Block Mining, Inc. v. Hosting Source, LLC

• Court: District Court, W.D. Washington
• Decided: April 16, 2026
• Docket: 2:24-cv-00319
• Status: Unknown

Opinion

1 2

3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE

9 10 BLOCK MINING, INC., CASE NO. C24-0319JLR 11 Plaintiff, ORDER v. 12 HOSTING SOURCE, LLC, 13 Defendant. 14

15 I. INTRODUCTION 16 Before the court is Plaintiff / Counter-Defendant Block Mining, Inc.’s (“Block 17 Mining”) motion for leave to submit a fee petition or, in the alternative, an order that 18 Defendant / Counter-Claimant Hosting Source, LLC, (“Hosting Source”) show cause 19 why it should not cover Block Mining’s reasonable attorneys’ fees incurred in response 20 to conduct that Block Mining alleges violates the Federal Rules of Civil Procedure and 21 this District’s Local Civil Rules. (Mot. (Dkt. # 100) at 5-7; Reply (Dkt. # 106).) Hosting 22 Source opposes the motion. (Resp. (Dkt. # 103).) The court has considered the parties’ 1 submissions, the relevant portions of the record, and the applicable law. Being fully 2 advised, the court DENIES Block Mining’s motion.

3 II. BACKGROUND 4 On December 16, 2025, the court (1) granted summary judgment in favor of Block 5 Mining as to Hosting Source’s liability for Block Mining’s claim for breach of contract 6 and both liability and damages for Block Mining’s claims for conversion and trespass to 7 chattels and (2) dismissed with prejudice Hosting Source’s counterclaim for breach of 8 contract. (12/16/25 Order (Dkt. # 87) at 20.) The court also granted Block Mining’s

9 motion for an award of damages of $1,219,746 against Hosting Source for its claims for 10 conversion and trespass to chattels. (Id.) On December 23, 2025, Block Mining moved 11 to voluntarily dismiss its sole remaining claim for breach of contract pursuant to Federal 12 Rule of Civil Procedure 41(a)(2) and requested that the court enter judgment under 13 Federal Rules of Civil Procedure 58(a) and (d). (MTD (Dkt. # 89).) On January 8, 2026,

14 the court granted Block Mining’s motion to voluntarily dismiss its breach of contract 15 claim and entered judgment against Hosting Source. (1/8/26 Order (Dkt. # 98).) 16 On January 12, 2026, Block Mining moved for sanctions on Hosting Source in the 17 form of reasonable attorneys’ fees incurred as a result of conduct that Block Mining 18 alleges violated the Federal Rules of Civil Procedure and this District’s Local Civil

19 Rules. (See Mot. at 5-7.) Block Mining asserts that after the court granted its motion for 20 summary judgment, Hosting Source “repeatedly obstructed or delayed Block Mining’s 21 efforts to obtain its judgment, violated the local rules, filed a motion in limine [“MIL”] it 22 knew to be moot, and filed a frivolous opposition brief in response to [Block Mining’s] 1 motion for voluntary dismissal[.]” (Id. at 5; see also id. at 6-7 (detailing Hosting 2 Source’s alleged misconduct).) Block Mining further asserts that it “incurred significant

3 attorney time to address this conduct.” (Id. at 7; see also Wolf. Decl. (Dkt. # 102) 4 ¶¶ 7-10; id. ¶¶ 3-5, Exs. 1-3 (detailing fees incurred).) On January 20, 2026, Hosting 5 Source filed a response opposing the imposition of sanctions. (See generally Resp.) On 6 January 26, 2026, Block Mining filed a reply. (See generally Reply.) On February 17, 7 2026, the court held a telephonic conference and heard oral argument, in part, on Block 8 Mining’s motion, but reserved ruling at that time. (2/17/26 Min. Order (Dkt. # 120)

9 (“Block Mining’s motion for attorneys’ fees for misconduct[] remains pending and the 10 court takes the motion under advisement[.]”).) The motion is now fully briefed and ripe 11 for the court’s consideration. 12 III. ANALYSIS 13 Block Mining moves for sanctions pursuant to Local Civil Rule 11(c), 28 U.S.C.

14 § 1927, and the court’s “inherent power to award attorneys’ fees[.]” (Mot. at 2; see 15 Reply at 5-6 (clarifying that Block Mining did not move for sanctions pursuant to Federal 16 Rule of Civil Procedure 11).) All three of these bases require a finding of bad faith or 17 intentional misconduct. Zambrano v. City of Tustin, 885 F.2d 1473, 1481 (9th Cir. 1989) 18 (local rules); Blixseth v. Yellowstone Mountain Club, LLC, 796 F.3d 1004, 1007 (9th Cir.

19 2015) (Section 1927); Mills v. Zeichner, No. C23-1130JLR, 2024 WL 37108, at *5 (W.D. 20 Wash. Jan. 3, 2024) (inherent powers). While either form of misconduct supports the 21 imposition of sanctions, the burdens of proof are distinct. Am. Unites for Kids v. 22 Rousseau, 985 F.3d 1075, 1090 (9th Cir. 2021) (discussing inherent powers). A finding 1 of willfulness “does not require proof of mental intent . . . but rather, it is enough that a 2 party acted deliberately.” Id. (citation omitted). Bad faith “requires proof of bad intent

3 or improper purpose.” Id. (citation omitted). The court considers each argument in turn. 4 A. Local Civil Rule 11(c) 5 First, Block Mining seeks sanctions under Local Civil Rule 11(c), which provides 6 that: 7 An attorney or party who without just cause fails to comply with any of the Federal Rules of Civil or Criminal Procedure, these rules, or an order of the 8 court, or who presents to the court unnecessary motions or unwarranted opposition to motions, or who fails to prepare for presentation to the court, 9 or who otherwise so multiplies or obstructs the proceedings in a case may, in addition to or in lieu of the sanctions and penalties provided elsewhere in 10 these rules, be required by the court to satisfy personally such excess costs and may be subject to such other sanctions as the court may deem 11 appropriate.

12 Local Rules W.D. Wash. LCR 11(c). Block Mining asserts that sanctions are warranted 13 under this rule due to Hosting Source’s alleged violations of the Federal Rules of Civil 14 Procedure and this District’s Local Civil Rules. (Mot. at 7.) Hosting Source’s alleged 15 violative conduct includes: (1) falsely certifying in its MIL that its counsel “conferred in 16 good faith with opposing counsel regarding the evidentiary issues raised in [the] 17 motion[;]” (2) filing a MIL that it knew or should have known would be moot and 18 asserting therein arguments that the court had already rejected; (3) refusing to stipulate or 19 agree not to oppose Block Mining’s motion for voluntary dismissal and entry of 20 judgment; and (4) filing a frivolous brief opposing Block Mining’s motion for voluntary 21 dismissal and entry of judgment. (Id. at 6-7.) 22 1 The court concludes that sanctions are not warranted under Local Civil Rule 11(c). 2 Hosting Source has not engaged in litigation conduct that “so multiplies or obstructs the

3 proceedings” as to result in “excess costs” to Block Mining. Local Rules W.D. Wash. 4 LCR 11(c). First, as to the MIL, Hosting Source filed its MIL on December 22, 2025, in 5 compliance with the court’s operative pretrial schedule. (See 12/2/24 Min. Order (Dkt. 6 # 63) (setting a December 22, 2025 deadline for the parties to file their MILs).) Block 7 Mining has adduced evidence showing that it made clear to Hosting Source that it 8 planned to dismiss the only remaining claim in the case. (Wolf Decl. (Dkt. # 90) ¶¶ 3-5,

9 Exs. 1-3 (Dismissal Emails).) The court, however, did not vacate the MIL response 10 deadline until December 29, 2025. (12/29/25 Min. Order (Dkt. # 91).) Given that the 11 trial date had not yet been vacated, it was not unreasonable for Hosting Source to 12 preserve its right to file MILs pursuant to the case schedule. Additionally, Hosting 13 Source is subject to no obligation to stipulate to Block Mining’s motion for voluntary

14 dismissal and entry of judgment. 15 Furthermore, to the extent that Block Mining asserts that the court should sanction 16 Hosting Source under Local Civil Rule 11(c) because Hosting Source purportedly filed a 17 “frivolous” brief, Block Mining cites to no authority supporting such action. (See Mot. at 18 7 (listing authority).) Indeed, none of the cases cited by Block Mining address the

19 imposition of sanctions under Local Civil Rule 11(c). Block Mining, in part, relies on 20 Est. of Blue v. Cnty. of Los Angeles, 120 F.3d 982, 985 (9th Cir. 1997), to support its 21 contention that “frivolous and legally unreasonable filings are sanctionable[.]” (Mot. at 22 7.) That case, however, pertains to sanctions in the context of Federal Rule of Civil 1 Procedure 11, which expressly “provides for the imposition of sanctions when a filing is 2 frivolous, legally unreasonable, or without factual foundation, or is brought for an

3 improper purpose.” Est. of Blue, 120 F.3d at 985 (citing Simpson v. Lear Astronics 4 Corp., 77 F.3d 1170, 1177 (9th Cir. 1996); see also id. (citing Buster v. Greisen, 104 F.3d 5 1186, 1190 (9th Cir. 1996) (“‘Frivolous’ filings are those that are ‘both baseless and 6 made without a reasonable and competent inquiry.’”). Local Civil Rule 11(c), in 7 contrast, does not refer to “frivolous” filings. See Local Rules W.D. Wash. LCR 11(c). 8 Block Mining also relies on Hart v. McDermott, No. C23-0503MJP, 2023 WL 7128848,

9 at *2 (W.D. Wash. Oct. 30, 2023), which contemplates the imposition of sanctions under 10 Washington state law rather than Local Civil Rule 11(c) and thus does not apply here. 11 Lastly, Block Mining cites Grundstein v. Ferguson, No. C14-1356RSL, 2015 WL 12 1965349, at *2 (W.D. Wash. May 1, 2015), in which the court imposed sanctions 13 pursuant to the All Writs Act, 28 U.S.C. § 1651(a), this District’s General Rule 3(d), and

14 Federal Rule of Civil Procedure 11. Block Mining does not move for sanctions under 15 any of those authorities. Thus, none of Block Mining’s cited authorities persuade the 16 court to issue sanctions here. 17 Finally, Block Mining does not meaningfully address whether Hosting Source 18 acted in bad faith and provides no evidence of bad intent or improper purpose. (See

19 generally Mot.) The court therefore DENIES Block Mining’s request for sanctions under 20 Local Civil Rule 11(c). 21 22 1 B. 28 U.S.C. § 1927 2 In its reply brief, Block Mining asserts for the first time that 28 U.S.C. § 1927

3 supports imposing sanctions on Hosting Source. (Reply at 5-6.) It is well-established, 4 however, that a party may not raise a new argument in its reply brief. Zamani v. Carnes, 5 491 F.3d 990, 997 (9th Cir. 2007) (“The district court need not consider arguments raised 6 for the first time in a reply brief.”) (citation omitted). The court, therefore, declines to 7 consider this basis for sanctioning Hosting Source. 8 C. Inherent Powers

9 Finally, Block Mining seeks sanctions pursuant to the court’s inherent powers. 10 (Mot. at 2.) “Federal courts possess certain ‘inherent powers,’ not conferred by rule or 11 statute, ‘to manage their own affairs so as to achieve the orderly and expeditious 12 disposition of cases.’” Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101, 107 13 (2017) (quoting Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). “That authority

14 includes ‘the ability to fashion an appropriate sanction for conduct which abuses the 15 judicial process.’” Id. (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 44-45 (1991)). 16 District courts may award attorneys’ fees as a sanction under their inherent powers. 17 Rousseau, 985 F.3d at 1088. To impose sanctions pursuant to its inherent powers, “a 18 district court must find either: (1) a willful violation of a court order; or (2) bad faith.”

19 Id. at 1090 (citation omitted). “Because of their very potency, inherent powers must be 20 exercised with restraint and discretion.” Chambers, 501 U.S. at 44 (citation omitted). 21 The court declines to exercise its inherent powers to issue sanctions. The court 22 determines that Hosting Source’s filing a MIL consistent with the court’s case 1 management schedule, failing to stipulate to voluntary dismissal, and opposing dismissal 2 on terms it thought unlawful does not constitute “conduct which abuses the judicial

3 process.” Haeger, 581 U.S. at 107 (citation omitted). To the extent that Hosting Source 4 falsely certified in its MIL that the parties had previously conferred about the evidentiary 5 issues raised in the motion, Block Mining has not met its burden to show that Hosting 6 Source acted in bad faith. Therefore, the court DENIES Block Mining’s request to 7 impose sanctions pursuant to the court’s inherent powers. 8 IV. CONCLUSION

9 For the foregoing reasons, the court DENIES Block Mining’s motion for leave 10 to submit a fee petition or for an order to show cause why sanctions are not 11 warranted (Dkt. # 100). 12 13 Dated this 1 6th day of April, 2026. A 14 JAMES L. ROBART 15 7United States District Judge 16 17 18 19 20 21 22