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John Zapata Dba Zapata Collection, Service, An Individual v. Flintco

January 24, 2012

JOHN ZAPATA DBA ZAPATA COLLECTION, SERVICE, AN INDIVIDUAL, PLAINTIFF,
v.
FLINTCO, INC., AN OKLAHOMA CORPORATION, SAN JOAQUIN COMMUNITY COLLEGE DISTRICT, A POLITICAL SUBDIVISION AND JOHN DOE 1-25, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge

ORDER

On September 7, 2011, the court dismissed this case for lack of federal subject matter jurisdiction and subsequently denied plaintiff's motion for reconsideration of the dismissal (Dkt. Nos. 56-57, 61).*fn1 In short, the court dismissed this action pursuant to 28 U.S.C. § 1359, concluding that plaintiff was the assignee relative to a collusive or "sham" assignment used to manufacture diversity jurisdiction. Meanwhile, defendants filed a motion seeking the imposition of nearly $160,000 in monetary sanctions against plaintiff pursuant to 28 U.S.C. § 1927 and the court's inherent powers (Dkt. No. 59), which is presently before the court.*fn2

Because oral argument would not materially aid the resolution of the pending motion, this matter was submitted on the briefs and record without a hearing. See Fed. R. Civ. P. 78(b); E. Dist. Local Rule 230(g). (Minute Order, Nov. 14, 2011, Dkt. No. 70.) The undersigned has fully considered the parties' briefs and appropriate portions of the record in this case and, for the reasons that follow, grants defendants' motion in part. Specifically, the court awards defendants $4,496.00 in monetary sanctions against plaintiff pursuant to 28 U.S.C. § 1927, as discussed below.

I. BACKGROUND

On December 23, 2009, plaintiff filed a complaint in this public contracting case,

alleging two claims for relief: (1) "breach of duty not to substitute subcontractor for listed subcontractor without proper consent," which was alleged against defendant Flintco, Inc. (see Compl. ¶¶ 12-23); and (2) violation of "due process,"*fn3 which was alleged against defendant San Joaquin Delta Community College District (see id. ¶¶ 24-36). Plaintiff filed this action as John Zapata, doing business as Zapata Collection Service, "an individual residing in Lancaster County, Nebraska" and "the assignee of all rights, title, [and] interest due to Midwest Demolition Company of California . . . , a California corporation, and against all Defendants." (Compl. ¶¶ 4-6.) The named defendants were Flintco, Inc., an Oklahoma corporation ("Flintco"), and San Joaquin Delta Community College, a political subdivision of the state of California ("the District"). (Id. ¶¶ 8-9.) Plaintiff alleged that this court has subject matter jurisdiction over this action pursuant to the diversity jurisdiction statute, 28 U.S.C. § 1332. (Compl. ¶¶ 1-2.)

Flintco and the District subsequently filed answers to plaintiff's complaint. On May 20, 2010, the undersigned conducted a status (pretrial scheduling) conference in this case. (Minutes, Dkt. No. 28; see also Order, May 21, 2010, Dkt. No. 29.) In the parties' Joint Status Report, defendants notified the court of their contention that this court might lack diversity jurisdiction over plaintiff's claims and that plaintiff, a non-lawyer, could not appear on behalf of the proper plaintiff in this case, Midwest Demolition Company of California ("MDC California"). (See Joint Status Report at 2, Dkt. No. 24.) Specifically, defendants alleged that the assignment from MDC California to plaintiff was a "sham" and ineffective to create diversity jurisdiction; MDC California, a California corporation, was the proper plaintiff; and there could be no complete diversity if MDC California was the proper plaintiff because the District was also a California entity. (See id. at 2:17-22.)

Following the scheduling conference, the undersigned entered an order: (1) permitting defendants to conduct limited discovery and a limited deposition of plaintiff confined to the issue of the court's subject matter jurisdiction; and (2) setting a briefing schedule for defendants' motion, if any, regarding the issues raised in the Joint Status Report. (See Order, May 21, 2010, at 3-5.) The undersigned set a special schedule to accommodate plaintiff, who informed the court that he would be traveling abroad and unavailable from approximately June 18, 2010, through the middle of August of 2010. (Id. at 3.) The goal of this schedule was to accomplish the jurisdiction-related discovery prior to the date that plaintiff was scheduled to leave the country.

Despite this accommodation, contentious discovery disputes arose wherein defendants contended, with supporting declarations and documents, that plaintiff's obstreperous behavior precluded compliance with the court's May 20, 2010 order. Indeed, the undersigned nearly sanctioned plaintiff and almost recommended that plaintiff's case be dismissed pursuant to Federal Rule of Civil Procedure 41(b) based on plaintiff's failure to prosecute this action and repeated failures to follow the court's orders. (See Order to Show Cause, Sept. 9, 2010, Dkt. No. 32; Order, Oct. 5, 2010, Dkt. No. 36.) Moreover, plaintiff did not return from his international trip until late September 2010, and did not notify the court of his return until he was under the threat of sanctions including dismissal. (See Letter, Sept. 28, 2010, Dkt. No. 35.) The undersigned ultimately modified the discovery and briefing schedules.*fn4 (See Order, June 10, 2010, Dkt. No. 31; Order, Oct. 5, 2010.)

Defendants were finally able to take plaintiff's deposition on October 13, 2010, nearly five months after the status (pretrial scheduling) conference. Defendants subsequently filed a timely motion to dismiss that challenged plaintiff's allegation that this court could exercise diversity jurisdiction over plaintiff's claims. After being granted an extension of time to oppose defendants' motion, plaintiff filed a written opposition. The undersigned subsequently conducted an evidentiary hearing regarding the issue of subject matter jurisdiction, which lasted approximately five hours.

As noted above, the court dismissed this case for lack of federal subject matter jurisdiction and subsequently denied plaintiff's motion for reconsideration of the dismissal. The court concluded that the assignment from MDC California to plaintiff was collusive or a "sham" within the meaning of 28 U.S.C. § 1359, and, accordingly, the court lacked diversity jurisdiction. It appears that plaintiff might have re-filed this action in a California Superior Court. (See Lax Decl. ¶ 8, Dkt. No. 59, Doc. No. 59-3.)

II. DISCUSSION

Through their motion, defendants seek to recover all of their attorneys' fees and costs incurred in this action while it proceeded in federal court. Specifically, Flintco requests a total award of $132,221.00, and the District requests a total award of $26,374.32.

Defendants offer two bases for the imposition of monetary sanctions on plaintiff. First, defendants seek sanctions pursuant to 28 U.S.C. § 1927. Second, defendants seek sanctions pursuant to the court's inherent power to impose sanctions. See Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991) (discussing court's inherent ...


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