Orange Production Credit Ass'n v. Frontline Ventures Ltd.
| Decision Date | 24 July 1986 |
| Docket Number | No. 85-4105,85-4105 |
| Citation | 792 F.2d 797 |
| Parties | , 5 Fed.R.Serv.3d 71 ORANGE PRODUCTION CREDIT ASSOCIATION, Plaintiff-Appellant, v. FRONTLINE VENTURES LIMITED, a limited partnership, Defendants, and William D. Foote, Elizabeth R. Foote, Daniel D. Lane, Joan A. Lane, Defendants- Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Richard J. Riordan, Jr., Kenneth G. Schoolcraft, Bradbury, Bliss & Riordan, Anchorage, Alaska, for plaintiff-appellant.
Arnold W. Mednick, Paul R. Hamilton, Memel, Jacobs, Pierno, Gersh & Ellsworth, Los Angeles, Cal., for defendants-appellees.
Appeal from the United States District Court for the District of Alaska.
Before GOODWIN, HALL and THOMPSON, Circuit Judges.
Orange Production Credit Association ("OPCA") appeals from that portion of the district court's amended judgment awarding the defendants-appellees William D. Foote, Elizabeth R. Foote, Daniel D. Lane, and Joan A. Lane (the "individual defendants") $50,102.00 attorneys' fees and $3,900.52 costs. The attorneys' fees and costs were awarded as sanctions against OPCA under Rule 11 of the Federal Rules of Civil Procedure. We affirm.
Frontline Ventures, Ltd., a California limited partnership in which defendants-appellees William D. Foote and Daniel D. Lane were limited partners, borrowed $1,146.444 from OPCA. Acting through its general partner, Frontline signed, as maker, a promissory note to OPCA and secured the note with a ship's mortgage which it signed as mortgagor. The individual defendants OPCA made no settlement with Frontline, and by November 1983 the loan was again in default. Shortly thereafter, Frontline's general partner resigned, and in December 1983 Frontline abandoned the mortgaged vessel in Dutch Harbor, Alaska. OPCA then asserted a further claim against the individual defendants for payment of the balance of the note and on February 14, 1984 filed suit against them in the United States District Court for the District of Alaska to recover $934,835.47 plus interest. The claims asserted against the individual defendants in the district court in Alaska were the same claims OPCA had asserted against them in the district court in California.
signed the note as co-makers and guaranteed the mortgage. Defaults in repayment of the loan occurred. OPCA filed suit against the limited partnership, Frontline, and against the individual defendants in the United States District Court for the Central District of California to foreclose the mortgage and recover a deficiency on the note. OPCA and the individual defendants then entered into a settlement agreement pursuant to which the individual defendants paid OPCA $200,000 in October 1983 and obtained from OPCA a signed stipulation for dismissal of the lawsuit, with prejudice, as to them. Unknown to the individual defendants, the district court in California had already entered its order on March 23, 1983 dismissing the lawsuit for lack of subject matter jurisdiction.
On February 27, 1984, the individual defendants filed a motion in the district court in California to enforce the settlement agreement and to compel compliance with the dismissal with prejudice that OPCA had signed in October 1983. In July 1984 the court heard the motion. At the hearing, and at the urging of OPCA, the district court in California denied the motion on the ground that the court's order of March 23, 1983 had dismissed the case for lack of subject matter jurisdiction and there was still no subject matter jurisdiction. 1 The only basis for subject matter jurisdiction was allegedly under 46 U.S.C. Sec. 954(a) which provides as follows:
Upon the default of any term or condition of a preferred mortgage upon a vessel, the mortgagee may, in addition to all other remedies granted by this chapter, bring suit in personam in admiralty in a district court of the United States, against the mortgagor for the amount of the outstanding mortgage indebtedness secured by such vessel or any deficiency in the full payment thereof.
The individual defendants were not mortgagors and section 954(a) did not afford subject matter jurisdiction over the in personam claims against them.
Meanwhile, back in Alaska, OPCA continued to litigate the same claims which it had asserted in California, but which the district In December 1984, the district court in Alaska granted the defendants' motion to dismiss the case for lack of subject matter jurisdiction, and determined that Rule 11 sanctions would be imposed against OPCA. Thereafter, the district court twice reconsidered its order imposing sanctions, and assessed attorneys' fees of $50,102.00 and costs of $3,900.52 against OPCA.
court in California had dismissed for lack of subject matter jurisdiction. Counsel for the individual defendants advised OPCA that if it did not terminate its Alaska suit against the individual defendants, they would seek Rule 11 sanctions. OPCA, however, chose to ignore that warning. The case was hard fought. OPCA pressed, and the individual defendants resisted, claims which, with interest, would have imposed a liability against the individual defendants in excess of $1 million.
Rule 11 provides:
Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated.... The signature of an attorney ... constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.... If a pleading, motion or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.
Subjective bad faith is not necessary to impose sanctions under Rule 11. Zaldivar v. City of Los Angeles, 780 F.2d 823, 829 (9th Cir.1986). Sanctions under Rule 11 are appropriate when a pleading which has been filed "is frivolous, legally unreasonable, or without factual foundation...." Id. at 831. Here, OPCA filed a complaint in Alaska against the individual defendants even though it completely lacked a factual foundation for subject matter jurisdiction. OPCA knew from the California district court's decision that there is no subject matter jurisdiction in federal court over an in personam action against guarantors of a ship's mortgage. That defect had caused the district court in California to dismiss the case. And yet OPCA refiled the same case on the same claims against the same defendants in the district court in Alaska.
OPCA contends that between the time the case was dismissed in California and the time it was refiled in Alaska, Frontline's...
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