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Garay v. Tabah

United States District Court, C.D. California

May 19, 2015

Jose Garay APLC, et al.,
Elvin Mathias Tabah, Esq., et al.


JAMES V. SELNA, District Judge.

Proceedings: (IN CHAMBERS) Order Granting in Part and Denying in Part Defendant's Motion for Rule 11 Sanctions

Pursuant to Federal Rule of Civil Procedure 11, Defendant Elvin Tabah ("Tabah") moves for sanctions against Plaintiffs Jose Garay, APLC and Jose Garay (collectively, "Plaintiffs"), as well as their counsel of record William Caldwell and Tamar Arminak (collectively, "Plaintiffs' counsel"). (Mot. Sanctions, Docket ("Dkt.") No. 43.) Plaintiffs oppose (Opp'n Mot. Sanctions, Dkt. No. 50), and Tabah has replied. (Reply Supp. Mot. Sanctions, Dkt. No. 58.)

For the following reasons, the Court GRANTS IN PART and DENIES IN PART Tabah's Motion.

I. Background

The facts, circumstances, and allegations in this matter are familiar to the parties and the Court. The claims in this action arose from Tabah's employment by Plaintiffs and Tabah's alleged theft of confidential information during and after his employment. (See generally FAC ¶¶ 19-21, 32-33, 48, Dkt. No. 16.)

In February 2014, Tabah sued Plaintiffs in Orange County Superior Court for various discrimination and harassment claims, Tabah v. Garay, Case No. 30-2014-00705428-CU-WT-CJC ("state action"). (Mot. Dismiss, Ex. A, Dkt. No. 21-1.) Plaintiffs brought a cross-complaint, the state equivalent of counterclaims, against Tabah in that action, but later dismissed them. (Id. at Ex. B, Dkt. No. 21-1.) Plaintiffs then brought the present action in this Court, first alleging false designation under the Lanham Act and fifteen state law claims. (Compl., Dkt. No. 1.) On November 17, 2014, Plaintiffs filed a First Amended Complaint ("FAC"), alleging fifteen state law claims, copyright infringement under 17 U.S.C. § 501, and violations of the Computer Fraud and Abuse Act ("CFAA") under 18 U.S.C. § 1030. (FAC, Dkt. No. 16.) Approximately a month later, Plaintiffs filed a Second Amended Complaint ("SAC") without leave of the Court or consent by Tabah. (SAC, Dkt. No. 17), and the Court struck the SAC because of that defect. (Dkt. No. 18.) Pursuant to Tabah's motion to dismiss the FAC (Mot. Dismiss, Dkt. No. 21), the Court dismissed all of Plaintiffs' claims except their CFAA claim to the extent that it alleged a violation after Tabah's employment. (Order re Mot. [PG]Dismiss 11, Dkt. No. 45-1.) Pursuant to the Court's sua sponte Order to Show Cause (OSC, Dkt. No. 46), the Court dismissed this remaining CFAA claim because under California Code of Civil Procedure § 426.30, it was a compulsory cross-complaint that had to be alleged in the state action. (Order re OSC 2-3, Dkt. No. 61.) However, the Court retained jurisdiction to decide on Tabah's instant Motion for Rule 11 Sanctions. (Id.)

II. Legal Standard

Federal Rule of Civil Procedure 11(c)(2) ("Rule 11"), the "safe harbor rule, " requires a party requesting sanctions under Rule 11 to wait 21 days between serving the opposing party and filing the motion with the Court. This allows the offending party an opportunity to correct any error.

"Rule 11 imposes a duty on attorneys to certify by their signature that (1) they have read the pleadings or motions they file and (2) the pleading or motion is well-grounded in fact, ' has a colorable basis in law, and is not filed for an improper purpose." Smith v. Ricks, 31 F.3d 1478, 1488 (9th Cir. 1994) (citing Fed.R.Civ.P. 11; Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990)). "[T]he subjective intent of the pleader or movant to file a meritorious document is" not relevant. Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir. 1986), overruled on other grounds by Cooter, 496 U.S. at 400. Instead, the Court must ask whether the "signed document is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law." Zaldivar, 780 F.2d at 830. An action is not warranted where no "plausible, good faith argument can be made by a competent attorney in support of the proposition asserted." Paciulan v. George, 38 F.Supp.2d 1128, 1144 (N.D. Cal. 1999) (citing Zaldivar, 780 F.2d. at 829, 833).

Under Rule 11, sanctions may be imposed "when a filing is frivolous, legally unreasonable, or without factual foundation, or is brought for an improper purpose." Estate of Blue v. Cnty. of Los Angeles, 120 F.3d 982, 985 (9th Cir. 1997). The cases warranting imposition of sanctions are "rare and exceptional." Operating Eng'rs Pension Trust v. A-C Co., 859 F.2d 1336, 1344 (9th Cir. 1988). Finally, sanctions imposed under Rule 11 shall be limited to what is sufficient to deter "repetition of the conduct or comparable conduct by others similarly situated." Fed.R.Civ.P. 11(c)(4). Rule 11 sanctions may include an award for "reasonable attorney's fees and other expenses directly resulting from the violation." Id.

III. Discussion

Tabah moves for sanctions based on Plaintiffs' FAC (Mot. Sanctions 3:28-4:5), which was the operative complaint in this action until the Court dismissed the remaining CFAA claim. (Order re OSC 2-3.)

Because the FAC is the "primary focus" of Tabah's Motion, the Court "must conduct a two-prong inquiry to determine (1) whether the complaint is legally or factually baseless' from an objective perspective, and (2) if the attorney has conducted a reasonable and competent inquiry' before signing and filing it." ...

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