Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_18-cv-03977/USCOURTS-cand-4_18-cv-03977-4/pdf.json

Parties Involved:
Jered Kenna
Defendant
Sridhar Srinvasan
Plaintiff

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SRIDHAR SRINVASAN,

Plaintiff,

v.

JERED KENNA,

Defendant.

MICHAEL HAAS, et al.,

Plaintiff,

v.

JERED KENNA,

Defendant.

Case No. 18-cv-03977-HSG 

ORDER ON MOTION FOR 

SANCTIONS

Re: Dkt. No. 57

Case No. 18-cv-03978-HSG 

Re: Dkt. No. 43

Pending before the Court is Defendant’s motions for sanctions under 28 U.S.C. § 1927 or 

the Court’s inherent powers. Case No. 18-cv-03977, Dkt. No. 57; Case No. 18-cv-03978, Dkt. 

No. 43 (“Mot.”). Defendant requests sanctions based on Plaintiffs counsel’s pursuit of “frivolous 

claims in [both] matter[s] over the course of many months through pleading after amended 

pleading.” Mot. at 3. For the following reasons, the Court DENIES both motions.

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1 The Court finds this matter appropriate for disposition without oral argument and the matter is 

deemed submitted. See Civ. L.R. 7–1(b).

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I. LEGAL STANDARD

Section 1927 states:

Any attorney or other person admitted to conduct cases in any court 

of the United States or any Territory thereof who so multiplies the 

proceedings in any case unreasonably and vexatiously may be 

required by the court to satisfy personally the excess costs, 

expenses, and attorneys’ fees reasonably incurred because of such 

conduct.

28 U.S.C. § 1927. Sanctions are appropriate under § 1927 only on a showing “of the attorney’s 

recklessness or bad faith.” Estate of Blas Through Chargualaf v. Winkler, 792 F.2d 858, 860 (9th 

Cir. 1986); see also Kohler v. Flava Enterprises, Inc., 779 F.3d 1016, 1020 (9th Cir. 2015)

(section 1927 requires proving that “the opposing party acted with ‘subjective bad faith’” (citation 

and quotations omitted)). For purposes of § 1927, bad faith is present “when an attorney 

knowingly or recklessly raises a frivolous argument . . . or argues a meritorious claim for the 

purpose of harassing an opponent.” Estate of Blas, 792 F.2d at 860 (citations omitted). 

Under the court’s inherent power, federal courts may impose sanctions only when there is 

a “specific finding of bad faith.” In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436 (9th Cir. 

1996). While recklessness is sufficient for § 1927, “mere recklessness, without more, does not 

justify sanctions under a court’s inherent power.” Fink v. Gomez, 239 F.3d 989, 993–94 (9th Cir. 

2001). Sanctions are available for a “variety of types of willful actions, including recklessness 

when combined with an additional factor such as frivolousness, harassment, or an improper 

purpose.” Id. at 994. “For purposes of imposing sanctions under the inherent power of the court, 

a finding of bad faith ‘does not require that the legal and factual basis for the action prove totally 

frivolous; where a litigant is substantially motivated by vindictiveness, obduracy, or mala fides, 

the assertion of a colorable claim will not bar the assessment of attorney’s fees.’” Id. at 992 

(citation and quotations omitted). 

II. ANALYSIS

The Court finds that sanctions are not warranted under § 1927 or the Court’s inherent 

powers. The Court finds nothing in the record proving that Plaintiff’s counsel acted in bad faith, 

or knowingly or recklessly raised a frivolous claim. While counsel very likely was ignorant or 

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United States District Court

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negligent in failing to understand that alter ego liability was a threshold issue because he made the 

choice to name Kenna as a defendant instead of Tradehill, ignorance or negligence is not a basis 

for sanctions under either § 1927 or the Court’s inherent powers.2 See Fink, 239 F.3d at 993. 

There is nothing in the record to suggest that Plaintiff’s counsel filed the Second Amended 

Complaint based on a vexatious or dishonest motive. 

Plaintiff counsel’s conduct does not compare to the sanctionable conduct in Defendant’s 

cited cases. See Mot. at 13 (citing cases). For example, in Wages v. I.R.S., the court found that 

sanctions were appropriate since plaintiff “attempt[ed] to file an amended complaint that did not 

materially differ from one which the district court had already concluded did not state a claim, and

by continually moving for alterations in the district court’s original judgment despite that court’s 

clear unwillingness to change its mind. 915 F.2d 1230, 1235 (9th Cir. 1990) (emphasis added). 

Additionally, plaintiff in Wages attempted to file an amended complaint substantially the same as 

the first even after the court dismissed with prejudice some of the claims, and dismissed without 

prejudice the remaining claims “because even if they were properly served, no Bivens action 

would lie.” Id. at 1233. Plaintiff filed no Rule 60 motion here, nor did the Court dismiss with 

prejudice any claims prior to Plaintiffs filing their Second Amended Complaint. Those facts were 

particularly significant in Wages. Similarly, in Johnson v. University of Rochester Medical 

Center, the court found that counsel made repeated allegations that defendant made an unsolicited, 

libelous statement about plaintiff, when the same counsel “requested and authorized the release of 

the allegedly libelous statement.” 642 F.3d 121, 126 (2d Cir. 2011). This information allowed the 

court to find that counsel “pursued claims she knew had no basis in law or fact.” Id. No such 

evidence of specific knowledge or bad faith is presented here. 

Instead, it is clear that Plaintiffs’ counsel failed to understand the legal landscape of alter 

 

2 Although the Court explained that “[h]olding Kenna liable for Tradehill’s acts and omissions . . . 

requires that Plaintiffs plead sufficient facts to invoke the alter ego doctrine so as to pierce 

Tradehill’s corporate veil” in its dismissal of Plaintiffs’ First Amended Complaint, counsel’s 

subsequent actions make it clear that he fundamentally did not understand this statement or the 

underlying legal concepts, and does not show that he intentionally sought to defy the Court’s 

order. 

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ego liability. After Defendant filed its first motion to dismiss, counsel recognized the weakness of 

the allegations, conceded that the unfair competition claims should be dismissed, and sought leave 

to amend before the Court ruled on the initial motion to dismiss. The Court then granted 

Defendant’s motion to dismiss the first amended complaint noting that the threshold issue was 

Plaintiffs’ failure to plead alter ego liability. Plaintiffs then filed a Second Amended Complaint 

where they “narrowed their state law causes of action to two: (1) conversion, as to all Plaintiffs; 

and (2) misrepresentation, as to Plaintiff Johnson alone.” Dkt. No. 56 at 3. As noted in the 

Court’s Order dismissing the case, “when confronted with their failure to amend the complaint in 

any way on [the alter ego liability] matter, . . . Plaintiffs’ only response was the following: 

A clarification is in order. Plaintiff[s] [is/are] not suing Tradehill, nor 

[is/are] plaintiff[s] stating any causes of action against Tradehill. 

Furthermore, plaintiff[s] [is/are] not pleading against Kenna based on 

alter ego liability. Plaintiff[s] [is/are] not alleging that Kenna is liable 

because of his actions on behalf of Tradehill as its CEO. 

Plaintiff[s] [is/are] alleging that Kenna converted [their] bitcoin. The 

cause of action for conversion is pleaded as against Kenna and the 

Doe defendants as individuals only, in their capacity as individuals 

only, not based on alter ego liability. Paragraph 6 therefore needs to 

be stricken to avoid this ambiguity. Plaintiff[s] stipulate[s] that it be 

stricken.”

Id. at 4. This explanation highlights Plaintiffs’ counsel’s fundamental misunderstanding. As the 

Court subsequently explained, “Plaintiffs must plead alter ego because they brought suit against 

Tradehill’s CEO, rather than Tradehill itself.” Id. After the Court’s clear statement, Plaintiff’s 

counsel has not sought to continue litigating the cases. 

The totality of the record does not justify the imposition of sanctions in this case, even 

accepting that Plaintiff’s counsel would have saved everyone’s time and resources had he 

correctly analyzed the threshold alter ego liability issue prior to filing the Second Amended 

Complaint. Accordingly, Court DENIES Defendant’s motions for sanctions.

IT IS SO ORDERED.

Dated: 1/6/2020

______________________________________

HAYWOOD S. GILLIAM, JR.

United States District Judge

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