Unpublished Disposition, 933 F.2d 1014 (9th Cir. 1989)

MEMORANDUM^** 

Mikel Manuel appeals from the dismissal by the District Court for the Northern District of California of two actions filed, in pro per, against the City of East Palo Alto. We have jurisdiction pursuant to 28 U.S.C. § 1291 and affirm the dismissal but reverse the determination as to sanctions.

In December 1988 Manuel filed a complaint in the Northern District of California, in pro per, requesting a temporary restraining order, an injunction, and damages against the City of Palo Alto. The complaint asked the court to prevent the City from demolishing buildings on a parcel of land, owned by Barca Corporation, pursuant to an Order of the East Palo Alto City Council declaring the parcel a public nuisance. The temporary restraining order was denied and the buildings on the parcel were demolished. With his complaint for an injunction and damages still pending, Manuel recorded lis pendens on property owned by various East Palo Alto city officials who were named defendants in the action.

In March 1989 Manuel filed a second federal court action, this time in the Eastern District of California. His second complaint, although it involved the same parcel of land, was a complaint for inverse condemnation, and for fifth and fourteenth amendment violations under 42 U.S.C. § 1983. Manuel apparently filed lis pendens against property owned by East Palo Alto officials in this action as well.

The District Court for the Eastern District transferred the action to the Northern District. The City filed motions to dismiss each of the actions, motions to expunge the lis pendens, and for sanctions pursuant to Fed. R. Civ. P. 11 related both to Manuel's complaint and to the recording of the lis pendens on property not related to the litigation. Manuel made a motion for default judgment and for sanctions in the inverse condemnation action.

On June 16, 1989, Judge Legge ruled on each of the motions. The separate actions were dismissed for lack of standing; Manuel's motion for default judgment and for related sanctions was denied; the City's separate motions for sanctions were denied; and all of the lis pendens recorded by Manuel in connection with the separate actions were expunged.

Manuel appeals the dismissal of his actions for lack of standing, and for denial of his motion for default judgment (89-15897, 89-15896). The City appeals the denial of its request for Rule 11 sanctions in the inverse condemnation action (89-15963). Finally, the City requests attorney's fees as a sanction for Manuel's filing a frivolous appeal pursuant to F.R.A.P 38.

The central issue here is whether Manuel had standing to file either a complaint for injunctive relief or the subsequent complaint for inverse condemnation relating to a parcel of property owned by a Corporation. Manuel is the majority shareholder of Barca Corporation which is the owner of the East Palo Alto lot. Apparently Barca's corporate powers under both Delaware and California law were suspended prior to the initiation of this litigation. It therefore was not within the power of Barca to file this action. The law is clear that a shareholder does not have standing to redress an injury to the corporation. Shell Petroleum, N.V. v. Graves, 709 F.2d 593 (9th Cir. 1983), cert. denied, 464 U.S. 1012 (1983); Von BrimerErlich v. Glasner, 418 F.2d 226 (9th Cir. 1969). The district court correctly dismissed the separate actions for lack of standing. Because we hold that Manuel was without standing to sue, we need not address his assertion that his motions for default judgment and for sanctions were not properly denied.

East Palo Alto appeals from the denial by the trial court of its motion for sanctions pursuant to Fed. R. Civ. P. 11. The City argues that sanctions were appropriate because both complaints filed by Manuel, and his motion for default judgment were entirely without merit. We review a decision under Rule 11 for abuse of discretion. Cooter & Gell v. Hartmarx Corp., --- U.S. ----, 110 S. Ct. 2447; King v. Idaho Funeral Service Association, 862 F.2d 744, 747 (9th Cir. 1988). Although a pro se complainant need not comply with every courtroom procedure, sanctions are nevertheless appropriate against a pro se plaintiff when he violates Rule 11 by signing and submitting a pleading that is not warranted by existing law, or a good faith argument for modification thereof. See Advisory Committee Note, 97 F.R.D. 199. The standard is an objective one:

[T]he subjective intent of the pleader ... to file a meritorious document is of no moment. The standard is reasonableness.... The pleader, at a minimum, must have a 'good faith argument' for his or her view of what the law is, or should be. A good faith belief in the merit of a legal argument is an objective condition which a competent attorney attains only after 'reasonable inquiry.' " Zaldivar v. City of Los Angeles, 780 F.2d 823, 830-31 (9th Cir. 1986).

Sanctions were appropriate in this case and therefore we remand for the district court to arrive at an appropriate award. Manuel has not at any stage of this proceeding made a reasonable argument why he should be permitted to sue on behalf of Barca, or as an individual. Barca owned the property at issue, and the law is clear that Manuel has no standing to sue on behalf of the corporate entity. Because the corporation's charter has been revoked, the separate actions appear to be an attempt by Manuel to subvert the suspension of Barca's charter. Moreover, a state court cross complaint filed by Manuel also was dismissed because of lack of standing. We hold that there was no reasonable basis upon which Manuel could argue that he was entitled to sue on behalf of Barca and therefore that the two complaints and motion for default judgment were filed in violation of Rule 11. In determining an appropriate sanction, the trial court may consider the fact that Manuel proceeded without the assistance of counsel. Advisory Committee Note, 97 F.R.D. 199.

East Palo Alto also requests an award of attorney's fees on appeal, pursuant to F.R.A.P. 38 for the filing of a frivolous appeal. Under Rule 38, we may award attorney's fees where the result on appeal is obvious or the appellant's arguments are wholly without merit. McDonnell v. Critchlow, 661 F.2d 116, 118 (9th Cir. 1981). Manuel was informed by at least two courts that he was without standing to assert this action and he has presented no argument on appeal that supports his view that he should be permitted to sue on behalf of Barca. This appeal therefore is frivolous and appellees are entitled to attorneys' fees and double costs pursuant to F.R.A.P. 38.

AFFIRMED IN PART and REVERSED IN PART.