United States Court of Appeals
For the First Circuit
No. 13-2070
UNIVERSAL TRUCK & EQUIPMENT COMPANY, INC.; NEW LONDON MINING
MANUFACTURING & PROCESSING, LLC; NICHOLAS E. CAMBIO, individually
and as Trustee of the Nicholas E. Cambio, Roney A. Malafronte and
Vincent A. Cambio Trust; VINCENT A. CAMBIO,
Plaintiffs-Appellants,
v.
SOUTHWORTH-MILTON, INC.,
Defendant-Appellee,
CATERPILLAR, INC.; CATERPILLAR FINANCIAL SERVICE CORPORATION; W.
FRANK BLOUNI; JOHN R. BRAZIL; DANIEL M. DICKINSON; JOHN T.
DILLON; EUGENE V. FIFE; GAIL D. FOSLER; JUAN GALLARDO; DAVID R.
GOODE; PETER A. MAGOWAN; WILLIAM A. OSBORN; JAMES W.L. OWENS;
CHARLES D. POWELL; EDWARD B. BUST, JR.; SUSAN C. SCHWAB;
JOSHUA I. SMITH; KENT ADAMS; JIM DUENSING; PETER DAGASTINO,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, U.S. District Judge]
Before
Torruella, Dyk* and Kayatta,
Circuit Judges.
Richard G. Riendeau, for appellant.
*
Of the Federal Circuit, sitting by designation.
J. Richard Ratcliffe, with whom Jeffrey Biolchini and
Ratcliffe Harten Burke & Galamaga, LLP were on the brief, for
appellee.
September 2, 2014
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DYK, Circuit Judge.
The plaintiffs here filed a breach of contract complaint in
state court. After the only non-diverse defendant was dismissed
from the case by the state court, the remaining defendants removed
the lawsuit to federal court, invoking diversity jurisdiction. At
the time of removal, the dismissal of the non-diverse defendant was
not final. The district court denied the plaintiffs’ motion to
remand and later granted summary judgment in favor of defendant
Southworth-Milton, Inc. (“Southworth”) and awarded attorneys’ fees.
In addition to challenging the summary judgment decision and award
of attorneys’ fees in favor of Southworth, the plaintiffs argue
that the case should be remanded to state court.
We hold that, despite the defendants’ failure to comply with
the statutory removal requirements, a remand to state court is not
required because complete diversity existed at the time of
judgment, and plaintiffs failed to object to the statutory
procedural defect in a timely manner. We also affirm the district
court’s grant of summary judgment and award of attorneys’ fees in
favor of defendant Southworth.
I.
The plaintiffs in this action are Universal Truck & Equipment
Co., Inc. (“Universal”); New London Mining Manufacturing &
Processing, LLC (“NLM”); Nicholas E. Cambio, individually and as
Trustee of the Nicholas E. Cambio, Roney A. Malafronte and Vincent
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A. Cambio Trust; and Vincent A. Cambio (collectively, the
“appellants” or “plaintiffs”). They are citizens of Rhode Island.
They brought state law contract claims against the following
defendants: Southworth, Caterpillar, Inc. (“Caterpillar”),
Caterpillar Financial Services Corp. (“CAT Financial”), and several
other entities and individuals (collectively, the “appellees” or
“defendants”). Southworth is a New Hampshire corporation and
authorized Caterpillar equipment dealer with its principal place of
business in Milford, Massachusetts. Caterpillar and CAT Financial
are distinct Delaware corporations with principal places of
business in Illinois and Tennessee, respectively. All but one of
the other defendants were not Rhode Island citizens. But Peter
D’Agostino, a salesman at Southworth, was also named as an original
defendant in state court, and he was a citizen of Rhode Island. If
D’Agostino were a proper party to the action, his Rhode Island
residency would have prevented diversity jurisdiction.
So far as pertinent for the present purposes, the state court
action arose from an alleged oral agreement between defendants
Caterpillar, CAT Financial, and Southworth, on the one hand, and
plaintiff NLM, on the other. Around March 17, 2008, NLM purchased
or refinanced construction equipment from Caterpillar’s Southworth
dealership for approximately $3.4 million. The purchase was
financed by CAT Financial, and NLM provided a security agreement
and promissory note to CAT Financial.
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After the 2008 national recession, NLM experienced a severe
downturn in its business, and by mid-2009, NLM was unable to make
its monthly payments to CAT Financial. As a result, CAT Financial
and NLM began to explore refinancing options.
Around July 29, 2009, NLM and CAT Financial agreed that NLM
would sell four of the purchased construction vehicles in order to
reduce NLM’s debt to CAT Financial. Southworth agreed to store the
four vehicles on its lot for a seventy-five day period while NLM
attempted to sell them. The vehicles were transferred to
Southworth’s custody, if not immediately to its lot, around August
9, 2009.
While the four vehicles were awaiting sale, a conversation
occurred, which forms the basis for the claimed oral contract.
Original defendant Peter D’Agostino, a salesman at Southworth,
visited NLM and spoke to an NLM officer, Vincent Cambio, regarding
the status of the refinancing negotiations. When D’Agostino asked
Cambio about the progress of the sales, Cambio responded “I got to
tell you, you know how they’re going; you know better than me.”
Transcript of Summary Judgment Hearing at 5:10-11, Universal Truck
& Equipment Co., Inc. v. Caterpillar, Inc., et al., No. 1:10-cv-
00466 (D.R.I., Dec. 5, 2012), ECF No. 103. D’Agostino then asked,
“So you’re going to get rid of some equipment?” Id. at 5:12-13, to
which Cambio answered, “Yeah there’s no use for them. Are you going
to try to sell some of them for us like outright sales?” Id. at
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5:13-15. D’Agostino then replied, “I’ll do what I can do,” or
“we’ll do what we can do.” Id. at 5:16-17. D’Agostino, allegedly
acting for Southworth and other defendants, never managed to sell
the equipment, and CAT Financial eventually repossessed and sold
it.
On June 18, 2010, the plaintiffs filed suit in Rhode Island
Superior Court. While the complaint set forth various claims, only
one is relevant for present purposes. The complaint alleged that
“NLM entered into negotiations with [Caterpillar], CAT Financial
and [Southworth] through their agent [D’Agostino],” and “[a]s part
of the Oral Agreement, [Southworth] through its agent [D’Agostino]
agreed to act as broker of the four (4) remaining vehicles . . . to
be marketed and sold at [Southworth] in the ordinary course of
business.” Complaint at 7-8, Universal Truck & Equipment Co., Inc.
v. Caterpillar, Inc., et al., No. 1:10-cv-00466 (D.R.I., Nov. 16,
2010), ECF No. 1-1. The complaint alleged that CAT Financial’s
repossession and sale of the vehicles constituted a breach of this
oral agreement and resulted in a loss to the plaintiffs.
When plaintiffs initiated this lawsuit, it would not have been
removable if D’Agostino, a resident of Rhode Island, were properly
named as a defendant. His presence would have defeated complete
diversity. However, D’Agostino filed a motion to dismiss the case
against him for failure to state a claim, arguing that he was not
a party to the alleged contract. On October 25, 2010, the Superior
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Court of Rhode Island granted D’Agostino’s motion and dismissed him
from the action. On November 16, 2010, before this dismissal became
final and non-appealable, the defendants filed a notice of removal
to the United State District Court for the District of Rhode
Island, asserting that diversity jurisdiction existed as of the
date D’Agostino was dismissed because the plaintiffs were Rhode
Island residents and the remaining defendants were not.
The defendants asserted that removal was timely because it
occurred within 30 days after the state court dismissed all claims
asserted against D’Agostino. The removal statute states:
if the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30
days after receipt by the defendant . . . of a copy of an
amended pleading, motion, order or other paper from which
it may first be ascertained that the case is one which is
or has become removable.
28 U.S.C. § 1446(b)(3).
On December 10, 2010, the plaintiffs filed a motion to remand
to state court, correctly pointing out that the state court’s
dismissal of D’Agostino had not become final, and arguing that
therefore removal was improper. The defendants responded to this
motion, arguing, for the first time, that removal was proper
because D’Agostino was fraudulently joined, the plaintiffs having
“failed to articulate any basis for their claims against
D’Agostino.” Defendants’ Memorandum In Support of Objection to
Plaintiffs’ Motion for Remand at 4, Universal Truck & Equipment
Co., Inc. v. Caterpillar, Inc., et al., No. 1:10-cv-00466 (D.R.I.,
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Dec. 22, 2010), ECF No. 5. In reply to this argument, the
plaintiffs simply asserted that the joinder was not fraudulent, but
raised no objection as to the timeliness of a removal based on
fraudulent joinder. On February 3, 2011, the district court denied
the motion to remand to state court, agreeing with the defendants’
fraudulent joinder theory and finding that D’Agostino had not been
properly joined in the lawsuit.
Following the motion to remand, the parties engaged in
discovery, and the defendants eventually moved for summary
judgment.1 On November 5, 2012, the district court granted summary
judgment in favor of the defendants with respect to the plaintiffs’
claims, holding that no reasonable jury could find that the alleged
oral agreement existed. On May 9, 2013, the court awarded
attorneys’ fees to Southworth on the grounds that the claims were
frivolous. The district court then granted certification under Rule
54(b). Rule 54(b) Order, Universal Truck & Equipment Co., Inc. v.
Caterpillar, Inc., et al., No. 1:10-cv-00466 (D.R.I., July 3,
2013), ECF No. 141. Plaintiffs appealed the judgment in favor of
Southworth.2
1
After removal, Defendant Southworth filed three
counterclaims against the plaintiffs, alleging that NLM and
Universal failed to pay for parts and repairs Southworth provided
and refused to pay Southworth the balance due on their accounts.
2
This appeal does not involve the plaintiffs’ case against
Caterpillar and CAT Financial, nor CAT financial’s counterclaims
against the plaintiffs. The Rule 54(b) motion encompassed
Southworth’s counterclaims against the plaintiffs, but plaintiffs
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We have jurisdiction under 28 U.S.C. § 1291. We review de novo
the question of whether there was a defect in the removal process.
See Esposito v. Home Depot U.S.A., Inc., 590 F.3d 72, 76 (1st Cir.
2009); Loftis v. United Parcel Service, Inc., 342 F.3d 509, 514
(6th Cir. 2003). We review the grant of summary judgment de novo
and the district court’s award of attorneys’ fees for abuse of
discretion. Hardy v. Loon Mountain Recreation Corp.,276 F.3d 18, 20
(1st Cir. 2002); Whitney Bros. Co. v. Sprafkin, 60 F.3d 8, 11-12
(1st Cir. 1995).
II.
A.
When plaintiffs file a civil action in state court over which
the federal courts would have had original jurisdiction based on
diversity of citizenship, the defendants may remove the action to
federal court, 28 U.S.C. § 1441(a), provided that no defendant “is
a citizen of the State in which such action is brought.” Id. §
1441(b)(2). Defendants must file their notice of removal “within 30
days after the receipt by the defendant . . . of a copy of the
initial pleading setting forth the claim for relief upon which such
action or proceeding is based,” 28 U.S.C. § 1446(b)(1), or “within
30 days after receipt by the defendant . . . of a copy of an
amended pleading, motion, order or other paper from which it may
first be ascertained that the case is one which is or has become
raise no issue regarding the counterclaims on appeal.
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removable.” Id. § 1446(b)(3). However, “[a] case may not be removed
. . . on the basis of [diversity jurisdiction] . . . more than one
year after commencement of the action.” Id. at 1446(c)(1).
The parties now apparently agree that the original asserted
grounds for removal—the dismissal of D’Agostino—was not proper
because the state court decision was not final in the sense that it
was not voluntary, and still subject to review on appeal. See
Insinga v. LaBella, 845 F.2d 249, 253-54 (11th Cir. 1988) (citing
American Car & Foundry Co. v. Kettlehake, 236 U.S. 311, 315-16
(1915)). Instead, the defendants argue that D’Agostino was
fraudulently joined, and his citizenship should be ignored for
diversity purposes.
While the First Circuit has not addressed the question, it is
generally recognized that, under the doctrine of fraudulent
joinder, removal is not defeated by the joinder of a non-diverse
defendant where there is no reasonable possibility that the state’s
highest court would find that the complaint states a cause of
action upon which relief may be granted against the non-diverse
defendant.3
3
Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir.
1992) (“[T]he federal court must engage in an act of prediction: is
there any reasonable possibility that a state court would rule
against the non-diverse defendant?”); McCabe v. Gen. Foods Corp.,
811 F.2d 1336, 1339 (9th Cir. 1987) (“If the plaintiff fails to
state a cause of action against a resident defendant, and the
failure is obvious according to the settled rules of the state, the
joinder of the resident defendant is fraudulent” (citing Moore's
Federal Practice (1986) ¶ O.161[2])).
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Under Rhode Island law, “an agent acting on behalf of a
disclosed principal is not personally liable to a third party for
acts performed within the scope of his authority” in the absence of
some exception. Cardente v. Maggiacomo Ins. Agency, Inc., 272 A.2d
155, 156 (R.I. 1971). Exceptions exist “for unauthorized acts
outside the scope of the agency, for acts to which the agent has
bound himself or herself—either expressly or impliedly—under a
contract, or for acts within the scope of a duty that is otherwise
independent of the agency relationship.” Kennett v. Marquis, 798
A.2d 416, 419 (R.I. 2002) (citations and quotation marks omitted)).
In this case, there was no basis for joining D’Agostino. The
complaint asserted no claim against D’Agostino individually, but,
instead, alleged that he was the agent of Caterpillar, CAT
Financial, and Southworth. Furthermore, the plaintiffs alleged no
facts on which we could find an exception to the general rule
against agent liability. Therefore, joinder of D’Agostino was
fraudulent. Because this fraudulent joinder was apparent from the
face of the original complaint, the defendants were required to
remove within 30 days after service of the complaint. They failed
to do so.
The question is whether this procedural error is fatal to the
judgment in favor of Southworth, requiring a remand to state court.
Ironically, another Caterpillar case provides the answer. In
Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), a case had been
improperly removed because complete diversity was lacking at the
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time of removal. By the time the case proceeded to trial, diversity
had become complete because the plaintiffs had settled their claims
against the non-diverse party. Id. at 67. The Supreme Court
concluded that this error did not require a vacatur of the judgment
and remand to state court, because the jurisdictional requirement
of the statute (complete diversity) was met at the time the
district court entered judgment. As the Court explained, “[t]he
jurisdictional defect was cured, i.e., complete diversity was
established before the trial commenced. . . . But a statutory flaw—
Caterpillar’s failure to meet the § 1441(a) requirement that the
case be fit for federal adjudication at the time the removal
petition is filed—remained in the unerasable history of the case.”
Id. at 73.
The Court rejected the plaintiff’s argument that the “ultimate
satisfaction of the subject-matter jurisdiction requirement ought
not swallow up antecedent statutory violations.” Id. at 74. “Once
a diversity case has been tried in federal court, . . .
considerations of finality, efficiency, and economy become
overwhelming.” Id. at 75. Requiring a vacatur and remand to state
court “would impose unnecessary and wasteful burdens on the
parties, judges, and other litigants waiting for judicial
attention.” Id. at 76 (internal quotation marks omitted); see also
Grubbs v. Gen. Elec. Credit Corp., 405 U.S. 699 (1972) (statutory
flaw does not require remand where no objection was raised).
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The Supreme Court’s more recent decision in Grupo Dataflux v.
Atlas Global Group, L.P., 541 U.S. 567 (2004), although it did not
involve removal, further explains the scope of Caterpillar. In
Grupo, the plaintiff filed suit in federal court, relying on
diversity jurisdiction. At the time the suit was filed, diversity
was lacking because the plaintiff, a Texas partnership, included
two Mexican nationals as partners, and the defendants were Mexican
citizens. While the case was pending, the plaintiffs sought to
create diversity by eliminating the Mexican citizens from the
partnership. The Court held that the plaintiffs could not
manufacture diversity jurisdiction by altering the composition of
their partnership after filing their lawsuit. The Court held that
“‘[w]here there is no change of party, a jurisdiction depending on
the condition of the party is governed by that condition, as it was
at the commencement of the suit.’” Id. at 574 (alteration in
original) (emphasis in original) (quoting Conolly v. Taylor, 27
U.S. 556, 565 (1829)). The Court distinguished Caterpillar: “It
related not to cure of the jurisdictional defect, but to cure of a
statutory defect.” Id. at 574 (emphasis in original). Thus, Grupo
confirms that the Caterpillar rule governs where there have been
procedural violations of the removal statute but where complete
diversity exists at the time of judgment because the non-diverse
party had been dismissed.
Caterpillar governs this appeal. Although the defendants
failed to remove this lawsuit due to fraudulent joinder in a timely
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manner, the defendants’ misstep was statutory, not jurisdictional.
The doctrine of fraudulent joinder permits a federal court to
“disregard, for jurisdictional purposes,” Mayes, 198 F.3d at 461,
the citizenship of non-diverse defendants, and the defendants’
theory of fraudulent joinder was properly asserted and accepted by
the district court. Accordingly, on appeal we can disregard the
citizenship of D’Agostino for the purposes of this lawsuit. Indeed,
federal subject matter jurisdiction has existed since the lawsuit’s
initiation. Considerations of “finality, efficiency, and economy”
counsel against a vacatur of the judgment and remand.
Case law from this circuit as well as our sister circuits
supports the application of Caterpillar to this case. In Esposito,
this court held that one defendant’s failure to consent to the
other defendant’s notice of removal within the statutory 30 day
time limit constituted a defect in procedure, rather than
jurisdiction. 590 F.3d at 77; see 28 U.S.C. § 1446(b)(2)(A) & (B)
(“When a civil action is removed . . . , all defendants who have
been properly joined and served must join in or consent to removal
of the action. Each defendant shall have 30 days after receipt by
or service on that defendant of the initial pleading or
summons . . . to file the notice of removal.”) Accordingly, this
court concluded that this flaw was not fatal to the ensuing federal
judgment. Esposito, 590 F.3d at 77. So here, a remand is not
necessary because the 30 day time limit is not jurisdictional and
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complete diversity existed as the time of the district court’s
grant of summary judgment.
At least three other circuits have held that the 30-day time
limit at issue here is not jurisdictional and provides no ground
for remand after judgment. See Farina v. Nokia, 625 F.3d 97, 114
(3d Cir. 2010) (the 30-day limit is a procedural, not a
jurisdictional, provision); Moore v. N. Am. Sports, Inc., 623 F.3d
1325, 1329 (11th Cir. 2010) (“Under the Supreme Court’s decision in
Caterpillar, any untimeliness would be an insufficient basis to
vacate the judgment and remand for a new trial.”); Huffman v. Saul
Holdings Ltd. P’ship, 194 F.3d 1072, 1079-80 (10th Cir. 1999)
(untimely notice of removal was not fatal to federal court
adjudication).
Numerous circuits, including this circuit, have held that
other statutory defects are not jurisdictional. See In re Exxon
Chem. Fire, 558 F.3d 378, 398-400 (5th Cir. 2009) (a failure to
satisfy 28 U.S.C. § 1441(b)(2)’s requirement that no defendant be
a citizen of the state in which the action was brought was not
fatal to federal court judgment because this defect was not
jurisdictional); Parrino v. FHP, Inc., 146 F.3d 699, 703 (9th Cir.
1998) (one defendant’s failure to consent to removal within 30
days, as required by § 1446(b)(2)(A) & (B), was not fatal to
federal court adjudication).
A remand here would be particularly inappropriate given that
the plaintiffs failed to argue the statutory defect to the district
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court in the two year period between removal and judgment. To be
sure, the plaintiffs argued that the original removal was
statutorily defective because the case was removed after the non-
final dismissal of D’Agostino. But the plaintiffs never argued that
the fraudulent joinder theory was untimely. That argument was
raised for the first time on appeal to this court, and, then, only
in the reply brief. Even if Caterpillar did not govern here,
plaintiffs did not preserve their objection to the defendants’
failure to comply with the statutory time limit with respect to
fraudulent joinder.
Multiple circuits, including this one, have reiterated that 28
U.S.C. § 1447(c) “effectively assigns to the parties the
responsibility of policing non-jurisdictional questions regarding
the propriety of removal, permitting them to assert a procedural
defect or to waive the defect if they choose to remain in the
federal forum.” Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d
192, 198 (4th Cir. 2008) (emphasis in original); see also Samaan v.
St. Joseph Hosp., 670 F.3d 21, 28 (1st Cir. 2012) (citations
omitted) (plaintiff waived a ground supporting remand by failing to
raise it, and “[t]he fact that the plaintiff objected to removal on
a different basis d[id] not avert this waiver”); Denman by Denman
v. Snapper Div., 131 F.3d 546, 548 (5th Cir. 1998) (citations
omitted) (same).
We conclude that remand to state court is not required, and
the district court had jurisdiction.
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B.
On the merits, the appellants argue the district court erred
in granting summary judgment in favor of Southworth. The district
court granted summary judgment because it concluded that there was
no support for the oral contract theory or any other claims
asserted by plaintiffs. On appeal, plaintiffs assert error only on
the grant of summary judgment on the oral contract claim.
Plaintiffs devote a meager 11 lines in their opening brief
asserting in conclusory terms that summary judgment on their oral
contract claim was improper. They cite no evidence in the record.
They include only two sentences remotely in the nature of an
argument ("Appellants raised the issue of whether conduct and
statements by Southworth and its agents created an oral contract on
which Appellants relied. Namely, Southworth’s agent, either within
or without the scope of his agency, assured Appellants that
Appellants’ construction equipment would be marketed in a
commercially reasonable manner"). In response, Southworth points
out (as did the district court below) that Vincent Cambio
disclaimed ever having made an oral agreement with D’Agostino.
Finally, in plaintiffs’ reply, they offer no rejoinder at all,
citing no evidence on point, and do not even address the issue.
Such a halfhearted effort falls far short of sufficiently raising
an issue on appeal. See Fed. R. App. P. 28(a); United States v.
Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (“[I]ssues adverted to in
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a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived.”) For that reason alone, we
affirm the summary judgment ruling.
Nor did the district court err in awarding attorneys’ fees to
Southworth pursuant to the court’s inherent authority and Rhode
Island General Laws § 9-1-45. In Whitney Bros., this court stated
that when a district court exercises its inherent power to award
attorneys’ fees, it must describe the losing parties’ bad faith
conduct with “sufficient specificity” and accompany this
description with a “detailed explanation of reasons justifying the
award.” 60 F.3d at 13 (quotations marks and citation omitted).
Whitney also clarified that the district court acts within its
authority in finding bad faith where “a party maintains an
unfounded action or defense without any reasonable hope of
prevailing on [the] merits.” Id. at 13-14 (citations omitted).
Similarly, the Rhode Island statute provides for an award of
attorneys fees where “there was a complete absence of a justiciable
issue of either law or fact raised by the losing party.” R.I. Gen.
Laws § 9-1-45(1). We find that the district court did not abuse its
discretion in concluding that the plaintiffs’ allegations against
Southworth were “clearly frivolous.” Order at 2, Universal Truck &
Equipment Co., Inc. v. Caterpillar, Inc., 1:10-cv-00466 (D.R.I. May
9, 2013), ECF No. 129. Nor did the district court err in not
providing a fuller explanation. The inherent power to sanction with
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such an award necessarily covers a broad range of litigation
conduct, some of which will be very fact-specific and require
fairly detailed explanation. Here, where the issue is frivolousness
of the claim itself as a matter of law, far less factual discussion
is necessary. This is especially so in a case such as this where,
even on appeal, plaintiffs point to nothing in the record that
supports their assertion that their claim had merit.
AFFIRMED
Costs to appellees.
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