United States District Court, D. Alaska
KATIE VAN, individually and on behalf of all others similarly situated, Plaintiff,
v.
LLR, INC., d/b/a LuLaRoe, and LULAROE, LLC, Defendants.
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) ...