The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge
MEMORANDUM DECISION AND ORDER
The Court has before it a motion for sanctions under Rule 11 and a motion for attorney fees. The motions are fully briefed and at issue. For the reasons explained below, the Court will deny both motions.
On February 26, 2010, plaintiffs, a group of investors, filed this class action suit against TitleOne, claiming that TitleOne breached its duties as a trustee under an indenture contract and caused the investors to lose millions of dollars. Plaintiffs alleged that this Court had subject matter jurisdiction under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). See Complaint (Dkt. 1) at ¶ 12.
Following briefing and argument by TitleOne and the plaintiffs, this Court dismissed the original complaint but granted leave to amend. Plaintiffs filed an amended complaint that also cited CAFA as the basis for subject matter jurisdiction. TitleOne moved to dismiss the amended complaint, and a hearing was scheduled for October 28, 2010, to resolve the motion.
To this point, TitleOne had not challenged plaintiffs' claim that subject matter rested on CAFA. But two days before the hearing, in an e-mail to TitleOne's counsel, plaintiffs' counsel raised this issue, questioning his own allegation of subject matter jurisdiction. In that e-mail, plaintiffs' counsel notes that in another case he was pursuing, opposing counsel had argued that CAFA does not apply to claims related to securities. As the e-mail continues, plaintiffs' counsel offers his own assessment of that argument applied to this case, concluding that "[a]lthough this is not a securities case, it certainly relates to securities." He goes on to attach a copy of a past decision from this Court finding CAFA did not apply to securities claims, and notes that "although arguably distinguishable, [it] addresses a similar issue." The e-mail ends by asking for TitleOne's "thoughts as to how to proceed."
The case from this Court attached to the e-mail was Carmona v. Bryant, 2006 WL 1043987 (D.Id. April 19, 2006). Plaintiff's counsel in that case -- Philip Gordon -- is also one of the local counsel representing plaintiffs in the present case. In Carmona -- decided about four years before this suit was filed -- Gordon argued that his case should be remanded to state court because this Court had no subject matter jurisdiction under CAFA. More specifically, Gordon argued that the CAFA exception was broad and covered cases like his involving securities and the breach of fiduciary duties. See Plaintiff's Brief in Carmona Litigation CV-06-78-BLW (Dkt. 14). The Court adopted Gordon's argument, granting his motion and remanding the case to state court.
Turning back to the present case, plaintiff's counsel followed up on his e-mail notification to TitleOne's counsel by notifying the Court about the issue. The Court directed plaintiffs to file a Notice by November 22, 2010, indicating whether they would proceed with their case here or dismiss it and re-file in state court. On that date, plaintiffs notified the Court that they would dismiss their case.
On November 30, 2010, plaintiffs filed a motion to dismiss for lack of subject matter jurisdiction. TitleOne filed a response brief and a motion for sanctions under Rule 11. Plaintiffs responded by filing (1) a notice of voluntary dismissal under Rule 41(a)(1)(A) and (2) a motion to strike the Rule 11 motion. TitleOne then filed a motion for attorney fees.
Both the motion for sanctions and the motion for attorney fees are based on the same alleged misconduct by plaintiff's counsel. TitleOne alleges that attorney Phil Gordon knew that CAFA could not be a basis for subject matter jurisdiction in this suit because he had prevailed on that very issue in a case a few years earlier, and yet he nevertheless filed this suit based on CAFA.
TitleOne's Motion For Attorney Fees
TitleOne's motion for attorney fees is based on Idaho Code § 12-121, which provides: "In any civil action, the judge may award reasonable attorney's fees to the prevailing party or parties . . . ." Fee awards under this statute also must meet the criteria set by I.R.C.P. 54(e)(1): " [A]attorney fees under section 12-121, Idaho Code, may be awarded by the court only when it finds, from the facts ...