Van v. LLR, Inc.

          ORDER

          H. Russel Holland United States District Judge

         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 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.

         Defendants moved to dismiss plaintiff's complaint, or in the alternative, to strike plaintiff's class allegations. On March 1, 2019, the court granted^[7] 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 (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 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, No. 2:15-CV-01862-BR, 2016 WL 4150749, at *2 (D. Or. August 2, 2016) ...