Lundstrom v. Young et al, No. 3:2018cv02856 - Document 122 (S.D. Cal. 2022)
Court Description: Order Denying Defendant Young's Motion for Sanctions (ECF No. 113 ). Signed by Judge Gonzalo P. Curiel on 10/27/22. (jmo)
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Lundstrom v. Young et al Doc. 122 Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4908 Page 1 of 9 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 BRIAN LUNDSTROM, Case No.: 18-cv-2856-GPC Plaintiff, 12 13 v. 14 CARLA YOUNG, an individual; LIGAND PHARMACEUTICALS, INC.; LIGAND PHARMACEUTICALS, INC. 401(k) PLAN; and DOES 1 through 20, 15 16 ORDER DENYING DEFENDANT YOUNG’S MOTION FOR SANCTIONS [ECF No. 113] Defendants. 17 18 19 Before the Court is Defendant Young’s (“Defendant” or “Young”) Motion for 20 Sanctions pursuant to Federal Rule of Civil Procedure (“Rule”) 11 and 28 U.S.C. § 1927. 21 ECF No. 113. Plaintiff Brian Lundstrom (“Plaintiff” or “Lundstrom”) filed a Response on 22 September 14, 2022. ECF No. 117. Defendant Young filed a Reply on September 21, 23 2022. ECF No. 118. For the reasons below, the Court DENIES Defendant’s Motion for 24 Sanctions. 25 BACKGROUND 26 27 28 1 18-cv-2856-GPC Dockets.Justia.com Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4909 Page 2 of 9 1 The Parties are familiar with the facts of this proceeding, and the Court will not 2 recount them here. Defendant Young seeks sanctions against Plaintiff and his Counsel 3 pursuant to Rule 11 and 28 U.S.C. § 1927. Specifically, Defendant argues Plaintiff 4 engaged in sanctionable conduct by: (1) misrepresenting the lack of notice he received to 5 appear before a Texas court; (2) misrepresenting that the Texas commitment order was 6 overturned; (3) increasing vexatious litigation in this Court before the Honorable 7 Anthony J. Battaglia; and (4) prosecuting a frivolous breach of contract claim against 8 Young, and then abandoning it. ECF No. 113-1 at 5.1 Plaintiff opposes. ECF No. 117. 9 LEGAL STANDARD 10 Rule 11 requires that an attorney who signs a pleading must certify that: (1) it is 11 not being presented for any improper purpose, such as to harass, cause unnecessary delay, 12 or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal 13 contentions are warranted by existing law or by a non-frivolous argument the law should 14 be changed; and (3) any factual contention has evidentiary support. Fed. R. Civ. P. 11(a) 15 & (b). Rule 11 is judged by an objective standard; the subjective intent of an attorney is 16 irrelevant. New Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298, 1306 (9th Cir. 1989). In the Ninth Circuit, complaints may be challenged only for “frivolousness,” 17 18 defined as a “filing that is both baseless and made without reasonable and competent 19 inquiry.” Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990). 20 The question is whether a reasonable attorney, after conducting an inquiry into the facts 21 and law, would determine that the complaint is well-founded. See also Truesdell v. So. 22 Cal. Permanente Med. Grp., 209 F.R.D. 169, 174 (C.D. Cal. 2002). Cases warranting the 23 impositions of sanctions for frivolous complaints are “rare and exceptional,” Operating 24 Eng’rs Pension Trust v. A-C Co., 859 F.2d 1336, 1344 (9th Cir. 1988). 25 26 1 27 28 The cited page numbers refer to CM/ECF pagination. 2 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4910 Page 3 of 9 28 U.S.C § 1927 states that an attorney may not “multipl[y] the proceedings in any 1 2 case unreasonably and vexatiously.” Sanctions under § 1927 must be supported by a 3 finding of subjective bad faith. New Alaska Dev. Corp., 869 F.2d at 1306. Bad faith is 4 present when “an attorney knowingly or recklessly raises a frivolous argument . . . or 5 argues a meritorious claim for the purpose of harassing an opponent.” Estate of Blas v. 6 Winkler, 792 F.2d 858, 860 (9th Cir. 1989) (citing Optyl Eyewear Fashion Int’l Corp. v. 7 Style Cos., 760 F.2d 1045, 1050-51 (9th Cir. 1985); Lone Ranger Television, Inc. v. 8 Program Radio Corp. 740 F.2d 718, 727 (9th Cir. 1984)). 9 10 11 DISCUSSION I. Rule 11 For Rule 11 sanctions to be appropriate in this case, it must be shown that 12 Plaintiff’s Second Amended Complaint was frivolous. “Frivolousness” is defined as 13 “baseless and made without reasonable and competent inquiry.” Townsend, 929 F.2d at 14 1362. An attorney’s subjective intent does not matter under Rule 11, but rather “‘[i]f 15 judged by an objective standard, a reasonable basis for the position exists in both law and 16 fact at the time the position is adopted, then sanctions should not be imposed.’” White v. 17 LA Pilates Carlsbad, 2021 WL 1626315, at *1 (S.D. Cal. Apr. 27, 2021) (quoting Conn 18 v. Borjorquez, 967 F.2d 1418, 1421 (9th Cir. 1992)). “Rule 11 is an extraordinary 19 remedy, one to be exercised with extreme caution.” Operating Eng’rs Pension Trust, 859 20 F.2d at 1345. Under this standard, Plaintiff’s arguments and factual representations in the 21 Second Amended Complaint were not so frivolous as to warrant Rule 11 sanctions. 22 First, Defendant argues that Plaintiff misrepresented the lack of notice he received 23 as to the Texas court entering the 401(k) QDRO and Stock DRO. Plaintiff and Defendant 24 appear to be talking past each other on this point. In the Motion for Sanctions, Young 25 argues Plaintiff Lundstrom received notice of the March 22, 2017 and April 5, 2017 26 hearings, and that this fact is uncontested. ECF No. 113-1 at 10. Plaintiff responds that 27 28 3 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4911 Page 4 of 9 1 his notice of those hearings is irrelevant; his argument is that he did not receive sufficient 2 notice “at the time the 401(k) QDRO and Stock DRO were submitted to the Texas court 3 for signature.” ECF No. 117 at 10 (emphasis in original). Plaintiff and Defendant have 4 differing viewpoints on whether notice of the signing of the Orders by the Texas court is 5 required by Texas law and/or the United States Constitution. See e.g., ECF No. 117 at 13 6 (Plaintiff’s Response to Motion for Sanctions) (“Plaintiff had a right to notice and a 7 hearing under the U.S. Constitution and Texas Law.”); ECF No. 118 at 4 (Defendant’s 8 Reply) (arguing the signing of the Orders was a “ministerial act” and thus no additional 9 notice was required); ECF No. 118 at 5 (Defendant’s Reply) (“There is absolutely no 10 case law or procedural requirement under Texas law that Plaintiff receive notice of the 11 Court signing the QDRO and DRO.” (emphasis in original)). The Court does not attempt 12 to resolve this question but finds that the existence of non-baseless arguments on both 13 sides renders this allegation not frivolous and not grounds for Rule 11 sanctions. 14 Second, the Court does not find that Plaintiff misrepresented to the Court that the 15 Commitment Order against him was overturned. Defendant argues that “Plaintiff filed an 16 Opposition to the Motion [to Dismiss] with his supporting declaration stating the Court of 17 Appeals overturned the Texas State arrest warrants sought by Young.” ECF No. 113-1 at 18 12. Plaintiff responds that he “did not make such a broad statement” and instead only said 19 that the first Commitment Order against him was overturned. ECF No. 117 at 13-14. The 20 Court agrees with Plaintiff. Plaintiff did not tell this Court or lead this Court to believe 21 that there are no Commitment Orders against Plaintiff at this time. At worst, both Parties 22 are guilty of omission. Defendant failed to draw the Court’s attention to the first 23 Commitment Order that was overturned on November 17, 2016, and Plaintiff failed to 24 tell this Court that there was currently a valid warrant for his arrest in the state of Texas. 25 Plaintiff argues the fact of a valid arrest warrant is irrelevant because the fugitive 26 disentitlement doctrine has no application to this case. ECF No. 117 at 14. Because the 27 28 4 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4912 Page 5 of 9 1 application of the fugitive disentitlement doctrine to Plaintiff’s case is a question with 2 non-baseless arguments on both sides,2 the Court again finds these representations and/or 3 omissions do not warrant Rule 11 sanctions. 4 Third, Defendant argues that Plaintiff should be sanctioned under Rule 11 because 5 he did not defend his breach of contract claim in his Opposition to Young’s Motion to 6 Dismiss, and thus the claim was frivolous. ECF No. 113-1 at 15. Plaintiff confirms that 7 he intends to no longer pursue the breach of contract claim, and the Court has dismissed 8 it. ECF No. 117 at 17; ECF No. 120 at 32-33. The Court finds that Plaintiff’s voluntary 9 abandonment of one claim for relief pled in the Second Amended Complaint does not 10 support Rule 11 sanctions. See Golden Eagle Distrib. Corp. v. Burroughs Corp., 801 F.2d 11 1531, 1540-41 (9th Cir. 1986) (“Nothing . . . supports the view that [Rule 11] empowers 12 the district court to impose sanctions on lawyers simply because a particular argument or 13 ground for relief contained in a non-frivolous motion is found by the district court to be 14 unjustified.”); see also id. at 1541 (“[T]he fact that the court concludes that one argument 15 or sub-argument in support of an otherwise valid motion, pleading, or other paper is 16 unmeritorious does not warrant a finding that the motion or pleading is frivolous or that 17 the Rule has been violated.”). 18 19 20 21 22 23 24 25 26 27 28 2 Defendant Young has not provided the Court with case law that unequivocally states the fugitive disentitlement doctrine applies to purely civil cases that are unrelated to criminal proceedings. See e.g., Cordell v. Tilton, 515 F. Supp. 2d 1114, 1119-1120 (S.D. Cal. Sept. 17, 2007) (“Courts have regularly applied this doctrine to dismiss both criminal appeals and related civil proceedings instituted by fugitives.” (emphasis added)). There is a non-frivolous argument the doctrine does not apply to Plaintiff’s lawsuit. See Conforte v. C.I.R., 692 F.2d 587, 590 (9th Cir. 1982) (“[Plaintiff] also argues that [the fugitive disentitlement doctrine] applies to civil cases only where a fugitive seeks relief based upon a claim related to his prior criminal convictions. . . . We need not decide whether [the doctrine] demands such a nexus requirement since in this case we have no difficulty concluding that [Plaintiff’s] previous conviction [relates to this civil proceeding].”). 5 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4913 Page 6 of 9 1 Last, Defendant’s argument that Rule 11 sanctions are required because Plaintiff’s 2 claims are barred by collateral estoppel is also rejected. Although the Court does agree 3 that collateral estoppel bars all of Plaintiff’s claims as to Defendant Young, it was not so 4 clear that collateral estoppel barred Plaintiff’s claims such that the Second Amended 5 Complaint is frivolous. The claims against Defendant Young were not “patently 6 unmeritorious” in this Court’s view. Riverhead Sav. Bank v. Nat’l Mortg. Equity Corp., 7 893 F.2d 1109, 1115 (9th Cir. 1990). 8 9 In deciding whether Plaintiff’s claims were barred by collateral estoppel, the Court analyzed many difficult legal questions, including the preclusive effect of a default 10 judgment under Texas state law and what issues were “fully and fairly litigated” in the 11 Texas state court proceedings. ECF No. 120 at 16-18; cf. Lundstrom, 857 Fed. Appx. at 12 954 n.2 (“We deny [the request for sanctions] because this appeal does not present highly 13 exceptional circumstances warranting sanctions, but instead involves complex issues 14 relating to the Rooker-Feldman doctrine . . . .”). Prior to this Order, the Court had not yet 15 answered whether collateral estoppel applied to Plaintiff’s claims. 16 “The key question in assessing frivolousness is whether a complaint states an 17 arguable claim—not whether the pleader is correct in his perception of the law.” Hudson 18 v. Moore Bus. Forms, Inc., 836 F.2d 1156, 1159 (9th Cir. 1987). Under Rule 11, a court 19 should not “‘examine the complaint in the same manner as a court considering a Rule 20 12(b)(6) motion,’ because ultimate failure on the merits is irrelevant.” Id. (quoting 21 Zaldivar v. City of Los Angeles, 780 F.2d 823, 832 (9th Cir. 1986)). Thus, that Plaintiff’s 22 claims against Ms. Young were dismissed as barred by collateral estoppel does not 23 necessarily mean that the claims were frivolous. 24 Further, the Ninth Circuit explicitly instructed this Court to consider the defense of 25 collateral estoppel on remand. See Lundstrom v. Young, 857 Fed. Appx. 952, 954 n.2 (9th 26 Cir. 2021) (“[W]e remand those claims to the district court to consider any other 27 28 6 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4914 Page 7 of 9 1 defenses, including claim and issue preclusion, in the first instance.”). The Court cannot 2 now sanction Plaintiff and his Counsel for asking this Court to do what the Ninth Circuit 3 mandated. Id. 4 II. 28 U.S.C. § 1927 28 U.S.C. § 1927 states that “[a]ny attorney or other person . . . who so multiplies 5 6 the proceedings in any case unreasonably and vexatiously may be required by the court to 7 satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred 8 because of such conduct.”3 A showing of subjective bad faith must be made for a Court 9 to impose § 1927 sanctions. In re Peoro, 793 F.2d 1048, 1051 (9th Cir. 1986). Bad faith 10 is present when an attorney “knowingly or recklessly raises a frivolous argument . . . or 11 argues a meritorious claim for the purpose of harassing an opponent.” Estate of Blas, 792 12 F.2d at 860. “For sanctions to apply [under § 1927], if a filing is submitted recklessly, it 13 must be frivolous, while if it is not frivolous, it must be intended to harass.” In re Keegan 14 Mgmt. Co. Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996). As already discussed, Plaintiff’s Second Amended Complaint is not frivolous. 15 16 There was a real question whether collateral estoppel applied, and the Ninth Circuit 17 expressly directed this Court to consider this issue, among others, on remand. 18 Thus, to support § 1927 sanctions, the Court must find that the Plaintiff’s conduct 19 or litigation tactics were an attempt to harass Defendant Young. The Court finds there is 20 21 22 23 24 25 26 27 28 Plaintiff is correct to point out that § 1927 sanctions “cannot be imposed for the filing of an initial complaint.” In re Keegan, 78 F.3d at 435 (“We have twice expressly held that § 1927 cannot be applied to an initial pleading.”). However, this is not an initial pleading. This is Plaintiff’s Second Amended Complaint and his third attempt at filing a Complaint. See Pascual v. Wells Fargo Bank, N.A., 2014 WL 582264, at *7-8 (N.D. Cal. Feb. 13, 2014) (finding an amended complaint subject to sanctions under § 1927); cf. Mirch v. Frank, 266 Fed. Appx. 586, 588 (9th Cir. 2008) (finding a third-party complaint was not an initial pleading because it could not have arisen “absent an underlying case”). 3 7 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4915 Page 8 of 9 1 not sufficient evidence to show this action was commenced primarily to harass Ms. 2 Young. It is true Ms. Young and Plaintiff have a long history of litigation in both this 3 Court and the Texas state court system. However, this alone is not enough to show that 4 the current lawsuit is an attempt to harass. The Court cannot conclude that the purpose of 5 this litigation is to harass Ms. Young as much as the purpose is to recover a substantial 6 amount of assets Plaintiff (rightfully or wrongfully) believes Defendant Young 7 unlawfully possesses. 8 9 The Court also does not think that the case removed from state court and now before Judge Battaglia constitutes finding that Plaintiff is a vexatious litigant and should 10 be sanctioned under § 1927. As Plaintiff argues in his Opposition to the Motion for 11 Sanctions, there are conceivable strategic reasons Plaintiff filed a state court action. ECF 12 No. 117 at 14-15. 13 Further, the Court is not able to issue sanctions under § 1927 for filing a complaint 14 in state court, even if the state court action involves identical claims to those raised in 15 federal court. “§ 1927 limits a federal court’s ability to sanction an attorney for conduct 16 before another court.” GriD Sys. Corp. v. John Fluke Mfg. Co., Inc., 41 F.3d 1318, 1319 17 (9th Cir. 1994). If a state court action has been removed to federal court, § 1927 will only 18 allow sanctions if the party unreasonably and vexatiously multiplied the proceedings 19 while in the federal court. Granite Rock Co. v. Int’l Brotherhood of Teamsters, 2011 WL 20 13373980, at *2 (N.D. Cal. Mar. 17, 2011) (citing GriD, 41 F.3d at 1319). “The issue 21 becomes whether there is a basis for [sanctioning Plaintiff] based on Plaintiff’s conduct 22 after the case was removed.” Id. 23 Here, upon removal of the state court action to federal court, the Parties filed a 24 Joint Stipulation to stay the case pending the outcome of the appeal to the Ninth Circuit, 25 and then Plaintiff’s subsequent petition to the Supreme Court of the United States. See 26 Lundstrom v. Young et al., No. 3:20-cv-2309-AJB-RBB (S.D. Cal.) (Docket Nos. 3, 4). 27 28 8 18-cv-2856-GPC Case 3:18-cv-02856-GPC-MSB Document 122 Filed 10/27/22 PageID.4916 Page 9 of 9 1 The case before Judge Battaglia remains stayed as of the signing of this Order. Id. Thus, 2 the Court cannot say that Plaintiff “unreasonably and vexatiously” multiplied the 3 litigation once the state court action was removed to federal court. Plaintiff and the 4 Parties did the opposite. Nonetheless, “[t]he Court reserves the right to reconsider this 5 matter if there is further litigation in federal court.” Granite Rock Co., 2011 WL 6 13373980 at *7. 7 8 9 CONCLUSION There is no doubt this litigation involves years hostility between Plaintiff and Defendant Young. However, at present, the Court does not find that sanctions are 10 appropriate under either Rule 11 or § 1927. Defendant Young’s Motion for Sanctions is 11 DENIED. 12 13 IT IS SO ORDERED. 14 15 Dated: October 27, 2022 16 17 18 19 20 21 22 23 24 25 26 27 28 9 18-cv-2856-GPC
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