No Sanctions For Plaintiff Which Challenged Subject Matter Jurisdiction


In this case, Northeast Natural Energy, LLC, v. Larson, 3:18-cv-240 (W.D. Pennsylvania November 25, 2019), the plaintiff originally filed the case in state court. The Defendant removed the action to federal court. Plaintiff then filed an unsuccessful motion to challenge subject matter jurisdiction.

The procedural history: “

Defendants argue that Plaintiff’s conduct in this lawsuit warrants Rule 11 sanctions. (ECF No. 42.) Defendants state the following as Plaintiff’s “bad faith and vexatious conduct:” (1) Plaintiff filed a complaint and a motion to vacate the arbitration award in state court in West Virginia the same day it filed its Amended Motion to Vacate Arbitration Award in this Court without informing either this Court or Defendants, (2) Plaintiff did not inform this Court about any protentional lack of diversity of citizenship until after this Court issued its September 20 Order and Opinion, (3) Plaintiff served Defendants in the West Virginia action five days after this Court issued its September 20 Order and Opinion, and (4) the West Virginia action is wasteful because the West Virginia court lacks personal jurisdiction over the Defendants and service on the motion to vacate was eight months late. (ECF No. 28 ¶¶ 12-18.)

In response, Plaintiff asserts that sanctions are not warranted because its conduct was not vexatious or in bad faith. (ECF No. 41.) Plaintiff asserts that it filed its Motion to Vacate and the West Virginia action to preserve its case. (Id.)”

The district court denied the motion for sanctions on the ground that Plaintiff had an absolute right to challenge subject matter jurisdiction, at any time during the litigation.

Here, Plaintiff has a right to challenge subject-matter jurisdiction at any time, even for the first time on appeal, or even if the party had previously acknowledged the Court’s jurisdiction. See Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434-35 (2011). Plaintiff has filed an appeal in this action and therefore could have skipped over this Court and raised the issue of subject-matter jurisdiction for the first time before the Third Circuit. The Court finds that Plaintiff filed the Motion to Vacate for the Court to address its jurisdiction before the Third Circuit would address it.

The Third Circuit has held Rule 11 sanctions unwarranted when a party files a motion as of right. See Lony v. E.I. Du Pont de Nemours & Co., 935 F.2d 604, 616 (3d Cir. 1991) (holding that defendant’s filing of a forum non conveniens motion did not warrant Rule 11 sanctions because defendant had a right to move for such a dismissal). Because Plaintiff had a right to challenge this Court’s subject-matter jurisdiction at any time, the Court will not impose sanctions on Plaintiff for exercising this right. The Court holds that Plaintiff’s filing of the Motion to Vacate was reasonable under the circumstances of this case.

Accordingly, Plaintiff’s conduct does not warrant Rule 11 sanctions.

Edward X. Clinton, Jr.

http://www.clintonlaw.net

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