Commercial Litigation and Arbitration

Pre-Removal State Court Sanction Treated as if Entered by Federal District Court — “Reconsideration” Denied — Law of the Case Doctrine (Good Quote)

The state court in Paschen v. Estate of McDaniel, 2010 U.S. Dist. LEXIS 1066 (D. Idaho Jan. 7, 2010), entered a monetary sanction in the amount of $7,955 — for attorneys' fees — pursuant to Idaho Rule of Civil Procedure 11, prior to removal. The sanctioned party moved the federal district court for reconsideration after removal:

Upon removal, this Court must treat all prior state court rulings in the case as if they had been made by this Court. Resolution Trust Corp. v. BVS Development, Inc., 42 F.3d 1206, 1212 (9th Cir. 1994). Thus, the Court will treat Judge Shindurling's decision as its own for purposes of resolving the motion to reconsider filed by the Moulton Law Office.

A motion to reconsider an interlocutory ruling requires an analysis of two important principles: (1) error must be corrected; and (2) judicial efficiency demands forward progress. The former principle has led courts to hold that a denial of a motion to dismiss or for summary judgment may be reconsidered at any time before final judgment. Preaseau v. Prudential Insurance Co., 591 F.2d 74, 79-80 (9th Cir. 1979). While even an interlocutory decision becomes the "law of the case," it is not necessarily carved in stone. Justice Oliver Wendell Holmes concluded that the "law of the case" doctrine "merely expresses the practice of courts generally to refuse to reopen what has been decided, not a limit to their power." Messinger v. Anderson, 225 U.S. 436, 444 (1912). "The only sensible thing for a trial court to do is to set itself right as soon as possible when convinced that the law of the case is erroneous. There is no need to await reversal." In re Airport Car Rental Antitrust Litigation, 521 F.Supp. 568, 572 (N.D.Cal. 1981)(Schwarzer, J.).

The need to be right, however, must be balanced with the need for forward progress. A court's opinions "are not intended as mere first drafts, subject to revision and reconsideration at a litigant's pleasure." Quaker Alloy Casting Co. v. Gulfco Indus., Inc., 123 F.R.D. 282, 288 (N.D.Ill.1988) [Shadur, J.]. "Courts have distilled various grounds for reconsideration of prior rulings into three major grounds for justifying reconsideration: (1) an intervening change in controlling law; (2) the availability of new evidence or an expanded factual record; and (3) need to correct a clear error or to prevent manifest injustice." Louen v Twedt, 2007 WL 915226 (E.D.Cal. March 26, 2007). If the motion to reconsider does not fall within one of these three categories, it must be denied.

The procedural premise of this opinion raises interesting questions. For a Federal District Judge to reconsider a state court sanction raises potential Rooker-Feldman issues. What if there are appeal rights in the state court system? In addition, there are practical ramifications. What if the sanction were entered post-removal, on analogy to Willy v. Coastal Corp., 503 U.S. 131 (1992), which holds that a federal court that lacks subject matter jurisdiction due to improper removal nonetheless has the power to impose sanctions for misconduct that occurred before it? The Texas Supreme Court approved this in In re Bennett, 960 S.W.2d 35, 39 (Tex. 1997) (orig. proceeding), and the U.S. Supreme Court has not ruled that the “proceed no further” dictate of 28 U.S.C. § 1447(d) precludes it.

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