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Owen v. Stokes

United States District Court, D. Nevada

January 10, 2020

ADAM STOKES, et al., Defendants.


          Gloria M. Navarro, District Judge United States District Court

         Pending before the Court is Plaintiff Christine Owens's (“Plaintiff's”) Motion for Attorney Fees and Sanctions, (ECF No. 33). Defendants Adam Stokes, Adam Stokes LLC, Half Price Lawyers, LLC, and Mark Coburn (collectively, “Defendants”) filed a Response, (ECF No. 36). Plaintiff filed a Reply, (ECF No. 37). For the reasons discussed below, Plaintiff's Motion is GRANTED in part and DENIED in part.

         I. BACKGROUND

         This case arises from Defendants' alleged failure to pay Plaintiff referral fees and bonuses consistent with the Half Price Lawyers, LLC licensing and operating agreements. (See Compl. ¶ 27, Ex. 2 to Pet. of Removal, ECF No. 1-2). Plaintiff filed her Complaint in state court, asserting fifteen state-law causes of action. (Id. ¶¶ 28-114). Defendants removed the case pursuant to 28 U.S.C. § 1331 because the breached agreements described in the Complaint allegedly “require[d] the interpretation of federal substantive law and federal procedure.” (Pet. of Removal ¶ 7, ECF No. 1). Plaintiff filed the Motion to Remand, arguing that the Complaint did raise a federal question. (Mot. Remand 4:4-7:20, ECF No. 7).

         On August 26, 2019, the Court entered an Order granting Plaintiff's Motion to Remand, (See Order, ECF No. 32). In the Order, the Court concluded that the Complaint did not raise a federal question under well-settled law, and “Defendants fail[ed] to provide the Court any specific argument or legal authority as to how Plaintiff's claims are supposedly dependent on federal issues.” (Id. 4:6-5:21) (emphasis original). The Court found that Defendants premised their arguments in favor of removal on misrepresentations of the parties' Operating Agreement. (Id. at 6:20-7:10). While Defendants explained that the Operating Agreement provided that “[t]he construction, performance, and interpretation” of the Agreement would be governed by the Lanham Act, the Agreement in fact stated that it “shall be governed by and construed and enforced in accordance with the laws of the State of Nevada . . . .” (Id.) (emphasis original). The Court advised Plaintiff that “it will entertain a motion for attorney's fees based on improper removal.” (Id. 7:13-14). The Court also admonished that, in light of Defendants' “blatant mischaracterization of the contractual agreements . . . . any further misrepresentations before this Court will result in appropriate sanctions.” (Id. 7:11-13). Plaintiff then filed the instant Motion for Attorney Fees and Sanctions, (ECF No. 33).


         28 U.S.C. § 1447(c) permits a court to award “just costs and any actual expenses, including attorney's fees, incurred as a result of removal” where a case was improperly removed from state court. 28 U.S.C. § 1447(c). However, “[a]bsent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). “[R]emoval is not objectively unreasonable solely because the removing party's arguments lack merit, or else attorney's fees would always be awarded whenever remand is granted.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). Instead, whether removal was objectively reasonable depends on the clarity of the applicable law and whether the law “clearly foreclosed” the defendant's arguments in favor of removal. See Id. at 1066-67; Wells Fargo Bank, NA v. Hunt, No. C-10-04965 JCS, 2011 U.S. Dist. LEXIS 14125, 2011 WL 445801, at *5 (N.D. Cal. Feb. 3, 2011). An award of costs and expenses under section 1447(c) “is left to the district court's discretion, with no heavy congressional thumb on either side of the scales.” Martin, 546 U.S at 139.


         Plaintiff argues that the Court should award attorney fees and impose sanctions against Defendants because they filed a frivolous Notice of Removal. (See Mot. Att'y Fees and Sanctions 3:1-5:4). Specifically, she alleges that, as the Court noted in its previous Order, Defendants' arguments in favor of removal were “meritless” and relied on “blatant mischaracterizations of the contractual agreements.” (Id. 2:13-20). Plaintiff therefore argues that the Court should grant “[s]anctions in the form of an award of attorney fees pursuant to 28 USC § 1447 and NRS 7.085, and further sanctions pursuant to 28 USC § 1447, FRCP 11, and LR IA 11-8” in the case. (Id. 1:20-23).

         Defendants make the following arguments in response to Plaintiff's Motion: (1) the Court should deny the Motion because Plaintiff moved for fees as a sanction rather than for improper removal, (Resp. 2:4-3:2, ECF No. 36); (2) Plaintiff failed to demonstrate removal was initiated in bath faith or for an improper reason, (id. 3:3-4:18); (3) Plaintiff should bare the fees because she failed to submit the matter to arbitration as required under the Operating Agreement, (id. 4:19-5:19); (4) even if the Court awards fees, the amount sought is excessive, (id. 5:20-6:20); and (5) if the Court awards fees, Plaintiff should not recover fees related to the issue of arbitration because it is unrelated to the case's removal, (id. 6:21-7:5). The Court addresses each contention below.

         Defendants' argument that the Court should deny Plaintiff's Motion because she seeks fees as a sanction is meritless. (Order 7:11-13, ECF No. 32). While the Court advised that it would entertain a motion for fees based on improper removal and warned Defendants that it would entertain further sanctions if Defendants continued to misrepresent the record, (see Order 7:11-14), an award of fees for improper removal is a sanction. See 28 U.S.C. § 1447(c). Although Plaintiff likewise moves for attorney fees and sanctions under additional authorities, (Mot. Fees 1:10-23), the Court confines its award to Defendants' sanctionable conduct under 28 U.S.C. § 1447(c).

         Defendants' argument that the Court should deny the Motion for Fees because Plaintiff has not demonstrated bad faith or improper purpose mistakes the relevant legal standard. As explained above, a Court may award fees incurred as a result of improper removal upon a showing that removal was objectively unreasonable; bad faith or improper purpose is not required. Martin, 546 U.S. at 141; See also Albion Pac. Prop. Res., LLC v. Seligman, 329 F.Supp.2d 1163, 1165 (N.D. Cal. 2004) (explaining that the language of the statute “distinguishes an award under section 1447(c) ‘from a punitive award which was associated with the formerly required bad faith finding.'”) (quoting Gotro v. R & B Realty Group, 69 F.3d 1485, 1487 (9th Cir. 1995)).

         Defendants provide no authority that the presence of an arbitration agreement provides an affirmative defense to a motion for fees incurred from improper removal. Section 1447(c) explains that a Court can require the improperly removing party to pay attorney fees “incurred as a result of removal.” 28 U.S.C. § 1447(c). Here, removal was without a reasonable basis and caused Plaintiff to incur unnecessary fees. If the parties had an enforceable arbitration agreement requiring them to arbitrate the dispute, Defendants may seek sanctions from a court of competent jurisdiction upon prevailing on a motion to compel arbitration. However, the parties' arbitration agreement has no bearing on Plaintiff's instant Motion.

         The Court concludes that an award of fees under 28 U.S.C. § 1447(c) is proper. Defendants' arguments in favor of removal were meritless and premised on blatant mischaracterizations of the Complaint to the Court. (See Order, 7:3-14). Therefore, Plaintiff is entitled to recover the costs she incurred as a result of the improper removal. Defendants remaining arguments ...

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