.

However, in order to further process the Parcel Map and to extend valuable benefits within Tuolumne County, JMZ deeded all of the real estate it owned relative to the Contract to SSR. JMZ did this in late July 2008, at the request of Tuolumne County. The grant deed was recorded on August 13, 2008, in Tuolumne County.

On August 28, 2008, arbitration went forward before Judge Broadman, but Lakelands did not appear. After hearing evidence, Judge Broadman issued his decision in favor of Plaintiffs.

On September 22, 2008, Plaintiffs filed a petition to confirm the arbitration award in the Tuolumne County Superior Court. On October 23, 2008, the Tuolumne County Superior Court confirmed Judge Broadman's order.

On January 14, 2009, Plaintiffs filed this lawsuit seeking an order from this Court to confirm Judge Broadman's arbitration award. The confirmation order that Plaintiffs wished this Court to sign is identical to that which the Tuolumne County Superior Court signed.

In February 2009, Lakelands filed a motion to dismiss and later filed a motion to remand. After Plaintiffs filed what the Court construed as an amended petition, the Court allowed Lakelands to file amended motions to dismiss and remand and told the parties that it had concerns over its jurisdiction to hear this case.

On May 13, 2009, the Court issued an order. The Court ruled that the case had not been removed because it was filed as an original case in this court and because there was no notice of removal that had been filed in this Court. The Court then held that it lacked subject matter jurisdiction. Specifically, the Court held that 9 U.S.C. § 9 does not confer jurisdiction and that Plaintiffs had failed to meet their burden of establishing diversity. Specifically, the Court ruled that a Limited Liability Company ("LLC") has the same citizenship as each of its owners and that no evidence had been presented that established the citizenship of any owners of the parties. Accordingly, the Court dismissed the case for lack of subject matter jurisdiction.

Plaintiffs filed a motion for reconsideration on May 26, 2009. On June 24, 2009, Plaintiffs filed a notice of removal. The Court denied the motion for reconsideration and found that Plaintiffs had failed to meet their burden under Rules 60(b)(1) and (6). In light of the June 24 notice of removal, the Court then remanded the case for lack of jurisdiction because the evidence submitted as part of the motion for reconsideration focused on the residences of members of the LLC parties. Plaintiffs again did not present evidence regarding domicile and thus, again failed to establish jurisdiction since residence is not the same as domicile and domicile determines the citizenship of natural persons.

On July 10, 2009, Defendant filed a motion for sanctions. On November 4, 2009, Defendant filed an amended motion for sanctions. The amendment to the motion removes the request for sanctions based on Plaintiffs' removal from state court because the Tuolumne County Superior Court has sanctioned Plaintiffs for that conduct.


"Sanctions are an appropriate response to willful disobedience of a court order . . . or when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Aloe Vera of Am., Inc. v. United States, 376 F.3d 960, 965 (9th Cir. 2004); Fink v. Gomez, 239 F.3d 989, 991 (9th Cir. 2001). There are three primary mechanisms through which a court may sanction parties or their lawyers for improper conduct: (1) Federal Rule of Civil Procedure 11, which applies to signed writings filed with the court; (2) 28 U.S.C. ยง 1927, which is aimed at penalizing conduct that unreasonably and vexatiously multiplies the proceedings; and (3) the court's inherent power. Fink, 239 F.3d at 991. "Each of these sanctions alternatives has its own particular requirements, and it is ...

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