Sanctions Awarded For Frivolous Counterclaim

This is an appeal from a decision sanctioning a lawyer and his client for filing a frivolous counterclaim in a foreclosure case. After the lender sued, the defendant, Gates, brought a counterclaim for rescission.  A rescission claim argues that the entire transaction should be canceled and the parties put back in their original places. Because the time limit for the rescission action had run, there was no basis for a rescission claim.  The claim was frivolous. The Ninth Circuit affirmed the sanctions award.

The district court did not abuse its discretion by awarding attorney’s fees in the amount of $17,474.50, jointly and severally, as a sanction against Gates and his attorney. See Christian v. Mattel, Inc., 286 F.3d 1118, 1126-28 (9th Cir. 2002)(setting forth standard of review and describing grounds for Rule 11 sanctions); see also Riverhead Sav. Bank v. Nat’l Mortg. Equity Corp., 893 F.2d 1109, 1113 (9th Cir. 1990) (concluding that jurisdiction to hear an appeal exists where a sanctions award was imposed jointly and severally on the defendants and their non-party counsel). Contrary to Gates’s contention, there are no nonfrivolous arguments to support his theory that the Supreme Court’s decision in Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015), revived his time-barred claim for rescission. See Fed. R. Civ. P. 11(b) & advisory committee’s note to 1993 amendment (arguments for modification or reversal of existing law do not violate Rule 11(b)(2) if they are nonfrivolous under an objective standard).

In his opening brief, Gates fails to challenge the district court’s determination under Rule 11 that he brought his counterclaim for an improper purpose, and he has therefore waived any such challenge. See Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[O]n appeal, arguments not raised by a party in its opening brief are deemed waived.”); Greenwood v. FAA, 28 F.3d 971, 977 (9th Cir. 1994) (“We will not manufacture arguments for an appellant. . . .”).

The case is LPP Mortgage Ltd. v. David W. Gates, 17-55355 (unpublished).

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