A California district judge declined Michael Hermalyn’s request for $310k in attorney fees that the Fanatics executive attributed to a jurisdictional back-and-forth in his case against DraftKings. The two sides are also at odds in a separate but related case launched by Hermalyn’s former employer.
In a ruling filed on Monday, California District Judge Mark C. Scarsi ruled while “suspect,” the first removal to federal court was not “unreasonable.”
Specifically, Scarsi wrote:
The Court declines to exercise its discretion to award fees and costs. Though the first removal was suspect, the Court declines to conclude that it was unreasonable.
Neither, ruled Scarsi, was the second removal. In that case, he said, DraftKings “presented a colorable theory.” The motions, he concluded, “are denied.”
Still, despite deciding in DraftKings favor, Scarci’s ruling was not without bite.
Improper Removal a ‘Common Mistake’
Hermalyn’s motion for legal fees claimed DraftKings’ attempts to shift its case to federal court as “improper,” “unreasonable,” and “lacking foundation.”
From that motion:
DraftKings’ removals have achieved exactly what they were designed to do — hamstring Mr. Hermalyn while DraftKings raced to file its own lawsuit, and obtain its own temporary injunction, in another forum.
DraftKings’ litigation tactics required plaintiff’s counsel to spend virtually an entire week attempting to get their case remanded twice on an emergency basis to the rightful state forum, where each time Mr. Hermalyn was about to seek ex parte relief.
In Judge Scarsi’s assessment of Hermaylyn’s request, he notes DraftKings’ lawyers moved Hermalyn’s initial case from state to federal court by mistakenly invoking diversity jurisdiction.
In the Court’s experience, he said, “applying the rule governing corporate citizenship” is an “unfortunately common mistake” made by attorneys removing cases to federal court.
Scarsi also points out that Hermalyn’s team may have avoided improper removal by “alleging facts probative of FVP’s citizenship in their state complaint.” (FVP Llc is Hermalyn’s co-plaintiff in the DraftKings case.)
However, the judge reserves the majority of his comments for DraftKings.
DraftKings Wins, Still Takes an ‘L’
Essentially, Scarsi wrote that while there were indications DraftKings lawyers intended to extend litigation or hike costs, the delays may simply be due to incompetence.
He even went as far as to invoke Hanlon’s Razor: “Never attribute to malice that which is adequately explained by stupidity.” [Or ignorance, carelessness, and other similar causes]
From the Apr. 8 ruling:
To be sure, there are indicia that Defendant here sought “to prolong litigation or impose costs” on Plaintiffs, which would support a finding of objective unreasonableness…
But, given the time pressure under which counsel operated to remove the case before the state-court hearing and the late hour counsel filed the notice of removal, (see Notice of Removal (filed at 11:07 p.m.)), the Court will apply Hanlon’s razor and decline to assign malice to an improper removal when a failure to recall a rule of civil procedure a first-year law student should know would fit almost as well.
The ruling saved DraftKings a few hundred thousand, but that’s gotta smart.
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