Nutramax Laboratories Inc. v. FLP LLC

          ORDER

          Honorable Susan M. Brnovich United States District Judge

         Pending before the court is Nutramax Laboratories Incorporated and Nutramax Laboratories Veterinary Sciences Incorporated's ("Plaintiffs") Motion to Reconsider Order Awarding Attorneys' Fees. (Doc. 37).

         I. Background

         On February 22, 2019, Plaintiffs filed their Complaint. (Doc. 1). Subsequently, on March 6, 2019, Defendant responded with a letter explaining why it felt the Complaint was without merit. (Doc. 21-1 at 4-5). On April 3, 2019, the parties communicated through email regarding the letter and thereafter had frequent communication about settlement. (See Doc. 21-1). On May 22, 2019, Plaintiffs emailed Defendant regarding a request for entry of default, and on May 24, 2019, Plaintiffs filed an Application for Entry of Default against Defendant, without confirming that Defendant received notice. (Doc. 18). Later that day, Defendant emailed Plaintiffs, requesting they withdraw the application and stating if they failed to do so that Defendant would request appropriate relief in a Motion to Set Aside. (Doc. 21-1 at 24). On May 28, 2019, the Clerk's Entry of Default was filed with the Court. (Doc. 19). Then, on June 1, 2019, Plaintiffs filed another status report with the Court and did not advise that default had been entered, but instead indicated that the parties remained in settlement discussions.

         On June 6, 2019, Defendant filed a Motion to Vacate Clerk's Entry of Default and Request for Attorneys' Fees. (Doc. 21). In support of the request for attorneys' fees, Defendant provided the case Cox v. Nasche, 149 F.R.D. 190 (D. Alaska 1993), which described that a finding of bad faith litigation provides the Court with authority to award attorneys' fees. (Id. at 14).

         On June 20, 2019, Plaintiffs filed a Response to Defendant's Motion to Vacate and Request for Attorneys' Fees, asserting Defendants provided no legal or procedural basis for the fee awards. (Doc. 23 at 1).

         On June 27, 2019, Defendant filed a Reply to Plaintiffs' Response to their Motion to Vacate and Request for Attorneys' Fees. (Doc. 23). The reply reiterated the arguments made in the initial motion and addressed Plaintiffs' argument that “attorney fees cannot be awarded unless legislation authorized such an award” by citing to [28] United States Code Section 1927. Id. at 5.

         On July 11, 2019, the Court ordered attorney fees after finding that Plaintiffs did not act in good faith in seeking entry of default when representing to the Defendant and the Court that they were still engaging in settlement discussions, failing to disclose to the court or adequately notify the Defendant that they were changing course, and refusing to withdraw the motion when requested by Defendant. (Doc. 31 at 3).

         On July 24, 2019, Plaintiffs filed a Motion to Reconsider Order Awarding Attorneys' Fees, requesting relief pursuant to Local Rule of Civil Procedure 7.2(g). (Doc. 37). Plaintiffs assert that attorneys' fees are not available because (1) Defendant failed to serve its motion for fees 21 days prior to its filing in accordance with the safe harbor provision of Rule 11(c)(2), (2) Section 1927 sanctions require a finding of subjective bad faith which the Court should not have found, and (3) Section 1927 fees are not proper here when the basis for the fee award was not raised by Defendants until their reply brief. (Id. at 2).

         In Response, Defendant asserts that failure to comply with the Rule 11(c)(2) safe harbor provision was not eligible for reconsideration per Local Rule of Civil Procedure 7.2(g), as it was not brought to the Court's attention in Plaintiffs' Response to Defendant's Motion to Vacate and Request for Attorneys' Fees prior to the Court's order granting the motion. (Doc. 44 at 3-4). Defendant also asserts that if the issue of complying with the safe harbor provision was eligible for reconsideration, that Defendant complied with its requirements. (Id. at 4-5). Lastly, Defendant asserts Plaintiffs' Motion to Reconsider failed to comply with Local Rule of Civil Procedure 7.2(g) in that it consisted of arguments that were repeated in Plaintiffs' Response to Defendant's Motion to Vacate Default. (Id. at 8).

         II. Legal Standard

         A. Motions for Reconsideration

         Motions for reconsideration are disfavored and should be granted only in rare circumstances. Defs. of Wildlife v. Browner, 909 F.Supp. 1342, 1351 (D. Ariz. 1995). A motion for reconsideration ordinarily will be denied “absent a showing of manifest error or a showing of new facts or legal authority that could not have been brought to its attention earlier with reasonable diligence.” L.R.Civ 7.2(g)(1). “Reconsideration is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.” Sch. Dist. No. 1J, Multnomah Cty. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). A party should not file a motion for reconsideration to ask the court “to rethink what the court has already thought through-rightly or wrongly.” Defs. of Wildlife, 909 F.Supp. at 1351 (citations omitted).

         B. Court Authority to Impose Sanctions in the Form ...