Best Industries Inc v. CIS BIO Intl Inc ( 1998 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BEST INDUSTRIES, INCORPORATED,
Plaintiff-Appellant,
v.
CIS BIO INTERNATIONAL,
INCORPORATED; CIS-US,
No. 97-1217
INCORPORATED; JEAN-PIERRE CABOCEL;
CHARLES PANNECIERE; DAVID B.
READER; NORTH AMERICAN
SCIENTIFIC, INCORPORATED; MICHAEL
CUTRER,
Defendants-Appellees.
BEST INDUSTRIES, INCORPORATED,
Plaintiff-Appellee,
v.
NORTH AMERICAN SCIENTIFIC,
INCORPORATED; MICHAEL CUTRER,
Defendants-Appellants,
No. 97-1412
and
CIS BIO INTERNATIONAL,
INCORPORATED; CIS-US,
INCORPORATED; JEAN-PIERRE CABOCEL;
CHARLES PANNECIERE; DAVID B.
READER,
Defendants.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Albert V. Bryan, Jr., Senior District Judge.
(CA-96-737-A)
Argued: December 3, 1997
Decided: February 2, 1998
Before WILKINS and MICHAEL, Circuit Judges, and
BUTZNER, Senior Circuit Judge.
_________________________________________________________________
Affirmed in part and vacated and remanded in part by unpublished
per curiam opinion.
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COUNSEL
ARGUED: Peter Christopher Grenier, GINSBURG, FELDMAN &
BRESS, CHARTERED, Washington, D.C., for Appellant. William C.
Brashares, MINTZ, LEVIN, COHN, FERRIS, GLOVSKY &
POPEO, P.C., Washington, D.C.; Michael John Lyle, D'ANCONA &
PFLAUM, Chicago, Illinois, for Appellees. ON BRIEF: John E.
Schwarz, GINSBURG, FELDMAN & BRESS, CHARTERED,
Washington, D.C.; Craig C. Reilly, RICHARDS, MCGETTIGAN,
REILLY & WEST, P.C., Alexandria, Virginia, for Appellant. Wil-
liam A. Davis, MINTZ, LEVIN, COHN, FERRIS, GLOVSKY &
POPEO, P.C., Washington, D.C., for Appellees CIS-US and Reader;
Kathleen H. Klaus, D'ANCONA & PFLAUM, Chicago, Illinois;
David G. Fiske, Michael J. Wendorf, SHAW, PITTMAN, POTTS &
TROWBRIDGE, Washington, D.C., for Appellees North American
Scientific and Cutrer.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
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OPINION
PER CURIAM:
The plaintiff-appellant, Best Industries, Inc. (Best), appeals the
determination of the amount of attorneys' fees and costs awarded to
defendants-appellees, CIS-BIO International, Inc. and CIS-US, Inc.
(collectively, CIS) and North American Scientific, Inc. (NAS), as a
condition for allowing Best to dismiss its complaint without preju-
dice. NAS cross-appeals the determination that it was not a prevailing
party eligible to receive attorneys' fees under the Virginia Uniform
Trade Secrets Act. We vacate the order dismissing the complaint with
prejudice, vacate the order determining the fees and costs awarded to
CIS and NAS, and remand for a redetermination of the awardable fees
and costs. We affirm the determination that NAS is not entitled to
attorneys' fees under the Virginia Uniform Trade Secrets Act.
I.
Best, a Virginia manufacturer of medical supplies, produces vari-
ous products for brachytherapy, a medical treatment for cancer which
involves the insertion of radioactive "seeds" either close to or inside
a tumor for controlled radiation therapy. Recently, Best developed the
technology for a new type of brachytherapy seed made of radioactive
iodine-125. Best also developed a proprietary analysis of the
brachytherapy market to assist in marketing the new product.
In 1995 Best entered into negotiations for the sale of its technology
or business to CIS. The negotiations focused on the manufacture and
sale of the brachytherapy seeds. Best and CIS entered into a "non-
disclosure, non-use confidentiality agreement" that bound CIS to keep
confidential any trade secrets disclosed by Best during the negotia-
tions. Best alleges that after CIS received proprietary information
from Best, CIS broke off the negotiations. Shortly thereafter, Best
claims, CIS joined with NAS to manufacture the brachytherapy seeds.
Best also claims that CIS used its (Best's) protected pricing and mar-
keting information in developing a strategy to enter the brachytherapy
seed market.
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On May 28, 1996, Best sued CIS and NAS under diversity jurisdic-
tion in the Eastern District of Virginia. Best's complaint pressed a
variety of state law claims, including claims under the Virginia Uni-
form Trade Secrets Act, relating to the alleged misappropriation of its
proprietary marketing analysis and strategy by CIS and NAS. CIS and
NAS answered, denying the charging allegations. On December 9,
1996, after discovery had ended, Best moved for a voluntary dis-
missal without prejudice pursuant to Fed. R. Civ. P. 41(a)(2). The dis-
trict court granted the motion on the condition that Best pay CIS and
NAS's attorneys' fees and costs for that portion of their work which
"would not inure to the benefit of defendants in the event any future
action is refiled."
CIS and NAS each filed separate requests for reimbursement of
fees and costs. CIS calculated its fees and costs for work lacking
future benefit to be $278,893. Appended to CIS's request were three
charts summarizing the fees and costs the company incurred in the lit-
igation. The first chart set forth, for each law firm representing CIS,
the total amount billed and the "amount useful if action refiled." The
next chart set forth by category of services the attorneys' fees repre-
senting work that "will be useful to [CIS] in a refiled action." This
chart contained four entries, with headings such as"Legal research
regarding trade secrets." The third chart filed by CIS set out the attor-
neys' fees that allegedly would not inure to its benefit in a future
action. Only five categories appear in this chart, with descriptions
such as "Procedural Matters," "Litigation Strategy," and "Other." CIS
also included a three-page affidavit from one of its lawyers attesting
to the total amount of fees and asserting that "virtually all of [local
counsel's] fees and costs . . . would not be useful if the case is
refiled." After Best opposed the CIS fee request, CIS submitted
another chart in reply. This chart was devoted to what CIS claimed
was "the extraordinary procedural misconduct by Best . . . that caused
the CIS defendants to spend" the claimed amounts of fees and costs.
This four-page chart did not tie fee amounts expended to particular
actions by Best, nor did the chart indicate whether those expenditures
would be useful to CIS in a subsequent action.
NAS's submission included lengthy exhibits, including billing
records, regarding the fees and costs ($74,636) it allegedly incurred.
A number of the entries in these exhibits contained generalized
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descriptions such as "office conference . . . regarding analysis and
strategy," "phone conference with client regarding factual background
of litigation," and "phone call . . . regarding . . . lawsuit."
Together, CIS and NAS sought $353,529 in fees and costs they
claimed would be of no benefit in future litigation.
After receiving these submissions, and Best's objections, the dis-
trict court issued an order on January 10, 1997, setting the total
amount of the fees and costs to be paid by Best at approximately
$160,000. The fees portion was arrived at by dividing the requests in
half. However, all local counsel fees were awarded to CIS as a dis-
bursed cost, without explanation. The district court noted in its opin-
ion that its method "may result in a less than accurate determination
of which fees and costs will not have to be duplicated." The court
nevertheless "conclude[d] that the requirement of these payments is
sufficient to satisfy the purpose the court intended."
On January 17, 1997, Best moved to modify the terms and condi-
tions of dismissal or in the alternative to allow it to refuse the condi-
tions altogether. The district court denied the motion, noting that "at
this late date the court is unwilling to permit plaintiff to withdraw [its]
motion for a voluntary dismissal . . . [because] plaintiff has had ample
opportunity well before now to choose its alternative." Because Best
did not pay the fees and costs fixed by the court, its claims were dis-
missed with prejudice on January 24, 1997. Best then filed a notice
of appeal.
Shortly thereafter, NAS filed a motion for more attorneys' fees
under the Virginia Uniform Trade Secrets Act, alleging that Best had
acted in bad faith because it failed to make reasonable inquiry before
filing suit. The district court denied this motion on February 21, 1997,
holding that because Best had "voluntarily dismissed" its complaint,
NAS could not be considered a prevailing party. Further, the court
found that there was insufficient evidence to show that Best had acted
in bad faith. NAS filed a cross appeal.
II.
After the defendants have answered a complaint,"an action shall
not be dismissed at the plaintiff's instance save upon order of the
5
court and upon such terms and conditions as the court deems proper."
Fed. R. Civ. P. 41(a)(2). The decision to grant voluntary dismissal is
reviewed for abuse of discretion. See Davis v. USX Corp., 819 F.2d
1270, 1273 (4th Cir. 1987). A court may condition a voluntary dis-
missal without prejudice on the payment of the nonmoving party's
attorneys' fees and costs in the litigation. See id. at 1276. In calculat-
ing the amount of fees and costs to be awarded, the district court must
first determine that the fruits of the work attributable to the fees can-
not be carried over to another action. It is an abuse of discretion to
award fees when the product of those fees can easily be carried over
to subsequent litigation. See id.In Cauley v. Wilson, 754 F.2d 769 (7th Cir. 1985), the defendant
submitted a two-page affidavit and one-page itemization to support its
application for an award of attorneys' fees. The court halved the
request and fixed that amount to be paid by the plaintiff as the condi-
tion for dismissal without prejudice under Rule 41(a)(2). The Seventh
Circuit reversed, holding that by accepting a "sketchy itemization"
and merely cutting the request in half, the district court abused its dis-
cretion. Id. at 772; see also Koch v. Hankins, 8 F.3d 650, 652 (9th Cir.
1993) (reversing attorneys' fees award based on fee application in
chart form with only general descriptions).
In this case, CIS and NAS submitted two very different fee
requests. Neither of these submissions, however, provided sufficient
basis for determining whether the items for which an award was
requested could not be used in future litigation. Like our sister cir-
cuits, we believe that a summary itemization with broad headings
such as "litigation strategy" and "other" does not provide the specific-
ity required to make that determination. As the district court acknowl-
edged, CIS and NAS did not "break down their requests" beyond
these general categories. Because of the inadequacy of the fee
requests in this case, the district court was forced to estimate the fee
amount attributable to nonreusable work by cutting the requests in
half. That determination does not permit us to engage in meaningful
appellate review. We therefore vacate the dismissal with prejudice
and the order setting the amount of fees and costs to be paid by Best,
and we remand for redetermination of the fee and cost award after the
district court receives more thorough and explicit submissions from
CIS and NAS, as well as further objections from Best.
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III.
The district court denied NAS's motion for additional attorneys'
fees under the Virginia Uniform Trade Secrets Act. That statute per-
mits a court to "award reasonable attorneys' fees to the prevailing
party" in a suit under its provisions. Va. Code§ 59.1-338.1. Fees may
be awarded if "the court determines that [ ] a claim of misappropria-
tion is made in bad faith." Id. The statute does not define what consti-
tutes a "prevailing party."
NAS claims that a voluntary dismissal without prejudice by a
plaintiff makes the defendant a prevailing party eligible to receive
attorneys' fees under this statute. Best argues that since a dismissal
without prejudice permits the suit to be relitigated in a separate action,
and is not a decision on the merits, NAS could not be considered a
prevailing party and should not be awarded additional fees.
We have not staked out a definitive position on this issue. In
Kollsman v. Cohen, 996 F.2d 702 (4th Cir. 1993), we indicated that
a dismissal "whether on the merits or not," generally means that the
defendant is a prevailing party. Id. at 706. Kollsman involved a dis-
missal with prejudice, however, leaving the defendant without risk of
further litigation on the claim. As a result, Kollsman does not provide
direct support for the proposition that a dismissal without prejudice
makes the defendant a prevailing party.
There are two distinct views on whether the defendant becomes a
"prevailing party" when the plaintiffs obtain a voluntary dismissal
without prejudice. The original view is that even when a voluntary
dismissal without prejudice is granted, "the defendant is deemed to be
the ``prevailing party' unless expressly provided otherwise." Norris v.
Turner, 637 F. Supp. 1116, 1124 (N.D. Ala. 1986). The leading case
for this view is Corcoran v. C.B.S., 121 F.2d 575 (9th Cir. 1941). In
that case, the court found that "[w]here, as here, a defendant has been
put to the expense of making an appearance . . . and the plaintiff then
voluntarily dismisses without amending his pleading, the party sued
is the prevailing party . . . even though he may, at the whim of the
plaintiff, again be sued on the same cause of action." Id. at 576 (cita-
tions omitted).
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The more recent view is illustrated by Szabo Food Service, Inc. v.
Canteen Corp., 823 F.2d 1073 (7th Cir. 1987), in which the Seventh
Circuit refused to grant attorneys' fees to the defendant pursuant to
42 U.S.C. § 1988(b) after the plaintiff obtained a voluntary dismissal
without prejudice.* Judge Easterbrook, writing for the court, noted
that under a dismissal without prejudice the defendant was still at risk
from litigation on the claim. Accordingly, the court held that a dis-
missal under Rule 41(a) is not "the practical equivalent of a victory
for the defendant on the merits," and the defendant could not be con-
sidered a prevailing party. Id. at 1076-77.
The purpose of a voluntary dismissal without prejudice under Rule
41(a)(2) is to permit the plaintiff to refile his suit at a later time. In
fact, attorneys' fees as a condition for such a dismissal may only be
awarded for work that could not be used again in a future suit. See
Davis v. USX Corp., 819 F.2d 1270, 1276 (4th Cir. 1987). This sug-
gests that further litigation is anticipated in a voluntary dismissal
without prejudice, which makes it more like a draw than a victory for
the defendant. As Judge Easterbrook persuasively noted in Szabo,
when a defendant remains at risk of another suit on the same claim,
he can hardly be considered to be in the same position as a defendant
who no longer faces the claim due to a dismissal with prejudice. We
therefore agree with the Seventh Circuit's view that a voluntary dis-
missal without prejudice does not render a defendant a prevailing
party. Since the Virginia Uniform Trade Secrets Act permits an award
of attorneys' fees only to prevailing parties, NAS cannot claim relief
under that provision. The district court's order on that issue is there-
fore affirmed.
IV.
We hold that the district court had insufficient information to deter-
mine the fees and costs to be awarded to CIS and NAS as a condition
for granting Best's motion for voluntary dismissal without prejudice.
We therefore vacate the order granting a dismissal with prejudice,
vacate the fees and costs order, and remand for redetermination of
awardable fees and costs. We further hold that the district court cor-
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*Section 1988 permits a court to award reasonable attorneys' fees and
costs to the prevailing party in a civil rights enforcement suit.
8
rectly determined that NAS is not entitled to fees under the Virginia
Uniform Trade Secrets Act. Accordingly, the orders of the district
court are
AFFIRMED IN PART,
VACATED AND REMANDED IN PART.
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