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Eleanora J. Dietlein Trust v. American Home Mortgage Investment Corp.

United States District Court, D. Nevada

October 7, 2014

THE ELEANORA J. DIETLEIN TRUST; et al., Plaintiffs,
v.
AMERICAN HOME MORTGAGE INVESTMENT CORP.; et al., Defendants.

ORDER

LARRY R. HICKS, District Judge.

Before the court are non-party Eric Dietlein ("Eric") and attorney Karlon J. Kidder's ("Attorney Kidder") objections to the Magistrate Judge's July 31, 2014 sanction order (Doc. #95[1]). Doc. ##99, 100.

I. Facts and Procedural History

This action concerns alleged property of the family trust of Eleanora Dietlein ("the trust") and disputes among the three trust beneficiaries; Eric, William Dietlien ("William"), and Nora Dietlein Christensen ("Nora").

The underlying wrongful foreclosure action was initiated by the trust and plaintiffs Derek and Gina Neumann ("the Neumanns"). At the time the complaint was filed, Attorney Kidder represented all three plaintiffs and Eric appeared as the "trust representative."[2]

During the pendency of this action, it came to the court's attention that Eric had initiated the present lawsuit and engaged in settlement negotiations without the knowledge of the other trust beneficiaries, William and Nora. On May 22 and 23, 2014, the Magistrate Judge held a show cause hearing for why Eric and Attorney Kidder should not be sanctioned for misrepresentations to the court and for violating the court's rules. After the hearing, the Magistrate Judge issued the challenged order. See Doc. #95. In that order, the Magistrate Judge sanctioned both Eric and Attorney Kidder, jointly and severally, for all attorney's fees and costs accrued by William and Nora in prosecuting their interests in this action. Id. The order further referred Attorney Kidder to the State Bar of Nevada for additional disciplinary proceedings in accordance with the Magistrate Judge's findings of professional misconduct. Id. Thereafter, Eric and Attorney Kidder filed the present objections to the July order. Doc. ##99, 100.

II. Legal Standard

Local Rule IB 3-1 authorizes a district judge to reconsider any pretrial matter referred to a magistrate judge pursuant to LR IB 1-3 where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law. Further, a district court must consider the timely objections and modify or set aside any part of an order that is clearly erroneous or contrary to law. FED. R. CIV. P. 72(a). An order is not clearly erroneous if it is just maybe or probably wrong, rather an order is clearly erroneous when it is "dead wrong" and appears so on a first impression. Alaimalo v. United States, 645 F.3d 1042, 1060 (9th Cir. 2011).

III. Eric Dietlein's Objection (Doc. #99)

In his objection, Eric argues that the sanction order was clearly erroneous because, as a nonparty, he cannot be sanctioned. Eric's objection is without merit. The court has the inherent authority to issue sanctions over both parties and non-parties to the action based on their conduct. In re Rainbow Magazine, Inc., 77 F.3d 278, 282 (9th Cir. 1996). Here, it is undisputed that Eric represented to the court that he was the trust representative in this action and then engaged in various court proceedings, including settlement negotiations, knowing that he was without authority to act as trustee. Therefore, the court shall deny Eric's objection accordingly.

IV. Attorney Karlon Kidder's Objections (Doc. #100)

In his separately raised objections, Attorney Kidder argues that the Magistrate Judge's order is clearly erroneous for six separate reasons: (1) failure to recuse; (2) lack of evidence to support a finding of bad faith; (3) lack of evidence to support a violation of Local Rule 4-1; (4) the reciprocal discipline rule of Local Rule 10-7 is inapplicable in this action; (5) the Magistrate Judge erred in allowing non-parties to participate in this action; and (6) the Magistrate Judge failed to hold a financial hearing before issuing the sanctions order. See Doc. #100. The court shall address each objection below.

1. Recusal

In February 2014, Attorney Kidder filed a motion for recusal of the Magistrate Judge. See Doc. #44. The Magistrate Judge denied the motion on March 7, 2014. Doc. #63. Attorney Kidder now argues that the Magistrate Judge ...


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