Malley v. San Jose Midtown Development LLC
- Edward Davila
- 5:20-cv-01925
- U.S. District Court · Northern District of California
- 4
In Malley v. San Jose Midtown, Judge Davila clarified that only federal claims were dismissed with prejudice and denied defendants’ fee motion.
Gregory Malley and the defendants, including San Jose Midtown Development LLC. The ruling clarified the effect of the earlier judgment on the parties’ federal and state-law claims and denied the defendants’ request for attorneys’ fees.
What happened
In Malley v. San Jose Midtown Development LLC, Gregory Malley asked the court to correct an earlier judgment that did not clearly dispose of his state-law usury claim. The defendants opposed that request and separately asked for attorneys’ fees.
The court granted Malley’s motion to alter the judgment. It clarified that only his federal claims were dismissed with prejudice; his state-law claims, including his state-law usury claim, were dismissed without prejudice. The court said Malley could bring those state-law claims in state court.
The court also denied the defendants’ motion for attorneys’ fees. Judge Edward J. Davila found that the fee provision applied to arbitration actions, not this case, and that it was not yet possible to determine who was the prevailing party because Malley intended to pursue his state-law claims.
The detailed version
- Malley v. San Jose Midtown Development LLC · No. 5:20-cv-01925
- Edward Davila
- Jan. 6, 2022
Background
Gregory Malley moved under Federal Rule of Civil Procedure 59(e), which allows a party to ask the court to change a judgment within 28 days after it is entered. The defendants separately moved for attorneys’ fees under Federal Rule of Civil Procedure 54(d) and California Civil Code section 1717.
Earlier, the court had granted the defendants’ motion to dismiss. It addressed Malley’s usury, racketeering, and wire-fraud causes of action. The court concluded that the joint-venture exception to the usury rule applied, that Malley had not shown the pattern of racketeering activity required for a federal Racketeer Influenced and Corrupt Organizations Act claim, and that he had not pleaded wire fraud with the particularity required by Rule 9(b). The court dismissed the federal claims without leave to amend. It declined to exercise supplemental jurisdiction over the remaining state-law claims and dismissed those claims without prejudice.
The resulting final judgment stated that judgment was entered for the defendants on Malley’s federal claims. Malley argued that the judgment should make clear that only the usury allegations used as part of his federal racketeering claim were resolved, while his separate California usury claim was dismissed without prejudice. The defendants argued that the complaint did not contain two separate usury claims.
Motion to Alter the Judgment
The court found that its earlier order and the judgment were inconsistent. It explained that, although the earlier order analyzed usury, it did so only to decide whether an alleged state-law usury violation could support Malley’s federal racketeering claim. The court did not intend to dismiss Malley’s state-law usury claim with prejudice.
The court determined that the second amended complaint contained separate usury-based claims: Count 3 alleged a violation of California usury law, while Count 5 alleged a federal racketeering violation based on the alleged collection of unlawful usury interest. The court therefore granted Malley’s motion to alter the judgment and stated that an amended order and judgment would clarify that only the federal causes of action were dismissed with prejudice. The state-law claims were dismissed without prejudice, and the court stated that Malley was free to file those claims in state court.
Motion for Attorneys’ Fees
The defendants sought fees under a prevailing-party fee provision in the SJMD Restated Operating Agreement. The court denied the motion for two reasons. First, it read the agreement as limiting the fee provision to arbitration actions, and this case was not an arbitration action. Second, because Malley had expressed a clear intent to pursue his state-law claims—which made up most of his amended complaint—the court could not yet determine which party was the prevailing party.
Disposition
The court granted Malley’s motion to alter the judgment and denied the defendants’ motion for attorneys’ fees. It stated that an amended order and judgment would follow.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.