Brian Smith v. Clark/Smoot/Russell

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1406
BRIAN K. SMITH,
Plaintiff – Appellant,
and
UNITED STATES OF AMERICA ex rel. BRIAN K. SMITH,
Plaintiff,
v.
CLARK/SMOOT/RUSSELL, a Joint Venture; CLARK CONSTRUCTION
GROUP, LLC; SMOOT CONSTRUCTION COMPANY OF WASHINGTON, D.C.;
H.J. RUSSELL AND COMPANY, INC., a/k/a H.J. Russell and
Company; SHIRLEY CONTRACTING COMPANY, LLC; SHIRLEY
CONTRACTING COMPANY, LLC, d/b/a Metro Earthworks; SHELTON
FEDERAL GROUP, LLC; SHELTON/METRO, a Joint Venture; HSU
DEVELOPMENT, INC.; HSU DEVELOPMENT, INC., d/b/a HSU
Builders,
Defendants – Appellees.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, Senior District Judge.
(8:13−cv−00009−RWT)
Argued: March 24, 2015 Decided: August 10, 2015
Before WYNN, FLOYD, and HARRIS, Circuit Judges.
Affirmed in part, reversed in part, vacated in part, and
remanded for further proceedings by published opinion. Judge
Wynn wrote the opinion, in which Judge Floyd and Judge Harris
concurred.
ARGUED: Jerry Alfonso Miles, II, DEALE SERVICES, LLC, Rockville,
Maryland, for Appellant. Randall A. Brater, ARENT FOX LLP,
Washington, D.C., for Appellees. ON BRIEF: William W. Goodrich,
Patrick R. Quigley, Karen S. Vladeck, ARENT FOX LLP, Washington,
D.C., for Appellees.
2
WYNN, Circuit Judge
To bring an action under the False Claims Act, a relator
must, among other things, file his complaint under seal and
maintain that seal for a period of sixty days. Although the
False Claims Act complaint in this matter was properly filed
under seal, the relator’s attorney revealed to the relator’s
employer the existence of the complaint well before the end of
the sixty day waiting period. Finding a violation of the seal
requirement, the district court dismissed the relator’s action
with prejudice.
On appeal, we conclude that the dismissal of Smith’s case
with prejudice was inappropriate under the False Claims Act
because the seal violation did not incurably frustrate the
seal’s statutory purpose. Furthermore, neither of the district
court’s alternative reasons for dismissing Smith’s claims—the
doctrine of primary jurisdiction and failure to comply with
Civil Procedure Rule 9(b)—warrant dismissal with prejudice. We
also conclude that the district court erred when it dismissed
Smith’s retaliation claim. Accordingly, we reverse the
dismissals and remand for further proceedings.
I.
A.
3
Relator Brian K. Smith worked on several federal
construction projects in 2012 and 2013: the City Market on O
Street project (“City Market”), the Smithsonian Institution’s
National Museum of African-American History and Culture
(“African-American Museum”), and the Smithsonian National Zoo
project (“National Zoo”). Due to their size, these projects
were subject to the Davis-Bacon Act, 40 U.SC. §§ 3141–3144,
3146, 3147.
The Davis-Bacon Act requires contractors and subcontractors
performing federally funded or assisted contracts of more than
$2,000 to set forth stipulations in covered contracts agreeing
to pay their workers no less than the locally prevailing wages. 1
Id. § 3142. The Secretary of Labor sets the prevailing wages,
which fall under four wage schedules (Building, Residential,
Highway, and Heavy) and several different labor categories
(painter, plumber, laborer, bricklayer, etc.). Id. When a
dispute arises regarding the proper classification of a
particular type of work, the Department of Labor makes a
determination of the prevailing wage. 29 C.F.R. § 5.11(a).
In this matter, the complaint named several defendants.
However, only Defendants Shirley Contracting Co., LLC, which
1
For purposes of the Davis-Bacon Act (and this opinion),
the term “wages” includes the basic hourly rates of pay,
overtime, fringe benefits, and other forms of compensation.
4
does business as Metro Earthworks (“Shirley/Metro”), and Clark
Construction Group, LLC (“Clark”) (collectively, “Defendants”)
are properly before us because Smith did not raise the dismissal
of the other defendants on appeal. See, e.g., United States v.
Al–Hamdi, 356 F.3d 564, 571 n.8 (4th Cir. 2004).
Defendants are construction companies that performed
construction work on one or more of the projects.
Shirley/Metro, a subsidiary of Clark, employed Smith. Smith
believed that Defendants failed to pay him the required Davis-
Bacon Act wages for the work he performed on the City Market,
African-American Museum, and National Zoo projects.
B.
On the City Market project, Smith was employed from April
through late-August 2012 as a bobcat operator, flagman,
jackhammer operator, roller, and unskilled general laborer. He
alleges that his City Market wages should have been paid under
the Heavy wage schedule but Defendants misclassified his work
under a lower-paying schedule. He also alleges Defendants’
outright failure to pay certain fringe benefits due, regardless
of the applicable schedule.
On the African-American Museum project, Smith worked from
August 27 until November 13, 2012, as a flagman and a general
laborer. The contract for the African-American Museum project
included two different Davis-Bacon Act wage schedules, Building
5
and Heavy, with the latter generally paying more for the same
labor category. Smith received appropriate payment under the
Building schedule, but alleges that he should have been paid
under the higher-paying Heavy schedule for his work as a
flagman.
In September 2012, Smith lodged an oral complaint with the
Department of Labor’s Wage and Hour Division, alleging that on
both projects his pay was less than the Davis-Bacon Act
required. The Department of Labor initiated an investigation,
and Smith alleges that the investigator concluded that he was
not being paid appropriate wages under the Davis-Bacon Act.
On November 14, 2012, Defendants temporarily reassigned
Smith and his team members to a residential contract that was
not subject to the Davis-Bacon Act. This transfer resulted in
decreased wages, increased commuting costs, and a substantially
longer commute. After working at the residential site for two
weeks, Smith began working on the National Zoo project, where he
worked as a general laborer, flagman, and shoveler. Between
December 24 and December 31, 2012, Smith was scheduled to work
only eight hours, which he alleges was a reduction.
C.
On January 2, 2013, Smith filed a False Claims Act
complaint, alleging, inter alia, that (1) Defendants’
certification of Davis-Bacon Act compliance on payrolls they
6
submitted for payment constituted false claims because he was
not paid appropriate wages on the City Market, African-American
Museum, and National Zoo projects; and (2) the November 2012
reassignment and the alleged December 2012 hours reduction were
retaliatory.
As required by Section 3730(b)(2), Smith’s attorney filed
the complaint under seal in camera. The next day, however,
Smith’s attorney called defendant Clark’s in-house counsel to
inform him that he had recently filed a False Claims Act case in
which Clark was a defendant. During this phone call, the
attorney requested that Clark cease retaliating against Smith.
[J.A. 247-48] When Clark’s in-house counsel asked for a copy of
the complaint, Smith’s attorney told him that he could not
provide a copy because it had to remain under seal for sixty
days. The next day, Smith’s attorney contacted a Shirley/Metro
human resources employee to request Smith’s employment records
and stated that he had recently filed a False Claims Act
complaint in which Shirley/Metro was a defendant.
On January 23, 2013, Smith’s attorney served the Government
with a copy of the complaint. And on February 7, 2013, an
attorney representing Shirley/Metro contacted the Government
regarding the communications his client had received from
Smith’s attorney. Recognizing that there was “little point in
maintaining the fiction of a seal when the defendants are aware
7
of the filing,” the Government moved for a partial lifting of
the seal. J.A. 169. In its memorandum in support of the
motion, the Government noted that a partial lifting “may allow
the government to better evaluate the relator’s claims and speed
the determination about whether the government will intervene in
this case.” J.A. 169. Smith’s attorney consented to the
Government’s motion, and the district court granted it on
February 20, 2013.
After requesting and receiving an extension on the deadline
by which it had to decide whether to intervene, the Government
ultimately elected not to intervene in the case. Defendants
then jointly filed a motion to dismiss pursuant to Civil
Procedure Rules 12(b)(1) and 12(b)(6). After hearing arguments
regarding the motion to dismiss, the district court dismissed
all ten counts contained in the complaint with prejudice. Smith
appeals only the dismissals of Counts I (Knowingly Presenting
False Claims to the Government), II (Knowingly Making False
Statements or Records to the Government), and IV (violation of
False Claims Act Anti-Retaliation Provision).
II.
Smith first argues that the district court erred when it
dismissed Counts I and II with prejudice. The district court
grounded its dismissal of those counts primarily upon the “very
8
serious matter” of the “violation of the statutory seal.” J.A.
488. Smith’s attorney undoubtedly violated the False Claims
Act’s seal requirement by publicly discussing the complaint.
Am. Civil Liberties Union v. Holder, 673 F.3d 245, 254 (4th Cir.
2011) (recognizing that “the seal provisions [prevent] the
relator . . . from publicly discussing the filing of the qui tam
complaint”); U.S. ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d
242, 244 (9th Cir. 1995) (holding that plaintiff “clearly
violated the seal provision . . . by making statements to [a
newspaper about] the existence and nature of her qui tam suit”).
The real dispute here centers on whether the district court
properly dismissed Smith’s case in response to the violation.
The procedural requirements of the False Claims Act,
including its seal provision, “are not jurisdictional, and
violation of those requirements does not per se require
dismissal.” Lujan, 67 F.3d at 245. Further, “[n]o provision of
the False Claims Act explicitly authorizes dismissal as a
sanction for disclosures in violation of the seal requirement.”
Id. Thus, the False Claims Act, on its face, neither mandates
nor expressly supports dismissal with prejudice.
But we recognize that every other circuit to consider this
issue has read such authority into the False Claims Act. See,
e.g., U.S. ex rel. Summers v. LHC Grp., Inc., 623 F.3d 287 (6th
Cir. 2010) (holding that violation of the seal requirements bars
9
qui tam plaintiffs from qui tam status); Lujan, 67 F.3d 242 (9th
Cir. 1995) (creating a ‘no harm, no foul’ balancing test for
determining whether seal violation warrants dismissal); United
States ex rel. Pilon v. Martin Marietta Corp., 60 F.3d 995, 998
(2d Cir. 1995) (adopting a test that analyzes whether seal
violations “incurably frustrated” the provision’s statutory
purpose). Because we find its rationale to be persuasive, we
join the Second Circuit and hold that a violation that results
in an incurable and egregious frustration of the “statutory
objectives underlying the filing and service requirements,”
Pilon, 60 F.3d at 998, merits dismissal with prejudice under the
False Claims Act.
The False Claims Act’s seal provision serves several
purposes: “(1) to permit the United States to determine whether
it already was investigating the fraud allegations (either
criminally or civilly); (2) to permit the United States to
investigate the allegations to decide whether to intervene; (3)
to prevent an alleged fraudster from being tipped off about an
investigation; and, (4) to protect the reputation of a defendant
in that the defendant is named in a fraud action brought in the
name of the United States, but the United States has not yet
10
decided whether to intervene.” Am. Civil Liberties Union, 673
F.3d at 250. 2
Here, the seal violation did not incurably frustrate these
purposes. Although Smith’s attorney’s breach of the seal
requirement tipped off Defendants, the Government was still able
to investigate the alleged fraud and determine whether it was
already investigating the same issue. The Government even
suggested that the fact that Defendants knew about the False
Claims Act claim would allow for early responses to the
Government’s questions, allowing it to “better evaluate the
relator’s claims and speed the determination about whether [to
intervene].” See Appellant’s Br. at 22. Additionally, because
the seal violation involved disclosure between the parties
rather than the public, Defendants’ reputations suffered no
harm. Accordingly, the False Claims Act does not support the
district court’s dismissal of Smith’s claims with prejudice. 3
2But see Lujan, 67 F.3d at 247 (concluding that “protecting
the rights of defendants is not an appropriate consideration
when evaluating the appropriate sanction for a violation of the
seal provision”).
3We in no way minimize the significance of the violation in
this case: By directly informing the Defendants of Smith’s qui
tam claim, Smith’s attorney risked serious interference with the
Government’s opportunity to investigate the alleged fraud. That
risk appears not to have materialized in this case. But such
disclosures have the potential to frustrate the purposes of the
seal provision in a way that merits dismissal with prejudice,
(Continued)
11
III.
The district court offered two additional rationales for
dismissing the case: (1) the doctrine of primary jurisdiction,
and (2) Rule 9(b) pleadings deficiencies. We address each in
turn.
A.
The district court stated that if its other reasons for
dismissal were inadequate, it “would still dismiss or at least
stay [the case] pending the outcome of any inquiry by the
Department of Labor” regarding “the appropriate wage scale”
under the Davis-Bacon Act. J.A. 489. It stated that it would
take this step as “a simple matter of prudence.” J.A. 489.
This particular prudential judicial maneuver is known as the
doctrine of primary jurisdiction.
The doctrine of primary jurisdiction “is designed to
coordinate administrative and judicial decision-making by taking
advantage of agency expertise and referring issues of fact not
within the conventional experience of judges or cases which
require the exercise of administrative discretion.” Envtl.
Tech. Council v. Sierra Club, 98 F.3d 774, 789 (4th Cir. 1996).
The doctrine of primary jurisdiction “requires the court to
and qui tam claimants are well advised to comply strictly with
the FCA’s seal requirements.
12
enable a ‘referral’ to the agency, staying further proceedings
so as to give the parties reasonable opportunity to seek an
administrative ruling.” Reiter v. Cooper, 507 U.S. 258, 268
(1993). Notably, such a referral of an issue to an
administrative agency “does not deprive the court of
jurisdiction; it has discretion either to retain jurisdiction
or, if the parties would not be unfairly disadvantaged, to
dismiss the case without prejudice.” Id. at 268-69. We review
a district court’s primary jurisdiction determination for an
abuse of discretion. Envtl. Tech. Council, 98 F.3d at 789.
Here, Smith alleges two types of fraud under the False
Claims Act. First, he alleges that he was misclassified (that
is, paid under the wrong Davis-Bacon Act wage schedule) on the
African-American Museum project. Smith’s allegations involving
misclassification implicate primary jurisdiction: Pursuant to
Davis-Bacon Act regulations, the Administrator of the Wage and
Hour Division of the Department of Labor is responsible for
resolving “disputes of fact or law concerning payment of
prevailing wage rates, overtime pay, or proper classifications.”
29 C.F.R. § 5.11(a). 4
4
See also U.S. ex rel. Windsor v. DynCorp, Inc., 895 F.
Supp. 844, 851 (E.D. Va. 1995) (“[I]t is impossible to determine
whether DynCorp submitted a false claim to the government
without first determining whether DynCorp actually misclassified
an employee [under the Davis-Bacon Act] in a given instance.”).
13
Second, Smith alleges that he was paid a wage that did not
correlate with any Davis-Bacon Act wage schedule on the City
Market and National Zoo projects. These allegations do not seem
to implicate primary jurisdiction. To assess the merit of these
claims, the district court need only compare Smith’s pay stub
with the applicable Davis-Bacon wage schedules to determine
whether the pay matches up. See, e.g., U.S. ex rel. Wall v.
Circle C Const., L.L.C., 697 F.3d 345, 354 (6th Cir. 2012)
(holding that primary jurisdiction referral was unnecessary
because “the core dispute here involve[d] misrepresentation, not
misclassification”).
Although it may be proper for a district court to invoke
the doctrine of primary jurisdiction in the face of this mixed
picture and thereby stay or dismiss the matter without prejudice
pending an agency determination, the district court dismissed
Smith’s entire complaint with prejudice. Relying on the
doctrine of primary jurisdiction to dismiss Smith’s suit with
prejudice would constitute an abuse of discretion and thus also
does not support the district court’s dismissal order.
B.
The district court’s third and final rationale for
dismissing Counts I and II is inadequate pleading under Civil
Procedure Rule 9(b). Yet this rationale, like the others,
provides no basis for dismissing Smith’s fraud claims.
14
Rule 9(b) of the Federal Rules of Civil Procedure provides
that “[i]n all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity. Malice, intent, knowledge, and other condition
of mind of a person may be averred generally.” Fed. R. Civ. P.
9(b). We treat a lack of compliance with Rule 9(b)’s pleading
requirements as a failure to state a claim under Rule 12(b)(6),
which we review de novo. Harrison v. Westinghouse Savannah
River Co., 176 F.3d 776, 783 n.5 (4th Cir. 1999).
“Rule 9(b) requires that ‘[a False Claims Act] plaintiff
must, at a minimum, describe the time, place, and contents of
the false representations, as well as the identity of the person
making the misrepresentation and what he obtained thereby.’”
United States v. Triple Canopy, Inc., 775 F.3d 628, 634 (4th
Cir. 2015) (quoting United States ex rel. Wilson v. Kellogg
Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008)). And
generally, “[a] court should hesitate to dismiss a complaint
under Rule 9(b) if the court is satisfied (1) that the defendant
has been made aware of the particular circumstances for which
she will have to prepare a defense at trial, and (2) that
plaintiff has substantial prediscovery evidence of those facts.”
Harrison, 176 F.3d at 784.
Our review of Smith’s complaint leads us to conclude that
Smith did indeed allege the “who, what, when, where and how of
15
the alleged fraud.” J.A. 491. In his long and detailed
complaint, Smith alleged, for example, that “Defendants, by
virtue of Davis-Bacon Act noncompliant compensation and billing
practices, have been defrauding the United States Government,
District of Columbia, and other state and local governments and
instrumentalities in a variety of ways, including, but not
limited to, knowingly providing false information via certified
payrolls in exchange for payment . . . .” J.A. 17. Smith’s
complaint detailed which Defendants were awarded and working on
which government contracts, including details about where the
construction work that was the subject of the contracts was to
occur, the award date for the contracts, and even some contract
numbers. See J.A. 21-24.
Smith’s complaint specified which government entities
funded pertinent contracts on which he worked and alleged that
all were funded in part by the United States. Smith’s complaint
stated that Defendants “certif[ied] compliance with the Davis
Bacon Act” and “have received payment in relation to the
reliance of cognizant government agencies . . . upon falsely
certified payrolls and other Davis Bacon Act certifications made
in relation to [] performance” of the identified contracts.
J.A. 25. Smith’s complaint included charts detailing Davis-
Bacon pay and fringe benefit rates and what Defendants actually
and deliberately wrongly paid him under the identified
16
contracts. Smith alleged that, “[a]s a result of these
misrepresentations, the federal government has been damaged by
paying a higher amount for wages that were not paid to Brian
Smith and potentially other affected employees.” J.A. 34. And
Smith’s complaint identified several other employees whom
Defendants allegedly misclassified and underpaid under the
Davis-Bacon Act. See J.A. 42-45.
In sum, Smith’s complaint identified who committed fraud—
Defendants; alleged that the Davis-Bacon Act applied to the
pertinent contracts; contended that Defendants paid Smith and
others less than the Davis-Bacon Act required, specifically
identifying Smith’s pay and comparing it to the applicable
Davis-Bacon Act pay scales; and alleged that Defendants falsely
certified their compliance with the Davis-Bacon Act to the
Government, which caused the Government to make improperly
inflated payments to Defendants. These allegations pass Rule
9(b) muster. See, e.g., Harrison, 352 F.3d at 921. That rule
therefore could not properly serve as a basis to dismiss Smith’s
claims with prejudice. 5
5 Smith’s attorney orally moved to amend the complaint to
address the district court’s Rule 9(b) concerns. The district
court ostensibly denied this motion. Because Smith had already
satisfied Rule 9(b), we affirm the district court’s denial of
this motion as moot.
17
Having reviewed all of the district court’s stated
rationales for dismissing Smith’s complaint with prejudice, we
find ourselves unable to affirm any. We therefore reverse the
district court’s dismissal of Counts I and II.
IV.
Count IV of Smith’s complaint sought relief under the False
Claims Act’s anti-retaliation provision, 31 U.S.C. § 3730(h).
The district court dismissed Count IV with prejudice, holding
that Smith failed to successfully allege retaliation.
The False Claims Act’s whistleblower provision, which
Congress broadened in 2009, prohibits retaliation “because of
lawful acts done . . . in furtherance of an action under this
section or other efforts to stop 1 or more violations of this
subchapter.” 31 U.S.C. § 3730(h). To plead retaliation under
Section 3730(h), a plaintiff must allege that (1) he engaged in
protected activity, (2) the employer knew about the activity,
and (3) the employer took adverse action against him as a
result. Glynn v. EDO Corp., 710 F.3d 209, 214 (4th Cir. 2013).
These allegations need pass only Civil Procedure Rule 8(a)’s
relatively low notice-pleadings muster—in contrast to Rule
9(b)’s specificity requirements discussed above. See, e.g.,
Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th
18
Cir. 2008); United States ex rel. Williams v. Martin-Baker
Aircraft Co., 389 F.3d 1251, 1259-60 (D.C. Cir. 2004).
Here, the district court assumed that Smith satisfied the
first prong—protected activity—but concluded that he failed to
demonstrate that Defendants knew of his conduct or took adverse
action against him because of those acts—the second and third
prongs. In its ruling from the bench, the district court noted
no “factual basis for alleging that the defendants were aware
that [Smith] was pursuing a claim of a fraudulent false claim
with the United States.” J.A. 493 (emphasis added).
Accordingly, it held that “there cannot be any sufficient
pleading of the employers taking action as a result of acts that
it never had knowledge of and there’s been no allegation that
they did have knowledge of them.” J.A. 493.
It strains credulity to believe that Congress would require
a defendant to have knowledge of a sealed action for a
retaliation claim to survive the pleading stage. What’s more,
the statute in its current form plainly does not limit protected
activity to “lawful acts done . . . in furtherance of an action”
under the False Claims Act, but rather expressly includes “other
efforts to stop 1 or more violations” of the False Claims Act.
31 U.S.C. § 3730(h). While we have not yet spelled out the
contours of “other efforts to stop” a False Claims Act
violation, it plainly encompasses more than just activities
19
undertaken in furtherance of a False Claims Act lawsuit. See
id.; see also U.S. ex rel. Grenadyor v. Ukrainian Vill.
Pharmacy, Inc., 772 F.3d 1102, 1108 (7th Cir. 2014) (Posner, J.)
(indicating that amended statute covers more than prior
version). Thus, even assuming for the sake of argument that
Smith provided no “factual basis for alleging that the
defendants were aware that [Smith] was pursuing a claim of a
fraudulent false claim,” J.A. 493 (emphasis added), that would
not necessarily mean he has pled no plausible factual
underpinning for a retaliation claim. 6 Further, Smith pled that
Defendants knew that he had pursued an investigation with the
Department of Labor, and the facts salient to that investigation
make up the bulk of the facts supporting Smith’s False Claims
Act qui tam claims. This suffices to fulfill the knowledge
prong.
Turning to the third prong required to make out a
retaliation claim, the district court made only the conclusory
statement that the defendants did not “[take] action against
6
Neither the district court nor the parties appear to have
recognized that 31 U.S.C. § 3730(h) was amended, much less the
amendment’s potential import. Regardless, we must apply the
correct law, here the amended version of the statute. See Kamen
v. Kemper Fin. Servs., Inc., 500 U.S. 90, 99 (1991) (“When an
issue or claim is properly before the court, the court is not
limited to the particular legal theories advanced by the
parties, but rather retains the independent power to identify
and apply the proper construction of governing law.”).
20
[Smith] as a result of those acts.” J.A. 493. Upon reviewing
Smith’s complaint, however, we cannot reach the same conclusion.
An employer undertakes a materially adverse action opening
it up to retaliation liability if it does something that “well
might have ‘dissuaded a reasonable worker from making or
supporting a charge of discrimination.’” Burlington Northern &
Santa Fe Ry. v. White, 548 U.S. 53, 67–68 (2006) (quoting Rochon
v. Gonzales, 438 F.3d 1211, 1219 (D.C. Cir. 2006)). Here, Smith
alleged that after lodging a complaint with the Department of
Labor that resulted in an investigation, he was transferred to a
lower-paying job site that substantially increased his commute
time and transportation costs. This action might well dissuade
a reasonable worker from whistleblowing. And while Defendants
muster a couple of easily distinguishable cases to support their
argument to the contrary, none of those mandates a holding that
reassignments that increase commute time and costs and decrease
pay are insufficient, as a matter of law, to support a
retaliation claim.
We hold that Smith has successfully pled retaliation under
Section 3730(h). The district court thus erred when it granted
Defendants’ motion to dismiss that claim.
21
V.
In sum, we hold that the district court erred when it
dismissed Counts I, II, and IV of Smith’s complaint with
prejudice. In light of this holding, the district court’s award
of costs to Defendants is also improper. Cf. Kollsman, a Div.
of Sequa Corp. v. Cohen, 996 F.2d 702, 706 (4th Cir. 1993)
(holding that defendant was a prevailing party eligible to
receive costs where there had been a dismissal with prejudice);
Fed. R. Civ. P. 54 (“Unless a federal statute, these rules, or a
court order provides otherwise, costs--other than attorney’s
fees--should be allowed to the prevailing party.”).
For the aforementioned reasons, we affirm the district
court’s denial of Smith’s oral motion to amend, reverse the
order granting a dismissal with prejudice as to counts I, II,
and IV—the only counts on appeal, vacate the costs order, and
remand to the district court for further proceedings in
accordance with this opinion.
AFFIRMED IN PART, REVERSED IN PART,
VACATED IN PART, AND REMANDED
FOR FURTHER PROCEEDINGS
22