J.C. Penney Corporation, Inc. v. Oxford Mall, LLC

[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-12461
____________________
J.C. PENNEY CORPORATION, INC.,
Plaintiff-Counter Defendant-Appellee,
versus
OXFORD MALL, LLC,
Defendant-Counter Claimant-Appellant.
____________________
Appeal from the United States District Court
for the Northern District of Alabama
D.C. Docket No. 1:19-cv-00560-KOB
____________________
Before G RANT, ABUDU, and E D C ARNES, Circuit Judges.
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G RANT, C IRCUIT J UDGE :
A limited liability company named Oxford Mall fought J.C.
Penney in federal court for over two years. Just when it was poised
to lose the case, Oxford informed the court that it lacked subject-
matter jurisdiction over the lawsuit. The court issued sanctions,
ordering Oxford to pay part of J.C. Penney’s wasted attorney’s fees.
But Oxford was not finished yet. When the district court asked the
parties for briefing on the appropriate amount of fees, Oxford
added an affidavit explaining why sanctions were not appropriate.
The district court struck the affidavit and awarded J.C. Penney two-
thirds of its requested fees. Oxford challenges both decisions as
abuses of discretion. We emphatically affirm.
I.
In a 2017 foreclosure sale, Oxford Mall, LLC, purchased the
Quintard Mall Shopping Center and subsequently entered into a
significant redevelopment plan with the local government. Acting
on this agreement, Oxford renovated the mall’s interior and razed
what had been an old Sears store in anticipation of new, more
inviting construction. More development was yet to come, but all
was not well behind the storefronts.
Enter J.C. Penney Corporation, Inc., a fixture at the mall
since 1968. As an inducement to set up shop, J.C. Penney’s lease
included the right to approve certain changes to the mall’s site plan,
as well as options to extend the lease’s term. Decades after that
initial agreement, and years after the mall changed hands, J.C.
Penney sought to exercise one of its remaining contractual options.
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But just three days after agreeing to redevelop the mall, Oxford
denied that request, claiming that J.C. Penney was out of extension
options. Whether that was true was crucial for the redevelopment
plans—if J.C. Penney’s lease was still in effect, Oxford would need
its approval to redevelop certain parts of the mall. If not, the
renovations could move forward unimpeded.
J.C. Penney filed this lawsuit in April 2019, invoking the
district court’s diversity jurisdiction. For federal diversity
jurisdiction to attach, all parties must be completely diverse.
Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267 (1806). Oxford
Mall did not contest jurisdiction in its answer to the complaint—
and even pleaded diversity jurisdiction in its counterclaim. Both
parties took the position that the court had diversity jurisdiction,
but Oxford’s LLC ownership structure made it a complex question.
A limited liability company or a limited partnership has the
citizenship of each one of its members. Rolling Greens MHP, L.P. v.
Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1021–22 (11th Cir.
2004). And because members of an LLC are often themselves LLCs
or LPs, the citizenship inquiry can balloon at each step.
J.C. Penney is a citizen of Delaware and Texas. So diversity
jurisdiction is defeated if any member of Oxford Mall, LLC, is a
citizen of Delaware or Texas. And if any of those members were
LLCs or LPs, the same rule would apply for the members of those
members, and so on. These requirements were met according to
both parties’ pleadings, and for the next two years, the lawsuit
proceeded with the understanding that jurisdiction existed.
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In the meantime, a second dispute popped up. Hibbett
Sporting Goods—another tenant—sued Oxford in August 2019,
seeking a declaration of its right to extend its lease term. Like J.C.
Penney, Hibbett asserted diversity jurisdiction. This time, though,
Oxford and its attorney Wayne Grovenstein1 immediately began
seeking information that would strip the court of jurisdiction over
the case. In one email to a member of Oxford, Eightfold
Opportunity Fund II, LP, Grovenstein accurately explained how to
determine diversity jurisdiction for Oxford. He emphasized that if
Eightfold was a citizen of Alabama, federal jurisdiction would be
unavailable and the Hibbett suit would move to state court—a
better forum from the partnership’s perspective. “Likewise for J.C.
Penney,” he went on, “if one or more of the members is a Texas or
Delaware resident, then we may be able to relocate their lawsuit
to Georgia.” The same outreach was repeated throughout
Oxford’s ownership chain, but without immediate success in
identifying a non-diverse person or entity that could shift either suit
to state court.
Those efforts trailed off in late 2019 for unknown reasons—
until January 2020, that is, when the Hibbett court ordered Oxford
to disclose the identity of all of its members and their states of
citizenship. At this point, Grovenstein reached back out to
Eightfold. Explaining his renewed interest, Grovenstein wrote that
he assumed that the judge did “not want to spend time on a
1 Grovenstein is general counsel for Oxford’s property manager, Hull Property
Group, LLC.
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22-12461 Opinion of the Court 5
diversity action for which diversity jurisdictions [sic] does not
actually exist,” just to “have the proceedings vacated at some later
date.”
The revived efforts paid off. On January 28, 2020, Eightfold
identified a Delaware citizen in its ownership chain, refuting
Hibbett’s assertion of diversity jurisdiction. The very next day,
Oxford filed a complaint against Hibbett in Georgia state court.
And thirty-six days after that, it filed a motion to dismiss the federal
Hibbett case for lack of jurisdiction. That was March 5, 2020.
For the J.C. Penney case, however, there was no such filing—
Oxford continued to actively litigate in federal court. Briefing on
the parties’ cross-motions for summary judgment was completed
just six days before Oxford learned that it was a Delaware citizen—
one of J.C. Penney’s states of citizenship. Oxford did not follow up
with the court. A few months later, when the district court stayed
the case in light of J.C. Penney’s bankruptcy petition, Oxford
remained silent. Litigation resumed after J.C. Penney agreed to
relinquish the right to have the claims heard in bankruptcy court.
Still, no one told the court. The stay was lifted on August 7, 2020—
more than six months after Oxford learned it was a Delaware
citizen. Still no word. With nothing standing in the way (that it
knew of), the district court turned to the merits. On August 27, it
granted J.C. Penney’s motion for partial summary judgment and
denied Oxford’s motion in full. Still no word.
Dissatisfied with that outcome, Oxford filed a motion for
reconsideration. Still no mention of the jurisdictional problem.
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Over the next two months, the parties briefed the motion and the
district court again ruled in favor of J.C. Penney on November 24,
2020. Still no word. Following that ruling, Oxford and J.C. Penney
jointly asked the district court to stay the case once more, this time
for mediation. Still—no word. Mediation was held on March 31,
2021, more than fourteen months after Oxford learned it was a
Delaware resident. The parties could not come to an agreement,
and they informed the district court of that fact on April 14. Oxford
Mall—still—informed neither J.C. Penney nor the court about the
lack of jurisdiction. The court scheduled a status conference for
April 28, 2021.
Exactly one week later—five days before the scheduled
conference and fifteen months after learning that both parties in
the case were citizens of Delaware—Oxford filed a motion to
dismiss for lack of subject-matter jurisdiction, finally informing the
court of the lack of diversity. The district court immediately stayed
all proceedings. For its part, J.C. Penney moved for sanctions
under Federal Rule of Civil Procedure 37 and the court’s inherent
powers. The court granted Oxford’s motion to dismiss, but
retained jurisdiction over J.C. Penney’s motion for sanctions.
After briefing and a hearing on the matter, the court agreed
to issue sanctions under its inherent powers (but not Rule 37),
instructed J.C. Penney to outline its fees, and asked Oxford to brief
the reasonableness of that amount. Oxford filed a brief as
requested. But it also added an affidavit from its attorney,
Grovenstein, who asserted that Oxford Mall had not intentionally
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22-12461 Opinion of the Court 7
misled the court. The district court was unmoved, and it struck
the affidavit as untimely and irrelevant. After yet another round of
briefing, the court awarded J.C. Penney $62,556 in attorney’s fees—
two-thirds of the amount that it incurred after Oxford learned the
diversity-destroying information—and another $558.05 in costs.
This is Oxford Mall, LLC’s appeal from both rulings.
II.
This Court reviews sanctions orders for abuse of discretion.
Purchasing Power, LLC v. Bluestem Brands, Inc., 851 F.3d 1218, 1222
(11th Cir. 2017). And because a finding of bad faith is a finding of
fact, we review it for clear error. DeLauro v. Porto (In re Porto), 645
F.3d 1294, 1304 (11th Cir. 2011); accord Skanska USA Civ. Se. Inc. v.
Bagelheads, Inc., 75 F.4th 1290, 1311 (11th Cir. 2023). We also
review a district court’s ruling on the admissibility of evidence,
including a decision to strike an affidavit, for abuse of discretion.
See Corwin v. Walt Disney Co., 475 F.3d 1239, 1249, 1252 (11th Cir.
2007); Useden v. Acker, 947 F.2d 1563, 1571–72 (11th Cir. 1991).
III.
The inherent powers of the federal courts include the
authority to fashion sanctions for conduct that abuses the judicial
process. Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101, 107
(2017). This power’s “dual purpose” is “to vindicate judicial
authority” and “to make the prevailing party whole.” Purchasing
Power, 851 F.3d at 1223. The “key to unlocking” that power is a
finding of bad faith. Id. But a blank conclusion that a party acted
in bad faith is not enough; the court instead needs to make specific
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8 Opinion of the Court 22-12461
findings about which conduct justifies sanctions. DeLauro, 645 F.3d
at 1304. And those findings must show “subjective bad faith,”
meaning intentional and not just reckless behavior. Purchasing
Power, 851 F.3d at 1224–25. Still, that intent can be inferred “if an
attorney’s conduct is so egregious that it could only be committed
in bad faith.” Id.
Just so here, where the district court made a series of specific
factual findings about why Oxford’s actions were in bad faith. First,
on January 28, 2020, Oxford had actual knowledge that it, like J.C.
Penney, was a citizen of Delaware, which destroyed the court’s
diversity jurisdiction. Next, the district court found that Oxford
properly understood the relevant law—a conclusion made
necessary by Oxford’s surprising argument that because
Grovenstein was a transactional lawyer, it was “imminently
plausible” that he did not recognize the relevance of shared
citizenship. That is absolute nonsense. Grovenstein was in charge
of Oxford’s effort to establish its citizenship, and his emails reflect
that he full well knew the effect of shared citizenship on diversity
jurisdiction. Oxford’s contention that it did not consider the
connection between its two tenant disputes at the same property
until after mediation was disproven by attorney Grovenstein’s own
September 2019 email spelling out the implications of the Hibbett
jurisdictional inquiry to the J.C. Penney litigation.
Finally, the district court found that Oxford’s delay in
disclosing the lack of diversity jurisdiction was strategic; it waited
until April 2021—15 months and several unfavorable rulings later.
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22-12461 Opinion of the Court 9
This evidence, the court concluded, showed that the
conduct was “so egregious that Oxford Mall could only have
committed it in bad faith.” We cannot disagree; Oxford Mall’s
wrongdoing here is startling in its obviousness. But even if we
were less certain, when “there are two permissible views of the
evidence, the factfinder’s choice between them cannot be clearly
erroneous.” Brnovich v. Democratic Nat’l Comm., 141 S. Ct. 2321,
2349 (2021) (quoting Anderson v. Bessemer City, 470 U.S. 564, 574
(1985)). The district court’s determination of bad faith is far more
than “plausible in light of the entire record,” and we do not disturb
it. See id.
Oxford, however, protests that sanctions are not appropriate
because bad faith is not the only plausible explanation for its actions.
But that argument misunderstands the standard. Requiring the
district court to rule out all other “plausible” explanations would
be tantamount to requiring proof beyond a reasonable doubt—a
bar even Oxford admits is too high.2 The district court, in short,
did not abuse its “broad discretion” in deciding whether to impose
sanctions. Peer v. Lewis, 606 F.3d 1306, 1316 (11th Cir. 2010).
2 We need not decide today whether district courts should use a
preponderance standard or a clear-and-convincing standard. The district court
applied the clear-and-convincing standard “out of an abundance of caution,”
and neither party challenges that decision on appeal.
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IV.
Oxford also argues that even if it did act in bad faith, the
district court’s sanction award was too high. Again, we disagree.
When a court uses its inherent authority to award a sanction
in the form of attorney’s fees, legal fees awarded “must be
compensatory rather than punitive”—at least in civil litigation.
Goodyear, 581 U.S. at 108. Because the purpose of this fee-shifting
mechanism is to reimburse the victim, a causal connection is
required between the fees awarded and the sanctioned party’s
misconduct. Id. at 108–09. So the complaining party may only
recover those fees it would not have incurred “but for” its
opponent’s misconduct. Id. at 109 (quotation omitted).
Under this approach, the court’s “fundamental job” is to
decide whether a legal fee would have existed even without the
sanctioned conduct. Id. at 110. This sometimes means evaluating
each specific litigation expense—but not always. Id. at 109. The
Supreme Court has been careful to avoid turning judges into
auditors: courts assessing fees “need not, and indeed should not,
become green-eyeshade accountants.” Id. at 110 (quoting Fox v.
Vice, 563 U.S. 826, 838 (2011)). So “rough justice” is the aim, not
“auditing perfection.” Id. (quotation omitted).
Along these lines, a district court may consider “its overall
sense of [the] suit” and “use estimates in calculating and allocating
an attorney’s time.” Id. (alteration adopted) (quotation omitted).
It could decide, for example, that “all (or a set percentage) of a
particular category of expenses” satisfy the standard. Id. In
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22-12461 Opinion of the Court 11
“exceptional cases,” the court could even award all fees incurred
after some significant event during the litigation. Id. As for our
standard of review on appeal, the district court’s judgment is
“entitled to substantial deference” in light of its “superior
understanding of the litigation.” Id. (quotation omitted).
The district court here complied with these standards. Its
starting point was the amount of fees that J.C. Penney incurred
after March 5, 2020—the date Oxford moved to dismiss the Hibbett
case for lack of subject-matter jurisdiction. After all, “J.C. Penney
would not have litigated any matters in this case after March 2020,
‘but-for’ Oxford Mall’s bad faith.”
That was not the only limitation. The district court offered
two reasons for not awarding J.C. Penney all of its fees starting on
that date. For one, “J.C. Penney’s efforts to litigate this case since
March 2020 were not entirely wasted” because it was able to make
“use of its arguments from this case in the state court proceeding.”
So awarding all of its fees from the relevant time period would
“overcompensate J.C. Penney, rather than ‘making it whole.’” On
top of that, the district court placed at least some part of the blame
on J.C. Penney for not working harder to discover the jurisdictional
defect itself.
For these reasons, the district court limited its sanction
award to two-thirds of J.C. Penney’s incurred attorney’s fees after
Oxford discovered its Delaware citizenship.3 Oxford argues that
3 We reject the argument that because the limitation had a dual purpose—
both avoiding an award for fees that J.C. Penney would have incurred anyway
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12 Opinion of the Court 22-12461
the district court erred by not “‘assessing and allocating specific
litigation expenses’ as the but-for standard ‘demands.’” But there
is no such “demand.” Oxford’s suggestion to the contrary ignores
Goodyear’s explicit qualifications of the general approach it
outlined. The Supreme Court went out of its way to caution that
district courts need not parse every single litigation expense with a
fine-tooth comb. Goodyear, 581 U.S. at 110. Here, the district court
considered its “overall sense of [the] suit,” “use[d] estimates,” and
concluded that “a set percentage” (two-thirds) “of a particular
category of expenses” (those incurred after Oxford should have
dismissed the case) were “incurred solely because of [Oxford’s]
bad-faith conduct.” Id. We owe this judgment substantial
deference on appeal. Id.
Ultimately, Oxford cries foul about the district court shifting
fees in a manner explicitly blessed by the Supreme Court. We
reject its attempt to characterize the district court’s action as
anything else. The district court did not abuse its considerable
discretion in determining the amount of fees owed to J.C. Penney.4
and accounting for J.C. Penney’s responsibility—it did not independently
satisfy either one.
4 Oxford also argues that the district court erred by refusing to apply the
“excess costs” framework from Amlong & Amlong, P.A. v. Denny’s, Inc., 500 F.3d
1230 (11th Cir. 2007). But Amlong only analyzed the permissibility of sanctions
under 28 U.S.C. § 1927. 500 F.3d at 1239–42. And this Court has previously
admonished lower courts for “blurr[ing] the lines between the inherent power
standard and the standard used for Rule 11 and § 1927 sanctions.” Purchasing
Power, 851 F.3d at 1223 n.4. “While these powers can be used to punish the
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V.
We also conclude that the district court did not abuse its
discretion when it sua sponte struck Oxford’s affidavit as untimely
and irrelevant.
On June 24, 2021, after both parties had moved for sanctions,
the district court ordered reply briefs to be filed no later than July
6, with a hearing twenty days later on whether the court should
impose sanctions. Both parties complied with the filing deadline,
and the court held the hearing. On August 5, it granted J.C.
Penney’s motion in part and imposed sanctions on Oxford.
Though the court had decided that sanctions were in order,
the amount was not yet determined. So the court’s next order
directed J.C. Penney to outline its legal fees and Oxford to brief the
reasonableness of those amounts. Seeing an opportunity, Oxford
filed an affidavit from its attorney, Grovenstein, in addition to its
brief. But this affidavit did not mention J.C. Penney’s fees at all, let
alone the reasonableness of those fees. Instead, it contained a
protracted merits discussion of how Grovenstein (and by
extension, Oxford) did not act in bad faith. The district court
refused to consider it. The affidavit, the court concluded, bore
“only on whether the court should impose sanctions at all—not the
amount of fees,” which was the only issue pending at the time.
same areas of conduct, they are not governed by the same standard.” Id. The
district court did not err by refusing to apply an incorrect standard.
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We see no problem—a district court is not required to
consider irrelevant evidence. Cf. United States v. Hall, 653 F.2d 1002,
1005 (5th Cir. 1981).5 Because Grovenstein’s affidavit had nothing
to do with the amount of fees recoverable, the district court had no
reason to assess it.
What’s more, even if the affidavit had been relevant, it was
untimely. The Federal Rules of Civil Procedure provide that “any
opposing affidavit must be served at least 7 days before the
hearing,” unless the court allows otherwise. Fed. R. Civ. P. 6(c)(2).
Oxford did not file Grovenstein’s affidavit until August 19, 2021—
forty-four days after its pre-hearing briefing deadline and twenty-
four days after the sanctions hearing. “Absent an affirmative
showing by the non-moving party of excusable neglect,” a “court
does not abuse its discretion in refusing to accept out-of-time
affidavits.” Useden, 947 F.2d at 1571 (quotation omitted). Oxford
made no such showing here. In fact, it did not even argue for
excusable neglect, admitting at oral argument that not filing sooner
was a “strategic decision.”
No matter how Oxford tries to reframe the issue, the district
court’s refusal to allow the overdue and irrelevant affidavit to
function as the equivalent of a motion for reconsideration was not
an abuse of discretion.
5 Decisions by the former Fifth Circuit handed down before October 1, 1981,
are binding on this Court. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th
Cir. 1981) (en banc).
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* * *
This case offers a textbook example of bad faith. Undeterred
after discovering that the district court lacked jurisdiction, Oxford
decided to withhold that fact and try its hand at the merits. When
those merits efforts failed, Oxford pulled out the diversity-
destroying card. And when jurisdiction vanished, so did all the
unfavorable rulings. We do not take this kind of jurisdictional
manipulation lightly. We therefore AFFIRM the award of
sanctions.
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