Gerald Carroll v. E One Inc ( 2018 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 17-2183
_____________
GERALD CARROLL; KENNETH CROSSWHITE;
RAY FOSTER; CHARLES HOTTINGER;
LAWRENCE SHELDRAKE; RICHARD SHELTRA;
KEVIN STUART; CHRISTOPHER TURNER;
ROBERT WELCH; WILLIAM WHETZEL;
TERRY WILLIAMS; BERN CAPPELLI, LLP
v.
E ONE INC; PIERCE MANUFACTURING INC;
SEAGRAVE FIRE APPARATUS LLC;
FEDERAL SIGNAL CORPORATION
Gerald Carroll; Kenneth Crosswhite; Ray Foster;
Charles Hottinger; Lawrence Sheldrake; Richard Sheltra;
Kevin Stuart; Christopher Turner; Robert Welch;
William Whetzel; Terry Williams; *Bern Cappelli, LLP,
Appellants
*(Pursuant F.R.A.P. 12(a))
_____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(E.D. Pa. No. 2-15-cv-00562)
District Judge: Honorable J. Curtis Joyner
Argued on March 22, 2018
Before: SMITH, Chief Judge, HARDIMAN, and ROTH,
Circuit Judges
(Filed: June 20, 2018)
Joseph J. Cappelli [ARGUED]
Shawn M. Sassaman
Bern Cappelli
101 West Elm Street, Suite 630
Conshohocken, PA 19428
Counsel for Appellants
Wayne A. Graver
Michael F. McKeon
Lavin O’Neil Cedrone & DiSipio
190 North Independence Mall West, Suite 500
Philadelphia, PA 19106
2
Jan P. Miller [ARGUED]
Thompson Coburn
One U.S. Bank Plaza
St. Louis, MO 63101
Counsel for Appellee
________________
OPINION
________________
SMITH, Chief Judge.
Plaintiffs are firefighters who allege that they suffered
hearing losses caused by the loud noise emitted by a
manufacturer’s fire sirens. A perfunctory investigation
conducted by the manufacturer during discovery revealed the
firefighters’ lawsuit to be clearly time-barred, and also
revealed that one firefighter had not even suffered hearing loss
attributable to noise exposure. Eventually, Plaintiffs requested
the District Court to dismiss the case with prejudice pursuant
to Federal Rule of Civil Procedure 41(a)(2). In doing so, the
District Court awarded attorneys’ fees and costs in favor of the
manufacturer, making an explicit reference to Plaintiffs’
counsel’s practice of repeatedly suing the fire siren
manufacturer in jurisdictions throughout the country in a
virtually identical fashion.
On appeal, Plaintiffs’ counsel argues that awarding
attorneys’ fees and costs is improper under Rule 41(a)(2).
Plaintiffs’ counsel further challenges the District Court’s
3
consideration of the nationwide scope of counsel’s litigation
tactics—arguing that, in the Rule 41 context, a district court’s
consideration of litigation in other jurisdictions constitutes
reversible error. Plaintiffs’ counsel is wrong on both scores.
Although attorneys’ fees and costs are typically not
awarded when a matter is voluntarily dismissed with prejudice,
we conclude that such an award may be granted when
exceptional circumstances exist. Exceptional circumstances
include a litigant’s failure to perform a meaningful pre-suit
investigation, as well as a repeated practice of bringing
meritless claims and then dismissing them with prejudice after
both the opposing party and the judicial system have incurred
substantial costs. Because such exceptional circumstances are
present in this case, the District Court’s award will be affirmed.
I.
Plaintiffs-Appellants brought suit against Defendant-
Appellee Federal Signal Corporation, alleging that they
suffered occupational hearing loss due to the “omni-directional
design” of Federal Signal’s sirens which “unnecessarily
exposed the firefighters to dangerous levels of sound.” Carroll
Br. 5. As Plaintiffs’ counsel notes in the first sentence of his
opening brief’s recitation of the facts, “[t]his action is but one
of multiple actions, nationwide, involving Plaintiffs’ counsel
and Federal Signal in which firefighters are seeking
compensation for hearing loss caused by Federal Signal’s
mechanical Q fire engine siren and its electronic counter part,
the e-Q2b.” Carroll Br. 9. In its opinion awarding attorneys’
fees and costs, the District Court similarly took notice of the
4
aggregate nature of counsel’s entrepreneurial litigation
strategy:
The history of this case essentially
mirrors that of many other cases instituted by
Plaintiffs’ counsel against Federal Signal and
several of the other original defendants in this
action. As defense counsel testified . . . since
sometime in 2011 when current Plaintiffs’
counsel became lead counsel, there have been
some 1300 cases filed in approximately 23
separate jurisdictions asserting claims for high
frequency hearing loss which was allegedly
caused by exposure to defectively designed fire
sirens. In taking more than 100 plaintiff
depositions across the country, defense counsel
learned that the plaintiffs receive a notice at their
fire departments either on a bulletin board or
receive a letter through some web-based
repository of their unions informing them that
free hearing screening is being offered at the
union hall. In many instances, those letters and
notices have been prepared by Plaintiffs’
counsel’s law firm.
Then when the firefighters who decide to
accept the free hearing test offer go to the union
hall, they go into a room, sometimes two
firefighters at a time, where an audiologist puts
headphones on them, plays pure tones and they
are either directed to raise their hands or push a
button when they hear the sounds. Through that
5
testing, an audiometric result is generated. The
firefighters are not told the results of their tests
and often do not learn the results of their tests
until months or sometimes years later, after they
have become part of a lawsuit. The firefighters
are not referred to a doctor or advised to wear
hearing protection.
Typically, a complaint involving 20–50
plaintiffs per case is then filed within two or
three years often almost to the day of the hearing
screen. Often, the firefighters do not learn that
they are plaintiffs in an action until after suit is
filed and they receive something in the mail from
Plaintiffs’ counsel’s law firm. In one case, a
Pittsburgh firefighter discovered he had been
named as a plaintiff when he heard a television
news story about the lawsuit. Frequently the first
contact a firefighter plaintiff has with someone
from Plaintiffs’ counsel’s law firm occurs at or
around the time of their deposition. Although a
number of these cases have gone to trial with
some resulting in verdicts for the plaintiffs and
some resulting in defense verdicts, there have
been other instances in which Federal Signal’s
attorneys have completed discovery in a matter
and sometimes even taken a case to trial when
Plaintiffs’ counsel dismisses the case.
JA 13–14 (District Court opinion). Although counsel objects
to this portion of the District Court’s opinion as having
inappropriately considered extra-jurisdictional litigation, the
6
thrust of the opinion was more concerned with the history of
the specific case before the District Court. A summary of that
history follows.
In January of 2015, Plaintiffs brought suit against
multiple defendants in the Philadelphia Court of Common
Pleas. Although Federal Signal is now the only remaining
defendant in this matter, a previous co-defendant removed this
civil action to the Eastern District of Pennsylvania in February
of 2015.1 Federal Signal conducted depositions of Plaintiffs
from late March to early April of 2015. These depositions
revealed two fatal flaws in Plaintiffs’ case.
First, deposition testimony revealed all Plaintiffs’
claims to be clearly time-barred. JA 15. As the District Court
explained:
[T]his case is somewhat unique in that
[Plaintiffs’] Fire Department has, since the
1990’s, conducted routine annual audiological
screenings of all of its firefighters as part of their
required annual physical examinations. As a
result, nearly all of the plaintiffs in this suit had
been advised many years earlier that they had
hearing loss that was very probably caused by the
1
In addition to suing Federal Signal, the Plaintiffs sued
three other manufacturers: E-One, Incorporated, Pierce
Manufacturing, Inc., and Seagrave Fire Apparatus, LLC.
JA 64–65. Plaintiffs later voluntarily dismissed with
prejudice all of their claims against those three companies.
7
loud noises to which they were exposed on the
job and that they should be wearing hearing
protection. Consequently, Plaintiffs’ claims were
obviously time-barred when they filed in or
around January 2015.
JA 14–15 (footnote omitted). The second fatal flaw uncovered
during discovery was that one of the Plaintiffs, Christopher
Turner, did not suffer from hearing loss attributable to noise
exposure.2 JA 15 n.1. As the District Court astutely pointed out,
“had Plaintiffs’ counsel spoken with the individual plaintiffs or
conducted any other type of investigation prior to commencing
this litigation, [counsel] would have learned these facts.” JA
15.
After discovery revealed these flaws in Plaintiffs’ case,
Federal Signal wrote to Plaintiffs’ counsel on May 10, 2016,
demanding voluntary dismissal with prejudice and informing
Plaintiffs’ counsel that Federal Signal would be seeking fees
and costs attributable to defending against Turner’s baseless
claims. JA 271–73. Plaintiffs’ counsel countered with an offer
to voluntarily dismiss all of the claims with prejudice so long
as Federal Signal agreed to waive costs for all plaintiffs except
for Turner. On May 23, 2016, Federal Signal rejected that
offer, countering with a proposal to stipulate to a voluntary
dismissal upon repayment of the then still nominal costs
attributable to litigating the meritless matter, as well as a
2
Although Turner’s audiograms revealed that he suffered
from hearing loss, it was not hearing loss attributable to
loud noises.
8
payment of fees associated with defending against Turner’s
allegations.3 JA 274–75. In its March 23rd letter, Federal Signal
explained that it had rejected counsel’s offer, choosing instead
to counter-offer, because of Plaintiffs’ counsel’s “failure to
conduct any diligence regarding the legal viability of the
individual cases or to otherwise properly screen in the first
place.” JA 274.
Plaintiffs’ counsel ignored Federal Signal’s counter-
offer, and on May 31, 2016—without seeking leave of the
District Court—filed a “Notice of Dismissal,” asking the Clerk
of Court to “mark the claims of all Plaintiffs as being dismissed
without prejudice to all parties in this action.” JA 77 (emphasis
added). As we explain in greater detail below, this “Notice of
Dismissal” was improper under Rule 41.4 By that point,
3
Federal Signal’s counter-offer sought $7,871.10 in fees
and costs, or approximately three percent of the
$255,646.95 that it ultimately requested the District Court
to award. The District Court awarded $127,823.47, which
was half of that ultimate request. Neither side challenges
the amount of the District Court’s award on appeal. JA 4,
18.
4
While Rule 41(a)(2) permits a plaintiff to voluntarily
dismiss a claim with a court’s order, Rule 41(a)(1) permits
a plaintiff to voluntarily dismiss a claim without a court
order if the plaintiff does so “before the opposing party
serves either an answer or a motion for summary
judgment,” or with a “stipulation of dismissal signed by
9
discovery had already closed, all of the defendants had
answered the complaint, and the parties had not agreed to a
stipulation of dismissal.
One month later, on June 30, 2016, Federal Signal filed
a motion seeking fees and costs, and further challenging
Plaintiffs’ counsel’s ability to “voluntarily” dismiss the
firefighters’ claims without prejudice. JA 79–89. On July 8,
Plaintiffs’ counsel opposed Federal Signal’s request for fees
and costs, but was by that point agreeable to dismissing the
matter with prejudice. JA 7, 447–50. Curiously, on July 21, the
Clerk of Court entered an order dismissing the action “with
prejudice, pursuant to agreement of counsel without costs.” JA
459. It is unclear who informed the Clerk of Court that the
parties had “agreed” to a dismissal without costs, as Federal
Signal had repeatedly requested attorneys’ fees and costs in
writing, and had already filed the instant action to collect those
fees and costs. The District Court vacated the Clerk’s order, as
erroneously entered, on July 27, 2016.
On September 6, 2016, the District Court issued a
memorandum concluding that, because the defendants had
already filed answers to the complaint prior to Plaintiffs’
counsel’s May 31 “Notice of Dismissal,” the firefighters “no
longer had the option to voluntarily dismiss” their claims
without the District Court’s permission. JA 464. The District
Court explained that Plaintiffs had therefore “clearly erred in
unilaterally filing a notice addressed to the Clerk of Court
all parties who have appeared.” FED. R. CIV. P.
41(a)(1)(A)(i–ii).
10
asking that their claims be marked as being dismissed without
prejudice.” JA 464. Nonetheless, the District Court explained
further that the “facts certainly militate in favor” of granting
dismissal under Federal Rule of Civil Procedure 41(a)(2). JA
467. That Rule permits a court to dismiss an action “at the
plaintiff’s request . . . on terms that the court considers proper.”
FED. R. CIV. P. 41(a)(2). In order to develop the proper terms
for dismissal, the District Court stayed Federal Signal’s motion
for fees and costs pending an evidentiary hearing. JA 467–70.
Hearings were held on both November 1, 2016 and December
20, 2016. JA 532, 656. A defense attorney for Federal Signal
testified; Plaintiffs’ counsel chose not to offer any witnesses.
On April 25, 2017, the District Court granted Federal
Signal’s Motion for Fees and Costs. JA 5. The memorandum
accompanying that order set out the procedural history of the
case, including the District Court’s determination in its
September 6, 2016 decision that Plaintiffs had erred in filing
the notice of dismissal without prejudice. The District Court
additionally explained that “Federal Signal had adduced
sufficient evidence that Plaintiffs’ counsel had failed to
undertake any pre-suit investigation into the viability of the
claims asserted.” JA 8.
The District Court then recognized the “general rule”
that attorneys’ fees are typically not available “when a plaintiff
dismisses an action with prejudice absent exceptional
circumstances,” JA 10, and further explained that such
“circumstances include an abuse of the judicial process or bad
faith conduct.” Id. The Court concluded that “there is no
question that Rule 41 authorizes a court to award costs and
attorneys’ fees as a condition of voluntary dismissal and
11
numerous courts have done so where a voluntary dismissal has
been granted.” JA 11.
Recognizing that any fee award must be compensatory
rather than punitive, and mindful that the dismissal was with
prejudice, the District Court awarded attorneys’ fees and costs
in the amount of $127,823.47, only half of the amount sought
by Federal Signal. JA 16–18. The Court directed that the action
“shall be dismissed with prejudice.” JA 18–19. This timely
appeal followed.
II.
The District Court exercised jurisdiction pursuant to 28
U.S.C. § 1332 and § 1441. We have final order jurisdiction
under 28 U.S.C. § 1291. We review a Rule 41(a)(2) order
granting an award of attorneys’ fees and costs for an abuse of
discretion. Westinghouse Elec. Corp. v. United Elec. Radio &
Mach. Workers of Am., 194 F.2d 770, 771 (3d Cir. 1952). We
review de novo any questions of law that underlie a district
court’s Rule 41(a)(2) analysis. See AeroTech, Inc. v. Estes, 110
F.3d 1523, 1527 (10th Cir. 1997).
III.
Though Plaintiffs’ counsel originally intended his May
31, 2016 “Notice of Dismissal” to be filed pursuant to Federal
Rule of Civil Procedure 41(a)(1), he now concedes “this was
improper and the action should have been dismissed pursuant
to Rule 41(a)(2).” Carroll Br. 22. We agree.
Rule 41(a) provides:
12
(a) Voluntary Dismissal.
(1) By the Plaintiff.
(A) Without a Court Order. Subject
to Rules 23(e), 23.1(c), 23.2, and 66
and any applicable federal statute, the
plaintiff may dismiss an action
without a court order by filing:
(i) a notice of dismissal before the
opposing party serves either an
answer or a motion for summary
judgment; or
(ii) a stipulation of dismissal
signed by all parties who have
appeared.
(B) Effect. Unless the notice or
stipulation states otherwise, the
dismissal is without prejudice. But if
the plaintiff previously dismissed any
federal- or state-court action based on
or including the same claim, a notice
of dismissal operates as an
adjudication on the merits.
(2) By Court Order; Effect. Except as
provided in Rule 41(a)(1), an action may
be dismissed at the plaintiff’s request only
by court order, on terms that the court
13
considers proper. If a defendant has
pleaded a counterclaim before being
served with the plaintiff’s motion to
dismiss, the action may be dismissed over
the defendant’s objection only if the
counterclaim can remain pending for
independent adjudication. Unless the
order states otherwise, a dismissal under
this paragraph (2) is without prejudice.
FED. R. CIV. P. 41.5 Because Federal Signal had already filed
its answer prior to Plaintiffs’ counsel’s May 31, 2016 “Notice
to Dismiss,” and had not stipulated to dismissal, Rule 41(a)(1)
was not applicable. This is because Rule 41(a)(1) requires that
5
The current text of Rule 41(a)(2) was the product of the
2007 amendments to the civil rules. The predecessor to
this rule provided: “An action shall not be dismissed at the
plaintiff’s instance save upon order of the court and upon
such terms and conditions as the court deems proper.” This
change was considered non-substantive. See 9 Charles
Alan Wright & Arthur R. Miller, Federal Practice and
Procedure, § 2361 (3d ed. 2008) (“Federal Rule 41 has
been amended seven times since it originally was
promulgated in 1938. The amendments, however, have
been substantively insignificant. It is doubtful if a single
case would have been decided differently if the rule stood
as it did in 1938 . . .”). Accordingly, we consider the case
law pertaining to the earlier version of this Rule to be
instructive.
14
such a filing be submitted either “before the opposing party
serves . . . an answer,” Rule 41(a)(1)(A)(i), or be filed along
with “a stipulation of dismissal signed by all parties who have
appeared.” Rule 41(a)(1)(A)(ii). In light of Rule 41(a)(1)’s
inapplicability, Plaintiffs’ counsel’s “Notice to Dismiss”
properly falls within the scope of Rule 41(a)(2), which allows
an action to be “dismissed at the plaintiff’s request only by
court order, on terms that the court considers proper.” The
District Court therefore properly considered dismissal under
Rule 41(a)(2) rather than Rule 41(a)(1).
IV.
Under Rule 41(a)(2), the District Court was permitted
to dismiss the case “on terms that the court considers proper.”
FED. R. CIV. P. 41(a)(2). In exercising that broad grant of
discretion, the District Court concluded that its terms would
include an award of attorneys’ fees and costs. As noted above,
in coming to this conclusion the District Court recognized the
“general rule [that] defendants are not permitted to recover fees
when a plaintiff dismisses an action with prejudice absent
exceptional circumstances.” JA 10. This general rule
acknowledges that, in the ordinary case, dismissal with
prejudice protects a defendant from otherwise repetitive
litigation, whereas dismissal without prejudice leaves a
defendant at risk of re-litigating dismissed issues. But this
general rule was not applied to the case at hand because, as the
District Court put it, “this case is unusual and it therefore calls
for an unusual solution.” JA 18.
15
A.
This Court has yet to provide guidance as to when
awarding attorneys’ fees and costs is appropriate under a Rule
41(a)(2) dismissal with prejudice. We have, however,
acknowledged a district court’s ability to attach conditions to
Rule 41(a)(2) dismissal orders. In Raab v. City of Ocean City,
we considered a district court’s ability to attach two terms to
its order of dismissal: an explicit incorporation of a settlement
agreement between the parties, and the requirement that the
district court retain jurisdiction over that agreement. Raab v.
City of Ocean City, 833 F.3d 286, 294 (3d Cir. 2016). An
appellee in that case argued that the district court’s sua sponte
retention of jurisdiction was invalid because the parties did not
consent to such a retention of jurisdiction over their agreement.
In addressing that argument we noted a distinction between
Rule 41(a)(1) and Rule 41(a)(2). With the former, the parties’
consent to a district court’s retention of jurisdiction is typically
sought; with the latter, “the Supreme Court has indicated [that]
district courts may retain jurisdiction without the parties’
consent.” Id. at 296.
In Raab, we referred to Kokkonen v. Guardian Life
Insurance Co. of America, in which the Supreme Court
explained that “[w]hen the dismissal is pursuant to [Rule]
41(a)(2) . . . the parties’ compliance with the terms of the
settlement contract (or the court’s ‘retention of jurisdiction’
over the settlement contract) may, in the court’s discretion, be
one of the terms set forth in the order.” Kokkonen v. Guardian
Life Insurance Co. of America, 511 U.S. 375, 381 (1994). The
Raab panel declared that “Kokkonen made clear that, for court
dismissals made pursuant to [Rule] 41(a)(2), a district court
16
may, in its discretion, ‘attach conditions to the parties’
stipulation of dismissal’—including the retention of
jurisdiction over the settlement agreement.” Raab, 833 F.3d at
296 (citation omitted).
Other courts have more directly addressed a district
court’s ability to award attorneys’ fees and costs as a proper
term of dismissal under Rule 41(a)(2).6 In doing so, courts have
often recognized the same general principle that the District
Court recognized in this case: although attorneys’ fees and
6
One persuasive example comes from the Supreme Court
of the State of Hawai‘i, where the Court held that, under
Hawai‘i District Rules of Civil Procedure (“HDCRCP”)
Rule 41(a)(2), “a trial court has discretion to impose terms
and conditions, including attorney’s fees and costs” as
long as the court provides the plaintiff with the opportunity
to either withdraw the request for dismissal or accept the
court’s terms. Tagupa v. VIPDesk, 353 P.3d 1010, 1020
(Haw. 2015). The Tagupa Court noted that “[w]hile this
court has not previously addressed whether attorney’s fees
may be imposed as a term or condition of voluntary
dismissal under HDCRCP Rule 41(a)(2), there is abundant
authority interpreting comparable provisions of the
Federal Rules of Civil Procedure,” and since HDCRCP
Rule 41(a)(2) was “essentially identical” to FRCP Rule
41(a)(2), “cases interpreting and applying HRCP Rule
41(a)(2) and FRCP Rule 41(a)(2) may be consulted for
guidance in interpreting HDCRCP Rule 41(a)(2).”
Tagupa, 353 P.3d at 1018.
17
costs may be frequently awarded when dismissal is without
prejudice, attorneys’ fees and costs are not typically
appropriate when dismissal is with prejudice. Importantly,
however, these cases do not hold that fees can never be
awarded in light of extraordinary circumstances. Indeed, courts
have held that awarding attorneys’ fees and costs as a term of
a Rule 41(a)(2) dismissal may be appropriate where such fees
and costs were unnecessarily incurred.7
One case applying the general rule against awarding
attorneys’ fees and costs when dismissal is with prejudice
comes from the Sixth Circuit. In Smoot v. Fox, 353 F.2d 830
(6th Cir. 1965), the Court explained that “cases permit
allowance of attorney’s fees against the dismissing party where
the action is dismissed without prejudice.” Smoot, 353 F.2d at
833. This was contrasted against “dismissal with prejudice,”
which “finally terminates the cause” meaning that “the
defendant cannot be made to defend again.” Id. After noting
this distinction, the Sixth Circuit cast doubt on the
appropriateness of awarding attorneys’ fees and costs when
7
For example, in GAF Corp. v. Transamerica Insurance
Co., 665 F.2d 364, 367 (D.C. Cir. 1981) (footnote
omitted), the D.C. Circuit explained that the purpose of the
“terms and conditions” clause in an earlier version of Rule
41(a)(2) was “to protect a defendant from any prejudice or
inconvenience that may result from a plaintiff’s voluntary
dismissal. Attorneys’ fees and costs are commonly
awarded as one such ‘term and condition’ for a voluntary
dismissal, for those costs were undertaken unnecessarily
in such a case.”
18
dismissal was with prejudice, citing to a district court’s holding
“that attorney’s fees are not proper where the dismissal is with
prejudice.” Id. (citing Lawrence v. Fuld, 32 F.R.D. 329 (D. Md.
1963)).
The Seventh Circuit has similarly questioned the
appropriateness of awarding attorneys’ fees and costs when
dismissal is with prejudice. In Cauley v. Wilson, 754 F.2d 769
(7th Cir. 1985), the Seventh Circuit considered a challenge to
an award of attorneys’ fees granted in response to an oral Rule
41(a)(2) motion for voluntary dismissal without prejudice. The
Court noted that “[f]ees are not awarded when a plaintiff
obtains a dismissal with prejudice because the ‘defendant
cannot be made to defend again.’” Cauley, 754 F.2d at 772
(quoting Smoot, 353 F.2d at 833). This was to be distinguished
from “the case of a dismissal without prejudice” since there
“the defendant may have to defend again at a later time and
incur duplicative legal expenses.” Id. Applying “these general
standards” to the fees awarded in the motion for voluntary
dismissal without prejudice then before the Court, the Seventh
Circuit explained that it would “affirm the fees award unless
the award constitutes an abuse of discretion by the district
court.” Id. But because the “request for attorney’s fees lacked
sufficient detail to permit the district court to determine a
reasonable award,” the Seventh Circuit remanded the case so
that the district court could “receive additional evidence and to
reconsider the fees issue.”8 Id.
8
In what now seems to be an almost quaint reference, the
Seventh Circuit also “question[ed] . . . whether a lawyer
19
While Smoot and Cauley illustrate a general hesitation
to award attorneys’ fees and costs when dismissal is with
prejudice, we read these cases as simply stating a general rule.
Indeed, this general rule is one that courts in this circuit must
similarly adhere to. But our recognition of this general rule
does not end our analysis. As with many areas of the law,
limited and principled exceptions to general rules often
develop over time.
Other circuits have distinguished Rule 41(a)(2)
dismissals with and without prejudice in a more textured
manner. These courts have explained that, although a dismissal
with prejudice does not ordinarily warrant an award of fees and
costs, there are times when such an award will be appropriate.
For example, in Colombrito v. Kelly, 764 F.2d 122 (2d Cir.
1985), the Second Circuit explained that although an award of
attorneys’ fees and costs is not ordinarily paired with a
dismissal with prejudice, the Second Circuit’s “reading of Rule
41(a)(2) does not altogether foreclose fees in the event of a
dismissal with prejudice.” Id. at 134. Specifically, “such an
award might be one of the appropriate ‘terms or conditions’
authorized by Rule 41(a)(2), e.g., if a litigant had made a
practice of repeatedly bringing potentially meritorious claims
and then dismissing them with prejudice after inflicting
substantial litigation costs on the opposing party and the
judicial system.” Id. at 134–35. Because the Second Circuit
concluded that such circumstances were not present in the case
less than three years out of law school was justified in
charging $100 per hour in 1975.” Cauley, 754 F.2d at 772.
20
before it, the Court reversed the district court’s award. Id. at
135.
Similarly, in AeroTech, Inc. v. Estes, the Tenth Circuit
considered whether a district court had “abuse[d] its discretion
in declining to award attorneys’ fees as a ‘term or condition’
under Rule 41(a)(2) when a plaintiff dismisse[d] its action with
prejudice.” AeroTech, 110 F.3d 1523, 1528 (10th Cir. 1997).
The Tenth Circuit began its analysis by noting that it
“continue[d] to adhere to the rule that a defendant may not
recover attorneys’ fees when a plaintiff dismisses an action
with prejudice absent exceptional circumstances.” Id. That
court went on to clarify that “[o]f course, when a litigant makes
a repeated practice of bringing claims and then dismissing
them with prejudice after inflicting substantial litigation costs
on the opposing party and the judicial system, attorneys’ fees
might be appropriate.” Id. Because the Tenth Circuit found that
“such an exceptional circumstance [wa]s not present,” the
Court “conclude[d] that the district court did not abuse its
discretion in denying attorneys’ fees under Rule 41(a)(2).”9 Id.
9
The Tenth Circuit has reaffirmed its rationale in AeroTech.
Steinert v. Winn Grp., Inc., 440 F.3d 1214, 1222 (10th Cir.
2006) (“But if the dismissal is with prejudice, attorney fees
may be imposed under Rule 41(a)(2) only in ‘exceptional
circumstances.’ AeroTech, 110 F.3d at 1528. An example of
such a circumstance is ‘when a litigant makes a repeated
practice of bringing claims and then dismissing them with
prejudice after inflicting substantial litigation costs on the
opposing party and the judicial system.’” (citation omitted));
Ryan v. Donley, 511 F. App’x 687, 692 (10th Cir. 2013)
21
We conclude, in step with our colleagues on the Second
and Tenth Circuits, that although attorneys’ fees and costs
should not typically be awarded in a Rule 41(a)(2) dismissal
with prejudice, exceptional circumstances may sometimes
warrant granting such an award. The facts of the instant case
exemplify such exceptional circumstances: a litigant’s failure
to perform a meaningful pre-suit investigation, coupled with a
litigant’s repeated practice of bringing claims and dismissing
them with prejudice after inflicting substantial costs on the
opposing party and the judicial system.
B.
As to a litigant’s failure to perform a meaningful pre-
suit investigation, we start by noting that this standard
constitutes a high bar for litigants to meet. The run-of-the-mill
case will not meet such a bar, even when a jurist believes that
a more thorough pre-suit investigation should have been
conducted. The instant case, however, provides an example of
the very sort of exceptional circumstances warranting an award
of attorneys’ fees and costs, despite a dismissal with prejudice.
We turn first to the circumstances surrounding Turner,
a plaintiff who did not even suffer the type of hearing loss
alleged in the underlying lawsuit. Had Plaintiffs’ counsel even
looked at Turner’s audiograms, he would have recognized the
(unpublished) (“Although AeroTech acknowledged that a fee
award ‘might be appropriate’ if there were exceptional
circumstances, this case does not present any such exceptional
circumstances.”) (internal citation omitted); see also JA 10–11
(citing Steinert, 440 F.3d at 1222).
22
deficiency in the claim. JA 260 (“None of [Turner’s] hearing
tests, including the November 28, 2011 hearing test sponsored
by [Plaintiffs’ counsel’s law firm] shows any features
consistent with noise-induced hearing loss.”). Plaintiffs’
counsel conceded this point at oral argument. Oral Argument
Transcript at 12–13 (“Judge . . . you can have high frequency
hearing loss that an expert would say is not noise related . . .
but caused by conduction . . . [as] somebody who looks at
audiograms I will tell you that [Turner’s hearing loss] is most
likely caused by conductive hearing loss.”); id. at 12
(“[C]learly [Turner’s] audiogram was more of a conductive
nature.”).
When Federal Signal wrote to Plaintiffs’ counsel on
May 10, 2016, demanding voluntary dismissal with prejudice,
Federal Signal alerted Plaintiffs’ counsel to the fact that
Turner’s audiograms revealed that he “does not have noise-
induced hearing loss.” JA 273. Federal Signal further wrote
that, had Plaintiffs’ counsel “reviewed Turner’s audiogram at
any point before filing this lawsuit, you would have realized
this.” JA 273. Moreover, Federal Signal’s letter memorializes
a conversation that had occurred between opposing counsel
“[o]n the morning of March 23, 2016, while there was still
sufficient time to cancel” Turner’s deposition. JA 273. In that
conversation, Federal Signal explained to Plaintiffs’ counsel
that if he “declined to dismiss Turner and instead forced
[Federal Signal] to go forward with his deposition, [Federal
Signal] would seek our fees and costs.” JA 273. Plaintiffs’
counsel, fully aware that Turner had no viable claim, still
forced Federal Signal to go forward with depositions.
23
But though the circumstances surrounding Turner
provide the most egregious evidence of counsel’s failure to
conduct a meaningful pre-suit investigation, it is not the only
evidence supporting an extraordinary circumstances
determination. As counsel for Federal Signal noted in one of
the evidentiary hearings conducted by the District Court,
depositions revealed that many of the plaintiffs freely
acknowledged that they had participated in annual hearing
checks for many years before the complaint was filed, during
which they were notified that loud noise likely caused their
hearing loss. JA 554. Plaintiffs’ counsel did not take the
opportunity to put on any evidence to refute this testimony
during either of the two evidentiary hearings conducted by the
District Court. JA 15 (referring to the evidence which was
“undisputed and wholly uncontradicted by the plaintiffs”). Nor
does it appear counsel could have done so, since even a brief
discussion with these clients in advance of filing would have
alerted counsel to the reality that Plaintiffs knew about their
hearing loss for multiple years in advance, making their claims
obviously time-barred.10
10
Plaintiffs’ complaint sought to hold Defendants either
strictly or negligently liable for damages allegedly caused by
Defendants’ products. Under Pennsylvania law, Plaintiffs
would have ordinarily been required to commence their actions
within two years of their injury. 42 PA. CONS. STAT. §§
5521(b), 5524(2). Pennsylvania, however, recognizes the
“discovery rule,” which tolls the running of a statute of
limitations for “that period of time during which a party who
has not suffered an immediately ascertainable injury is
24
One plaintiff, for example, confirmed that he had been
aware of his hearing results since 2011, explaining that his
results were “[n]ot good,” JA 210, and that he had been
referred to a specialist because he was losing his hearing. JA
211. Similarly, Gerald Carroll confirmed that he had been told
of his hearing loss since at least 2011. JA 231–32. Indeed,
Carroll learned that his hearing loss was likely attributable to
his job as a firefighter no later than 2011. JA 232. The
depositions of other plaintiffs revealed similar issues.11
reasonably unaware he has been injured, so that he has
essentially the same rights as those who have suffered such an
injury.” Fine v. Checcio, 870 A.2d 850, 858 (Pa. 2005). In light
of the discovery rule, Plaintiffs might have been excused from
commencing their claims if they had not learned of their injury
until much later. But as the District Court noted, since “nearly
all of the plaintiffs in this suit had been advised many years
earlier that they had hearing loss that was very probably caused
by the loud noises to which they were exposed on the job and
that they should be wearing hearing protection . . . Plaintiffs’
claims were obviously time-barred when they were filed in or
around January, 2015.” JA 14–15 (footnote omitted).
Plaintiffs’ counsel concedes that his clients’ claims were time-
barred. Carroll Br. 31 (“Clearly Dr. Malomo’s testimony was
enough to lead the trier of fact [to find] that both prongs of the
discovery rule test were satisfied and that action was no longer
tenable.”).
11
For example, one plaintiff noticed his hearing loss when he
was riding ambulances in either 1975 or 1976. JA 168. Another
plaintiff acknowledged that his ringing in the ears started
25
It is unremarkable that Plaintiffs did not exhibit an
understanding of Pennsylvania tort law sufficient to permit
them to conclude that their claims were time-barred. Any
plaintiff would have likely learned of that reality only after
discussing the matter with counsel. In stark contrast to the
routine discussions that an attorney should have with a client
before filing suit, Carroll clarified in his deposition that he
learned of his participation in this lawsuit only after he received
an e-mail from Plaintiffs’ law firm. JA 227. Such an
uninformed rush to the courthouse skirts the norms of proper
legal practice in pursuit of the fruits of aggregation. It should
not be condoned.
Plaintiffs’ counsel argues that he was not put on notice
of the time-barred nature of his clients’ claims until the
deposition of Dr. Malomo, a medical director of the police and
fire clinic that provided annual hearing tests to Plaintiffs.
Carroll Br. 6; JA 234–37. But even if true, it only provides
further evidence of counsel’s failure to conduct a meaningful
pre-suit investigation. Rather than wait for the deposition of
Dr. Malomo, counsel could simply have asked his clients
during a routine interview when they had first discovered that
they were suffering from hearing loss attributable to their jobs
as firefighters. By failing to do so, counsel shifted the costs of
a pre-suit investigation onto Federal Signal by requiring
Federal Signal to take depositions in order to ask Plaintiffs the
within the last ten years, and that he had been told at his yearly
physicals over those years that he had failed his hearing tests.
JA 183–85.
26
very questions that their own lawyer should have asked prior
to filing suit.
Plaintiffs’ counsel argues that the District Court
inappropriately took him “to task for allegedly not conducting
a proper investigation even though all parties recognize that
[Plaintiffs] are subject to a hearing program that has no equal
in any of the fire departments from which these [nationwide]
claims have arisen.” Carroll Br. 30. Not so. The fact that
Plaintiffs’ fire department conducts annual hearing
examinations, unlike other departments throughout the
country, does not excuse counsel from speaking to his own
clients before filing a lawsuit on their behalf. It highlights the
importance that counsel treat each individual case in this
aggregate litigation as just that, its own individual case. Neither
this panel nor the District Court has pronounced judgment as
to whether Plaintiffs’ counsel exhibited the characteristics of a
“good” or “bad” lawyer during this litigation. What we can say,
however, is that this case is an example of some of the excesses
of modern mass tort litigation—when attention to an individual
case is sacrificed for the sake of pursuing mass filings. In
granting an award, the District Court appropriately offset some
of the costs incurred by Defendants which resulted from
Plaintiffs’ counsel’s failure to pay attention to detail.
C.
In awarding attorneys’ fees and costs, the District
Court’s analysis did more than take account of the lack of
meaningful pre-suit preparation. Specifically, the District
Court considered circumstances that extended beyond the
geographic boundaries that make up the Eastern District of
27
Pennsylvania. Plaintiffs’ counsel makes much of this portion
of the District Court’s opinion, going as far as stating that the
District Court “appoint[ed] itself the policeman of this
nationwide litigation” by “unilaterally usurp[ing] the powers
of the other courts.” Carroll Br. 25–26. Putting aside counsel’s
overheated rhetoric, we conclude that the District Court did not
abuse its discretion when it explicitly considered the entirety
of this “nationwide litigation.”
Far from seeking “any excuse to impose[] what would
be the equivalent of sanctions on Plaintiff[s’] counsel,” Carroll
Br. 25, the District Court properly took notice of how the case
before it fit within the larger network of cases brought by
Plaintiffs’ counsel throughout the country. In doing so, the
District Court acted in accord with the reasoning of the Second
Circuit in Colombrito, and the Tenth Circuit in AeroTech—
courts that have explicitly made clear that attorneys’ fees and
costs may be appropriately awarded, despite dismissal with
prejudice, in those rare instances when a litigant repeatedly
brings and dismisses claims with prejudice after inflicting
substantial costs on the opposing party and the judicial
system.12 The District Court concluded that that exception
12
Colombrito v. Kelly, 764 F.2d 122, 134–35 (2d Cir. 1985)
(“Conceivably such an award might be one of the appropriate
‘terms or conditions’ authorized by Rule 41(a)(2), e.g., if a
litigant had made a practice of repeatedly bringing potentially
meritorious claims and then dismissing them with prejudice
after inflicting substantial litigation costs on the opposing party
and the judicial system.”); AeroTech, Inc. v. Estes, 110 F.3d
1523, 1528 (10th Cir. 1997) (“Of course, when a litigant makes
28
should apply to the case at hand, and we conclude that the
Court did not abuse its discretion in doing so. See, e.g., JA 14
(referring to “instances in which Federal Signal’s attorneys
have completed discovery in a matter and sometimes even
taken a case to trial when Plaintiffs’ counsel dismisses the
case.”).
Plaintiffs’ counsel attempts to limit this exception to the
general rule against awarding attorneys’ fees and costs.
Specifically, Plaintiffs’ counsel argues that a district court
should only be permitted to inquire into abusive litigation
practices that occur within the district court’s own jurisdiction.
See Carroll Br. 24. To the extent that our sister circuits were
unclear on this point, we take this opportunity to clarify that a
district court in this Circuit need not restrict its inquiry into
litigation activity to any single jurisdiction. In cases like the
one at hand, where counsel has made a habit of filing
essentially identical claims in multiple jurisdictions, and has
voluntarily dismissed those claims after their opposing party
(and the judiciary) have incurred substantial costs, a district
court may, in its discretion, give weight to such facts when
considering terms of dismissal under Rule 41(a)(2). To hold
otherwise would be to permit counsel to frivolously expose
their adversaries to unnecessary litigation costs. We will not
a repeated practice of bringing claims and then dismissing
them with prejudice after inflicting substantial litigation costs
on the opposing party and the judicial system, attorneys’ fees
might be appropriate.”).
29
require district courts to wear blinders when exercising the
broad discretion afforded them under Rule 41(a)(2).
Finally, Plaintiffs’ counsel argues in the alternative that
if “evidence of other actions is somehow relevant to the District
Court’s decision . . . . Plaintiffs’ counsel would direct the
Court’s attention to the fact that Federal Signal has sought fees
and costs in Philadelphia Common Pleas for improper
dismissal and its motions were denied by the Court.” Carroll
Reply Br. 9. As Plaintiffs’ counsel put it in his opening brief,
“[l]ogically, if the Court accepted the evidence, proffered by
Federal Signal of Plaintiffs’ counsel’s litigation strategy in
other jurisdictions, it should have taken heed of the results of
Federal Signal’s motions for fees and costs in those
jurisdictions.” Carroll Br. 21. Perhaps so. But while it might be
worthwhile in a particular case for a district court to consider
whether other courts have found it appropriate to award fees
and costs, a district court is not bound by the decisions of other
state and federal trial courts throughout the country. After
conducting two evidentiary hearings in order to determine the
appropriateness of awarding attorneys’ fees and costs in this
case, the District Court was free to exercise its discretion in
deciding whether granting the request for fees and costs was
appropriate.
V.
Although attorneys’ fees and costs are typically not
awarded when a matter is voluntarily dismissed with prejudice
under Rule 41(a)(2), we conclude that such an award may be
granted when exceptional circumstances are demonstrated.
Exceptional circumstances include a litigant’s failure to
30
perform a meaningful pre-suit investigation, and a repeated
practice of bringing claims and dismissing them with prejudice
after inflicting substantial costs on the opposing party and the
judicial system. As those exceptional circumstances were
present in this case, we conclude that the District Court did not
abuse its discretion in awarding attorneys’ fees and costs. The
District Court’s judgment will be affirmed.
31