Brockman, M.D v. Friedman

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 JAMES T. BROCKMAN, M.D., Case No.: 23-CV-0162-GPC 12 Plaintiff, ORDER 13 v. (1) DENYING DEFENDANT’S MOTION FOR SANCTIONS 14 STANLEY FRIEDMAN, individually; (2) AWARDING DEFENDANT and DOES 1-10, inclusive, 15 COSTS UNDER FED. R. CIV. P. 41(d) Defendants. [16] [ECF No. 10] [17] 18 Before the Court is Defendant Stanley Friedman’s Motion for Sanctions against 19 Plaintiff James T. Brockman and Plaintiff’s Counsel. ECF No. 10. Brockman filed a 20 response in opposition, ECF No. 12, and Friedman filed a reply, ECF No. 13. The Court 21 finds the matter appropriate for decision without oral argument and VACATES the hearing 22 previously scheduled for Friday, May 5, 2023. See Civ. L. R. 7.1.d.1. For the reasons that 23 follow, the Court DENIES Friedman’s Motion for Sanctions but awards Friedman costs 24 for the earlier action pursuant to Federal Rule of Civil Procedure 41(d). [27] 1 I. PROCEDURAL BACKGROUND 2 On November 18, 2022, Brockman filed a state court action in the San Diego 3 Superior Court of California alleging fraud, conversion, and intentional infliction of 4 emotional distress regarding Friedman’s alleged misrepresentations when selling a Porsche 5 automobile to Brockman. ECF No. 12-2 at 13–14.1 On December 16, 2022, Friedman 6 removed the matter to federal court pursuant to 28 U.S.C. § 1441 (b) and filed a Motion to 7 Transfer to the District Court for the Northern District of Illinois shortly thereafter. Case 8 No. 3:22-cv-2002-GPC-AGS ECF No. *1, *2.2 On January 10, 2023, Brockman filed a 9 voluntary dismissal pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i). ECF 10 No. *4. 11 On January 11, 2023, Brockman filed effectively the same action in the San Diego 12 Superior Court, replacing the intentional infliction of emotional distress claim with a claim 13 for unjust enrichment and making a more specified monetary damages request. Compare 14 ECF No. 12-2 at 12–15 (November 2022 complaint), with ECF No. 12-2 at 17, 20–21 15 (January 2023 complaint). Friedman again removed the case to federal court and filed a 16 Motion to Transfer to the Northern District of Illinois. ECF No. 1, 4. On 17 February 22, 2023, Brockman filed another Notice of Voluntary Dismissal of Action 18 pursuant to Rule 41(a)(1)(A)(i). ECF No. 8. 19 The Court issued an order instructing the Clerk to close the case and noting that, 20 regardless of how Brockman framed his notice of voluntary dismissal, pursuant to Rule 21 41(a)(1)(B) Brockman’s second Voluntary Dismissal of Action operated as an adjudication 22 on the merits. ECF No. 9 at 2. [24] 25 1 Pages numbers are based on CM/ECF pagination. 26 2 Citations to the docket for Case No. 22-cv-2002 are denoted with an asterisk (*). Otherwise, the citation is to the docket for Case No. 23-cv-162. [27] 1 II. FACTUAL BACKGROUND 2 A. Vehicle Purchase Logistics 3 Friedman’s late wife, Monique Friedman, owned a 2009 Porsche 911 automobile 4 from 2009 until her death on August 9, 2022. ECF No. 10-1 at 34; see also ECF No. 12-1 5 at 6 (vehicle history report). Friedman states that on September 15, 2022, as successor-in6 interest for the vehicle, he transferred both title and the physical vehicle to car dealers 7 Napleton Cadillac, Inc. (“Napleton”) and Steve Foley Cadillac, Inc. (“Foley”). ECF No. 8 10-1 at 34. 9 Brockman first noticed the vehicle for sale online “[i]n or about October 2022,” with 10 Napleton listed as the merchant. ECF No. 12 at 5; ECF No. 10-1 at 34. Brockman contends 11 that Napleton represented that Friedman owned the vehicle “and that Napleton was 12 managing the transaction and paperwork on Friedman’s behalf.” ECF No. 12 at 5. 13 Conversely, Friedman asserts that he was not the “real seller” of the vehicle in 14 October 2022 given his previous title transfer. ECF No. 10-1 at 26–27; see also ECF No. 15 10-1 at 50 (identifying Napleton as “The Seller”). 16 Brockman also alleges that Napleton misrepresented that the vehicle had not had any 17 body work or paint work done. ECF No. 12-1 at 2. Only after the vehicle was delivered 18 to Brockman’s California address several weeks after the purchase date did he realize that 19 the paint job was much worse than represented. ECF No. 12 at 6; ECF No. 1 at 11; see 20 ECF No. 10-1 at 50 (sales agreement with purchaser address). 21 B. Amount in Controversy 22 Brockman purchased the vehicle for $109,391.37, per an “AS IS/AS SOLD” 23 contract inclusive of an arbitration agreement. ECF No. 10-1 at 12–13, 50–58. However, 24 because of Napleton’s alleged misrepresentations, Brockman contends that Friedman is 25 liable for $30,000–$40,000, which is the price difference between what Brockman paid 26 and what Brockman estimates the vehicle is worth. ECF No. 12 at 7. According to [27] 1 Brockman, the requested relief of the price difference forecloses removal to federal court 2 on the basis of diversity jurisdiction. ECF No. 12 at 8. 3 Before filing the complaint, Brockman purportedly offered to “unwind the deal and 4 return the vehicle in exchange for a return of his money.” ECF No. 1 at 12. Under his 5 claim for fraud, Brockman alleges that “[a]bsent the false representations, [he] would not 6 have purchased the Automobile, or would not have purchased at the final agreed upon 7 price.” ECF No. 1 at 12. Under his claim for conversion, Brockman alleges that Friedman 8 “wrongfully obtained money from [Brockman] as a result of . . . misrepresentation,” and 9 has refused to return that money to Brockman in exchange for the return of the vehicle. 10 ECF No. 1 at 13. Friedman contended that Brockman’s allegations of seeking to “unwind” 11 a payment of more than $100,000 for the vehicle; being induced to purchase the vehicle 12 due to false representations; and conversion of $100,000 satisfied the amount in 13 controversy requirement. See ECF No. 1 at 3. 14 C. Diversity of Citizenship 15 Brockman purportedly resided in San Diego, California at the time of the sale, ECF 16 No. 1 at 9, and Friedman’s primary place of residence is in Illinois, ECF No. 10-1 at 9. 17 Brockman’s vehicle records suggest that it was “exclusively maintained in San Diego 18 County from 2011 until September 2022,” ECF No. 12-1 at 7–10, and Counsel determined 19 that Friedman owned and resided at a property “in Rancho Santa Fe for large portions of 20 the year,” ECF No. 12-2 at 2. Conversely, Friedman’s driver’s license, voter registration, 21 and income tax returns demonstrate that he was and is an Illinois resident—establishing [27] 1 diversity of citizenship. ECF No. 4-1 at 57–61.3 The two other merchants involved in the 2 Porsche purchase are also based in Illinois. ECF No. 10-1 at 45–47. 3 III. DISCUSSION 4 Friedman moves for sanctions pursuant to 28 U.S.C. § 1927 and this Court’s inherent 5 sanction powers. He alleges that Brockman “engaged in bad faith litigation tactics . . . by 6 multiplying proceedings, filing lawsuits making false statements of [Friedman’s] 7 citizenship, and attempting to evade” an arbitration and forum selection clause. ECF 8 No. 10-1 at 18. Because Brockman effectively filed the same action twice, the Court also 9 “may order the plaintiff to pay all or parts of the costs of that previous action.” Fed. R. 10 Civ. P. 41(d)(1). Courts “ordinarily should rely on the Rules rather than the[ir] inherent 11 power” to issue sanctions. Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991). 12 A. 28 U.S.C. § 1927 13 Section 1927 states that “[a]ny attorney or other person . . . who so multiplies the 14 proceedings in any case unreasonably and vexatiously may be required by the court to 15 satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred 16 because of such conduct.” To succeed on a Section 1927 sanctions claim, the moving party 17 must establish that opposing counsel “acted ‘recklessly or in bad faith.’ ” United States v. 18 Associated Convalescent Enters., Inc., 766 F.2d 1342, 1346 (9th Cir. 1985) (quoting 19 United States v. Blodgett, 709 F.2d 608, 610 (9th Cir. 1983)). 20 Section 1927 “limits a federal court’s ability to sanction an attorney for conduct 21 before another court.” GriD Sys. Corp. v. John Fluke Mfg. Co., 41 F.3d 1318 , 1319 (9th 22 Cir. 1994). A “suit filed in state court is an entirely separate action, not subject to the [25] 3 Friedman’s license and voter registration were made available to Brockman via 26 Friedman’s declaration in support of his motion to transfer venue in the earlier case. See ECF No. *2-1 at 55, 57. [27] 1 sanctioning power of the district court [pursuant to Section 1927].” Id. If a state court 2 action has been removed to federal court, Section 1927 allows sanctions only if the party 3 unreasonably and vexatiously multiplied the proceedings while in the federal court. See 4 Granite Rock Co. v. Int’l Bhd. of Teamsters, No. C 10-03718, 2011 WL 13373980 , at *2 5 (N.D. Cal. Mar. 17, 2011) (“The issue becomes whether there is a basis for awarding 6 attorney fees to Defendant based on Plaintiff’s conduct after the case was removed.”). Id. 7 Here, Brockman’s actions in front of this Court do not warrant Section 1927 8 sanctions because the alleged “bad faith multiplication of proceeding[s],” i.e. Brockman 9 filing a second complaint in state court after voluntarily dismissing the first complaint from 10 this court, see ECF No. 10-1 at 21, occurred in state court. Aside from responding to 11 Friedman’s motion for sanctions, Brockman’s only action before this Court has been to 12 voluntarily dismiss the case. ECF No. 8; see also ECF No. *4 (notice of voluntary 13 dismissal in Case No. 22-cv-2002). Friedman’s request for sanctions pursuant to Section 14 1927 is therefore DENIED. 15 B. Rule 41(d) 16 Under Rule 41(d) this Court may consider Brockman’s activity in front of “any 17 court.” Fed. R. Civ. P. 41(d)(1). Rule 41(d) states that “[i]f a plaintiff who previously 18 dismissed an action in any court files an action based on or including the same claim 19 against the same defendant, the court . . . may order the plaintiff to pay all or parts of the 20 costs of that previous action.” In the Ninth Circuit, “costs” within the context of Rule 41(d) 21 “do not include attorney’s fees as a matter of right.” Moskowitz v. Am. Sav. Bank, F.S.B., [22] 37 F.4th 538, 546 (9th Cir. 2022). 23 Here, Brockman filed effectively the same action twice. Brockman disagreed with 24 Friedman’s decision to remove the first case to federal court and chose to voluntarily 25 dismiss the case rather than move to remand it back to state court. ECF No. 12 at 12; see [26] 28 U.S.C. § 1447 (c) (providing procedure for remand). Because Brockman chose to again [27] 1 voluntarily dismiss his complaint and has expressed the intention to file a third complaint 2 in state court, see ECF No. 12 at 12, the Court hereby Orders that Brockman shall pay to 3 Friedman the $402.00 filing fee that Friedman paid in order to remove the first complaint 4 to federal court. See ECF No.*1; Fed. R. Civ. P. 41(d). 5 C. The Court’s Inherent Sanction Powers 6 Finally, courts retain an “inherent power to impose sanctions for . . . bad-faith 7 conduct.” Chambers v. NASCO, Inc., 501 U.S. 32, 46 (1991). This discretionary power 8 affords courts “the ability to fashion an appropriate sanction for conduct which abuses the 9 judicial process.” Id. at 44–45. It includes the power to dismiss a lawsuit outright, assess 10 attorney’s fees, and impose relevant costs. Id. at 45 . This discretion allows courts “to 11 manage their own affairs so as to achieve the orderly and expeditious disposition of 12 cases.” Link v. Wabash R.R. Co., 370 U.S. 626 , 630–631 (1962). But the inherent sanction 13 power “must be exercised with restraint.” Chambers, 501 U.S. at 44 . 14 Generally, sanctions are available under a court’s inherent powers “if the court 15 specifically finds bad faith or conduct tantamount to bad faith. Sanctions are available for 16 a variety of types of willful actions, including recklessness when combined with an 17 additional factor such as frivolousness, harassment, or an improper purpose.” Fink v. 18 Gomez, 239 F.3d 989, 994 (9th Cir. 2001). An “improper purpose” would include “an 19 attempt to influence or manipulate proceedings in one case in order to gain tactical 20 advantage in another case.” Id. 21 Chambers established a high threshold for issuing sanctions pursuant to the court’s 22 inherent powers. See 501 U.S. at 38–39. There, the Supreme Court affirmed the district 23 court’s imposition of “sanctions against [the defendant] in the form of attorney’s fees and 24 expenses totaling $996,644.65, which represented the entire amount of [the plaintiff’s] 25 litigation costs paid to its attorneys.” Id. at 40. Defendant’s conduct warranted sanctions 26 because of his attempts, despite court warnings and a finding that he acted in contempt of [27] 1 the court, “to deprive the [c]ourt of jurisdiction, fraud, misleading and lying to the [c]ourt.” 2 Id. at 42 (quoting NASCO, Inc. v. Calcasieu Television & Radio, Inc., 124 F.R.D. 120 , 139 3 (W.D. La. 1989)). Specifically, the Defendant and his counsel “intentionally withheld 4 information from the court,” id. at 37, defied a preliminary injunction, id. at 38, filed “a 5 series of meritless motions and pleadings,” id. (quoting Calcasieu, 124 F.R.D. at 127 ), and 6 acted in contravention of the court’s judgment on the merits, id. at 39. The sanctions 7 accounted for the fact that “the extraordinary amount of costs and expenses expended in 8 [the] proceeding were caused . . . solely by the relentless, repeated fraudulent and brazenly 9 unethical efforts of [the defendant].” Id. at 58 (quoting Calcasieu, 124 F.R.D. at 136 ). 10 Simple ignorance does not support a finding for sanctions. In Barber v. Miller, 11 plaintiff’s counsel filed a patent infringement lawsuit with the knowledge that the plaintiff 12 no longer owned the patent at issue. 146 F.3d 707 , 709 (9th Cir. 1998). Well-settled law 13 established that only patent owners have standing to sue for patent infringement. Id. at 14 709–10. Opposing counsel first communicated this to plaintiff’s counsel by phone, and 15 then again stated it in a motion to dismiss. Id. at 709. Plaintiff’s counsel then filed an 16 amended complaint that the court dismissed because of the standing issue that defense 17 counsel had raised “since the beginning of the litigation.” Id. After declining to find that 18 the plaintiff acted recklessly or in bad faith, the district court awarded the defendant $2,500 19 in sanctions under Rule 11. Id. The Ninth Circuit reversed the Rule 11 sanctions award, 20 but affirmed the denial of sanctions under the court’s inherent powers because even though 21 the case “certainly show[ed] ignorance or negligence on the part of [plaintiff, it did] not 22 compel a finding that he was reckless or acted in bad faith.” Id. at 711. 23 Here, the facts do not support a finding for sanctions pursuant to this Court’s inherent 24 powers. Friedman is correct that, as noted above, Brockman appears to have 25 misunderstood the relevant subject matter jurisdiction considerations and procedures. ECF 26 No. 13 at 9; see Mollan v. Torrance, 22 U.S. 537 (1824) (“[T]he jurisdiction of the Court [27] 1 depends upon the state of things at the time of the action brought.”); Dart Cherokee Basin 2 Operating Co. v. Owens, 574 U.S. 81 , 87 (2014) (“When a plaintiff invokes federal-court 3 jurisdiction, the plaintiff’s amount-in-controversy allegation is accepted if made in good 4 faith. Similarly, when a defendant seeks federal-court adjudication, the defendant’s 5 amount-in-controversy allegation should be accepted when not contested by the plaintiff 6 or questioned by the court.” (citations omitted)). However, unlike the Chambers 7 defendant, Brockman did not defy any court warnings, attempt to circumvent court orders, 8 or engage in any behavior that constituted contempt of this Court. 9 Further, Brockman’s jurisdictional arguments are premised upon Friedman’s 10 previous property ownership and connections with San Diego, California. ECF No. 12 11 at 10. They are therefore not frivolous given the operative question is “whether a complaint 12 states an arguable claim—not whether the pleader is correct in his perception of the law.” 13 Hudson v. Moore Buus. Forms, Inc., 836 F.2d 1156 , 1159 (9th Cir. 1987). Brockman also 14 does not appear to have harassed Friedman given, at this stage, all Brockman has done is 15 file two lawsuits and two voluntary dismissals—the second of which constitutes an 16 adjudication on the merits. ECF No. 9; Fed. R. Civ. P. 41(a)(1)(B). As in Barber, 17 Brockman appears to have shown an “ignorance” of the law, but nothing that “compel[s] a 18 finding that he was reckless or acted in bad faith.” 146 F.3d at 711. 19 Friedman’s request for sanctions under the Court’s inherent powers is therefore 20 DENIED. 21 III. CONCLUSION 22 Brockman’s two lawsuits and two voluntary dismissals ultimately resulted in an 23 adjudication on the merits. The Court concludes that sanctions are not appropriate under 24 either Section 1927 or the Court’s inherent powers. For the foregoing reasons, the Court 25 DENIES Friedman’s Motion for Sanctions but awards $402.00 in costs to Friedman, [27] 1 ||against Brockman, for the cost of removing the first action to federal court under Federal 2 || Rule of Civil Procedure 41(d). 3 IT IS SO ORDERED. 4 || Dated: April 28, 2023 72 st 5 Hon. athe Cee 6 United States District Judge [26] 27 10 28 23-CV-0162-GPC