Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-04971/USCOURTS-cand-4_04-cv-04971-0/pdf.json

Parties Involved:
Howard Fried
Defendant
Idea Place Corporation
Plaintiff
Idea Place Noodle Shop, Inc.
Defendant
Craig Sparer
Defendant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IDEA PLACE CORPORATION,

Plaintiff,

v.

HOWARD FRIED, et al.,

Defendants.

 /

No. C 04-4971 SBA

ORDER

[Docket No. 40]

This matter comes before the Court on the Motion for Award of Attorney's Fees [Docket No. 40]

of Defendants Howard Fried, Craig Sparer, and Idea Place Noodle Shop, Inc. (collectively, "Defendants"). 

Having read and considered the arguments presented by the parties in the papers submitted to the Court,

the Court finds this matter appropriate for resolution without a hearing. The Court hereby DENIES

Defendants' Motion for Award of Attorney's Fees.

BACKGROUND

On November 23, 2004, Plaintiff Idea Place Corporation ("Plaintiff") filed a complaint in this Court

against Defendants Howard Fried, Craig Sparer, and Idea Place Noodles Shop, Inc. (collectively,

"Defendants"). The complaint alleged various claims for breach of contract, breach of the covenant of good

faith and fair dealing, and intentional interference with contractual or economic relations. On December 13,

2004, Plaintiff moved for a preliminary injunction, seeking to compelDefendants Fried and Sparer to execute

certain documentation pursuant to their alleged contractual obligations. On February 11, 2005, the Court

dismissed the action due to lack ofsubjectmatter jurisdictionafter finding that Plaintiff's complaint did not state

a cause of action arising under federallaw and did not require the resolution ofa substantialquestion offederal

law [Docket No. 39].

On February 25, 2005, Defendants filed the instant motionforanaward of attorney's fees. Defendants

Case 4:04-cv-04971-SBA Document 47 Filed 05/02/05 Page 1 of 5
United States District Court

For the Northern District of California

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1California Code of Civil Procedure § 1717 provides that "[i]n any action on a contract, where the

contract specifically provides that attorney's fees and costs, which are incurred to enforce the contract, shall

be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the

party prevailing on the contract . . . shall be entitled to reasonable attorney's fees." Cal. Code Civ. Proc. §

1717(a). Section 1717 further states that "[t]he court . . . shall determine who is the party prevailing on the

contract . . . whether or not the suit proceeds to final judgment." Cal. Code Civ. Proc. § 1717(b)(1). 

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contend that they are entitled to fees in the amount of $52,380 pursuant to California Code of Civil Procedure

§ 1717 because theywere the "prevailing party" on Plaintiff's contract claim. On March 14, 2005, Plaintiff filed

its opposition to Defendant's motion for an award ofattorney's fees. Plaintiff opposes Defendants' motion on

the grounds that Defendants are not "prevailing parties" in this action since the Court did not adjudicate

Plaintiff's complaint on its merits but, instead, dismissed the action for lack of subject matter jurisdiction. 

ANALYSIS

Ordinarily, under Federal Rule of Civil Procedure 54(d), when a final judgment has been entered in a

case, the "prevailing party"may make a motion for attorney's fees and costs. Fed. R. Civ. Proc. 54(d). In the

Ninth Circuit, however, a defendant is not considered a "prevailing party"when dismissalis mandated by a lack

ofsubjectmatter jurisdiction. Miles v. State of California, 320 F.3d 986, 988 (9th Cir. 2003) (analyzing the

term "prevailing party" with respect to civil rights claims). Thus, fees and costs under Federal Rule of Civil

Procedure 54(d) may not be awarded where an underlying claim is dismissed for lack of subject matter

jurisdiction. Id. 

Here, Defendants ignore the express holding of Miles and nevertheless contend that they are entitled

to attorney's fees under Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 259 n. 31

(1975)becauseCalifornia Code ofCivil Procedure § 1717 provides forthe recovery of attorney's fees relating

to contract actions.1 However, as Defendants concede, AlyeskaPipelineServiceCo. v. Wilderness Society,

421 U.S. 240, 259 (1975), only concerns the applicability of state laws pertaining to the award of attorney's

fees in diversity actions. Id. The instant case is not a diversity case. More importantly, however, the Alyeska

court did not address the precise question here, which is whether a party may recover attorney's fees when a

case has been dismissed for lack of subject matter jurisdiction. Id. Accordingly, Defendants' reliance on

Alyeska is misplaced. 

Further, contrary to Defendants' assertions, Defendants were quite obviously not the prevailing party

on the contract. Indeed, the Court's conclusion that subject matter jurisdiction was lacking expressly

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2Section 1919 provides that "[w]henever any action or suit is dismissed . . . for want of jurisdiction,

such court may order the payment of just costs." 28 U.S.C. § 1919. 

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In fact, the other holding in Correspondent Services – that a district court has "inherent" discretion

to consider an application for attorney's fees as a "collateral issue" even when jurisdiction is lacking – is

utterly unsupported by any relevant authorities. Specifically, the Correspondent Services court does not

cite to any other cases in which a district court used its "inherent discretion" to award attorney's fees. Id. at

*50. Instead, all of the cases cited by the Correspondent Services court concern a district court's

discretion to award sanctions under Fed. R. Civ. Proc. 11. Id. 

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precluded the Court from making any findings with respect to the merits of the underlying action, including

Plaintiff's breach of contract claim. Compare WillisCorroon Corp. of Utah,Inc. v.UnitedCapitol Ins. Co.,

1998 U.S. Dist. LEXIS 5394 (N.D. Cal. 1998) (granting motion to dismiss after reviewing the contract and

determining that the filing ofthe complaint violated a 30-day "standstill" provision in the contract). Further, this

Court's dismissal for lack of subject matter jurisdiction in federal court did not foreclose the possibility that

Plaintiff could pursue its contract claims in state court. Thus, it remains to be seen which entity is the

"prevailing party" on Plaintiff's contract action. 

Further, as Plaintiff correctly notes, Congress has specifically considered the costs that a party may

recover when a complaint is dismissed for lack of subject matter jurisdiction and has expressly declined to

include "attorney's fees" in the category ofrecoverable costs. See 28 U.S.C. §§ 19192 and 1920. Under 28

U.S.C. § 1920, only the following costs are potentially recoverable:(1) fees ofthe clerk and marshal; (2) fees

of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case;

(3) fees and disbursements for printing and witnesses; (4) fees for exemplification and copies of papers

necessarily obtained for use in the case; (5) docket fees; and (6) compensation of court appointed experts,

compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services. 28

U.S.C. § 2020. 

Defendants' reliance on Correspondent Services Corp. v. JVW Investment, Ltd., 2004 U.S. Dist.

LEXIS 19341 (S.D.N.Y. 2004) to establish that this Court has the discretion to award attorney's fees as "just

costs" pursuant to 28 U.S.C. § 1919 is unpersuasive. First, Correspondent Services is a district court case

from the Southern District of New York and therefore is not controlling authority. Its precedential value is

particularly dubious in light of the fact that Correspondent Services appears to be in direct conflict with the

Ninth Circuit's holding in Miles.

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4Significantly, the district court's decision to award attorney's fees was not reviewed by – and thus

not approved by – the Second Circuit on appeal. Id. at * 43.

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Moreover, the facts in Correspondent Services are not analogous to this case. Although the

Correspondent Services court determined that it had the discretion to award attorney's fees under Section

1919 – a position this Court does not agreewith– theCorrespondent Services court also noted that attorney's

fees should not be awarded unless exceptional circumstances exist.4 Id. at * 48-50. The Correspondent

Services court found that two factors warrant a finding of exceptional circumstances: (1) the financialburden

of hardship suffered by the parties; and (2) the parties' conduct. Id. at 49. The court concluded that these

factors had been metfor numerous reasons unique to the Correspondent Services litigation including that: (1)

the case had been proceeding for approximately four years and the parties had endured six dispositive motions

and an appealto the Second Circuit; (2) there was evidence that one ofthe parties had pursued its claim in bad

faith, knowing that subject matter did not exist; and (3) one of the parties had sustained a substantial financial

burden due to its lack of access to funds that had been wrongfully attached. Id. at * 1-15, 51. The

Correspondent Services court also concluded that the assessment offees and costs was appropriate because

the court's conclusion that one of the party's had "wrongfully" attached another party's assets was "closely

related to, and necessarily flow[ed] from the determination that subject matter jurisdiction [was] lacking." Id.

at 51. Specifically, the court's determination that the amount in controversy had not been established

necessitated an evaluation of the value of the asset attached. Id. It is quite obvious from a review of the

Correspondent Services lengthy and fact-specific opinion that none of the factors relevant to the

Correspondent Services court's opinion is present here.

Accordingly, Defendants have not established that they are entitled to an award of attorney's fees.

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CONCLUSION

IT IS HEREBY ORDERED THAT Defendant's Motion for an Award of Attorney's Fees [Docket

No. 40] is DENIED. 

IT IS SO ORDERED.

 /s/ Saundra Brown Armstrong 

Dated: 5-2-05 SAUNDRA BROWN ARMSTRONG

United States District Judge

Case 4:04-cv-04971-SBA Document 47 Filed 05/02/05 Page 5 of 5