Keeping Tabs on the Ninth Circuit
August 29, 2020 - This Week at the Ninth

This Week at the Ninth: In Rem and Out of Time

Expanding The Ninth? The Plan to Add Five More Judges

This week, the Ninth Circuit creates a potential circuit split on personal jurisdiction in in rem proceedings, and clarifies whether a post-judgment motion for attorneys’ fees extends the time to appeal (spoiler alert: it does not).

The Court held that a district court need not apply “minimum contacts” personal jurisdiction analysis to a claimant in an in rem civil forfeiture proceeding.

Panel: Judges Rawlinson, Ikuta, and Bennett.  Judge Rawlinson wrote the opinion and Judge Ikuta dissented.

Key Highlight: “In an in rem action, the focus for the jurisdictional inquiry is the res, in this case Obaid’s … shares, rather than Obaid’s personal contacts with the forum.”

Background: Claimant Tarek Obaid, a Saudi oil executive, purchased shares of stock in a U.S. technology company.  Attempting to recoup money allegedly obtained in an international money laundering scheme, the U.S. government filed an in rem civil forfeiture action against the shares in the Central District of California.  Obaid moved to dismiss, arguing that the district court lacked personal jurisdiction over him and that venue in the Central District was improper.  The district court denied the motion, reasoning that it was not required to determine its jurisdiction over Obaid to adjudicate rights to the shares.  The district court also concluded that venue was proper because multiple acts giving rise to the alleged conspiracy occurred in the Central District.

Result: The Ninth Circuit affirmed. As the Court explained, the dispute largely centered on the proper interpretation of two Supreme Court cases.  In Shaffer v. Heitner, 433 U.S. 186 (1977), the Supreme Court held that plaintiffs’ efforts to “sequester” property under Delaware law to force non-resident defendants to appear to defend a suit required the application of minimum contacts analysis.  But 25 years later, in Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440 (2004), the Supreme Court held that courts have in rem jurisdiction to adjudicate anyone’s claims over property at issue in bankruptcy proceedings because “jurisdiction over the person is irrelevant if the court has jurisdiction over the property.” 

The Ninth Circuit concluded that Shaffer was limited to the context of quasi in rem proceedings, where claims are still essentially personal in nature, as opposed to true in rem proceedings like Hood, where the underlying cause of action relates directly to property.  Because the government’s forfeiture action here was a true in rem proceeding, the Court held that Hood provided more direct guidance, and no determination of the district court’s personal jurisdiction over Obaid was necessary.  The Court acknowledged that its conclusion was in tension with decisions of the Second and Fourth Circuits, but rejected “the lukewarm discussion of Shaffer” in those cases.  Finally, the Court also held that venue was proper, rejecting Obaid’s arguments that venue required a specific criminal act to be committed in the Central District, and that it could not be premised on the actions of third parties.

Judge Ikuta dissented, criticizing the majority for “minimizing” Shaffer and the decisions of other courts of appeals. “With one stroke,” she wrote, “the majority has swept away Shaffer v. Heitner, the Supreme Court’s landmark decision ensuring that ‘traditional notions of fair play and substantial justice’ apply to all persons with property subject to adjudication, regardless of the Latin label attached to the proceeding.”  Judge Ikuta read Shaffer to cover all assertions of jurisdiction, in rem or otherwise, and interpreted Hood as being limited to the context of bankruptcy proceedings. Thus in her view, “Hood did not resurrect the in rem jurisdiction theory, rejected in Shaffer, that a court may assert jurisdiction over an absent property owner so long as it has jurisdiction over the property itself.”

The Court held that a post-judgment motion for attorneys’ fees could not be re-characterized as a motion to alter or amend the judgment to extend the time to appeal.

Panel:  Judges M. Smith, Bade, and Bress, with Judge Bress writing the opinion.

Key Highlight: “Because appellant did not file a notice of appeal within 30 days of the district court’s judgment or obtain a Rule 58(e) order extending the time to appeal, the notice of appeal was untimely as to the district court’s underlying judgment.”

Background: Nutrition Distribution sued IronMag Labs under the Lanham Act, alleging that the company falsely advertised its nutrition supplements as having “no toxicity” or “unwanted side effects.”  On cross motions for summary judgment, the district court denied Nutrition Distribution’s claim for monetary relief because it concluded the plaintiff had not been injured, but issued an injunction to prevent consumers from being deceived.  Two weeks after the court entered judgment, Nutrition Distribution filed a motion for attorneys’ fees under Federal Rule of Civil Procedure 54(d).  The district court denied the motion about a month later, and Nutrition Distribution filed a notice of appeal purporting to seek review of both the underlying judgment and the denial of attorneys’ fees.

Result: The Ninth Circuit dismissed the appeal of the judgment as untimely and affirmed the denial of post-judgment attorneys’ fees.  The Court explained that the Rules of Civil Procedure give parties who want to appeal a judgment and ask for post-judgment fees two options: they can either pursue those goals independently, or they can ask the district court to extend the time to appeal until the fee issue is decided, and appeal the two together if necessary.  (Most litigants opt for the first option, the Court noted, “due to a healthy lawyerly paranoia for missing deadlines.”)  Because Nutrition Distribution neither filed a notice of appeal nor asked the district court to extend the time to appeal in the first 30 days, its appeal was untimely.

The Court also rejected Nutrition Distribution’s argument that the Court should re-characterize the fee motion as a motion to alter or amend the judgment to preserve the appeal.  That, the Court said, would amount to “an end-run around Rue 58(e),” which authorizes—but does not require—district courts to make just such a re-characterization for purposes of time to appeal.  In any event, the Court said, Supreme Court and Ninth Circuit precedent make clear that fee motions are not the same thing as motions to amend or alter.  It did not matter that the district court had rejected a previous fee request in entering summary judgment, because fee issues are “collateral to the main cause of action” and thus are issues to which a motion to alter or amend “was never intended to apply.”  Although one decision of the Seventh Circuit suggested that fee determinations under the Lanham Act in particular might be characterized as motions to alter or amend because they “require[] reexamination of factual findings and legal conclusions in the judgment,” that decision “was not easily reconciled” with subsequent Supreme Court decisions.

Finally, the Court affirmed the one part of Nutrition Distribution’s appeal that was timely: the district court’s denial of post-judgement attorneys’ fees.  The Lanham Act allows an award of attorneys’ fees only in “exceptional cases.”  Because Nutrition Distribution had failed to show any injury and had filed some 80 similar lawsuits in a three-year span, the district court had not abused its discretion in denying a fee award.