In re Franklin Wireless Corp. Derivative Litigation

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ) Case No.: 21-CV-1837-BEN-MSB ) 12 ) DENYING DEFENDANTS’ 13 In re FRANKLIN WIRELESS CORP. ) MOTION FOR ATTORNEYS’ DERIVATIVE LITIGATION ) FEES AND 14 ) ORDER GRANTING 15 ) DEFENDANTS’ MOTION TO ) RETAX COSTS 16 ) 17 ) ) 18 19 Before the Court are Defendants’ Motion for Recovery of Attorneys’ Fees 20 and Expenses (ECF No. 166) and Motion to Retax Costs. (ECF No. 175). The 21 Court heard oral argument on May 28, 2025. Having considered the Parties’ 22 submission, relevant legal authority, and the record in this matter, the Court rules 23 as follows: 24 I. Motion for Attorneys’ Fees 25 Defendants seek attorneys’ fees under 28 U.S.C. § 1927, arguing that 26 Plaintiffs unreasonably and vexatiously multiplied proceedings. To impose 27 1 sanctions under section 1927, the Court must find that counsel acted with bad faith 2 or with recklessness. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F. 3 2d 626, 638 (9th Cir. 1987); Fink v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001); 4 Kaass Law v. Wells Fargo Bank, N.A., 799 F.3d 1290, 1293 (9th Cir. 2015).1 5 Here, the Record does not support a finding of bad faith or unreasonable 6 conduct. Plaintiffs prevailed at summary judgment on specific issues (ECF No. 7 88), and the jury ultimately found in their favor on claims of demand futility and 8 breach of fiduciary duty, resulting in a monetary judgment (albeit nominal). (ECF. 9 Nos. 160, 163). These results reflect legal success, not sanctionable litigation 10 conduct. 11 Defendants have not demonstrated that Plaintiffs’ counsel engaged in 12 conduct rising to the level required by section 1927. Accordingly, the Motion for 13 Attorneys’ Fees is DENIED. 14 II. Motion to Retax Costs and Plaintiffs’ Bill of Costs 15 Under Federal Rule of Civil Procedure 54(d)(1), there is a presumption that 16 costs are awarded to the prevailing party. Local Civil Rule 54.1 (f)2 provides that 17 when both parties recover in part, the party with the more substantial recovery is 18 generally considered the prevailing party. 19 Plaintiffs obtained a jury verdict in their favor, and a final judgment was 20 21 22 1 Kaass clarifies that 28 U.S.C. § 1927 applies only to individual attorneys, not law firms. 23 2 “Party Entitled to Costs. The determination of the prevailing party will be within 24 the discretion of the Court in all cases except where such determination is inconsistent with statute or the Fed. R. Civ. P. or the rules of the appellate courts. 25 If each side recovers in part, ordinarily the party recovering the larger sum will be 26 considered the prevailing party. The defendant is the prevailing party upon any termination of the case without judgment for the plaintiff except a voluntary 27 dismissal under Fed. R. Civ. P. 41(a).” 1 entered accordingly. (ECF Nos 160, 163). While the damages awarded were 2 nominal, precedent establishes that even a nominal award can confer prevailing 3 party status. See Farrar v. Hobby, 506 U.S. 103, 112-13 (1992); see also Mahach- 4 watkins v. Depee, 593 F.3d 1054, 1059 (9th Cir. 2010); Save Our Valley v. Sound 5 Transit, 335 F.3d 932, 945 (9th Cir. 2003).3 6 Based on that verdict, the Clerk taxed costs of $15,433.70 in favor of the 7 Plaintiffs. (ECF No. 174). Defendants now move to retax costs, arguing that the 8 nominal nature of the judgment does not justify such an award. 9 The Court agrees. While nominal damages may suffice to establish 10 prevailing party status, they did not mandate an award of costs. The Court retains 11 discretion to deny costs when the prevailing party’s success is purely technical or 12 de minimis. See Ass’n of Mexican-Am. Educators v. California, 231 F. 3d 572, 13 591-92 (9th Cir. 2000) (en banc); Draper v. Rosario, 836 F.3d 1072, 1087 (9th Cir. 14 2016); Escriba v. Foster Poultry Farms, Inc., 743 F. 3d 1236, 1247-48 (9th Cir. 15 2014). In evaluating whether costs should be denied, courts may consider 16 equitable factors such as: (1) whether the issues were close and complex; (2) 17 whether the prevailing party’s recovery was nominal or partial; (3) whether the 18 losing party litigated in good faith; and (4) whether the case presented a landmark 19 issue of national importance. See Ass’n of Mexican-Am. Educators, 231 F. 3d at 20 592 n. 15; Save Our Valley, 335 F. 3d at 945; Champion Produce, Inc. v. Robinson 21 Co., Inc., 342 F.3d 1016, 1022-24 (9th Cir. 2003). 22 Here, the limited nature of the relief obtained—a $0.99 judgment with no 23 demonstrable injunctive, corporate governance, or monetary benefit to the 24 company—weighs heavily against awarding substantial costs. While the amount 25 26 3 “[T]he losing party must show why costs should not be awarded.” Save Our 27 Valey, 335 F. 3d at 945 (citations omitted). 1 |/sought may not be facially excessive, it is materially disproportionate to the 2 |}outcome achieved. Awarding over $15,000 in costs under these circumstances 3 || would be inconsistent with the equitable principles underlying Rule 54(d)(1). The 4 || Court, exercising its discretion, finds that the Defendants have rebutted the 5 || presumption in favor of costs and that equity compels each party to bear their own 6 || costs. 7 Accordingly, the Defendants’ Motion to Retax Costs is GRANTED. 8 HI. Conclusion 9 || For the following reasons: 10 1. Defendants’ Motion for Attorneys’ Fees (ECF No. 166) is DENIED; 11 2. Defendants’ Motion to Retax Costs (ECF No. 175) is GRANTED; 12 3. Each party shall bear their own costs. 13 14 IT IS SO ORDERED. " 15 || DATED: June 6, 2025 16 HON. ROGER T. BENITEZ 17 United States District Judge 18 19 20 21 22 23 24 25 26 27 28 _4-