Month: May 2020

District Court Holds That Oregon Cannot Assert Personal Jurisdiction Over Alaska Lawyers


The case is MBJE, Inc. v. Barbara Norris, et al., No. 6:19-CV-00161 (D. Oregon, Eugene Division, January 23, 2020). The plaintiff is an Oregon corporation that filed a legal malpractice suit against attorneys who live and practice in Alaska. The underlying dispute concerned a probate case in the Alaska courts that the lawyers handled. When they were sued for legal malpractice in Oregon, the moved to dismiss for lack of personal jurisdiction.

The opinion summarizes the dispute:

“Plaintiff MBJE Inc. is an Oregon corporation. Plaintiff brings four legal malpractice claims against two Alaskan attorneys, Tonja Woelber and Barbara Norris, and their firms, Tonja Woelber, Attorney at Law, P.C.; Woelber & Passard, LLC; Law Office of Barbara A. Norris, LLC.[1] Plaintiff brings a legal malpractice claim, a breach of fiduciary duty claim (“BOFD”), and an indemnity claim against both defendants. Plaintiff also brings a breach of contract claim against Woelber.

Plaintiff was assigned the claims of Phillip Jones. Jones’ stepmother, Mary Buza Jones was a long-time resident of Alaska who died in Alaska. She left an estate (of real and personal property located in Alaska) that was probated in the Superior Court of Alaska. Jones called attorney Woelber in Alaska and asked her to represent him in the probate of his stepmother’s estate. Jones asked Woelber to have him appointed Personal Representative of that estate. She filed the probate action and successfully petitioned the court as requested.

As Personal Representative of his stepmother’s estate, Jones then contacted attorney Norris in Alaska and asked her to review a California settlement agreement involving the estate, which she did. Norris also, on Jones’ request, sent a letter to the Internal Revenue Service confirming that Jones was the Personal Representative of his late stepmother’s estate. Norris was known to Jones because Norris had represented Jones’ sister, who resided in Arizona, in a guardianship matter as to the siblings’ stepmother.

Woelber communicated with Jones by email, mail, and phone but never traveled to Oregon to meet with him. She sent invoices to an Oregon address. Norris communicated with Jones by email, fax, and telephone but never traveled to Oregon to meet with him. She sent invoices to a California address provided by Jones.

The two attorneys and their law firms are citizens of Alaska. Both defendants were and are licensed to practice law in Alaska. Neither attorney has ever been licensed to practice law in Oregon. Neither attorney has done business or advertised business in Oregon. Norris has been to Oregon for professional reasons two times. In 2015, she attended a deposition of an Oregon witness for an unrelated Alaska case scheduled by another counsel. And “many years ago,” on behalf of an Alaskan client, she came to Oregon to search for that client’s kidnapped children. Norris Decl. ¶ 5. Woelber has only been to Oregon as a tourist.

After plaintiff filed the present complaint, defendants moved to dismiss the claims for lack of personal jurisdiction, or in the alternative to transfer venue to the District of Alaska.”

The court concluded that there was no personal jurisdiction over the attorneys:

To establish specific jurisdiction for a tort claim, a plaintiff must show that a defendant purposely directed its activities at the forum state. Schwarzenegger, 374 F.3d at 804-05. Specifically, the plaintiff must show that a defendant (1) committed an intentional act (2) expressly aimed at the forum state (3) causing harm that the defendant knows is likely to be suffered in the forum state. Id.

Here, plaintiff asserts that defendants purposely directed activities at Oregon because (1) they provided legal services to Jones and advised him on the probate matter, and, (2) in receiving payment for these services, defendants “consummated a transaction” with Jones. Pl’s Resp. to Def. Mot. to Dismiss at 12-13.

But these claims are not based on intentional or purposeful acts. Plaintiff alleges malpractice and BOFD, which are claims of negligence. Plaintiff alleges not that defendants purposefully directed allegedly wrongful activities at Oregon but that they acted with “mere untargeted negligence.” Calder v. Jones, 465 U.S. 783, 789 (1984). Thus, as to the legal malpractice and BOFD claims, plaintiff fails to establish that defendants purposely directed their activities at Oregon. Thus, this Court cannot exercise specific personal jurisdiction over defendants with respect to plaintiff’s tort claims.

Comment: this result appears to be correct as the attorneys handled a case in Alaska, not Oregon, and would not have expected to be sued in Oregon.

Rule 11 Sanctions Granted For Frivolous Damages Claim


The plaintiff, a jewelry merchant, sustained damage when its inventory was destroyed in a fire in a BMW. Plaintiff sued BMW for damages and sought $5,677,114 in lost profits. The District Court granted the motion and sanctioned plaintiff $5,000 because the law is well settled that the merchant can only recover the replacement cost of the merchandise. The reasoning is provided below:

The claim for full retail value had absolutely no chance of success under governing precedents.[4] Where property is partially destroyed, the plaintiff may recover the lesser of: (1) the difference between the market value of the property before and after the harm was inflicted;[5] or (2) the replacement cost.[6] Hartshorn v. Chaddock, 135 N.Y. 116, 31 N.E. 997, 998 (1892); see also In re Sept. 11th Litig.,590 F. Supp. 2d 535, 541 (S.D.N.Y. 2008). Where the plaintiff’s property is totally destroyed, the measure of damages is its reasonable market value. Gass v. Agate Ice Cream, Inc., 264 N.Y. 141, 144, 190 N.E. 323 (1934); Reed v. Cornell Univ.,138 A.D.3d 816, 818 (N.Y. App. Div. 2016).[7]

Crucially, “[t]he market value of a merchant’s goods is the price at which they could be replaced in the market, not the retail price at which they could be sold.” Ever Win, Inc. v. 1-10 Indus. Assoc., 111 A.D.3d 884, 886, 976 N.Y.S.2d 123 (N.Y. App. Div. 2013) (quoting Wehle v. Haviland, 69 N.Y. 448, 450 (1877)). Recovery of the retail value, including the merchant’s lost profits, is only permissible in limited cases which do not apply here—for instance, if the merchandise was already under contract for a specified price and awaiting delivery, or if the goods were stolen by the defendants. Reed, 138 A.D.3d at 818; Wehle v. Butler, 61 N.Y. 245, 245 (1874).

In opposing Rule 11 sanctions, Plaintiff’s counsel concedes that “after reviewing the available evidence” its client could not plausibly be entitled to damages based on retail value or lost profits. (ECF No. 109, “Pl’s Opp’n” at 5, 9-10). However, Plaintiff’s counsel nonetheless urges this Court to deny the motion on mootness grounds, citing a December 6, 2019 email he sent to Defendant’s counsel:

“In performing our review and analysis … we believe that the plaintiff can establish its damages based on the diminution in value of the business … and will seek permission from the court to amend our claim accordingly, and to produce expert analysis establishing a lost valuation claim of $1.5 Million. In the event the Court denies our motion to so amend and produce expert analysis, we agree to amend our complaint by withdrawing the claim for lost profits, and proceed with a claim based upon replacement cost….”

(Id. at 5). The Court is perplexed by Plaintiff’s counsel’s interpretation of his own email. He insists this email proves that Plaintiff accepted Defendant’s request to calculate damages based on replacement cost. (Id.). But his purported acceptance is no acceptance at all. It is a counteroffer, conditioned in part upon this Court’s uncertain permission to reopen discovery based on a new theory of damages.[8]

Accordingly, Defendant’s Rule 11 motion is granted.[9] Sanctions are imposed in the amount of $5,000, payable to the Clerk of the Court, to be paid within 30 days of this order.

Comment: the lawyer attempted to avoid the sanctions issue by writing an email to opposing counsel offering to withdraw the allegation. Instead, the lawyer should have simply withdrawn the allegation within the safe harbor period.

Zsa Zsa Jewels, Inc. v. BMW of North America, LLC, No. 15-cv-6519 (E.D. NY April 2, 2020).

Noncompliant Plaintiff Avoids Rule 37 Dismissal


If a party disregards a court order to produce documents or update discovery responses, the court may order dismissal of the case pursuant to Rule 37. In Glover v. CoreCivic of Tennessee, No. 18-cv-2330 (S.D. Cal. February 11. 2020), the plaintiff failed to comply with an order to supplement its discovery responses, but the court denied the defendant’s motion to dismiss. The court reasoned that both parties were not dealing with each other in an appropriate and civil manner.

Rule 37 allows for terminating sanctions to be levied against a party for not obeying an order to supplement discovery responses. Fed. R. Civ. P. 37(c)(1)(C). It is so harsh a penalty that it should only be imposed as a sanction in extreme circumstances. Henderson, 779 F.2d at 1423 (9th Cir. 1986). When sanctions for dismissal are considered, the court weighs: (1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; (3) the risk of prejudice to defendant; (4) the public policy favoring disposition of cases on the merits; and (5) the availability of less drastic sanctions. Thompson v. Hous. Auth. of City of L.A., 782 F.2d 829, 831 (9th Cir. 1986).

The public’s interest in expeditious resolution of litigation is not a factor that weighs in Defendant’s favor. The parties’ seeming inability to work cooperatively in bringing this case to trial or settlement is evidenced by the recent flurry of motion practice in this case. Since this motion has been filed Plaintiff has filed a Motion for Evidentiary and Monetary Sanctions for Spoliation of Evidence (Doc. No. 34), a Motion for Extension of Time to File an Opposition to the Current Motion (Doc. No. 40), a Motion to Disqualify Counsel (Doc. No. 41) and a Motion for Relief from Court Order Pursuant to Fed. R. Civ. P. 60(B); Motion for Sanctions (Doc. No. 42), and Defendant has filed three motions to stay related to Plaintiff’s motion to disqualify, spoliation of evidence and its own motion to dismiss (Doc. Nos. 45, 46, 47.) But the responsibility for this cannot be laid entirely at Plaintiff’s door.

None of the remaining factors weigh in Defendant’s favor either. The delay in producing the documents is not so prejudicial to CoreCivics that it cannot be remedied by, for example, extending the discovery cut-off date. Furthermore, by its own admission, GEO Group has produced countless records related to Mr. Glover, including those under his aliases. Notably, absent from Defendant’s motion is any mention of the fact that the video of the alleged fall has been destroyed.

Finally, Defendant argues that the imposition of lesser sanctions is not feasible because Plaintiff has not produced or disclosed the information sought because it is unfavorable to him and that prohibiting him for producing evidence of injury would nullify his claim. But Defendant’s all or nothing approach is extreme and ignores other less drastic measures such as monetary sanctions, evidence and issue preclusion, or tailored jury instructions.[2] See Fed. R. Civ. P. Fed. R. Civ. P. 37(c)(1)(A)-(B). But Mr. Kaufman is in violation of Judge Stormes’ order, and the court has given him “crystal clear” warning of the significant consequences available to the court for any continuing failures. Henderson, 779 F.2d at 1424. At bottom, however, the record here does not reveal a long history of inexcusable delay and neglect on the part of plaintiff’s counsel and, as far as this court is aware, Mr. Kaufman has not violated any other discovery orders.

While the court is not condoning Plaintiff’s failure to comply with Judge Stormes’ order, dismissal of this case is not warranted under either Rule 37 or Rule 41. Accordingly, the court DENIES Defendant’s Motion to Dismiss for Lack of Prosecution (Doc. No. 31). The parties are reminded that the basic standards of professionalism are expected of all attorneys appearing before this court. See CivLR 83.4(a)(1)(a)-(b), (2)(a)-(b).

Comment: civil conduct is often the best way to avoid problems in any court.

Eleventh Circuit Affirms Rule 11 Sanctions For False Allegations in Complaint


This is an unpublished opinion, Estrada v. FTS USA, LLC, No. 18-15336 (11th Cir. April 20, 2020), the Eleventh Circuit affirmed a $60,000 Rule 11 sanctions award against lawyers who included a false allegation in their complaint.

The explanation follows:

The district court imposed sanctions under Rule 11(b)(3) because it found that Mr. Zidell and his firm filed a Fair Labor Standards Act (“FLSA”) complaint making the objectively frivolous allegation that FTS had “never” paid their client, Orlando Estrada, “any” overtime wages as required by the Act. The district court found this allegation demonstrably false because (1) FTS’s weekly time records—signed by Mr. Estrada—showed that FTS had paid him overtime wages during the months in question, and (2) Mr. Estrada acknowledged in his deposition that he had been paid the overtime wages documented in his earnings statements. The district court explained that Mr. Zidell and his firm did not conduct a reasonable investigation into Mr. Estrada’s claims and neglected to withdraw or modify the allegation in question when given the opportunity….

Continuing to lean on the language of the complaint, Mr. Zidell and his firm contend that satisfying the pleading requirements to state an FLSA claim under Federal Rule of Civil Procedure 8 render sanctions inappropriate here. This argument fails to advance Mr. Zidell and his firm’s position. The factual allegations required under Rule 8 “are subject to Rule 11’s command—under pain of sanctions—that `the allegations and other factual contentions have, or are likely to have following discovery, evidentiary support.'” Lowery v. Ala. Power Co., 483 F.3d 1184, 1216 (11th Cir. 2007) (quoting FED. R. CIV. P. 11(b)). Therefore, alleging facts sufficient under Rule 8 does not shield the pleading from Rule 11 scrutiny when the allegations are objectively frivolous. Said another way, the magistrate court sanctioned Mr. Zidell and his firm not because the wording of the complaint failed to state a claim, but instead because the allegation as worded objectively lacked evidentiary support.

Second, Mr. Zidell and his firm assert that their factual claim was not objectively frivolous because Mr. Estrada was also alleging that he was not paid “all” of the overtime wages to which he was entitled. This argument, however, ignores the fact that the unsupported factual allegation—that FTS “never” paid Mr. Estrada “any” overtime wages—was never withdrawn, and FTS was forced to defend against it. The assertion by Mr. Zidell and his firm that their case for Mr. Estrada “just . . . did not pan out,” see Appellant’s Br. at 32, does not show an abuse of discretion.

The court affirmed an award of $60,000 in sanctions, which was about 1/2 of the requested amount. A dissenting judge would remand for a full hearing on the reasonableness of the fee request.

Should you have an issue under Rule 11, do not hesitate to contact me.

Ed Clinton, Jr.

http://www.clintonlaw.net

Rule 37 Sanctions Denied Even Though Defendant Failed to Produce Documents


Gym Door Repairs, Inc. v. Young Equipment Sales, Inc. (No. 15-cv-4244 March 11, 2020) discusses a Rule 37 sanctions motion where one party failed to produce some documents. Here the court denied sanctions because the documents that were not produced would not have changed the outcome of the case. The plaintiffs obtained the documents by serving a FOIA request on a governmental body. The reasoning is included here:

In an opinion also dated January 28, 2020, the Magistrate Judge denied the plaintiffs’ request for Rule 37 sanctions based on the alleged failure of the Defendants to produce the documents that were disclosed as a result of the FOIL request. Federal Rule of Civil Procedure 72(a) requires this Court to set aside any portion of the order under review “that is clearly erroneous or is contrary to law.” As a “non-dispositive matter,” a Magistrate Judge’s pretrial discovery ruling is reviewed under this highly deferential standard. See Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990). An order is clearly erroneous if the reviewing court is “left with the definite and firm conviction that a mistake has been committed.” See Easley v. Cromartie, 532 U.S. 234, 242 (2001) (citation and internal quotation marks omitted). “An order is contrary to law when it fails to apply or misapplies relevant statutes, case law or rules of procedure.” Thompson v. Keane, No. 95-CV-2442 (SHS), 1996 WL 229887, at *1 (S.D.N.Y. May 6, 1996) (citation and internal quotation marks omitted). See also Frydman v. Verschleiser, No. 14-CV-8084 (JGK), 2017 WL 1155919, at *2 (S.D.N.Y. Mar. 27, 2017).

It is not clear that the plaintiffs have filed a timely appeal from the denial of sanctions under Rule 37. The plaintiffs have not denominated their pleading as an appeal from the Magistrate Judge’s ruling, and have referred to Rule 37 only in the final sentence of their objections to the Magistrate Judge’s Report and Recommendation relating to Rule 11 sanctions. Even then, the plaintiffs do not detail any objections to the denial of their request for Rule 37 sanctions.

In any event, in this case, far from being erroneous, the Magistrate Judge correctly concluded that there was no basis for imposing any sanctions under Rule 37 because the failure to produce the documents disclosed in response to the FOIL request would not have changed the outcome of the summary judgment motions at all. There were numerous reasons to grant the summary judgment motions against the plaintiffs and the documents produced in response to the FOIL request would not have changed that result. Therefore, the decision of the Magistrate Judge was not clearly erroneous or contrary to law but was plainly correct.

The court denied all requests for sanctions.