Justin Randolph v. Pravati Spv II LLC ( 2023 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 24 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JUSTIN G. RANDOLPH, individually; et No. 22-15709
al.,
D.C. No. 2:21-cv-00713-SRB
Plaintiffs-Appellants,
v. MEMORANDUM*
PRAVATI SPV II LLC, a Delaware Limited
Liability company with its principal business
in Arizona; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding
Submitted April 20, 2023**
Phoenix, Arizona
Before: TALLMAN, OWENS, and BADE, Circuit Judges.
Justin Randolph and Andrew Williams, along with their respective law
practices (collectively, “Randolph”), appeal from the district court’s award of
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
attorneys’ fees and costs in favor of Appellees, former litigation funders and
affiliates (collectively, “Pravati”). We have jurisdiction under 28 U.S.C. § 1291,
and we affirm.
Randolph sought and received litigation funding loans from Pravati. In
agreeing to repay the funds, Randolph signed two contracts, each of which
contained mandatory arbitration clauses for disputed claims. After Randolph
defaulted, Pravati initiated arbitration proceedings, and Randolph responded by
filing various amended complaints alleging that Pravati violated the Racketeer
Influenced and Corrupt Organizations Act (“RICO”). Pravati moved to dismiss
each complaint, arguing that the claims were subject to mandatory arbitration. The
district court agreed, and ultimately dismissed Randolph’s second amended
complaint without prejudice for an arbitrator to determine what, if any, claims
were arbitrable. Pravati moved for attorneys’ fees and costs, asserting that it was
the prevailing party, and the district court granted the motion for fees, in part.
On appeal, Randolph argues that the district court erred in awarding fees
because it failed to apply Chang v. Chen, 95 F.3d 27 (9th Cir. 1996) (“Chang II”).
Randolph argues that Chang II provides that defendants cannot be awarded fees
when plaintiffs in a RICO action did not all sign the underlying contracts at issue
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and the alleged pattern of racketeering was not based on any one contract.1 We
conclude that Chang II is inapplicable.
In Chang v. Chen, 80 F.3d 1293 (9th Cir. 1996) (“Chang I”) overruled on
other grounds by Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007) (en
banc), after repeatedly trying and failing to bring a cognizable RICO claim,
plaintiffs’ second amended complaint was dismissed without leave to amend. Id.
at 1296. Defendants then moved for attorneys’ fees, which we denied in Chang II.
95 F.3d at 27.
In Chang II, we held that RICO “does not preclude prevailing defendants
from recovering attorneys’ fees when specified by an agreement of the
parties.” Id. at 28. However, in that case the parties had not entered into such an
agreement. Instead, the alleged pattern of racketeering activity consisted of three
different real estate transactions, and each transaction was consummated by a
written contract with a clause stating that, in the event of legal action “arising out
of the execution of this agreement or the sale . . . , the prevailing party shall be
entitled to” reasonable attorneys’ fees. Id. (emphasis omitted). We concluded that
because the plaintiffs asserted RICO claims, and not claims arising out of the
agreements related to the real estate transactions, and there was no agreement that
1
Randolph is not contesting the district court’s determination that an
arbitrator must determine whether the claims are arbitrable.
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all the plaintiffs signed, the defendants were not entitled to fees. Id. at 28–29.
Here, however, neither the district court’s order granting the motion to
dismiss, nor the order awarding fees and costs, included a ruling on the merits of
Randolph’s RICO claims. Instead, the district court’s order awarding fees and
costs was based solely on the interpretation and enforcement of the legal funding
agreements, which provided that the prevailing party in an action to “enforce or
interpret the terms of” the agreement “shall be entitled to” fees and costs. Because
the court ultimately agreed with Pravati’s interpretation of the agreements’
mandatory arbitration provisions, Pravati was the prevailing party and was entitled
to attorneys’ fees and costs.
AFFIRMED.
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