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Dufour v. Allen

United States District Court, C.D. California

September 29, 2014



CHRISTINA A. SNYDER, District Judge.


The Court finds this motion appropriate for decision without oral argument. Fed.R.Civ.P. 78; Local Rule 7-15. Accordingly, the hearing date of October 6, 2014, is vacated, and the matter is hereby taken under submission.


The procedural history of the instant action is complex. In brief, plaintiff Frank DuFour first filed a complaint in the instant action on February 8, 2012, in Los Angeles County Superior Court. See Def.'s Request for Judicial Notice ("DRJN") Ex. 1. DuFour filed the Fourth Amended Complaint ("FAC") on Dec. 27, 2013, also in Los Angeles County Superior Court. See DRJN Ex. 6. The FAC named as defendants Robert Allen ("Allen"), Enlightened Wealth Institute International, L.C., Prosper, Inc ("Prosper"), Green Planet Services, Opteum Financial Services, Midland Mortgage Company, Aurora Loan Services, Sherson Lehman, Millennium Home Loans, Charlie Payne, and several Does. Id . The FAC asserted that two individuals connected to the defendants, Kenny Gregg ("Gregg") and Trent Staggs ("Staggs"), fraudulently induced DuFours to purchase investment properties located in Jackson, Mississippi, and that defendants concealed various business relationships among themselves. Id.

On May 19, 2014-after the Superior Court entered summary judgment on the FAC in favor of defendants on the grounds that all asserted claims were time-barred-DuFour filed a so-called "cross-cross complaint" ("CCC") in response to a cross-complaint brought by Prosper and still pending at that time. See DRJN Ex. 12. The CCC named as "cross-cross-defendants" several parties named as defendants in the FAC, as well as Freedom Mortgage ("Freedom"), the party bringing this motion for sanctions. Id . The CCC asserted claims for (1) Broker Liability for Intentional Non-Disclosure of Material Facts, (2) Unfair Business Practices, (3) Cancellation of Instruments, (4) Declaratory Relief, (5) Breach of Contract, and (6) violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. Id.

On February 28, 2014, the Federal Deposit Insurance Corporation (the "FDIC") was appointed as receiver of defendant Millennium Bank, N.A., a failed bank. Dkt. #1. On July 19, 2014, the FDIC removed this action to federal court based on federal question jurisdiction.[1] Id . On August 7, 2014, defendants filed a Joint Motion for Judgment on the Pleadings. Dkt. #17. DuFour filed an opposition to that motion on August 26, 2014. Dkt. #33. On September 15, 2014, after holding a hearing on the matter, the Court granted the Joint Motion for Judgment on the Pleadings, dismissing the CCC as duplicative of previously filed pleadings. Dkt. #46.[2]

On September 8, 2014, Freedom filed a motion for sanctions against DuFour and his attorney, Andrew J. Kulick ("Kulick"), pursuant to Fed.R.Civ.P. 11, 28 U.S.C. § 1927, and Cal. Code Civ. P. § 128.7. Dkt. #37. Freedom seeks sanctions in the amount of $33, 309.43, the amount of attorneys' fees and costs it claims it has incurred in defending against the CCC. Id . DuFour filed an opposition on September 12, 2014, Dkt. #41, and Freedom replied on September 22, 2014, Dkt. #48. After considering the parties' arguments, the Court finds and concludes as follows.


A. Fed.R.Civ.P. 11

Under Fed.R.Civ.P. 11, a court may impose sanctions upon attorneys or unrepresented parties for submitting papers to a court that are frivolous, legally unreasonable, baseless, or filed for an improper purpose, such as harassment. Simpson v. Lear Astronics Corp. , 77 F.3d 1170, 1177 (9th Cir.1996). All pleadings and other motions filed with a court must be signed by an attorney or the unrepresented party, certifying that "to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances": (1) the paper is not presented for an improper purpose; (2) the claims have a valid legal basis; and (3) there is factual support for the allegations. Fed.R.Civ.P. 11(b). Rule 11 imposes on attorneys an "objective standard of reasonableness under the circumstances." Golden Eagle Dist. Corp. v. Burroughs Corp. , 801 F.2d 1531, 1537 (9th Cir. 1986) (internal quotation marks omitted). However, Rule 11 "is not intended to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories." Greenberg v. Sala , 822 F.2d 882, 887 (9th Cir. 1987) (quoting Fed.R.Civ.P. 11 advisory committee's note).

The imposition of Rule 11 sanctions is a matter within the discretion of the trial court. Fed.R.Civ.P. 11(c); see id. advisory committee's notes (1993 amendments) ("The court has significant discretion in determining what sanctions, if any, should be imposed for a violation...."). Any Rule 11 sanctions "must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated." Fed.R.Civ.P. 11.[3]

B. 28 U.S.C. § 1927

28 U.S.C. § 1927 provides that any "attorney... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." The statute "applies only to unnecessary filings and tactics once a lawsuit ...

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