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Mfc Twin Builders, LLC v. Henry Doloso Fajardo

September 4, 2012

MFC TWIN BUILDERS, LLC,
PLAINTIFF,
v.
HENRY DOLOSO FAJARDO;
JK DENTAL CLINIC; AND DOES 1-10, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge

FINDINGS AND RECOMMENDATIONS THAT PLAINTIFF'S REQUEST FOR ATTORNEY'S FEES PURSUANT TO 28 U.S.C. § 1447(c) BE GRANTED (Doc. No. 7) (Doc. No. 12)

FINDINGS AND RECOMMENDATIONS THAT PLAINTIFF'S MOTION FOR SANCTIONS PURSUANT TO RULE BE GRANTED OBJECTIONS DUE: 14 DAYS

I. INTRODUCTION

On February 14, 2012, Defendants Henry Doloso Fajardo ("Fajardo") and JK Dental Clinic (collectively, "Defendants") removed this matter from the Fresno County Superior Court to the U.S. District Court for the Eastern District of California. (Doc. 1.) On March 14, 2012, Plaintiff MFC Twin Builders, LLC ("Plaintiff") filed a motion to remand the case to state court. (Doc. 6.) Together with the motion to remand, Plaintiff also filed a request for an award of costs and fees pursuant to 28 U.S.C. § 1447(c). (Doc. 7.) On April 10, 2012, Plaintiff filed a motion for sanctions pursuant to Rule 11. (Doc. 12.) On April 18, 2012, Defendants filed an opposition to Plaintiff's motion to remand. (Doc. 14.) Plaintiff filed a reply to the opposition on April 25, 2012. (Doc. 16.) Defendants did not file an opposition to Plaintiff's motion for sanctions. The undersigned recommended that the district court remand the action for lack of subject matter jurisdiction, noting that if the district court remanded the action, further recommendations regarding attorneys' fees and sanctions would be issued. (Doc. 20.) The underlying matter was remanded by the district court on May 29, 2012. (Doc. 25.)

The Court issued an order on July 2, 2012, permitting Plaintiff to file supplemental information in support of its request for attorneys' fees pursuant to 28 U.S.C. § 1447(c). Plaintiff filed a supplemental brief on July 9, 2012. (Doc. 28.)

For the reasons set forth below, the Court RECOMMENDS that Plaintiff's motions for costs and fees pursuant to 28 U.S.C. § 1447(c) and for sanctions pursuant to Federal Rule of Civil Procedure 11 be GRANTED.

II. BACKGROUND

On February 6, 2012, Plaintiff filed a verified complaint in the Superior Court of California, County of Fresno, asserting a claim for unlawful detainer against Defendants. (Doc. 1, p. 10-16.) The complaint alleges that, on December 12, 2008, Fajardo executed a "Construction Collateral Deed of Trust" ("deed of trust") conveying the property located at 2100 E. Clinton Avenue, Fresno, California ("Property") to secure payment of a promissory note made by JP Unlimited LLC ("JP"), in the amount of $1,300,000.00, payable to Metro Funding Corporation ("Metro"). (Doc. 1, p. 11, ¶ 7.) On December 15, 2008, Metro recorded an assignment of its interests under the deed of trust to MFC Funding, LLC. (Doc. 1, p. 11, ¶ 8.)

JP subsequently defaulted on the loan and, on January 26, 2010, MFC Funding, LLC recorded a notice of default and election to sell under the deed of trust. (Doc. 1, p. 12, ¶ 9.) On February 14, 2011, Metro made a second assignment of its interests in the deed of trust to MFC Funding, LLC. (Doc. 1, p. 12, ¶ 10.) MFC Funding, LLC then recorded an assignment of its interests under the deed of trust to MFC Real Estate, LLC, on February 15, 2011. (Doc. 1, p. 12, ¶ 11.) Notice was given on March 23, 2011, that the Property was scheduled to be sold at public auction on April 20, 2011. (Doc. 1, p. 12, ¶ 12.)

On April 19, 2011, Fajardo filed a Chapter 11 petition in the United States Bankruptcy Court for the Eastern District of California ("Bankruptcy Court"). (Doc. 1, p. 12-13, ¶ 13.) The trustee's sale was postponed until June 1, 2011. (Doc. 1, p. 13, ¶ 14.) On May 25, 2011, the Bankruptcy Court issued an order dismissing Fajardo's bankruptcy petition for failure to timely file documents, among other things. (Doc. 1, p. 13, ¶ 15; see also Doc. 8-1, p. 2.)*fn1 Fajardo filed a second Chapter 11 bankruptcy petition on May 31, 2011, again postponing the trustee's sale, which was subsequently rescheduled for August 24, 2011. (Doc. 1, p. 13, ¶ 16-18.)

On July 28, 2011, the Bankruptcy Court entered an order granting MFC Real Estate, LLC relief from the automatic stay relating to Fajardo's second bankruptcy petition. (Doc. 1, p. 13, ¶ 19.) The Bankruptcy Court found that the filing of the bankruptcy petition was "part of a scheme to delay, hinder, and defraud creditors that involved multiple bankruptcy filings affecting the Property." (Doc. 1, p. 13, ¶ 19; see also Doc. 18-4, p. 5.)

The Property was sold to Plaintiff at the trustee's sale on August 24, 2011. (Doc. 1, p. 13, ¶ 20.) On August 26, 2011, MFC Real Estate, LLC recorded an assignment of its interest under the deed of trust to Plaintiff. (Doc. 1, p. 84, Exhibit I; see also Doc. 18-4, p. 9.) Plaintiff alleges that Defendants, who were not tenants, but prior owners of the Property, were in possession of the Property at the time of the sale, and subsequently remained in possession. (Doc. 1, p. 14, ¶ 22.) The Bankruptcy Court dismissed Defendant Fajardo's second bankruptcy petition on September 23, 2011. (Doc. 8-1, p. 5.)

On October 28, 2011, Plaintiff served Defendants with written notice to quit the premises. (Doc. 1, p. 14, ¶ 23.) Defendants failed to vacate the Property by November 1, 2011, as required by the notice to quit. (Doc. 1, p. 14, ¶ 24.) On the day Defendants were served with the notice to quit, Fajardo filed a new Chapter 13 bankruptcy petition in the Bankruptcy Court. (Doc. 1, p. 14, ¶ 25.) On December 16, 2011, the Bankruptcy Court entered an order confirming that the automatic stay was not in effect as to Fajardo's third bankruptcy petition. (Doc. 1, p. 14, ¶ 26; see also Doc 18-4, p. 19.) The Bankruptcy Court dismissed this petition on January 22, 2012. (Doc. 8-1, p. 7.) During this time, Defendant Fajardo also filed three successive complaints against Plaintiff, which were all dismissed, alleging violations of state law regarding the loan and foreclosure. (Doc. 8- 2.)

On February 6, 2012, Plaintiff filed an unlawful detainer action in Fresno County Superior Court against Defendants, seeking the reasonable rental value of the Property from August 26, 2011. The caption of the complaint designates the matter as a limited jurisdiction civil case with an amount in controversy not exceeding $25,000. (Doc. 1, p. 10.)

Defendants filed no response to Plaintiff's complaint in state court. (See Doc. 9-1, ¶ 3.) On February 14, 2012, Defendants filed a notice of removal with this Court. (Doc. 1.) Defendants filed no response to this complaint following its removal to federal court. Defendant Fajardo filed a separate action with this Court, Fajardo, et al. v. Ross, et al., Case No. 1:12-cv-00217-AWI-DLB (E.D. Cal. filed Feb. 13, 2012), alleging violations of state and federal law regarding the Property at issue in this case. (Doc. 8-3.)*fn2

On March 14, 2012, Plaintiff filed a motion to remand and requested that this court enter defaults as to both Defendants. (Docs. 6, 9.) On April 10, 2012, Plaintiff filed a motion for sanctions pursuant to Federal Rule of Civil Procedure 11. (Doc. 12.) Fajardo filed an opposition to Plaintiff's motion to remand on April 18, 2012. (Doc. 14.) Plaintiff filed a reply on April 25, 2012. (Doc. 16.) Plaintiff indicated a total of $9,384.00 in attorneys' fees for the motion to remand and anticipated an additional $1,040.00 in fees to prepare for and attend the hearing on the motion. (Doc. 17, p. 2, ¶ 9.) Plaintiff also anticipated incurring $542.79 in travel fees for Plaintiff's counsel to attend the hearing, for a total of $10,966.79 in costs and fees incurred from filing the motion. (Doc. 17, p. 3, ¶¶ 13.) Defendants filed no opposition to Plaintiff's Rule 11 motion.

The Court determined that Plaintiff's motions were suitable for decision without oral argument, and on May 9, 2012, issued Findings and Recommendations that Plaintiff's requests for judicial notice, motion for remand, and request for entry of Defendants' defaults be granted. (Doc. 20.)

On May 14, 2012, Defendant Fajardo filed obejctions to the Findings and Recommendations. (Doc. 21.) Plaintiff filed a response to Fajardo's objections on May 17, 2012. (Doc. 24.) That same day, Defendant Fajardo filed an ex parte motion to reconsider the Findings and Recommendations and requested a temporary restraining order enjoining Plaintiff from evicting Fajardo from the Property. (Doc. 22.) On May 29, 2012, Chief District Judge Anthony W. Ishii granted Plaintiff's requests for judicial notice, Plaintiff's motion for remand, and denied Defendants' motion for reconsideration and request for temporary restraining order. (Doc. 25.)

On July 2, 2012, the Court issued an order permitting Plaintiff to file a supplemental brief in support of its request for attorneys' fees under Section 1447(c). (Doc. 27.) Plaintiff filed its supplemental brief on July 9, 2012. (Doc. 28.)

III. DISCUSSION

A. Plaintiff's Request for Costs and Fees Under 28 U.S.C. § 1447(c)

Although the underlying case has been remanded to state court, the district court retains jurisdiction to issue orders related to collateral matters, such as attorneys' fees. Rutledge v. Seyfarth, Saw, Fairweather & Geraldson, 201 F.3d 1212, 1215 (9th Cir. 2000), as modified, 208 F.3d 1170 (9th Cir. 2000); Moore v. Permanente Med. Grp., Inc., 981 F.2d, 443, 445 (9th Cir. 1992).

1. Legal Standard

Under 28 U.S.C. § 1447(c), a district court remanding a case to state court "may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." However, attorneys' fees are not to be granted or denied as a matter of course. Martin v. Franklin Capital Corp., 546 U.S. 132, 139 (2005). "Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal." Id. at 141. Thus, the standard for awarding fees turns on the "reasonableness of the attempted removal, not a showing of bad faith, and an award of fees is intended as reimbursement for unnecessary litigation costs, not a punitive measure." See Moore v. Permanente Med. Grp., 981 F.2d 443, 446-47 (9th Cir. 1992). While it is within the district court's discretion to consider whether unusual circumstances warrant departure from this general rule, the reasons for such ...


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