Stella Andrews v. America's Living Centers, LLC , 827 F.3d 306 ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1658
STELLA ANDREWS, individually and on behalf of similarly
situated persons,
Plaintiff - Appellant,
v.
AMERICA’S LIVING CENTERS, LLC, a for profit limited
liability corporation, organized under the laws of the State
of North Carolina, doing business as; CAROLINA LIVING
CENTER; CAROLINA LIVING CENTER #1; ZION HILL LIVING CENTER;
GOLDEN HARVEST LIVING CENTER #1; GOLDEN HARVEST LIVING
CENTER #2; UNION MILLS LIVING CENTER #1; UNION MILLS LIVING
CENTER #2; UNION MILLS LIVING CENTER #3; FOUR SEASONS FAMILY
CARE HOME; TRANSYLVANIA LIVING CENTER; KENNETH HODGES,
individually & as mbr/mgr of America’s Living Ctrs LLC, &
owner &/or mgr of Carolina Living Ctrs; Carolina Living Ctr
1; Golden Harvest Living Ctrs 1 & 2; Union Mills Living Ctrs
1, 2 & 3; Four Seasons Family Care Home; & Transylvania
Living Ctr,
Defendants - Appellees.
-------------------------------------
JOHN J. KORZEN,
Amicus Supporting Appellees.
Appeal from the United States District Court for the Western
District of North Carolina, at Asheville. Martin K. Reidinger,
District Judge. (1:10-cv-00257-MR-DLH)
Argued: May 10, 2016 Decided: June 28, 2016
Before TRAXLER, Chief Judge, GREGORY, Circuit Judge, and Joseph
F. ANDERSON, Jr., Senior United States District Judge for the
District of South Carolina, sitting by designation.
Vacated, reversed, and remanded for proceedings consistent with
this published opinion. Judge Gregory wrote the opinion, in
which Chief Judge Traxler and Senior Judge Anderson joined.
ARGUED: Joseph H. Cassell, ERON LAW, P.A., Wichita, Kansas, for
Appellant. Ashley S. Escoe, Rolf Garcia-Gallont, WAKE FOREST
UNIVERSITY SCHOOL OF LAW, Winston-Salem, North Carolina, for
Court-Assigned Amicus Counsel. ON BRIEF: John J. Korzen, Court-
Assigned Amicus Counsel, WAKE FOREST UNIVERSITY SCHOOL OF LAW,
Winston-Salem, North Carolina.
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GREGORY, Circuit Judge:
Stella Andrews appeals the district court’s dismissal of
her action in light of her failure to pay attorneys’ fees from a
prior action under Federal Rule of Civil Procedure 41(d). While
we conclude that Rule 41(d) may permit the award of attorneys’
fees under certain circumstances, those circumstances are not
present here. We thus vacate, reverse, and remand.
I.
Andrews first filed suit against Defendants 1 under the Fair
Labor Standards Act (“FLSA”) on June 4, 2010. On July 29, 2010,
Defendants moved to dismiss under Federal Rule of Civil
Procedure 12(b)(6), to which Andrews responded on September 15,
2010. In the response, Andrews stated that she was “prepared as
the Court may direct and allow to submit an Amended Complaint
setting forth her allegations in more detail.” J.A. 206. In a
subsequent order setting a hearing, the magistrate judge noted
that this was not a proper request, as the local rules
prohibited making a motion within a response to another motion
and Andrews had missed the twenty-one-day deadline provided in
Federal Rule of Civil Procedure 15(a)(1) for unilaterally
amending the complaint after a motion to dismiss. On October
1 The Court appointed Amicus to represent Defendants on
appeal.
3
19, 2010, the day before the hearing on the motion to dismiss,
Andrews filed a motion for leave to amend with a proposed
amended complaint.
The magistrate judge heard argument on both motions and
provided the three following options for the parties: 1) he
could rule on the motion to dismiss, recommending that the
district court dismiss the case; 2) he could rule on the motion
for leave to amend; 3) or Andrews “c[ould] just stand up and
say, I want to take a dismissal . . . plaintiff can be free to
file another complaint.” Id. at 132-33.
Andrews decided to voluntarily withdraw her complaint under
Federal Rule of Civil Procedure 41(a)(1). On November 3, 2010,
Andrews dismissed her first action and filed a second complaint,
which she served on Defendants in February 2011. Defendants
then moved to stay the second action and for costs under Rule
41(d). Defendants sought $25,437.75 for attorneys’ fees and
other expenses that had been incurred in defending the first
action. The magistrate ordered that Defendants be awarded those
fees that related to the motion to dismiss, and the district
court affirmed, finding that an award of attorneys’ fees was
proper under Rule 41(d) and that Andrews’s conduct amounted to
vexatious litigation, for which fees could be recovered.
This case has been before us twice before: in 2013,
Andrews appealed before an amount had been determined, and we
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dismissed the appeal as interlocutory and unappealable. Andrews
v. Am.’s Living Centers, LLC, 503 F. App’x 199, 201 (4th Cir.
2013). On remand, the district court awarded $13,403.75 in
attorneys’ fees to Defendants and stayed the case pending
payment. In 2015, Andrews appealed without paying the costs and
before the case was dismissed for nonpayment. After oral
argument, we granted Andrews’s motion for voluntary dismissal
and dismissed the case. Andrews v. Am.’s Living Centers, LLC,
13-1695 (4th Cir. Mar. 24, 2015). On remand, the district court
dismissed the second action for failure to pay the awarded
attorneys’ fees. Andrews timely appealed.
II.
We first consider whether and under what circumstances Rule
41(d) permits an award of attorneys’ fees as a component of
“costs,” an open question in this Circuit. The proper scope of
a rule of procedure is a question of law subject to de novo
review. Marex Titanic, Inc. v. Wrecked & Abandoned Vessel, 2
F.3d 544, 545 (4th Cir. 1993).
Federal Rule of Civil Procedure 41(d) provides,
If a plaintiff who previously dismissed an action in
any court files an action based on or including the
same claim against the same defendant, the court:
(1) may order the plaintiff to pay all or part of
the costs of that previous action; and
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(2) may stay the proceedings until the plaintiff
has complied.
Fed. R. Civ. P. 41(d).
As is apparent from the text, Rule 41 does not explicitly
permit attorneys fees. Nevertheless, courts have noted that the
purpose of Rule 41(d) is “to serve as a deterrent to forum
shopping and vexatious litigation.” Simeone v. First Bank Nat’l
Ass’n, 971 F.2d 103, 108 (8th Cir. 1992); see also Esposito v.
Piatrowski, 223 F.3d 497, 501 (7th Cir. 2000) (citing Simeone,
971 F.2d at 108); Wright & Miller, 9 Fed. Prac. & Proc. Civ.
§ 2375 (3d ed.) (citing cases). This includes attempts to “gain
any tactical advantage by dismissing and refiling th[e] suit.”
Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 874 (6th Cir.
2000) (citation omitted) (alteration in original). With this
purpose in mind, some courts have determined that Rule 41(d)
permits an award of attorneys’ fees. As one court has
explained, “Surely, Congress intended that that provision of the
federal rules have some ‘teeth.’” Behrle v. Olshansky, 139
F.R.D. 370, 374 (W.D. Ark. 1991).
Several of our sister circuits have considered the question
now before us, producing an apparent split of authority. The
Eighth and Tenth Circuits, for example, have both upheld an
award of attorneys’ fees under Rule 41(d), albeit without much
explanation. Meredith v. Stovall, 216 F.3d 1087 (10th Cir.
6
2000) (unpublished); Evans v. Safeway Stores, Inc., 623 F.2d
121, 122 (8th Cir. 1980); see also Robinson v. Bank of Am.,
N.A., 553 F. App’x 648, 651 (8th Cir. 2014) (unpublished)
(relying on Evans).
Meanwhile, based on the language of the rule itself, the
Sixth Circuit has held that attorneys’ fees are not included in
costs. Rogers, 230 F.3d at 874. The Rogers court reasoned,
“Where Congress has intended to provide for an award of attorney
fees, it has usually stated as much and not left the courts
guessing. Further, the law generally recognizes a difference
between the terms ‘costs’ and ‘attorney fees’ and we have no
desire to conflate the two terms.” Id. The court recognized
that attorneys’ fees may be permissible where the structure
“evinces an intent to provide” them, id. at 875 (quoting Key
Tronic Corp. v. United States, 511 U.S. 809, 815 (1994)), but
was unpersuaded that the structure mandated costs to include
attorneys’ fees in this context, where other provisions in the
Federal Rules explicitly provided for attorneys’ fees. Id.(citation omitted).
Between these two goalposts, the Seventh Circuit has held
that attorneys’ fees are not generally awardable under Rule
41(d) “unless the substantive statute which formed the basis of
the original suit allows for the recovery of such fees as costs
(or unless such fees are specifically ordered by the court).”
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Esposito, 223 F.3d at 501. In so holding, the court first
determined that nothing in the text of the rule indicated that
Congress intended to “alter” the “American Rule,” under which
attorneys’ fees are not generally recoverable. Id. at 500
(citing Key Tronic, 511 U.S. at 815; Alyseka Pipeline Serv. Co.
v. Wilderness Soc’y, 421 U.S. 240, 247 (1975)).
The Esposito court then considered Marek v. Chesny, 473
U.S. 1 (1985), where the Supreme Court held that the costs
provided for in Federal Rule of Civil Procedure 68 did not
include attorneys’ fees. Id. Like Rule 41(d), Rule 68(d)
allows for an award of costs but does not define the term. See
Fed. R. Civ. P. 68(d). Determining that the authors of the
Federal Rules were familiar with the American Rule and its
exceptions, the Marek Court held that “the most reasonable
inference is that the term ‘costs’ in Rule 68 was intended to
refer to all costs properly awardable under the relevant
substantive statute or other authority.” 473 U.S. at 9. “Thus,
absent congressional expressions to the contrary, where the
underlying statute defines ‘costs’ to include attorney’s fees,
we are satisfied such fees are to be included as costs for
purposes of Rule 68.” Id. As the plaintiff had sued under 42
U.S.C. § 1983, and a prevailing party in a § 1983 action may be
awarded attorneys’ fees “as part of the costs,” 42 U.S.C.
§ 1988(b), “such fees are subject to the cost-shifting provision
8
of Rule 68. This ‘plain meaning’ interpretation of the
interplay between Rule 68 and § 1988 is the only construction
that gives meaning to each word in both Rule 68 and § 1988.”
Marek, 473 U.S. at 9.
Applying this reasoning to Rule 41(d), the Esposito court
held that “a party may recover reasonable attorneys’ fees as
part of its ‘costs’ under Rule 41(d) only where the underlying
statute defines costs to include attorneys’ fees.” 223 F.3d at
501. “Thus, attorneys’ fees are not a recoverable cost of
litigation under Rule 41(d) unless the substantive statute which
formed the basis of the original suit allows for the recovery of
such fees as costs . . . .” Id. 2 As Esposito had brought suit
under § 1983, the defendants would have to show that the first
2
At least one district court has called this reasoning into
question in light of the 1993 revisions to Federal Rule of Civil
Procedure 54(d). See Cadle Co. v. Beury, 242 F.R.D. 695, 698
(S.D. Ga. 2007). The amendment divided 54(d) into two
subsections entitled “Costs Other than Attorneys’ Fees” and
“Attorneys’ Fees.” “This subdividing clarifies that attorney’s
fees are considered by the Rule drafters to be a part of
‘costs.’” Id. “[W]hatever was the distinction between costs
and attorney’s fees under the common law or ‘American Rule,’
Rule 54(d) now defines costs to include attorney’s fees, and it
controls for purposes of interpreting the word ‘costs’ in a
fellow Federal Rule.” Id. Defendants argue that this amendment
to 54(d) applies to the definition of costs under Rule 41(d).
We disagree. See TM, LLC v. Anderson, No. 2:11-CV-00071-FL,
2012 WL 4483180, at *10 (E.D.N.C. Sept. 27, 2012) (“[T]his court
is not persuaded by such reasoning where neither Rule 68, at
issue in Marek, nor Rule 41(d) has been amended in the same
manner as Rule 54(d) and there is no indication that the
drafters intended a broader application of the amendment beyond
Rule 54(d) itself.”).
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suit was “frivolous, unreasonable, or groundless,” as it is only
on such a showing that prevailing defendants can recover
attorneys’ fees in a § 1983 suit. Id.
The Esposito court briefly noted an alternative way to
award attorneys’ fees as part of costs: if “such fees [were]
specifically ordered by the court.” Id.. The Seventh Circuit
explained this alternative in a subsequent unpublished decision
the same year. See Sanderson v. Spectrum Labs, Inc., 248 F.3d
1159, 2000 WL 1909678 (7th Cir. 2000) (unpublished table
decision). In Sanderson, in addition to the availability of
attorneys’ fees based on the underlying Lanham Act claim, the
court found attorneys’ fees appropriate “[e]ven when Rule 41(d)
does not authorize” them, as a district court may award
attorneys’ fees when the opposing party has “acted in bad faith,
vexatiously, wantonly, or for oppressive reasons.” 2000 WL
1909678, at *6 (second quote quoting F.D. Rich Co., Inc. v.
United States ex rel. Indus. Lumber Co., 417 U.S. 116, 129
(1974)).
We find the Seventh Circuit’s reasoning persuasive and thus
adopt it here. Rule 41(d) does not provide for an award of
attorneys’ fees as a matter of right; instead, a district court
may award attorneys’ fees under this rule only where the
underlying statute provides for attorneys’ fees. A court may
also, within its discretion, award attorneys’ fees where it
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makes a specific finding that the plaintiff has acted “in bad
faith, vexatiously, wantonly, or for oppressive reasons,” a
well-established exception to the American Rule. Alyeska, 421
U.S. at 258-59; see Kreager v. Solomon & Flanagan, P.A., 775
F.2d 1541, 1543 (11th Cir. 1985) (applying Alyeska exception to
FLSA claim); Hensley v. Alcon Labs., Inc., 277 F.3d 535, 543
(4th Cir. 2002) (“Also under its inherent powers, the district
court has authority to shift attorneys fees, but again only in
the extraordinary circumstances where bad faith or abuse can
form a basis for doing so.”).
This rule strikes the right balance between upholding the
American Rule and furthering the goal of Rule 41(d) to deter
forum shopping and vexatious litigation on the part of the
plaintiff. Such a rule also minimizes any inconsistency with
Rule 41(a)(2), which courts have interpreted to allow attorneys’
fees despite the lack of an express reference. See Davis v. USX
Corp., 819 F.2d 1270, 1276 (4th Cir. 1987) (implicitly
recognizing district court’s ability to impose attorneys’ fees
under Rule 41(a)(2) but only where plaintiff acted prejudicially
or in bad faith); see also, e.g., LeBlang Motors, Ltd. v. Subaru
of Am., Inc., 148 F.3d 680, 686-87 (7th Cir. 1998); Painter v.
Golden Rule Ins. Co., 121 F.3d 436, 440-41 (8th Cir. 1997).
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III.
We now turn to whether fees were properly awarded here and
conclude that they were not. In general, “the decision whether
and in what amount to award attorney fees is one commit[t]ed to
the award court’s discretion, subject only to review for ‘abuse’
of that discretion.” United Food & Commercial Workers, Local
400 v. Marval Poultry Co., 876 F.2d 346, 350-51 (4th Cir. 1989).
We have noted, however, that “the decision to award attorneys’
fees is often an ‘amalgam—an exercise of discretion based upon
express or implicit findings of fact and conclusions of law
about the availability and scope of discretion.’” Hyatt v.
Shalala, 6 F.3d 250, 254 (4th Cir. 1993) (quoting Marval
Poultry, 876 F.2d at 351). A determination of bad faith,
vexation, or forum shopping is “a finding of fact underlying the
district court’s discretionary decision to award fees,” and we
review that finding for clear error. Id. at 255 (citing Mutual
Fed. Sav. & Loan Ass’n v. Richards & Assoc., Inc., 872 F.2d 88,
93 (4th Cir. 1989)). Under the clearly erroneous standard, a
district court’s determination should be affirmed unless the
Court is “left with the definite and firm conviction that a
mistake has been committed.” Mallory v. Booth Refrig. Supply
Co., 882 F.2d 908, 909 (4th Cir. 1989) (citation omitted).
We first consider whether the underlying statute includes
attorneys’ fees. Andrews originally brought suit under the
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FLSA, which provides that when a plaintiff prevails a court
“shall . . . allow a reasonable attorney’s fee to be paid by the
defendant.” 29 U.S.C. § 216(b). But the statute is silent as
to attorneys’ fees in suits where the defendant prevails. See
id. Thus, an award of attorneys’ fees on a statutory basis
would be improper.
We next consider whether attorneys’ fees were warranted by
Andrews’s behavior. Here, the magistrate did not specifically
label Andrews’s conduct vexatious. Nonetheless, he found an
award was warranted because Andrews “voluntarily dismissed the
first action shortly after a hearing on a motion to dismiss in
order to avoid an adverse ruling. Plaintiff then re-filed the
action the very same day.” J.A. 61. The magistrate judge found
these actions to have “delayed the resolution of this case,
increased the costs of defending this action, and wasted the
judicial resources of the Court.” Id. at 62.
After Andrews’s objection, the district court affirmed the
decision of the magistrate judge. The district court found,
From the record before this Court, it is clear that
the Plaintiff dismissed the prior action in order to
avoid negative rulings on the Defendants’ motion to
dismiss as well as her motion to amend. Faced with a
motion to dismiss, the Plaintiff attempted to amend,
apparently to no avail. Meanwhile, the Defendants
continued to incur legal fees while Plaintiff
attempted to “get it right.” Although the Plaintiff
may not have been acting in bad faith, the end result
of such conduct is repeated litigation of the same
13
claim against the same defendant; that is, vexatious
litigation.
Id. at 90 (internal citation omitted).
We have previously relied on the Black’s Law definition of
vexatious: “By its plain language, vexatious means ‘without
reasonable or probable cause or excuse.’” In re 1997 Grand
Jury, 215 F.3d 430, 436 (4th Cir. 2000) (quoting Black’s Law
Dictionary 1559 (7th ed. 1999)). We agree with Andrews that her
conduct was not so egregious as to rise to the level of
vexatious and find that the district court clearly erred in so
holding.
At the hearing, the magistrate judge instructed the
parties,
Now the plaintiff has this option. The plaintiff
right now, since an answer—all we’ve got is a motion
to dismiss and a motion to amend. The plaintiff could
take a dismissal right now. The plaintiff has been
the one that has incurred the costs so far in this,
which is the filing fee and the service fee. The
plaintiff would then be free to file whatever
complaint that the plaintiff might wish to seek, which
might help solve all the problems of the plaintiff.
. . .
. . . Plaintiff can just stand up and say, I want
to take a dismissal, that’s fine; and plaintiff can be
free to file another complaint or I rule on the motion
to amend. Depending on the ruling in that, I can
then—whether it’s futile or not, I can then—which you
all don’t know no [sic] and I don’t know which way
that will go. You’d then go on to the motion to
dismiss, which I can tell you right now I would do an
M&R recommending dismissal.
J.A. 131-33.
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We are unmoved by Defendants’ argument that the district
court found “that in no manner did the exchange which occurred
amount to an ‘invitation’ for the Plaintiff to dismiss the
action with impunity.” Id. at 88. Considering the definition
of vexatious, we would be hard-pressed to find that Andrews was
acting “without reason or cause”; instead, the option was
presented by the magistrate judge, and Andrews “dismissed the
first lawsuit and then refilled [sic] the current lawsuit after
adding and amending the factual allegations in an attempt to
strengthen the case before facing the federal pleading
standard.” Costin v. Ally Bank Corp., No. 7:13-CV-113-BO, 2013
WL 5603230, at *1 (E.D.N.C. Oct. 11, 2013) (denying motion for
costs); see also Wishneski v. Old Republic Ins. Co., No. 5:06-
CV-148-OC-10GRJ, 2006 WL 4764424, at *4 (M.D. Fla. Oct. 10,
2006) (finding no vexation where “no discovery had been taken in
the case previously filed and dismissed in the Southern District
of Florida,” no “substantial motion practice initiated by the
Plaintiff,” and the case was dismissed only one month after
filing); CIVCO Med. Instruments Co v. Protek Med. Prods., 231
F.R.D. 555, 564 (S.D. Iowa 2005) (declining to award fees where
previous action had been pending for two months in Minnesota,
and when faced with a motion to dismiss for lack of personal
jurisdiction, plaintiff “resolved the matter by conducting very
15
brief jurisdictional discovery, negotiating a voluntary
dismissal, and refiling the claim in Iowa”).
Defendants also do not argue that Andrews acted
particularly egregiously or in bad faith; instead, they contend,
as the magistrate judge and district court held, that Andrews’s
behavior had the result of increasing the costs of defending the
previous action, wasting judicial resources, and avoiding an
adverse ruling. Again, we find this argument unavailing.
First, that delay results from a given circumstance is different
from acting “vexatiously, wantonly, or for oppressive reasons.”
Alyeska, 421 U.S. at 258-59. Moreover, in support of his
holding that costs were warranted, the magistrate judge cited
Andrews’s refiling her second action “the very same day.” J.A.
61. This fact is insufficient evidence of vexation. Unlike in
Robinson, where the Eighth Circuit affirmed an award of fees,
Andrews’s first and second complaints were not “virtually
identical,” see 553 F. App’x at 652; rather, Defendants
acknowledged that the second complaint was “much more detailed
than both the Complaint in the first action and the proposed
Amended Complaint in the first action, with 135 paragraphs of
allegations,” Amicus Br. 4. See also Kent v. Bank of Am., N.A.,
518 F. App’x 514, 517 (8th Cir. 2013) (affirming fee award based
on vexatious behavior where no explanation for refiling was
provided and “the only changes were ‘incidental’”); Sanderson,
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2000 WL 1909678, at *6 (affirming fee award where allegations in
first complaint “were repeated almost verbatim in his second
complaint”).
Given Defendants’ admission regarding Andrews’s second
complaint and the magistrate judge’s options at the hearing—
which at least included, if not encouraged, voluntary dismissal—
we cannot deem Andrews’s conduct vexatious. As the district
court did not find that Andrews acted in bad faith, wantonly, or
oppressively, and as the record does not bear out such a
finding, we also decline to affirm the award on any alternative
basis.
IV.
Based on the foregoing, we conclude attorneys’ fees are a
permissible award under Federal Rule of Civil Procedure 41(d)
under certain circumstances, but that those circumstances are
not present here: the FLSA does not permit an award of
attorneys’ fees for defendants and Andrews’s conduct was not
undertaken in bad faith, vexatiously, wantonly, or for
oppressive reasons. Because we find that Andrews’s conduct was
not vexatious, and thus that no award of attorneys’ fees was
proper, we do not address her argument that the fees imposed by
the district court were too high. Accordingly, we vacate the
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dismissal, reverse the order to pay attorneys’ fees, and remand
the case for further proceedings consistent with this opinion.
VACATED, REVERSED, AND REMANDED
FOR PROCEEDINGS CONSISTENT WITH THIS OPINION
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