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Jacob v. Rusk

United States District Court, D. Nevada

May 1, 2018

Mo Jacob, Plaintiff
v.
Dennis E. Rusk, et al., Defendants

          ORDER DENYING MOTION FOR SANCTIONS [ECF NOS. 65, 67]

          Jennifer A. Dorsey Judge

         I previously granted defendant Dennis E. Rusk's motion for judgment on the pleadings, finding that plaintiff Mo Jacob was-under the most generous claim-accrual calculation and the longest possible limitations period-five days too late in filing his claims.[1] Rusk now moves for sanctions against Jacobs and his attorney, Robert Yaspan, arguing that Yaspan unreasonably and vexatiously multiplied these proceedings by failing to abandon this lawsuit in the face of Rusk's statute-of-limitations argument.[2] I find that Yaspan argued in good faith that a California tolling statute applied to Jacob's claims and brought them within the limitations period. So, I decline to sanction Yaspan or Jacob for maintaining this lawsuit.

         Background

         Jacob is a resident of California, and the defendants are residents of Nevada.[3] Jacob consulted for, and invested in, the development of VERGE (“a High-Rise Condominium project with retail shops, restaurants, theatre, professional offices, etc.”[4] that would be built in Las Vegas), and Rusk was the architect for VERGE. For many reasons, VERGE was never built, which led to much litigation between Rusk, Jacob, VERGE, and other interested parties. The parties settled their disputes based on some assurances from Rusk, but that settlement was rescinded when the Nevada State Board of Architecture discovered that Rusk had misrepresented many of the bases for their settlement.

         Jacob brought this action in California and alleged claims arising out of the rescinded settlement agreement as well as the original contract to build VERGE (which predated the settlement rescission by five years). The Central District of California requires litigants to meet and confer before filing a summary-judgment motion, so Rusk met with Jacob to discuss his bases for requesting summary judgment. At that meeting, Rusk raised his statute-of-limitations argument (among others), Jacob responded that a California civil-procedure statute tolled the limitations period while Rusk was in Nevada, and Rusk replied that Nevada law-not California law-governs this case.[5] The parties couldn't resolve their disputes at that conference, so Rusk moved for summary judgment.

         In his motion, Rusk once again raised the statute-of-limitations argument.[6] And without discussing which state's law governs, Jacob echoed his pre-motion-conference argument that California law tolled the limitations period.[7] The California court denied the motion without prejudice because Rusk failed to comply with the local rules, and before Rusk could renew his argument with a rule-compliant motion, the California court transferred Jacob's case to this district. Rusk then moved for judgment on the pleadings (a motion that was functionally equivalent to his summary-judgment motion). I granted that motion, after concluding that, regardless of which state's law I applied, Jacob's claims were too late. I also found that the California tolling statute was unconstitutional as applied because it violated the commerce clause. Rusk now moves for sanctions against Jacob's attorney for maintaining this lawsuit, in spite of earlier indications that the claims were too late.

         Discussion

         A. Standard for sanctions under 28 U.S.C. § 1927[8]

         The United States Code allows a court to sanction an attorney for “unreasonably and vexatiously” “multipl[ying] the proceedings in any case.”[9] This sanction applies “only to unnecessary filings and tactics once a lawsuit has begun”; it does not apply to the filing of a complaint.[10] To be sanctioned under § 1927, the attorney must have acted in bad faith.[11] “Bad faith is present when an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the purpose of harassing an opponent.”[12] “For sanctions to apply, if a filing is submitted recklessly, it must be frivolous, while if it is not frivolous, it must be intended to harass. Thus, while it is true that reckless filings may be sanctioned, and nonfrivolous filings may also be sanctioned, reckless nonfrivolous filings, without more, may not be sanctioned.”[13]

         B. Sanctions under § 1927 are not warranted.

         Rusk argues that it was unreasonable and vexatious for Jacob to maintain this lawsuit after Rusk raised the statute-of-limitations argument at the pre-summary-judgment-motion conference.[14] To get around this argument, Jacob had to rely on a California tolling statute that has been found to be unconstitutional where interstate commerce is involved.[15] So, this raises two questions. First, did Jacob lack a good-faith belief that California applied? And second, did Jacob believe in bad faith that interstate commerce was not involved?

         1. Rusk has not shown that Jacob had a bad-faith belief that California law applied.

         Jacob never directly addresses the governing-law issue, but he relies entirely on a California tolling statute to get his claims within the relevant limitations periods.[16] So, it's fair to say that he believes California's law governs the underlying dispute. Rusk, on the other hand, contends that Nevada law applies.[17] But his contentions (in this motion and throughout this case) are conclusory and lack any analysis or supporting citations.[18] So, Rusk has not met his burden to show that Jacob lacked a good-faith belief that California law applied.

         2. Jacob had a good-faith belief that Cal. Civ. Proc. ...


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