Van v. LLR, Inc. et al

WO IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
KATIE VAN, individually and on behalf )
of all others similarly situated, )
)
Plaintiff, )
)
vs. )
)
LLR, INC., d/b/a LuLaRoe, and LULAROE, )
LLC, )
) No. 3:18-cv-0197-HRH
Defendants. )
_______________________________________)
O R D E R
Motion for Attorney’s Fees
Defendants move for an award of attorney’s fees.1 This motion is opposed.2 Oral
argument was not requested and is not deemed necessary.
Background
Plaintiff Katie Van brought this diversity action against defendants LLR, Inc., d/b/a
LuLaRoe, and LuLaRoe, LLC based on allegations that she had been improperly charged
1Docket No. 55.
2Docket No. 58.
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sales tax on purchases she had made from LuLaRoe retailers in other states. Plaintiff alleged
that defendants improperly charged sales tax “on at least 72,503 sales transactions shipped
into non-taxing jurisdictions in Alaska from April 2016 through June 1, 2017.”3 Plaintiff
asserted two claims on behalf of herself and others similarly situated. In Count I of her
amended complaint, plaintiff asserted an Alaska Unfair Trade Practices and Consumer
Protection Act (UTPCPA) claim. Plaintiff alleged that
[d]efendants violated the UTPCPA by knowingly charging and
collecting an unlawful sales tax on its clothing sales to
[p]laintiff and class member[s]; by failing to disclose that they
were not authorized to collect such taxes; and by actively
misrepresenting to their customers, directly and through [their]
retailers, that their 2016 Tax Policy and their collection of “sales
tax” from the class members was proper and lawful.[4]
Plaintiff also alleged that “[d]efendants intentionally violated the UTPCPA by programming
their online point-of-sale payment system to collect sales tax on clothing when such
collection was unlawful and not authorized by the taxing authority of the buyer.”5 In Count
II, plaintiff asserted a conversion claim. For relief, plaintiff sought “an accounting; interest;
statutory damages; and punitive damages.”6 Defendants contend that the potential statutory
damages for the proposed class would have exceeded $36 million.
3First Amended Class Action Complaint at 11, ¶ 67, Docket No. 4.
4Id. at 19, ¶ 108.
5Id. at 19, ¶ 109.
6Plaintiff’s Opposition to Defendants’ Motion to Dismiss at 1, Docket No. 35.
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Defendants moved to dismiss plaintiff’s complaint, or in the alternative, to strike
plaintiff’s class allegations. On March 1, 2019, the court granted7 defendants’ motion to
dismiss, finding that plaintiff lacked Article III standing, in large part because defendants had
already refunded the sales tax she was improperly charged.8 Judgment was entered on March
4, 2019.9 The judgment read that the court had ordered that “plaintiff recover nothing, the
action be dismissed on the merits.”10
Pursuant to Rule 54, Federal Rules of Civil Procedure, Local Rule 54.3, and Alaska
Civil Rule 82, defendants now move for an award of attorney’s fees.
Discussion
In an action where a district court is exercising its subject matter
jurisdiction over a state law claim, so long as “state law does not
run counter to a valid federal statute or rule of court, and usually
it will not, state law denying the right to attorney’s fees or
giving a right thereto, which reflects a substantial policy of the
state, should be followed.”
MRO Communications, Inc. v. American Tel. & Tel. Co., 197 F.3d 1276, 1281 (9th Cir.
1999) (quoting Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 259 n.31
7Docket No. 52.
8The court dismissed plaintiff’s claims with prejudice because it determined that
amendment would be futile. The court’s intention was to dismiss plaintiff’s claims without
leave to amend because of futility. Pursuant to Rule 60(b), Federal Rules of Civil Procedure,
the court has requested leave of the appellate court to correct its order and judgment to reflect
its intent. See Order at 3, Docket No. 66.
9Docket No. 53.
10Id. at 1.
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(1975)). Attorney’s fees may be available in a diversity case such as this based on Alaska
Rule 82. Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc., 738 F.3d 960, 973 (9th Cir.
2013). Rule 82(a) provides that “[e]xcept as otherwise provided by law or agreed to by the
parties, the prevailing party in a civil case shall be awarded attorney’s fees calculated under
this rule.” Rule 82(b)(2) provides that “[i]n cases in which the prevailing party recovers no
money judgment, the court . . . shall award the prevailing party in a case resolved without
trial 20 percent of its actual attorney’s fees which were necessarily incurred.”
Because this case involved diversity jurisdiction, the parties’ arguments as to
attorney’s fees focus on Rule 82. However, there is Ninth Circuit case law that was not cited
by the parties that stands for the proposition that “[a] court that lacks jurisdiction at the outset
of a case lacks the authority to award attorneys’ fees.” Skaff v. Meridien North America
Beverly Hills, LLC, 506 F.3d 832, 837 (9th Cir. 2007). Here, the court lacked jurisdiction
of plaintiff’s case at the outset because plaintiff lacked Article III standing. Thus, pursuant
to Skaff, the court does not have the authority to award attorney’s fees to defendants.
The court is mindful that Skaff appears to be contrary to the Ninth Circuit’s statement
in Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 887 (9th Cir. 2000), that “[u]nder
the law of our circuit, a district court sitting in diversity may award attorneys’ fees to the
prevailing party under applicable state law, despite a dismissal of the action for lack of
subject matter jurisdiction.” But, district courts have routinely declined to follow Kona
Enterprises either because that case is distinguishable because the jurisdictional problem was
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cured by amendment, see Skaaning v. Sorensen, 679 F. Supp. 2d 1220, 1224 (D. Hawai’i
2010), or because the court has found Kona Enterprises to not be binding authority because
it “is contrary to prior established precedent as well as subsequent Ninth Circuit case law[.]”
Willow Farms, LLC v. AWCC WCW Holdings, LLC, Case No. 2:15-CV-01862-BR, 2016
WL 4150749, at *2 (D. Or. August 2, 2016) (citation omitted). This court too declines to
follow Kona Enterprises and instead follows Skaff and the cases cited therein that hold that
when the court lacks subject matter jurisdiction of a case at the outset, it lacks authority to
award attorney’s fees.
Because the court lacked subject matter jurisdiction of this case from the outset, it
lacks authority to award attorney’s fees. Defendants’ motion for attorney’s fees is thus
denied.
But even if the court were to consider the Rule 82 arguments raised by the parties, the
court would still conclude that defendants’ motion for attorney’s fees should be denied.
Defendants argue that they are entitled to attorney’s fees because they were the prevailing
parties even though this case was dismissed on jurisdictional grounds. Defendants then cite
to a number of cases in support of this argument.
Defendants first cite to Hawkins v. Attatayuk, 322 P.3d 891 (Alaska 2014), in support
of their argument. Hawkins involved a dispute over property for which a restricted deed
pursuant to the Alaska Native Townsite Act had been granted. Id. at 893-894. Hawkins and
Attatayuk, who had once been married, both claimed ownership of the property in question.
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Id. Although Hawkins argued that the state superior court did not have subject matter
jurisdiction, the superior court disagreed, and the case went to trial. Id. at 894. The jury
found in favor of Attatayuk, and the court thereafter awarded her attorney’s fees. Id. On
appeal by Hawkins, the Alaska Supreme Court held that “[s]tate courts do not have subject
matter jurisdiction to adjudicate the title or right to possession of restricted townsite lots.”
Id. at 895. The Alaska Supreme Court reversed and remanded “with directions to the
superior court to DISMISS the case.” Id. at 897. The Alaska Supreme Court noted that “[i]n
light of this disposition, the award of attorney’s fees in favor of Attatayuk must be vacated.
Hawkins is the prevailing party and is entitled to an award of attorney’s fees in the superior
court.” Id. at 897 n.21.
Defendants also cite to Foster v. State, Department of Transportation, 34 P.3d 1288
(Alaska 2001). There, Foster brought a trespass claim against the State of Alaska, which
“[t]he superior court dismissed for lack of subject matter jurisdiction . . . [b]ecause
adjudicating Foster’s claim would have required [it] to determine the scope of an easement
on Foster’s Native allotment, and . . . state courts lack jurisdiction to adjudicate the
ownership or right to possession of Native allotment land[.]” Id. at 1289. The superior court
awarded attorney’s fees to the state, and on appeal, “Foster argue[d] that it was an abuse of
discretion to award costs and attorney’s fees to the state under Alaska Civil Rules 79 and 82,
given the superior court’s conclusion that it lacked jurisdiction to adjudicate Foster’s
complaint.” Id. at 1291. The Alaska Supreme Court rejected this argument, holding that the
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superior “court could award the state costs and attorney’s fees under Civil Rules 79 and 82,
even after it concluded that it lacked jurisdiction over Foster’s claims.” Id.
Defendants next cite to Conoco, Inc. v. State, Department of Natural Resources, Case
No. 1JU-91-796, 1993 WL 13563632 (Alaska June 9, 1993). There, the superior court
awarded attorney’s fees to the state after it dismissed the plaintiffs’ breach of contract claims
because the plaintiffs had to pursue their claims against the state administratively. Id. at *1.
The plaintiffs argued that no attorney’s fees should have been awarded because the state was
not the prevailing party. Id. at *3. The Alaska Supreme Court observed that “[a] dismissal
for lack of subject matter jurisdiction is without prejudice, so in a technical sense no issues
have been joined and no prevailing party yet exists. On the other hand, we do not approach
the definition of a prevailing party in such a rigid fashion.” Id. The Alaska Supreme Court
held that the plaintiffs’ “independent action required the state to expend time and money on
considerable motion-related paperwork and oral arguments, even if the state simply
challenged the trial court’s jurisdiction. Therefore, the issues here were joined in a practical
sense, and [the lower court] did not abuse [its] discretion by awarding the state attorney’s
fees.” Id.
In all of these state court cases cited by defendants, the cases were dismissed based
on state law jurisdictional grounds. But, in this case, plaintiff’s claims were dismissed
because plaintiff lacked Article III standing. In other words, plaintiffs’ claims were
dismissed based on federal law, not state law. Because defendants did not prevail on any
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issue of state law, plaintiff argues that defendants cannot be considered the “prevailing
parties” for purposes of Rule 82.
Plaintiff cites to Gentemann v. NANA Development Corp., Case No. 3:08–cv–221
JWS, 2009 WL 2486040 (D. Alaska Aug. 12, 2009), in support of her argument. There, the
court had dismissed the plaintiffs’ state law tort claim against NANA for lack of subject
matter jurisdiction. Id. at *1. NANA then moved for an award of attorney’s fees. Id. at *2.
The court denied the motion, explaining that
the only action taken by the court when it dismissed this case
was entirely the result of federal law, not Alaska law. The court
resolved no dispute respecting state law, not even a state law
standing or jurisdictional issue. In such circumstances, it would
seem obvious that it would be inappropriate to award attorney’s
fees to NANA based on the application of the principles of state
substantive law reflected in Rule 82 when the dismissal was
dictated entirely by federal law without consideration of any
state law issue. To hold otherwise would substitute Rule 82’s
variation on the “English Rule” allowing recovery of fees by the
successful litigant for the “American Rule” which is generally
applied to disputes decided under federal law and makes no
provision for the recovery of fees. Furthermore, awarding fees
based on state law when no state law issue was considered,
much less decided, would promote neither any state interest, nor
any federal interest.
Id. Similarly here, plaintiff argues that the dismissal of her claims was based entirely on
federal law. Plaintiff insists that in order for defendants to be entitled to attorney’s fees
under Rule 82, defendants must have prevailed on some issue of state law, which they did
not do here.
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There is, however, case law from this district to the contrary. In United States ex rel.
Rebar Placement Co. v. GBC, L.L.C. Contractors, Case No. A03–73 CV JWS, 2005 WL
846211 (D. Alaska Jan. 18, 2005), Rebar brought Miller Act claims against GBC’s sureties
and state law claims against the GBC, and GBC brought a state law counterclaim against
Rebar. Id. at *1. After the court dismissed the Miller Act claims, GBC moved for dismissal
of the parties’ state law claims and counterclaim arguing that the court should decline to
exercise supplemental jurisdiction. Id. The court granted GBC’s motion to dismiss and GBC
then moved for an award of attorney’s fees pursuant to Rule 82. Id. The court held that GBC
was “entitled to recover the attorney’s fees it incurred in defending against RPC’s state-law
claims because it is the prevailing party under Rule 82.” Id. The court explained:
District courts follow state rules for awarding attorney’s fees
when exercising their subject matter jurisdiction over state-law
claims. In Alaska, Rule 82 provides for an award of attorney’s
fees to the prevailing party in a civil case. A party prevails if it
succeeds on the main issues in the action, or if the case against
it is dismissed, even when there is no final determination on the
merits.
Id. (citations omitted).
This court finds Gentemann, which is the later of the two cases, more persuasive. To
award attorney’s fees based on a state substantive rule such as Rule 82 in a case in which the
defendants did not prevail on any issue of state law would run counter to the general rule that
applies in federal cases, which is that attorney’s fees are not recoverable. Because
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defendants did not prevail on any issue of state law, they are not “prevailing parties” for
purposes of Rule 82.
Conclusion
Based on the foregoing, defendants’ motion for attorney’s fees is denied.
DATED at Anchorage, Alaska, this 2nd day of May, 2019.
/s/ H. Russel Holland
United States District Judge
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