Ninth Circuit Awards Attorney Fees After Defendants Proceed on Void Ab Initio Case with Lack of Jurisdiction
- Introduction
This motion presents an opportunity for the Court to exercise its discretion in a manner consistent with fairness and the interests of justice. Although this Court ultimately determined that the district court lacked subject-matter jurisdiction, the Attorney Defendants nevertheless seek an additional award of attorney fees against a pro se litigant who repeatedly attempted to identify and correct the jurisdictional and procedural defects in the case, starting before the anti-SLAPP motion was filed. See Exhibit A, Plaintiff’s Motion for Leave to Retain Representation on Limited Scope filed July 22, 2019, ECF No. 11, 3:19-cv-00605-LL-AHG (anti-SLAPP motion filed July 30, 2019, ECF No. 21).
The motion for further attorney fees relies upon factual assertions that are contradicted by the record. Those assertions have been repeated by Defendants Ellis Roy Stern, Alan N. Goldberg, and Stern & Goldberg (collectively, the “Attorney Defendants”), through their counsel, Corinne C. Bertsche of Lewis Brisbois Bisgaard & Smith LLP. The relevant documents are matters of public record, including Plaintiff’s Notice of Voluntary Dismissal, attached as Exhibit B.
This Court possesses the authority to award attorney fees notwithstanding its determination that subject-matter jurisdiction was lacking. The question presented here, however, is not whether the Court has that authority, but how it should exercise its discretion under these unusual circumstances. Because the litigation proceeded despite threshold jurisdictional defects, because Plaintiff acted in good faith to correct procedural errors once they became apparent, and because the record does not support several of the factual assertions advanced in support of the present motion, equity weighs heavily against any substantial fee award. At most, a nominal award of one dollar is appropriate.
While any award of fees is unreasonable on a macro level, the fees are overstated on the detailed time analysis.
- Factual Background
The Attorney Defendants were named as defendants in an action involving a Limited Liability Company (“LLC”) that they represented, along with the plaintiff’s sisters, who were members of the LLC, and its manager.
The Attorney Defendants were named because they negotiated on behalf of the other individual members in an effort to induce the plaintiff to sell her membership interest to them for approximately one-sixth of its actual value.
The plaintiff, proceeding pro se, filed the action in federal court without realizing the well-settled rule that an LLC shares the citizenship of each of its members. As a result, naming the LLC as a defendant destroyed diversity jurisdiction because the plaintiff was also a member of the LLC. In addition, the derivative legal malpractice claim against the Attorney Defendants required the LLC to be represented by licensed counsel. Because the plaintiff was not an attorney and attempted to prosecute that claim on the LLC’s behalf, the derivative claim was void ab initio.
The Attorney Defendants’ motion for attorney fees contains factual assertions that are contradicted by the record.
First, the Attorney Defendants assert that “HAMMETT filed claims clearly barred by California’s anti-SLAPP statute against her litigation adversary’s counsel.” Mot. at 4. Plaintiff’s claims against the Attorney Defendants alleged legal malpractice and conversion. Plaintiff consistently argued that neither claim satisfied the first prong of California’s anti-SLAPP analysis because neither arose from protected activity. Rather than addressing the first prong, the district court proceeded directly to the second prong and concluded that Plaintiff’s voluntary dismissal established, by operation of law rather than by adjudication on the merits, that the Attorney Defendants would have prevailed.
Second, the Attorney Defendants assert that Plaintiff voluntarily dismissed her claims “in response to the anti-SLAPP motion.” Mot. at 4. The record establishes otherwise. Plaintiff’s Notice of Voluntary Dismissal expressly states that the dismissal occurred because Plaintiff concluded that the derivative claims filed by a non-attorney were a legal nullity and that the claims should instead be refiled as direct claims by Plaintiff individually. See Exhibit B, Plaintiff’s Notice of Voluntary Withdrawal. The dismissal was therefore prompted by Plaintiff’s recognition of a procedural defect, not by the filing of the anti-SLAPP motion.
The record further demonstrates Plaintiff’s efforts to correct that defect before dismissing the claims. Plaintiff moved for leave to retain counsel on a limited-scope basis because she could not afford full representation but needed legal assistance concerning the distinction between derivative and direct claims. See Exhibit A. Judge Janis L. Sammartino denied that request. Had limited-scope counsel been permitted, the procedural defect that necessitated the voluntary dismissal likely would have been avoided altogether.
The Attorney Defendants accurately state that Plaintiff attempted to appeal the district court’s interlocutory attorney-fee order before entry of final judgment. This Court ordered Plaintiff to show cause why the appeal should not be dismissed for lack of appellate jurisdiction, and the appeal was dismissed because the order was not immediately appealable –not because of the lack of subject matter jurisdiction.
The jurisdictional defect in the underlying action was not addressed until years later, after final judgment had been entered and the appeal had been fully briefed. As this Court ultimately held, the district court lacked subject-matter jurisdiction. Federal jurisdiction was absent because neither a federal question nor complete diversity existed. An LLC is a citizen of every state in which one of its members is a citizen; therefore, when a member sues the LLC, complete diversity is lacking. Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990); Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006).
Rather than promptly raising the threshold jurisdictional deficiencies—that Plaintiff, proceeding pro se, could not maintain derivative claims and that complete diversity was absent—the Attorney Defendants litigated the case extensively and accumulated attorney fees exceeding six figures. Plaintiff, by contrast, voluntarily dismissed the derivative claims after recognizing the procedural defect and sought dismissal by this Court based upon the lack of jurisdiction. Under these circumstances, imposing an additional attorney-fee award on a pro se litigant would be inequitable.
Finally, the derivative complaint filed by a non-attorney was a legal nullity. If that complaint is treated as valid for purposes of determining legal fees, it cannot later serve as the basis for imposing consequences that effectively preclude Plaintiff from pursuing properly pleaded direct claims. Any contrary result, such as a claim that the savings statute should not apply because the original complaint was void, would produce inconsistent treatment of the same pleading.
- ARGUMENT
- Although the Court Possesses Authority to Award Attorney Fees Following Dismissal for Lack of Subject-Matter Jurisdiction, That Authority Is Discretionary and Should Be Exercised Equitably.
Plaintiff does not dispute that a federal court may, in appropriate circumstances, award attorney fees or impose collateral sanctions notwithstanding a later determination that subject-matter jurisdiction was lacking. See, e.g., Willy v. Coastal Corp., 503 U.S. 131 (1992); Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990).
The issue before the Court is therefore not whether it possesses the authority to award additional attorney fees, but whether such an award would further the purposes of fee-shifting under the extraordinary facts presented here.
“The Court has broad discretion to determine the amount of reasonable fees and the award of such fees is governed by equitable principles. Gorman v. Tassagara Development Corp., 178 Cal. App. 4th 44, 92 (2009), quoting PLCM Group, Inc. v. Drexler, 22 Cal. 4th 1084, 1094-1095 (2000).” Abselet v. All. Lending Grp., Inc., No. 2:11-CV-00815-JFW(JEMX), 2018 WL 11696646, at 2 (C.D. Cal. Aug. 28, 2018). Among the relevant factors a court may consider is the necessity for and the nature of the litigation. Abselet, No. 2:11-CV-00815-JFW(JEMX), 2018 WL 11696646, at 2.
That discretion should be exercised in light of the totality of the circumstances rather than by mechanical application of fee-shifting principles.
- Equity Does Not Favor a Substantial Fee Award Against a Pro Se Litigant Who Attempted to Correct Jurisdictional and Procedural Defects.
The record demonstrates that Plaintiff acted in good faith throughout the litigation.
After recognizing that a derivative action could not be maintained by a non-attorney, Plaintiff voluntarily dismissed the derivative claims and sought to proceed properly. See Exhibit B. Plaintiff also raised the absence of jurisdiction in her interlocutory appeal. Rather than attempting to prolong the litigation, Plaintiff sought to terminate proceedings that could not properly remain in federal court.
By contrast, the Attorney Defendants elected to litigate extensively despite threshold procedural and jurisdictional defects, resulting in attorney fees exceeding six figures. The subject matter jurisdictional defect that was overlooked by the Attorney Defendants and the court is a concept taught in 1L law school curriculums universally.
The purposes of fee-shifting—including deterrence of abusive litigation and compensation for unnecessary expense—are not served by imposing substantial additional fees under these circumstances. Instead, such an award would punish a pro se litigant who attempted to correct her own mistakes while rewarding years of unnecessary litigation.
- The Motion Relies Upon Factual Assertions That Are Not Supported by the Record.
An award of attorney fees should not rest upon factual assertions contradicted by the record.
The Attorney Defendants continue to characterize Plaintiff’s voluntary dismissal as a response to the anti-SLAPP motion despite Plaintiff’s contemporaneous Notice of Voluntary Dismissal expressly stating otherwise.
Likewise, the Attorney Defendants characterize Plaintiff’s claims as “clearly barred” by California’s anti-SLAPP statute despite Plaintiff’s consistent argument that the claims failed the first prong of the anti-SLAPP analysis because they did not arise from protected activity.
While Plaintiff recognizes that this Court need not revisit the merits of the anti-SLAPP ruling, the accuracy of the factual narrative advanced in support of additional attorney fees remains relevant to the Court’s exercise of equitable discretion.
- If Any Additional Fee Award Is Appropriate, It Should Be Nominal.
The Court has broad discretion when calculating and awarding attorney fees. See Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008). Here, several equitable considerations weigh strongly against a substantial award:
Plaintiff proceeded without counsel and attempted in good faith to comply with complex procedural rules. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978).
Plaintiff voluntarily dismissed the derivative claims after recognizing a procedural defect; Plaintiff challenged the existence of jurisdiction in her response to this Court’s order to show cause why the plaintiff’s interlocutory appeal should not be dismissed; The litigation continued for years before the subject matter jurisdictional defect was recognized; The courts failed to ever recognize that the derivative claim was a nullity from the inception; The present motion relies upon factual assertions that are contradicted by the record.
Under these circumstances, the purposes of fee-shifting would not be advanced by imposing additional substantial attorney fees against Plaintiff.
If the Court concludes that some fee award remains appropriate notwithstanding these circumstances, Plaintiff respectfully submits that a nominal award of one dollar adequately recognizes the Court’s authority while avoiding a manifestly inequitable result.
- The Calculated Fee Is Grossly Overstated
Corinne C. Bertsche is requesting $450 per hour. Yet, she pretended not to know that a derivative claim filed by a non-attorney is void ab initio and the federal court lacked subject matter jurisdiction.
Further, Ms. Bertsche claimed that she spent 2.8 ours preparing the motion responded to here. The motion is substantially identical to the motion filed on the same day for fees on appeal 24-3621. The data in the declaration is different. This data is most likely contained in a software program and can be inserted by a clerk or quickly by the $450 per hour lead attorney. Therefore, if the Court finds it reasonable to charge fees for a case that was unreasonable to proceed on at all, then the Court should at least make a significant adjustment to the fees requested.
Respectfully submitted,
Exhibit A
Exhibit B
A Higher Law 