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analyzing EAJA costs issue separate from attorney's fees issue and framing propriety of a judgment for costs as hinging upon "if Alpha is a prevailing party, whether the Court should exercise its discretion to award costs to Alpha"
Summary of this case from Baker v. ColvinOpinion
No. 1:97-cv-461
April 3, 2003
MEMORANDUM
On the first day of trial, prior to voir dire and jury selection, plaintiff United States of America announced in open court that it was voluntarily dismissing with prejudice all of its claims against defendant Alpha Medical, Inc. ("Alpha"). Alpha had no objection. The Court treated the plaintiffs statement as a motion for voluntary dismissal pursuant to FED. R. Civ. P. 41(a)(2) which was granted and the trial proceeded without Alpha. On March 8, 2002, the Court entered a post-trial order dismissing with prejudice all of the plaintiffs claims against Alpha. [Court File No. 385]. If a plaintiff moves under Rule 41(a)(2) to voluntarily dismiss its complaint with prejudice, the district court must grant the motion. Smoot v. Fox, 340 F.2d 301, 303 (6th Cir. 1964); York v. Ferris State University, 36 F. Supp.2d 976, 979 (W.D. Mich. 1998); 9 CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 2367 p. 318 n. 3 (1995) ("WRIGHT MILLER").
The matter presently before the Court is Alpha's application for attorney's fees, costs, and other litigation expenses filed pursuant to 28 U.S.C. § 2412 and 1920, FED. R. Clv. P. 54, and E.D. TN. LR 54.1. [Court File No. 389]. Plaintiff opposes the application. [Court File Nos. 393, 399]. After reviewing the record, the Court concludes that Alpha's application will be DENIED. I. Costs Under 28 U.S.C. § 2412(a)(1) 28 U.S.C. § 2412(a)(1) provides that costs may, in the Court's discretion, be awarded to the prevailing party in any civil action brought by the United States. Two issues must be resolved: (1) whether Alpha is a prevailing party; and (2) if Alpha is a prevailing party, whether the Court should exercise its discretion to award costs to Alpha. Alpha's application for costs under 28 U.S.C. § 2412(a)(1) will be DENIED. Although Alpha is technically a prevailing party, the Court in its discretion declines to award any costs to Alpha under § 2412(a)(1).
A. Alpha Is A Prevailing Party
The government contends Alpha cannot recover its costs under § 2412(a)(1) because Alpha is not a prevailing party. The government says its decision to voluntarily dismiss was not based on anything that Alpha presented to the Court or prevailed upon. Prior to trial, the Court denied virtually all of Alpha's motions to dismiss and for summary judgment. [Court File No. 234]. Alpha was dismissed from the case solely because the government made a motion for voluntary dismissal pursuant to FED. R. CIV. P.41(a)(2). The voluntary dismissal was not based on a dispositive motion or any evidence submitted by Alpha. According to the government, it chose to voluntarily dismiss its claims because Alpha lacked sufficient funds to satisfy a damage award. The government argues that the Court's dismissal order is not a judgment "on the merits" such that Alpha can be deemed the prevailing party.
The Court concludes that Alpha is a prevailing party. Federal courts have struggled to determine whether a defendant is the prevailing party when the plaintiff voluntarily dismisses the complaint with prejudice. This has posed an especially difficult question in federal civil rights suits where, as a matter of policy, costs and attorney's fees are only awarded to prevailing defendants in the most egregious cases of misconduct by the plaintiff Christiansburg Garment Co. v. E.E.O.C., 434 U.S. 412 (1978); Dean v. Riser, 240 F.3d 505 (5th Cir. 2001); Roane v. City of Mansfield, 229 F.3d 1153 (Table, text at 2000 WL 1276745) (6th Cir. Aug. 28, 2000)); Marquart v. Lodge 837, 26 F.3d 842 (8th Cir. 1994); Espada v. Rosado, 2001 WL 1020549 (S.D.N.Y. Sept. 5, 2001); Easiley v. Norris, 107 F. Supp.2d 1332 (ND. Okla. 2000); York v. Ferris State University, 36 F. Supp.2d 976 (W.D. Mich. 1998); Hughes v. Unified Sch. Dist. # 330, Wabaunsee County, 872 F. Supp. 882 (D. Kan. 1994). It is important to recognize that the instant case does not involve any claims or causes of action predicated on federal civil rights laws. This Court must determine what is the proper standard applicable to non-civil rights cases.
The term "prevailing party" is not defined in 28 U.S.C. § 2412, except with regard to eminent domain proceedings under § 2412(d)(2)(H) which is not applicable here. In the absence of a definition in § 2412, the Court looks to the ordinary meaning of the term "prevailing party" as it is commonly defined and used by federal courts. The definition of what constitutes a prevailing party is often discussed in federal civil rights cases involving motions for attorney's fees under 42 U.S.C. § 1988. Although the present case involves 28 U.S.C. § 2412 and it is not a federal civil rights action governed by 42 U.S.C. § 1988, the analysis in § 1988 cases is instructive. As the Supreme Court explains in Buckhannon Board and Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 532 U.S. 598, 602-03 (2001), the term "prevailing party" is contained in numerous fee-shifting statutes and it must be construed as having a consistent meaning in federal statutes, unless otherwise indicated by Congress in the plain statutory language. See Chambers v. Ohio Dept. of Human Services, 273 F.3d 690, 693 n. 1 (6th Cir. 2001). When Congress enacted 28 U.S.C. § 2412, it intended that "prevailing party" be construed consistently with the use and meaning of the phrase "prevailing party" in other federal fee-shifting statutes. Heeren v. City of Jamestown, Ky., 39 F.3d 628, 631 (6th Cir. 1994); Citizens Coalition for Block Grant Compliance, Inc., v. City of Euclid, 717 F.2d 964, 966 n. 2 (6th Cir. 1983).
A prevailing party is one who has been awarded some relief on the merits by the court. Buckhannon, 532 U.S. at 603-04; Farrar v. Hobby, 506 U.S. 103, 109-11 (1992); Hewitt v. Helms, 482 U.S. 755, 760 (1987); Hanrahan v. Hampton, 446 U.S. 754, 758 (1980); E.W. Grobbel Sons, Inc. v. N.L.R.B., 176 F.3d 875, 878 (6th Cir. 1999). An award of nominal damages suffices to make the plaintiff a prevailing party. Buckhannon, 532 U.S. at 604; Farrar, 506 U.S. at 121. In Texas State Teachers Assn. v. Garland Independent School Dist., 489 U.S. 782 (1989), the Supreme Court reasoned that to be considered a prevailing party within the meaning of § 1988, "the plaintiff must be able to point to a resolution of the dispute which changes the legal relationship between itself and the defendant." Id. at 792. Consequently, the "touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties." Id. at 792-93. This point was reaffirmed in Buckhannon, 532 U.S. at 604-05 (to prevail a party must obtain a judicially sanctioned change in the legal relationship of the parties). See also Chambers, 273 F.3d at 691-93; Berger v. City of Mayfield, 265 F.3d 399, 406 (6th Cir. 2001).
A settlement agreement subject to judicial enforcement through a consent decree may serve as the basis for an award of cost and attorney's fees to the prevailing party. Buckhannon, 532 U.S. at 604; Farrar, 506 U.S. at 111; Maher v. Gagne, 448 U.S. 122 (1980). Although a consent decree does not always include an admission of liability, it is a court-ordered change in the legal relationship between the plaintiff and defendant. Buckhannon, 532 U.S. at 604; Texas State Teachers Assn., 489 U.S. at 792; Hewitt, 482 U.S. at 760-61. Judgments on the merits and court-ordered consent decrees create the judicially sanctioned material alteration of the parties' legal relationship necessary to authorize an award of costs and attorney's fees. Buckhannon, 532 U.S. at 604; Texas State Teachers, 489 U.S. at 792-93.
With this basic definition of "prevailing party" in mind, we turn to the task of determining whether the government's Rule 41(a)(2) voluntary dismissal of its complaint against Alpha with prejudice and the order of dismissal entered by this Court on March 8, 2002, serve to make Alpha a prevailing party for purposes of awarding costs and attorney's fees under 28 U.S.C. § 2412.
Although the Sixth Circuit has not rendered a published decision directly on point, its unpublished opinion in Roane, 2000 WL 1276745, provides some guidance. Review of Roane is complicated by the fact that each member of the three-judge appellate panel wrote a separate opinion. Plaintiff Donald Roane brought a federal civil rights action under 42 U.S.C. § 1983. After settlement negotiations failed and the defendants filed a motion for summary judgment, plaintiff Roane moved to voluntarily dismiss the action pursuant to FED. R. CIV. P. 41(a)(2). The district court granted the motion and dismissed the complaint with prejudice upon plaintiff Roane's oral consent. Defendants made a motion for attorney's fees under 42 U.S.C. § 1988 which was granted by the district court. The district court determined that the defendants were the prevailing parties based on the voluntary dismissal.
On appeal, Roane argued that no award of attorney's fees was justified under § 1988 because the suit had been voluntarily dismissed. The Sixth Circuit reversed the award of attorney's fees under § 1988. Writing the majority opinion, Circuit Judge Clay reasoned inter alia that the defendants were not the prevailing parties because they "did not receive a favorable judicial determination on the merits. . . ." Roane, 2000 WL 1276745 at ** 2. However, the other two circuit judges on the panel clearly disagreed with Judge Clay's analysis on this particular point. In a concurring opinion, Circuit Judge Jones said that by obtaining a voluntary dismissal of the plaintiffs complaint with prejudice, the defendant city was a prevailing party. Roane, 2000 WL 1276745 at ** 2-3 (Jones, J., concurring). In a dissenting opinion, Circuit Judge Batchelder also said the defendant city was a prevailing party. Roane, 2000 WL 1276745 at ** 3-6. (Batchelder, J., dissenting). In sum, two out of three judges in Roane agreed that the plaintiffs voluntary dismissal of his complaint with prejudice made the defendant city the prevailing party. The position taken by Circuit Judges Jones and Batchelder in Roane is consistent with the majority rule expressed in other federal cases.
The majority of federal courts that have addressed the specific issue hold that where a plaintiff voluntarily dismisses the complaint with prejudice in a non-civil rights case, the defendant is the prevailing party for the purpose of awarding costs. Zenith Ins. Co. v. Breslaw, 108 F.3d 205, 207 (9th Cir. 1997); Cantrell, 69 F.3d at 458; Sheets v. Yamaha Motors Corp., U.S.A., 891 F.2d 533, 539 (5th Cir. 1990); Schwarz v. Folloder, 767 F.2d 125, 130 (5th Cir. 1985); Beer v. John Hancock Life Insurance Co., 211 F.R.D. 67, 70 (N.D.N.Y. 2002); Uniflow Mfg. Co. v. Superflow Mfg. Corp., 10 F.R.D. 589 (N.D. Ohio 1950); 10 WRIGHT MILLER § 2667, pp. 209-10 n. 14; see also Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 889 (9th Cir. 2000). This Court agrees with and follows the majority rule.
Numerous federal courts, including the Sixth Circuit, recognize that a plaintiffs voluntary dismissal of a complaint with prejudice pursuant to FED. R. CIV. P. 41(a) gives the defendant the full relief to which the defendant is legally entitled and is tantamount to a judgment on the merits. Dean, 240 F.3d at 509; Catz v. Chalker, 142 F.3d 279, 287 (6th Cir. 1998), opinion amended on denial of rehearing, 243 F.3d 234 (6th Cir. 2001); Israel v. Carpenter, 120 F.3d 361, 365 (2nd Cir. 1997); Breslaw, 108 F.3d at 207; NBN Broadcasting, Inc. v. Sheridan Broadcasting Networks, Inc., 105 F.3d 72, 78 (2nd Cir. 1997); Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 345 (2nd Cir. 1995); Samuels v. Northern Telecom, Inc., 942 F.2d 834, 836 (2nd Cir. 1991); Harrison v. Edison Bros. Apparel Stores, Inc., 924 F.2d 530, 534 (4th Cir. 1991); Nemaizer v. Baker, 793 F.2d 58, 61 (2nd Cir. 1986); Schwarz, 767 F.2d at 130; Storey v. Cello Holdings, L.L.C., 182 F. Supp.2d 355, 361-62 (S.D.N.Y. 2002); Beer, 211 F.R.D. at 70.
When a plaintiff voluntary dismisses a cause of action with prejudice, future litigation of that same cause of action is barred by the doctrine of res judicata. In Smoot, 340 F.2d at 303, the Sixth Circuit said that a plaintiffs voluntary dismissal of an action with prejudice is a complete adjudication of the issues presented by the pleadings and is a bar to further action between the same parties, an obvious reference to the doctrine of res judicata. "An adjudication in favor of the defendant, by court or jury, can rise no higher than this." Id. (collecting case citations). In other words, a plaintiffs voluntary dismissal of the complaint with prejudice constitutes a final adjudication in the defendant's favor. This is discussed by the Sixth Circuit in Roane, 2000 WL 1276745 (Jones, J., concurring, and Batchelder, J., dissenting). See also Burpo v. Algoma Steel Corp., Ltd., 772 F.2d 905 (Table, text in 1985 WL 13565, *2 (6th Cir. Aug. 29, 1985)); Cream Top Creamery v. Dean Milk Co., 383 F.2d 358, 362 (6th Cir. 1967). After reviewing Sixth Circuit precedent, this Court is convinced the Sixth Circuit follows the majority rule.
The order entered by this Court on March 8, 2002, dismissing the government's claims against Alpha with prejudice based on the government's Rule 41(a)(2) voluntary dismissal [Court File No. 385] is a judicially sanctioned material alteration in the legal relationship between Alpha and plaintiff United States. It is tantamount to a judgment on the merits and is sufficient to confer on Alpha the status of a prevailing party for the purpose of awarding costs and attorney's fees pursuant to 28 U.S.C. § 2412. United States v. 163.25 Acres of Land, Graves County, Ky., 663 F. Supp. 1119 (W.D. Ky. 1987).
B. Award of Costs Not Justified
Although Alpha is technically a prevailing party, this is an appropriate case for the Court to exercise its discretion under 28 U.S.C. § 2412(a)(1) and decline to award costs to Alpha. The Court has examined the circumstances of this litigation and considered the proper context in which the government's Rule 41(a)(2) voluntary dismissal occurred. The government's decision to voluntarily dismiss was not based on anything that Alpha presented to the Court. Prior to trial, the Court denied virtually all of Alpha's motions to dismiss and for summary judgment. The voluntary dismissal was not motivated by a dispositive motion or any evidence submitted by Alpha. Instead, the government chose to voluntarily dismiss its claims because Alpha lacked sufficient funds to satisfy a damage award. The government made a good faith determination that further litigation against Alpha would not be worth the effort due to Alpha's lack of assets and financial resources.
In short, this is not a case where a calculating plaintiff has voluntarily dismissed a groundless or frivolous complaint in a strategic move to preclude entry of an adverse judgment on the merits and thereby seek to avoid the imposition of costs and attorney's fees. Based on the record, the Court cannot say that the government's claims against Alpha were groundless or frivolous. Voluntary dismissal occurred after the government's claims had survived Alpha's pretrial motions for dismissal and summary judgment. The voluntarily dismissal under Rule 41(a)(2) is essentially a gratuitous act on the government's part since it clearly was not caused or prompted by anything that Alpha said or did. Under these circumstances, common sense and logic dictate Alpha should not recover its costs from the federal government pursuant to 28 U.S.C. § 2412(a)(1).
II. Attorney's Fees and Other Expenses Under 28 U.S.C. § 2412(d)(1)(A)
Under the "American Rule," parties are ordinarily required to bear their own attorney's fees. As a general rule, the federal courts do not award attorney's fees to a prevailing party absent explicit statutory authority permitting such awards or an enforceable contract. Buckhannon, 532 U.S. at 602; Key Tronic Corp. v. United States, 511 U.S. 809, 819 (1994); Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975); Riddle v. Egensperger, 266 F.3d 542, 547 (6th Cir. 2001).
28 U.S.C. § 2412(d) is a fee-shifting statute. When Congress enacted § 2412(d), it waived the United States government's sovereign immunity and general statutory immunity from attorney's fee awards, and created a limited exception to the American Rule against awarding attorney's fees to prevailing parties. Pierce v. Underwood, 487 U.S. 552, 575 (1988) (Brennan, J., concurring); Heeren, 39 F.3d at 630. Because it is a waiver of sovereign immunity, § 2412(d) is strictly and narrowly construed in favor of the United States.
28 U.S.C. § 2412(d)(1)(A) provides in relevant part:
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances made an award unjust.
For Alpha to be entitled to an award of attorney's fees and other expenses from under § 2412(d)(1)(A), three essential elements must exist: (1) Alpha must be a prevailing party; (2) the government's position was not substantially justified; and (3) no special circumstances make an award to Alpha unjust. Commissioner, INS v. Jean, 496 U.S. 154, 158 (1990); Anderson v. Commissioner of Social Security, 198 F.3d 244 (Table, text at 1999 WL 1045072, **3-4 (6th Cir. Nov. 12, 1999)); United States v. $515,060.42 in U.S. Currency, 152 F.3d 491, 506-07 (6th Cir. 1998).
As discussed supra, Alpha is a prevailing party for purposes of 28 U.S.C. § 2412. However, the second element is not satisfied here. The Court finds that the government's position against Alpha was substantially justified. The government bears the burden of showing that its position was substantially justified. United States v. True, 250 F.3d 410, 419 n. 7 (6th Cir. 2001); Crawford v. Sullivan, 935 F.2d 655, 658 (4th Cir. 1991). The government has met its burden in this case.
The term "`substantially justified' is defined as meaning" "justified in substance or in the main that is, justified to a degree that could satisfy a reasonable person." Pierce, 487 U.S. at 565. To be substantially justified under § 2412(d)(1)(A) means "more than merely undeserving of sanctions for frivolousness. . . ." Pierce, 487 U.S. at 566. The government's position can be justified even though it is not correct. A position can be substantially justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact. Id. at 566 n. 2; Jean, 496 U.S. at 158 n. 6; $515,060.42 in United Currency, 152 F.3d at 507; Heeren, 39 F.3d at 632; United States v. Real Property Located at 2323 Charms Road, 946 F.2d 437, 440 (6th Cir. 1991); United States v. One 1985 Chevrolet Corvette, 914 F.2d 804, 808 (6th Cir. 1990); Jankovich v. Bowen, 868 F.2d 867, 869 (6th Cir. 1989).
The mere fact that the government chose to voluntarily dismiss its claims against Alpha does not raise a presumption that the government's position lacked substantial justification. Cf. Real Property Located at 2323 Charms Road, 946 F.2d at 440. The Sixth Circuit has said that even if the federal government's position is ultimately found to be incorrect and it does not prevail, such an outcome does not necessarily lead to an award of attorney's fees under § 2412(d)(1)(A). $515,060.42 in U.S. Currency, 152 F.3d at 507.
This Court finds that the government's position and its claims against Alpha were substantially justified within the meaning of 28 U.S.C. § 2412(d)(1)(A). An objectively reasonable person could think the government's position against Alpha was correct because it had a reasonable basis in law and fact. A key factor in the Court's analysis is that the government's claims against Alpha survived Alpha's pretrial motions to dismiss and for summary judgment. The Court determined that the government had a sufficient factual and legal basis to proceed to trial on its claims against Alpha. The Court has not changed its mind.
Accordingly, Alpha's application for attorney's fees and other expenses pursuant to 28 U.S.C. § 2412(d) will be DENIED. III. Costs and Attorney's Fees Under FED. R. Civ. P. 54(d) and 28 U.S.C. § 1920
In its application for costs and attorney's fees, Alpha cites FED. R. Civ. P. 54 and 28 U.S.C. § 1920. Alpha's application against the United States for costs, attorney's fees, and other expenses is governed by 28 U.S.C. § 2412. Because the Court has determined that it will not award costs and attorney's fees to Alpha under § 2412, any such claim asserted by Alpha under Rule 54(d) and § 1920 must be denied. Rule 54(d) does not provide a separate or alternative basis for awarding costs and attorney's fees against the United States government in this case beyond 28 U.S.C. § 2412.
Rule 54(d)(1) provides that except when express provision is made either in a federal statute or the FEDERAL RULE OF CIVIL PROCEDURE, costs other than attorney's fees shall be allowed as of course to the prevailing party "unless the court directs otherwise." But costs against the United States "shall be imposed only to the extent permitted by law." The Court has determined that costs will not be awarded to Alpha under 28 U.S.C. § 2412(a)(1). Consequently, Alpha cannot recover its costs under Rule 54(d)(1) when its application for costs pursuant to 28 U.S.C. § 2412(a)(1) is being denied.
Likewise, Alpha's application for attorney's fees brought under FED. R. Civ. P. 54(d)(2) must be denied. The application for attorney's fees against the United States is governed by 28 U.S.C.
§ 2412(d) and the Court has determined that no attorney's fees will be awarded to Alpha under § 2412(d). Alpha cannot recover attorney's fees under Rule 54(d)(2) when its application for attorney's fees pursuant to § 2412(d) is being denied.
Accordingly, an order will enter denying Alpha's application.
ORDER
In accordance with the accompanying memorandum opinion, the application for costs, attorney's fees, and other expenses filed by defendant Alpha Medical Inc. pursuant to 28 U.S.C. § 2412 and 1920, and FED. R. CIV. P. 54 [Court File No. 389] is DENIED.
SO ORDERED.