1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 MERIDA MANIPOUN a.k.a. ANOMA Case No.: 17-CV-2325-AJB-BGS

SENGVIXAY,

12

ORDER GRANTING IN PART AND

Plaintiff, 13 DENYING IN PART DEFENDANTS’ v. MOTION FOR RULE 11 14

SANCTIONS

LOU DIBELLA; CHRIS KELLY;

15 LINDA CARR; JAMES COX; SAN (Doc. No. 91) 16 DIEGO EUROPEAN MOTORCARS, LTD. d/b/a ASTON MARTIN OF SAN 17 DIEGO; and DOES 1-20, 18 Defendants. 19 20 Pending before this Court is a Motion for Rule 11 Sanctions filed by Defendants San 21 Diego European Motorcars, Ltd. d/b/a Aston Martin of San Diego and James Cox 22 (“Defendants”). (Doc. No. 91.) Oppositions were filed by Mr. VerStandig, (Doc. No. 102), 23 Mr. Obagi, (Doc. No. 105), Mr. Vining, Ms. Colt, and Plaintiff, (Doc. No. 103). For the 24 reasons set forth below, the Court GRANTS IN PART AND DENIES IN PART 25 Defendants’ Motion for Rule 11 Sanctions. 26 / / / 27 / / / 28 / / / 1 BACKGROUND 2 On May 7, 2016, Merida Manipoun (“Plaintiff”) participated in the “Dream 3 Machine,” a promotional event held at Viejas Casino and Resort (“Casino”). (Doc. No. 50- 4 1 at 4; Doc. No. 62-1 at 2–3.) Plaintiff was issued a “V Club Card” that garnered entries 5 into a drawing each time the V Club Card was used on the slot machine. (Id.) Plaintiff 6 “earned the opportunity” to participate in the drawing and was called on stage to select a 7 single envelope from various envelopes available. (Doc. No. 50-1 at 5.) Plaintiff picked an 8 envelope containing a certificate for an Aston Martin V8 Vantage (the “Car”). (Id.) The 9 Casino issued Plaintiff a Form 1099 indicating a $134,000 income, the suggested retail 10 value of the Car. (Id. at 6.) 11 On May 12, 2016, Mr. Dibella, the Casino’s manager, called Plaintiff to inform her 12 she would not be receiving the Car. (Doc. No. 1 ¶ 26.) Defendants assert the Casino 13 disqualified Plaintiff from the contest because she allowed her companion to use her V 14 Club Card to improperly gain entries into the drawing, which constituted a violation of the 15 contest rules. (Doc. No. 62-1 at 2.) 16 On November 16, 2017, Plaintiff sued Defendants and three other defendants for 17 fraud, conspiracy to defraud, breach of unfair competition, and breach of unilateral 18 contract. (Doc. No. 1.) Other defendants to this action were Lou Dibella, Chris Kelly, and 19 Linda Carr. (Id.) On May 10, 2018, Plaintiff voluntarily dismissed Defendants Dibella and 20 Carr from this litigation. (Doc. No. 31.) Defendants’ filed a motion to dismiss that was 21 subsequently denied on procedural grounds as it was untimely. (Doc. No. 54 at 3.) The 22 parties then began discovery. Magistrate Judge Skomal granted in part sanctions against 23 Plaintiff for Plaintiff’s failure to appear at her deposition and Plaintiff’s failure to respond 24 to certain requests for admissions. (Doc. No. 58.) Plaintiff sought leave to file an amended 25 complaint, however, this was denied as untimely. (Doc. No. 76.) Defendants then filed a 26 motion for order requiring Plaintiff to post an undertaking and a motion for summary 27 judgment. (Doc. Nos. 56, 62.) Plaintiff filed a motion to strike as her opposition to 28 Defendant’s motion for summary judgment. (Doc. No. 65.) Plaintiff then sought to file a 1 sur-reply, which the Court permitted. (Doc. No. 69.) The Court then held a hearing 2 regarding Defendants’ motion for summary judgment. Thereafter, the Court issued an order 3 granting Defendants’ motion for summary judgment. (Doc. No. 89.) Subsequently, 4 Defendants filed the instant motion for sanctions. (Doc. No. 91.) 5 LEGAL STANDARD 6 Rule 11 sanctions are warranted when a party files a lawsuit or motion that is 7 frivolous, legally unreasonable, without factual foundation, or is otherwise brought for an 8 improper purpose. Warren v. Guelker, 29 F.3d 1386, 1388 (9th Cir.1994). Complaints filed 9 in the face of previous dismissals involving the same legal issues or the same parties 10 warrant sanctions under Rule 11. See Harris v. Heinrich, 919 F.2d 1515, 1516 (11th 11 Cir.1990); Kurkowski v. Volcker, 819 F.2d 201, 204 (8th Cir.1987); Warren, 29 F.3d at 12 1390. When one party seeks sanctions against another, the Court must first determine 13 whether any provision of Rule 11(b) has been violated. Id. at 1389. A finding of subjective 14 bad faith is not required under Rule 11. See Smith v. Ricks, 31 F.3d 1478, 1488 (9th 15 Cir.1994) (“Counsel can no longer avoid the sting of Rule 11 sanctions by operating under 16 the guise of a pure heart and empty head”). Instead, the question is whether, at the time the 17 paper was presented to the Court (or later defended) it lacked evidentiary support or 18 contained “frivolous” legal arguments. Where such a violation is found, Rule 11 authorizes 19 sanctions against persons-attorneys, law firms, or parties-responsible. See Pavelic & 20 LeFlore v. Marvel Entm’t Gp., 493 U.S. 120, 110 S.Ct. 456, 107 L.Ed.2d 438 (1989); 21 Fed.R.Civ.P. 11(c)(2) (“If warranted, the court may award to the prevailing party the 22 reasonable expenses, including attorney’s fees, incurred for the motion.”). 23 Where such sanctions are sought by motion, Rule 11 contains a “safe harbor” 24 provision stating that a motion for sanctions may not be filed until 21 days after it is served. 25 See Fed. R. Civ. Pro. 11(c)(1)(A). This “safe harbor” gives the party subject to the Rule 11 26 motion 21 days to withdraw the offending pleading and thereby escape sanctions. See 27 Barber v. Miller, 146 F.3d 707, 711 (9th Cir.1998). The 21–day “safe harbor” period is an 28 absolute prerequisite (unless some other period is established by a court) to a motion for 1 sanctions brought by any party. This provision does not apply to bar court-initiated sanction 2 proceedings; however, the court must issue an order to show cause and there are restrictions 3 on the court’s sua sponte sanctions authority. See id. 4 DISCUSSION 5 Defendants seek sanctions under Rule 11 on the basis that this case is a “clear 6 example of an abuse of the judicial process.” (Doc. No. 91-1 at 8.) Furthermore, Defendants 7 argue that this was not a temporary lapse in judgment, but rather was prolonged because 8 Plaintiff pursued this case through summary judgment. (Id.) Defendants specifically 9 identify three instances of conduct that violated Rule 11: (1) Plaintiff’s Complaint, (2) 10 Plaintiff’s Motion for Leave to File Amended Complaint, and (3) Plaintiff’s Opposition to 11 Defendants’ Motion for Summary Judgment. (Id. at 9.) 12 A. Request for Judicial Notice 13 Defendants request judicial notice of the Court’s docket in this matter as Exhibit 1. 14 Plaintiff, Mr. VerStandig, Mr. Obagi, Mr. Vining, and Ms. Colt do not oppose judicial 15 notice of these documents. However, the Court need not take judicial notice of the its own 16 docket or documents filed on the docket in this case. Henricks v. California Pub. Utilities 17 Comm’n, No. 17CV2177-MMA (MDD), 2018 WL 2287346, at *8 (S.D. Cal. May 18, 18 2018) (citing Asdar Grp. v. Pillsbury, Madison, & Sutro, 99 F.3d 289, 290 n.1 (9th Cir. 19 1996)) (finding moot Plaintiff’s request for the Court to take judicial notice of pleadings 20 filed on the docket in this case). Since this document is the Court’s docket in this case, the 21 Court DENIES AS MOOT Defendants’ request for judicial notice. (Doc. No. 91-2.) 22 B. Safe Harbor Notice 23 Rule 11 contains a “safe harbor” provision that a motion for sanctions may not be 24 filed until 21 days after it is served. See Fed. R. Civ. Pro. 11(c)(1)(A). Here, Defense 25 counsel informed Plaintiff throughout the litigation that Defense counsel would be seeking 26 sanctions. On December 21, 2017 and January 24, 2018, Defense counsel informed Mr. 27 Obagi and Mr. VerStandig that Defense counsel believed there was no factual or legal basis 28 to proceed with this case. (Doc. No. 91-1 at 7.) On May 17, 2018, Defense counsel formally 1 served its Rule 11 “safe harbor” notice. (Id.) On August 29, 2018 and October 4, 2018, 2 Defense counsel informed Mr. Vining of the “safe harbor” notice. (Id.) On September 5, 3 2018, Defense counsel informed Ms. Colt of the “safe harbor” notice. (Id.) Accordingly, 4 Defense counsel has met the procedural requirement for Rule 11 sanctions. 5 C. Sanctions Against Mr. VerStandig and Mr. Obagi 6 Plaintiff was originally represented by Mr. VerStandig and Mr. Obagi. (Doc. No. 7 102 at 5.) Out of the three pleadings Defendants allege create the basis for Rule 11 8 Sanctions, Mr. VerStandig and Mr. Obagi only represented Plaintiff for the complaint. The 9 complaint alleged claims of fraud, conspiracy to defraud, breach of unfair competition, and 10 breach of unilateral contract. (See generally Doc. No. 1.) Both Mr. VerStandig and Mr. 11 Obagi declare that they each investigated the facts alleged in the complaint prior to bringing 12 this suit. (Doc. No. 102 at 7, Doc. No. 105 at 5.) Mr. VerStandig and Mr. Obagi attest that 13 they reviewed evidence of the Casino’s promotion, reviewed the Form 1099 that was sent 14 to Plaintiff, verified the Casino’s promotions, and assessed the financial viability of the 15 promotions. (Doc. No. 102 at 8, Doc. No. 105 at 5–6.) These publicly available facts did 16 not reveal any inconsistencies or other problems to both Mr. VerStandig and Mr. Obagi. 17 (Id.) Defendants allege that Mr. VerStandig and Mr. Obagi failed to identify any 18 information from these other available sources that supported the claims against 19 Defendants. 20 Defendants sent a safe harbor version of a motion for sanctions in May of 2018. 21 Upon review of this letter, Mr. VerStandig and Mr. Obagi began to press the Plaintiff for 22 further assurances as to certain facts not verifiable in the public record. (Doc. No. 102 at 6, 23 Doc. No. 105 at 4.) Thereafter, while Plaintiff’s answers to interrogatories were being 24 worked on and Plaintiff’s deposition was nearing, Mr. VerStandig and Mr. Obagi “became 25 uncomfortable prosecuting the case any further.” (Id.) Both sought leave of the Court to 26 withdraw as counsel. (Id.) Accordingly, Mr. VerStandig and Mr. Obagi request that they 27 not be responsible beyond the scope of the complaint. 28 While Mr. VerStandig and Mr. Obagi did press Plaintiff for further assurances after 1 they received the safe harbor version of the motion, they are required to do this before 2 filing the complaint. Attorneys and parties are required to “think first and file later” and 3 “look before leaping.” See Stewart v. RCA Corp., 790 F.2d 624, 633 (7th Cir. 1986); Lied 4 v. Topstone Indus., Inc., 788 F.2d 151, 157 (3d Cir. 1986). Further, after they pressed 5 Plaintiff for further assurances, Mr. VerStandig and Mr. Obagi became uncomfortable. 6 However, it is unclear to the Court what information Plaintiff could have originally 7 provided to Mr. VerStandig and Mr. Obagi to support the allegations in the complaint. 8 Plaintiff’s claims were not legally supportable. Mr. VerStandig and Mr. Obagi should have 9 conducted the necessary research and investigation before filing this litigation. Had counsel 10 properly done so, it should have prevented the filing of this baseless lawsuit. Accordingly, 11 the Court GRANTS sanctions against Mr. VerStandig and Mr. Obagi. 12 D. Sanctions Against Ms. Colt, Mr. Vining, and Plaintiff 13 First, Plaintiff’s counsel states that its arguments will be strengthened once Plaintiff 14 has the hearing transcript and can file a supplemental response. However, the transcript of 15 the hearing was attached to the Declaration of Joseph A. Gonella in support of Defendants’ 16 motion for sanctions. (Doc. No. 91-9.) It is unclear if Plaintiff’s counsel read the motion 17 for sanctions. Furthermore, Plaintiff and Plaintiff’s counsel failed to appear at the Court’s 18 hearing on this matter on December 12, 2019. 19 Second, Plaintiff’s counsel states that they recall that the Court was willing to 20 consider that course of conduct established an objective contract under California law. 21 (Doc. No. 103-1 at 3–4.) The Court did consider the course of conduct argument in its 22 Order granting Defendant’s motion for summary judgment. (Doc. No. 89.) Further, Mr. 23 Vining presented this argument at the hearing, and the Court addressed it at the hearing. 24 (Doc. No. 91-9 at 19, 22.) 25 Further, Plaintiff’s counsel states that the Mr. Samouris led the Court to believe that 26 Plaintiff was lying about the 1099 Form. (Doc. No. 103-1 at 4.) However, this is not what 27 Mr. Samouris stated. Mr. Samouris explained that a 1099 Form was issued incorrectly, and 28 the Casino then issued a correction to the IRS. (Doc. No. 91-9 at 18.) Mr. Samouris did 1 state that Plaintiff was lying about paying taxes on the Car, but he did not state that she 2 was lying about the 1099 Form. (Id. at 19.) Mr. Samouris never stated that Plaintiff 3 submitted a fraudulent document to the IRS. However, this point simply does not matter. 4 The Casino issued the 1099 Form, not Defendants. Accordingly, the existence of the 1099 5 Form and whether Plaintiff paid taxes on the Car does not establish the existence of a 6 contract between Plaintiff and Defendants. 7 Additionally, Plaintiff’s counsel explains that the Court would not grant a 8 continuance of the hearing despite Ms. Colt’s car being stolen the morning of the hearing 9 on the motion for summary judgment. (Doc. No. 103-1 at 4.) However, Plaintiff’s counsel 10 never requested a continuance. Further, Plaintiff’s counsel did not contact the Court to 11 explain that they would be late for the hearing due to Ms. Colt’s car being stolen. Instead, 12 Plaintiff’s counsel simply showed up twenty-eight minutes late for the hearing. 13 Additionally, Plaintiff and Plaintiff’s counsel failed to appear for the hearing on this matter. 14 Plaintiff then argues that her attempt to file an amended complaint was not frivolous 15 because they had just recently discovered new evidence. (Doc. No. 103-1 at 5–6.) 16 However, this newly discovered evidence was a fact that was known to Plaintiff since the 17 start of this litigation. Furthermore, Plaintiff sought leave to amend after the discovery 18 cutoff date and had not been diligent throughout the discovery process. 19 Plaintiff then filed a response to Defendants’ motion for summary judgment, but 20 claimed it was in fact a new motion to strike. Plaintiff failed to obtain a hearing date from 21 the Court to file a new motion to strike. Plaintiff then sought leave to file a sur-reply to the 22 motion for summary judgment. The Court typically does not allow for a sur-reply, but 23 allowed it in this case due to Plaintiff’s claim that her response was a new motion to strike. 24 Plaintiff’s response to Defendants’ motion for summary judgment was not procedurally 25 proper and was also frivolous. After all of the extensive briefing, Plaintiff decided at the 26 hearing for the motion for summary judgment to abandon her claims of fraud, conspiracy, 27 and unfair competition. However, puzzling to the Court, Plaintiff argues in her response to 28 this motion that the Court erroneously granted the motion for summary judgment for fraud, 1 conspiracy, and unfair competition. 2 It is clear to the Court that the filing for an amended complaint, the opposition to 3 Defendant’s motion for summary judgment, and continuing to pursue this case to the 4 summary judgment stage were frivolous. There was absolutely no evidence to establish a 5 contract between Plaintiff and Defendants. Plaintiff throughout this entire litigation seems 6 to confuse Defendants with the Casino. Plaintiff and Plaintiff’s counsel continued to pursue 7 a baseless lawsuit. Mr. VerStandig and Mr. Obagi became uncomfortable prosecuting the 8 case further. Of concern to the Court is that Mr. Vining and Ms. Colt still do not express 9 this same sentiment. 10 Mr. Vining and Ms. Colt also attempted to extract a quick settlement from 11 Defendants with the threat of filing an amended complaint with “incendiary” allegations 12 that would attract the interest of the “news media.” (Doc. No. 107 at 3.) Now, Mr. Vining 13 states that he had undisclosed evidence to support Plaintiff’s case that was stolen from Ms. 14 Colt’s car the night before the hearing on the motion for summary judgment. The discovery 15 cut-off date was September 10, 2018. Plaintiff’s response to the motion for summary 16 judgment was due February 20, 2019. Further, Plaintiff has failed to provide any 17 description of this evidence to the Court in her response to the instant motion. It is unclear 18 to the Court what this undisclosed evidence would have been that was suddenly stolen the 19 night before the hearing that occurred over a year after the discovery cutoff date. The Court 20 finds Plaintiff and Plaintiff’s counsel behavior throughout the entire course of the litigation 21 to be inappropriate. 22 Accordingly, the Court GRANTS sanctions against Ms. Colt, Mr. Vining and 23 Plaintiff. 24 E. Reasonableness of Fees Requested by Defendants 25 Mr. VerStandig and Mr. Obagi argue that Defendants fail to attach any billing 26 records for the attorneys’ fees sought and thus, makes it impossible to assess the 27 reasonableness and necessity of the fees incurred. (Doc. No. 102 at 14, Doc. No. 105 at 28 11.) Plaintiff, Mr. Vining, and Ms. Colt do not present such an argument. ] “The moving party bears the burden of documenting the appropriate hours spent in 2 || the litigation and submitting evidence in support of the hours worked.” Zest IP Holdings, 3 || LLC v. Implant Direct Mfg., LLC, No. 10-CV-0541-GPC (WVG), 2014 WL 6851612, at 4 ||*6 (S.D. Cal. Dec. 3, 2014). After the moving party provides evidence of the hours billed, 5 opposing party has the burden of submitting evidence “challenging the accuracy and 6 ||reasonableness of the hours charged or the facts asserted by the prevailing party in its 7 || submitted affidavits.” Gates v. Deukmejian, 987 F.2d 1392, 1398 (9th Cir. 1992). Here, the 8 Court agrees with Mr. VerStandig and Mr. Obagi that Defendants failure to file any billing 9 ||records for the attorneys’ fees sought in their original motion made it difficult to assess the 10 ||reasonableness and necessity of the fees incurred. Defendants did attach this information 11 |/in their reply, but that did not provide Mr. VerStandig, Mr. Obagi, Mr. Vining, Ms. Colt, 12 Plaintiff an opportunity to respond. Accordingly, the Court will not assess the 13 reasonableness of the fees requested by Defendants in this motion. The Court requests that 14 || Defendants file a motion to address the fees sought within 30 days from the date of this 15 || Order. Defendants must call the Court’s chambers to obtain a hearing date once Defendants 16 prepared to file this motion. 17 CONCLUSION 18 ||Based on the foregoing, the Court GRANTS IN PART AND DENIES IN PART 19 || Defendant’s motion for sanctions. 20 21 IS SO ORDERED. 22 |!Dated: August 11, 2020 © 7 er : 23 Hon. Anthony J.Battaglia 24 United States District Judge 25 26 27 28