United States District Court, S.D. California
ORDER DENYING DEFENDANT'S MOTION FOR ATTORNEY'S FEES [Dkt. No. 29.]
GONZALO P. CURIEL, District Judge.
Before the Court is Defendant California Nurses Association/National Nurses Organizing Committee ("CNA")'s motion for attorney's fees. (Dkt. No. 29.) Plaintiff Fallbrook Hospital Corporation d/b/a Fallbrook Hospital filed an opposition and Defendant filed a reply. (Dkt. Nos. 37 & 38.) After a review of the briefs, supporting documentation and the applicable law, the Court DENIES Defendant's motion for attorney's fees.
Plaintiff Fallbrook Hospital operates an acute care hospital in Fallbrook, California. Defendant CNA represents employees working at Fallbrook Hospital and is a labor organization. On May 23, 2013, Plaintiff filed a complaint against Defendant seeking declaratory judgment that the parties agreed to submit any disputes related to their collective bargaining negotiations or the agreement to arbitration rather than to any outside entity or agency such as the National Labor Relations Board ("NLRB"). (Dkt. No. 1.) On May 30, 2013, Plaintiff filed a first amended complaint ("FAC") adding causes of action for breach of contract and specific performance. (Dkt. No. 3.) On June 24, 2013, Defendant filed a motion to dismiss for lack of jurisdiction and failure to state a claim. (Dkt. No. 6.) On September 23, 2013, the Court granted Defendant's motion to dismiss the first amended complaint and granted Plaintiff leave to amend. (Dkt. No. 10.) On October 15, 2013, Plaintiff filed a second amended complaint ("SAC") alleging breach of contract, specific performance and declaratory judgment. (Dkt. No. 11.) On November 5, 2013, Defendant filed a motion to dismiss for failure to state a claim. (Dkt. No. 12.) On February 19, 2014, the Court granted Defendant's motion to dismiss second amended complaint with leave to amend. (Dkt. No. 19.) On March 11, 2014, Plaintiff filed a third amended complaint ("TAC") for breach of contract, specific performance and declaratory judgment. (Dkt. No. 20.) On April 1, 2014, Defendant filed a motion to dismiss for failure to state a claim. (Dkt. No. 23.) On June 19, 2014, the Court granted Defendant's motion to dismiss the third amended complaint with prejudice. (Dkt. No. 27.) Judgment was entered in this case on the same date. (Dkt. No. 28.) On July 21, 2014, Plaintiff filed a notice of appeal. (Dkt. No. 31.)
On July 3, 2014, Defendant filed a motion for attorney's fees. (Dkt. No. 29.) Plaintiff filed an opposition on August 8, 2014. (Dkt. No. 37.) Defendant filed a reply on August 15, 2014. (Dkt. No. 38.)
A. Attorney's Fees
There are three sources of authority to allow courts to 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. § 1927, which is aimed at penalizing conduct that unreasonably and vexatiously multiples the proceedings, and (3) the court's inherent power." Fink v. Gomez , 239 F.3d 989, 991 (9th Cir. 2001).
Defendant seeks an award of attorney's fees in the amount of $41, 840.00 pursuant to the Court's inherent sanctioning power and pursuant to 28 U.S.C. § 1927. Defendant alleges that Plaintiff has acted in bad faith throughout this frivolous litigation and unreasonably multiplied the litigation. It argues that Fallbrook Hospital made numerous misrepresentations that are intentionally false and misleading. Plaintiff opposes and disputes Defendant's factual and legal allegations.
1. Court's Inherent Powers
A court has the inherent power to assess attorneys' fees for "willful disobedience of a court order... or when the losing part has acted in bad faith, vexatiously, wantonly, or for oppressive reasons...." Roadway Express, Inc. v. Piper , 447 U.S. 752, 766 (1980). Due to its potency "inherent powers must be exercised with restraint and discretion." Chambers v. Nasco , 501 U.S. 32, 44 (1991). In reviewing Supreme Court authority, under Roadway Express and Chambers v. NASCO, Inc., the Ninth Circuit held that "the district court has the inherent authority to impose sanctions for bad faith, which includes a broad range of willful improper conduct." Fink , 239 F.3d at 992. This also includes "willful abuse of judicial processes." Id.
A specific finding of bad faith is required for inherent power sanctions while recklessness, without more, does not justify inherent power sanctions. Id. at 993; see also Yagman v. Republic Ins. , 987 F.2d 622, 628 (9th Cir.1993) (quoting United States v. Stoneberger , 805 F.2d 1391, 1393 (9th Cir.1986)); accord Zambrano v. City of Tustin , 885 F.2d 1473, 1478 (9th Cir. 1989) ("To insure that restraint is properly exercised, we have routinely insisted upon a finding of bad faith before sanctions may be imposed under the court's inherent power.") Recklessness combined with an additional factor, such as frivolousness, harassment, or an improper purpose, can justify inherent power sanctions. Fink , 239 F.3d at 993.
A party may demonstrate bad faith "by delaying or disrupting the litigation or hampering enforcement of a court order." Primus Auto Fin. Servs. v. Batarse , 115 F.3d 644, 649 (9th Cir. 1997). In addition, a court may assess attorneys' fees when the litigation is perceived to have been brought in bad faith to harass or vex a party. Sheetmetal Workers Int'l Ass'n Local Union No. 359 v. Madison Indus., Inc. of Arizona , 84 F.3d 1186 (9th Cir. 1996).
In one case, inherent sanctions were warranted where the party being sanctioned submitted misleading information to the court by omitting the second page of an exhibit to the verified complaint that would exonerate defendants from the wrongdoings alleged in the complaint and was done in bad faith since the page was available prior to the lawsuit being filed. Nanak Fdn. Trust v. GMAC Mort., LLC, No. C-12-5647 EMC, 2012 WL 5818284, at *4 (N.D. Cal. Nov. 15, 2012).
Misstatements of both fact and law can support sanctions based on the court's inherent power. Stone, Inc. v. Greenberg Traurig, LLP, 2011 WL 995930 (D. Az. Mar. 21, 2011). In Stone, Inc., Plaintiff misrepresented holdings of cases in its brief and at oral argument, made further misrepresentations of holdings of certain cases and while it alleged to have filed a proof of claim in the bankruptcy proceedings, it did not file such a claim. Stone, Inc., 2011 WL 995930, at *3-4. Then, within a day of the hearing, Plaintiff filed a voluntary notice of dismissal after multiple defendants were required to brief two rounds of motions to dismiss and prepare for an oral argument requested solely by Plaintiff. Id. at 4. Moreover, Plaintiff filed unsupported allegations and further misstatements of law and fact in response to the OSC why sanctions should not issue Id . The court concluded ...