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Aqua Connect, Inc., A Nevada Corporation v. Code Rebel

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA


June 6, 2012

AQUA CONNECT, INC., A NEVADA CORPORATION, PLAINTIFF,
v.
CODE REBEL, LLC, A HAWAII LIMITED LIABILITY COMPANY; ARBEN KRYEZIU, AN INDIVIDUAL; VLADIMIR BICKOV, AN INDIVIDUAL; AND DOES 1 THROUGH 300, INCLUSIVE, DEFENDANTS.

The opinion of the court was delivered by: Honorable Ronald S.W. Lew Senior, U.S. District Court Judge

ORDER re: Defendants Code Rebel LLC and Arben Kryeziu's Motion for Sanctions Pursuant to Federal Rules of Civil Procedure, Rule 11(b) and 28 U.S.C. § 1927 [36]

On May 18, 2012, Defendants Code Rebel LLC and Arben Kryeziu's ("Movants") Motion for Sanctions Pursuant to Federal Rules of Civil Procedure, Rule 11(b) and 28 U.S.C. § 1927 came on for regular calendar before this Court [32]. The Court having reviewed all papers submitted pertaining to this Motion and having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:

The Court hereby DENIES Movants' Motion for Sanctions. As a preliminary matter, in its Opposition, Plaintiff objects to paragraphs three and four of the supplemental declaration of John Houkom as hearsay and lacking personal knowledge. The Court finds that these objections are misguided and OVERRULES Plaintiff's objections.

As to the merits, Movants primarily argue that Plaintiff should be sanctioned because Plaintiff included, in its Proposed Second Amended Complaint ("SAC"), an allegedly frivolous claim that was previously dismissed by this Court without leave to amend. In its Opposition, Plaintiff, however, contends that it only included this previously dismissed claim for misappropriation of trade secrets for the purpose of preserving the issue on appeal. In analyzing whether Plaintiff's filings are sanctionable under Rule 11, the Court must determine whether Plaintiff's actions were objectively reasonable. Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir. 1986). "The pleader, at a minimum, must have a 'good faith argument' for his or her view of what the law is, or should be." Id.

The Court finds that Plaintiff was objectively reasonable in including a previously dismissed misappropriation claim in its Proposed SAC. The Ninth Circuit has held that a Plaintiff can replead any claim that a district court has previously dismissed with prejudice in order to preserve the right to appeal a dismissal. Detabali v. St. Luke's Hosp., 482 F.3d 1199, 1204 (9th Cir. 2007). Here, Plaintiff's repleading of a claim that the Court dismissed without leave to amend may appear to be in direct violation of the Court's prior ruling. However, in light of Ninth Circuit precedent which allows repleading of dismissed claims, the Court finds that Plaintiff's actions did not violate the "objectively reasonable" threshold that would warrant sanctions against Plaintiff pursuant to Rule 11.

In addition, Movants argue that Plaintiff should be issued sanctions because it can be inferred that Plaintiff sought joinder of Moboware for improper forum shopping purposes. As support, Movants argue that each proposed allegation against Moboware is frivolous. Here, the Court finds that Plaintiff's Motion to Amend was not objectively baseless and made "without a reasonable and competent inquiry. Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990). Though the Court denied Plaintiff's Motion to Amend, Plaintiff's Motion, nevertheless, applied the correct legal standards, made a legally coherent argument, and ultimately cannot be found to rise to the level of an incompetent and baseless inquiry that merits sanctions. Accordingly, the Court DENIES Movants' request for sanctions against Plaintiff.

Finally, in Opposition to this Motion for Sanctions, Plaintiff makes its own request for sanctions against Movants for failing to meet and confer as required by Local Rule 7-3. The Court finds this request without merit and DENIES Plaintiff's own request for sanctions.

In sum, for the foregoing reasons, the Court DENIES Movants' Motion for Sanctions Pursuant to Federal Rules of Civil Procedure, Rule 11(b) and 28 U.S.C. § 1927. The Court also DENIES Plaintiff's own request for sanctions that Plaintiff made in its Opposition to this Motion.

IT IS SO ORDERED.

20120606

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