Opinion
3:16-cv-02305-YY
07-28-2023
THE ESTATE OF MARJORY GAIL THOMAS OSBORN-VINCENT, Plaintiff, v. AMERIPRISE FINANCIAL SERVICES, INC., a Delaware Corporation, and RIVERSOURCE LIFE INSURANCE COMPANY, a Minnesota Corporation, Defendants.
FINDINGS AND RECOMMENDATIONS
Youlee Yim You United States Magistrate Judge.
FINDINGS
Currently pending are defendants' Motion for Attorney Fees and Costs, ECF 237, and plaintiff's Motion for Sanctions, ECF 239, as amended. See Mot. to Amend/Supplement, ECF 243, Ex. 2. Both motions should be denied, except for defendants' motion for costs, a decision on which should be reserved pending defendants' response to the court's order directing defendants to submit additional information. See ECF 256.
Plaintiff filed a Motion for Sanctions and Attorney Fees and Costs on September 23, 2022. ECF 239. On October 12, 2022, before defendants filed a response to plaintiff's motion, plaintiff filed a Motion to Amend/Supplement its prior motion. ECF 243. Plaintiff attached a copy of its amended motion for sanctions and attorney fees and costs to its motion to amend. Pl. Mot. Amend, Ex. 2, ECF 243, at 23-27. On November 4, 2022, defendants filed a Combined Response to both plaintiff's motion and amended motion. ECF 247. Thus, defendants have had an opportunity to respond to the amended motion.
Plaintiff, the Estate of Marjory Gail Thomas Osborn-Vincent (“the Estate”), brought suit in December 2016, alleging claims for breach of a life insurance contract, breach of the duty of good faith and fair dealing, and elder abuse under Oregon law. Fourth Am. Compl. ¶¶ 35-70, ECF 83. Defendants Ameriprise Financial Services, Inc. and RiverSource Life Insurance Company litigated this action for nearly two years before filing a motion in the District of Minnesota on May 31, 2019, to enforce the terms of a 2001 class action settlement agreement and find the Estate's claims were released under that agreement. Mot. Enforce Class Action Settlement, Benacquisto v. American Express Fin., No. 0:00-cv-01980 (DSD/DTS) (D. Minn. May 31, 2019), ECF 603. The parties had filed cross-motions for summary judgment in this case before the District of Minnesota took up the motion to enforce. See ECF 152, 173. And both parties filed supplemental motions here after the District of Minnesota granted defendants' motion to enforce in November of 2019. See ECF 200, 205; Benacquisto, 2019 WL 13114420 at *4.
This case was stayed while plaintiff appealed the District of Minnesota's decision to the Eighth Circuit. Order (May 26, 2020), ECF 220. In February 2021, the Eighth Circuit remanded the matter back to the District of Minnesota to resolve a jurisdictional issue based on defendants' failure to property serve the Estate's representative. Osborn-Vincent v. Am. Express Fin. Corp., 835 Fed.Appx. 167, 168 (8th Cir. 2021). Defendants subsequently served the Estate's representative. The District of Minnesota then granted defendants' motion to substitute the Estate's representative and enforce the settlement agreement, and the Eighth Circuit affirmed. Benacquisto, 2021 WL 2229805 at *1, aff'd, 44 F.4th 741 (8th Cir. 2022).
On September 9, 2023, this court lifted the stay, and granted defendants' motion for summary judgment against all of plaintiff's claims. ECF 213, 235. Both parties moved for attorney fees or sanctions following the entry of judgment, and a hearing on those motions was held on April 13, 2023. ECF 237, 239, 243, 256.
I. Defendants' Motion for Attorney Fees
Attorney fee awards in federal actions brought under state law are a substantive matter to which state law applies. Rodriguez v. Cty. of Los Angeles, 891 F.3d 776, 809 (9th Cir. 2018); Inre Larry's Apartment, L.L.C., 249 F.3d 832, 838 (9th Cir. 2001) (“[A] federal court sitting in diversity applies state law in deciding whether to allow attorney's fees when those fees are connected to the substance of the case.”). Generally, a party to litigation has no right to recover attorney fees unless there is a statute or contract that confers such a right. Powell v. Rasmussen, No. 2:19-CV-1077-JR, 2022 WL 2292023, at *1 (D. Or. June 24, 2022) (citing Lumbermen's v. Dakota Ventures, 157 Or.App. 370, 374 (1998)). Defendants seek attorney fees under O.R.S. § 20.105(1), which requires the court to award reasonable attorney fees to the prevailing party if it determines “there was no objectively reasonable basis for asserting a claim.” See also Paatalo v. Lincoln Cnty., No. 6:21-CV-00117-MC, 2023 WL 2266447, at *1 (D. Or. Feb. 28, 2023). The relevant inquiry is “whether the claim was entirely devoid of legal or factual support either at the time it is made or, in light of additional evidence or changes in the law, as litigation proceeds.” Hunt v. City of Eugene, 249 Or.App. 410, 432 (2012).
Although this case has been pending against defendants since 2017 and defendants insist that plaintiff's case “never should have been brought,” defendants' motion is limited to the $205,230 in attorney fees incurred after May 31, 2019. Defendants contend this is date after which plaintiff “had no objectively reasonable basis to continue to pursue the litigation filed in Oregon.” Defs. Mot. Attorney Fees 9, ECF 237. As mentioned above, May 31, 2019, is the date on which defendants filed the motion to enforce the class action settlement in the District of Minnesota, which according to defendants was the culmination of a “years-long effort to educate [plaintiff] that its claims were precluded” by the 2001 class action settlement in the Benacquisto litigation. Id. at 8.
But merely filing a motion to enforce a settlement agreement did not actually establish that plaintiff's continued litigation of its claims was objectively unreasonable. In other words, plaintiff was not required to simply dismiss the matter and give up in the face of defendants' allegations or the assertion in defendants' motion that the settlement agreement precluded plaintiff's claims. See Pl. Resp. 4, ECF 246. For example, defendants insist that they notified plaintiff early and often about the existence of the settlement agreement and their position that the agreement precluded plaintiff's claims. See Defs. Mot. Attorney Fees 8, ECF 237. In response to plaintiff's efforts to amend the complaint back in 2018, defendants produced, among other things, a copy of the settlement agreement and a declaration showing that Osborn-Vincent had received the benefit of the class action settlement agreement. Heidelberger Decl. ¶ 10, ECF 35. But plaintiff's claims were premised on the theory that defendants began the alleged “scheme” of charging unwarranted premiums and costs of insurance between 2010 and 2015, which was many years after the close of the class period. See Pl. Resp. 6, ECF 41; Second Am. Compl.¶ 9, ECF 69. This court ruled that plaintiff's claims based on defendants' post-class period actions were not futile, Order (Feb. 13, 2018), ECF 57, and that issue remained an open question until the District of Minnesota, and eventually the Eighth Circuit, ruled that plaintiff's claims necessarily depended on the initial sale of the life insurance policy to Osborn-Vincent in 1989, and were therefore precluded by the class action settlement. See Benacquisto v. Am. Express Fin. Corp., 44 F.4th 741, 746 (8th Cir. 2022). While plaintiff's theory was ultimately unsuccessful, it was not objectively unreasonable for plaintiff to rely on defendants' depletion of Osborn-Vincent's life insurance policy's cash value-which indisputably began after the close of the class period-in an attempt to avoid the effect of the settlement agreement's release provisions.
That is not to say, however, that all of plaintiff's arguments had merit. For example, plaintiff's argument that this court had conclusively ruled on the merits on plaintiff's “post-class period actions” theory in granting plaintiff leave to file an amended complaint was baseless. E.g., Pl. Resp. Defs. Mot. Fees 3, ECF 246 (“Further, Defendants' Motion fails to discuss in any context this Court's rulings in February and March of 2018, wherein the Court rejected Defendants' arguments that the Benacquisto Class-Action settlement had a preclusive effect on Plaintiffs claims in this matter.”). As this court clarified at least two different times, and as the District of Minnesota expressly noted as well, the rulings in 2018 made in connection with plaintiff's motion for leave to amend its complaint was not in any sense a decision on the merits. E.g. Findings & Recommendations (Jan. 3, 2019) 6 n.3, ECF 134 (“Finally, plaintiff contends that this court has already rejected this defense in its prior decision granting leave to amend the complaint. To the contrary, an order granting leave to amend is not a dispositive ruling with preclusive effect. This court did not decide the merits of the underlying issues or otherwise rule on the merits of the proposed amendments in that decision.”) (internal citations omitted); Benacquisto, 2019 WL 13114420 at *3 n.2 (“The court in the Oregon Action subsequently made clear that it has not ruled on the merits regarding whether the Benacquisto Settlement precludes the Estate's claims in the Oregon Action.”).
Plaintiff also asserted that it had no record that Osborn-Vincent ever received notice of the class action or notice of the settlement benefit, which was an accidental death benefit for a period of three years following the settlement. See Benacquisto, 2019 WL 13114420 at *3. Defendants assert they put plaintiff “on notice” that the class action settlement barred plaintiff's claims, but none of the documents cited in support of that proposition contain any evidence directly addressing plaintiff's theory that Osborn-Vincent never received notice of the settlement benefit. Defs. Mot. Attny. Fees 8 (citing ECF 34, 90, 218). Instead, defendants did not put on such evidence until filing the motion to enforce in the District of Minnesota, and although that court eventually found that defendant's evidence of notice was sufficient, plaintiff's argument
was not “entirely devoid of legal or factual support” at the time it was made, or in light of later developments in the case. See Hunt, 249 Or.App. at 432; see also Benacquisto, 2019 WL 13114420 at *3 (citing evidence showing that Osborn-Vincent received the settlement benefit). It was not unreasonable for plaintiff to insist that defendants prove that the settlement agreement did in fact preclude all of plaintiff's claims rather than simply acquiesce to defendants' assertion of that affirmative defense in their pleadings and other motions. See, e.g., Defs. Resp. Pl. Objs. 5-7, ECF 218.
Also, notably, plaintiff successfully appealed the District of Minnesota's original decision granting defendants' motion to enforce on jurisdictional grounds. Osborn-Vincent, 835 Fed.Appx. at 167. At the hearing on the present motions, counsel for defendants downplayed the significance of the Eighth Circuit's remand, arguing that the problem with the District of Minnesota's initial decision was a technical one related to service under Federal Rule of Civil Procedure 4 and not one related to the merits. But the issue raised by the appeal went to the court's personal jurisdiction over the parties, which is no mere technicality. See, e.g., Torres v. Oakland Scavenger Co., 487 U.S. 312, 312 (1988) (“[A]lthough . . . a court may construe the Rules liberally and ignore ‘mere technicalities' in determining compliance, it may not waive the jurisdictional requirements of Rules 3 and 4, even for ‘good cause shown.' ”). It was not objectively unreasonable for plaintiff's counsel to assert lack of jurisdiction in opposing defendants' motion to enforce.
In short, defendants have failed to show that plaintiff's claims lacked any factual or legal basis after May 31, 2019, as would be required to impose upon plaintiff the $205,230 in attorney fees that defendants currently seek.
II. Plaintiff's Motion for Sanctions
Plaintiff also moves for sanctions under Federal Rule of Civil Procedure 11(b)(1) and 11(c), and attorney fees under O.R.S. § 20.105(1). Pl. Mot. Sanctions and Attorney Fees and Costs 2, ECF 239. Plaintiff subsequently filed an amended motion withdrawing the request for attorney fees under O.R.S. § 20.105. See Pl. Amd. Mot. Sanctions 2, ECF 243.
As for plaintiff's motion for Rule 11 sanctions, plaintiff did not follow the “strict procedural requirements” that a party must satisfy when moving for sanctions under Rule 11. Radcliffe v. Rainbow Const. Co., 254 F.3d 772, 788 (9th Cir. 2001). Rule 11(c)(1) empowers the court to “impose an appropriate sanction” against a party or attorney who violates Rule 11. The party moving for sanctions under Rule 11(c) must first serve the motion on the party against whom sanctions are sought and allow that party at least 21 days to correct or withdraw the challenged filing. FED. R. CIV. P. 11(C)(2). This “safe harbor” procedure is strictly enforced. Islamic Shura Council of S. California v. F.B.I., 757 F.3d 870, 872 (9th Cir. 2014) (“A motion for sanctions may not be filed, however, unless there is strict compliance with Rule 11‘s safe harbor provision.”).
Defendants assert, and plaintiff does not dispute, that plaintiff did not serve the motion for sanctions on defendants before filing the motion with the court, and therefore the court has no authority to impose sanctions under Rule 11(c). Lovelady v. Beamer, No. 2:16-CV-1614-PK, 2017 WL 4707509, at *7 (D. Or. Oct. 19, 2017), aff'd, 731 Fed.Appx. 672 (9th Cir. 2018) (“[T]his court is without authority to impose sanctions pursuant to Rule 11(c) absent the moving party's full compliance with the ‘safe harbor' provisions of the rule.”); see also Defs. Combined Resp. 5, ECF 247.
Moreover, judgment was entered in this case on September 9, 2022, and plaintiff did not file the current motion for sanctions until September 23, 2022. See ECF 236, 239; see also Pl. Reply 2, n.1 (discussing “post judgment motions concerning sanctions under” Rule 11). Once the court has rendered judgment, it is impossible for Rule 11‘s “safe harbor” provision to have any effect because “it is too late for the offending party to withdraw the challenged claim.” Ridder v. City of Springfield, 109 F.3d 288, 297 (6th Cir. 1997); see also Islamic Shura Council, 757 F.3d at 873 (“Motions for Rule 11 attorney's fees cannot be served after the district court has decided the merits of the underlying dispute giving rise to the questionable filing.”). The grounds that plaintiff asserts in its motion as a basis for sanctions arose on May 31, 2019, when defendants filed their motion to enforce in the District of Minnesota. Benacquisto, 2019 WL 13114420 at *1-2. It is not clear why plaintiffs waited until two weeks after judgment was entered to move for sanctions; in any event, defendants did not receive the full 21 days under the safe harbor provision to withdraw the challenged motion to enforce, and thus plaintiff is not entitled to Rule 11 sanctions. Stiles v. Clifford, No. SA CV 22-00469-JGB-DFM, 2022 WL 18359236, at *4 (C.D. Cal. Dec. 12, 2022), report and recommendation adopted, No. SA CV 22-00469-JGB-DFM, 2023 WL 307451 (C.D. Cal. Jan. 18, 2023) (denying motion for sanctions brought two weeks after dismissal with prejudice).
RECOMMENDATIONS
Defendants' Motion for Attorney Fees (ECF 237) and plaintiff's Motion for Sanctions (ECF 239), as amended by plaintiff's Motion to Amend/Supplement (ECF 243), should be denied. Decision should be reserved on defendants' motion for costs (ECF 237).
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Friday, June 2, 2023. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement.
NOTICE
These Findings and Recommendations are not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any Notice of Appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of a judgment.