United States District Court, W.D. Wisconsin
OPINION & ORDER
D. PETERSON District Judge
6, 2017, the court dismissed this case for lack of subject
matter jurisdiction after plaintiff K3 Prop, LLC, failed to
adduce evidence sufficient to establish its citizenship. Dkt.
65. It awarded defendant GQ Sand, LLC, its reasonable actual
attorney fees and costs. Both parties have submitted numerous
filings concerning the amount of fees and who should pay
them-K3 or its counsel. See Dkt. 61; Dkt. 64; Dkt.
69; Dkt. 71; Dkt. 72; Dkts. 77-81. GQ contends that K3's
counsel should be held jointly and severally liable for fees
under Federal Rule of Civil Procedure 11. The court agrees.
But it will reduce the amount of fees requested.
K3 Prop, LLC, procures frac sand for its customers in the
petroleum industry. In March 2017, it filed this lawsuit
against defendant GQ Sand, LLC, alleging that GQ breached the
parties' frac sand purchase agreement and converted
K3's funds for its own use. K3 invoked this court's
subject matter jurisdiction under 28 U.S.C. § 1332. But
the allegations in K3's initial complaint were
insufficient to determine whether the parties were completely
diverse because K3 failed to allege the names or citizenships
of any of its or GQ's members. See Dkt. 1. The
court allowed K3 to file an amended complaint establishing
subject matter jurisdiction. Dkt. 14. K3 did so, alleging
that K3's sole member is Charles Cody Lyon, a citizen of
Texas, and that GQ's members are Joe Gargano and Joshua
Quisling, both citizens of Wisconsin. Dkt. 16. Those
allegations were sufficient to establish subject matter
jurisdiction at the pleading stage. Dkt. 18.
than amending its complaint, K3 didn't do much in the
case. It failed to participate in the court's preliminary
pretrial conference. See Dkt. 15, at 1. It failed to
answer GQ's counterclaims, prompting the court to enter
default. Dkt. 25. (The court set aside the entry of default
and allowed K3 to file a supplemental answer based on its
counsel's representation that he forgot to record the
answer deadline. Dkt. 38.) After GQ moved for summary
judgment, K3 filed a response that put the veracity of its
earlier allegations regarding its citizenship in doubt. It
adduced a document titled “Membership Interests
Purchase and Sale Agreement, ” dated July 29, 2015,
which purports to transfer membership of K3 from Kenneth C.
White, III, and Kenneth C. White, Jr., to Managed Owners
Group, LLC. Jim R. Pierce signed the document on behalf of
Managed Owners Group as its manager. Dkt. 48-5. The agreement
does not mention Charles Cody Lyon.
with evidence calling into question K3's allegation that
Lyon was its sole member, the court ordered K3 to adduce
evidence sufficient to determine the members of K3 and the
citizenship of each member. Dkt. 63. It warned K3 that
failure to timely submit evidence would result in prompt
dismissal of the matter for lack of subject matter
jurisdiction with an award of fees and costs to GQ. The court
also addressed a side issue: in opposition to GQ's
summary judgment motion, K3 adduced Lyon's declaration
and several exhibits attached to the declaration. Dkt. 48. GQ
claimed that Lyons was recently sentenced to 30 years in
prison and was therefore unable to testify at trial. The
court ordered K3 to show that the content of Lyon's
declaration-the sole evidence it adduced in opposition to
GQ's summary judgment motion, other than the frac sand
purchase agreement-would be admissible at trial and warned K3
that failure to make this showing would result in the court
striking Lyon's declaration and its attachments.
the warning, K3 failed to respond to the court's order.
So the court dismissed the case and invited GQ to file
documentation supporting the attorney fees that it incurred
in defending the action. Dkt. 65.
court has already awarded attorney costs and fees to GQ.
There is no question that K3 is liable for the award. But the
parties seek the court's decision on two remaining
issues: K3's attorneys' joint liability for the award
under Rule 11 and the amount of the award.
GQ asks that K3's counsel be held jointly and severally
liable with K3 as a sanction under Rule 11. Rule 11(b)
By presenting to the court a pleading, written motion, or
other paper-whether by signing, filing, submitting, or later
advocating it-an attorney or unrepresented party certifies
that to the best of the person's knowledge, information,
and belief, formed after an inquiry reasonable under the
(1) It is not being presented for any improper purpose, such
as to harass, cause unnecessary delay, or needlessly increase
the cost of litigation;
(2) The claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for
establishing new law;
(3) The factual contentions have evidentiary support or, if
specifically so identified, will likely have evidentiary
support after a reasonable opportunity for ...