Michael H. Simon, District Judge.
Keith Manufacturing Co. ("Keith") brought this lawsuit against its former employee Larry D. Butterfield ("Butterfield"). Eighteen months later, the parties stipulated to the dismissal of all claims with prejudice. The stipulation was silent on the issue of attorney's fees. Twelve days after Keith filed the stipulated dismissal, Butterfield filed a motion for attorney's fees under Rule 54 of the Federal Rules of Civil Procedure. That rule permits a prevailing party to move for attorney's fees within fourteen days after entry of judgment. Butterfield argues that a stipulated dismissal with prejudice is an appealable order and thereby qualifies as a judgment for purposes of Rule 54. Butterfield also argues that because Keith dismissed its claims with prejudice, Butterfield is the prevailing party.
Keith opposes Butterfield's motion and raises three arguments. First, Keith argues that the filing of the voluntary dismissal by stipulation ends the lawsuit and, thus, divests the Court of jurisdiction to award attorney's fees. Second, Keith argues that a motion for attorney's fees under Rule 54 requires a judgment and a voluntary dismissal by stipulation is not a judgment because it is not an appealable order. Third, Keith argues that no one in this case is a prevailing party and, thus, Butterfield is not entitled to recover attorney's fees. Finally, Keith has filed its own conditional motion for attorney's fees, asserting that if the Court rejects Keith's arguments regarding the unavailability of attorney's fees in this case, then Keith is entitled to recover its attorney's fees as a prevailing party, either instead of Butterfield or in addition to Butterfield. For the reasons stated below, the Court concludes that: (1) the Court has jurisdiction to resolve the parties' cross-motions for attorney's fees; and (2) attorney's fees are not available to either party because, based on a recent decision from the Supreme Court, a voluntary dismissal by stipulation (even with prejudice) is not an appealable order and, thus, not a judgment for purposes of Rule 54. Accordingly, the Court denies both parties' motions for attorney's fees.
On October 23, 2015, Keith filed this lawsuit against its former employee Butterfield. According to Keith, during Butterfield's employment with Keith, Butterfield filed a patent application that led to the issuance of U.S. Patent No. 9,126,520 ("the '520 patent"). Keith alleges that Butterfield's patent application was based on
On May 3, 2016, Keith filed its second amended complaint. On May 16, 2016, Butterfield sent to Keith a covenant not to sue (the "Covenant Not to Sue"). The preamble to Butterfield's Covenant Not to Sue states that "Keith's advertisement and sale of its products ... do not infringe and are not likely ever to infringe Butterfield's patent rights at a level sufficient to warrant the substantial time and expense of continued litigation." ECF 23-1 at 2. Butterfield's Covenant Not to Sue continues, in relevant part:
Id.
The following day, May 17, 2016, Butterfield filed a motion to dismiss four of Keith's claims, excluding only the claim for correction of inventorship. Butterfield argued that his Covenant Not Sue renders moot Keith's claims that sought a declaration of noninfringement of the '520 patent and a declaration of invalidity of the '520 patent. Butterfield also argued that the applicable statutes of limitation and the doctrine of laches bars Keith's claims for breach of contract and trade secret misappropriation. On August 2, 2016, the Court granted in part and denied in part Butterfield's motion to dismiss. The Court ruled that Keith's declaratory judgment patent claims are moot in light of Butterfield's unconditional and irrevocable Covenant Not to Sue, but Keith's state claims for breach of contract and trade secret misappropriation may proceed. Two weeks later, on August 16, 2016, Butterfield filed his answer to Keith's second amended complaint. On April 21, 2017, more than eight months after the Court issued its ruling on Butterfield's motion to dismiss, the parties
Butterfield moves for an award of attorney's fees pursuant to Fed. R. Civ. P. 54(d), Or. Rev. Stat. § 20.096, Or. Rev. Stat. § 646.467, and 35 U.S.C. § 285. Rule 54(d)(2) of the Federal Rules of Civil Procedure provides, in relevant part:
Fed. R. Civ. P. 54(d)(2) (emphasis added) (headings omitted). Rule 54(a) defines "judgment" as follows: "`Judgment' as used in these rules includes a decree and any order from which an appeal lies." Fed. R. Civ. P. 54(a). In this case, there was no document labeled "Judgment," and the Court did not enter any decree or order; nor was one requested by any party.
Keith opposes Butterfield's motion for attorney's fees on three grounds. First, Keith argues that a stipulation of dismissal pursuant to Rule 41(a)(1)(A)(ii) is self-executing and divests the Court of jurisdiction over the case, including jurisdiction to consider a motion for attorney's fees. Second, Keith argues that a motion for attorney's fees under Rule 54 requires a judgment and a voluntary dismissal by stipulation is not a judgment because it is not an appealable order. Third, Keith argues that Butterfield was not the "prevailing party" on any claim asserted in this case.
Eighteen months after Keith commenced this lawsuit, Keith filed a Stipulation of Dismissal with Prejudice, signed by both Keith and Butterfield. The parties' stipulation states: "Pursuant to Fed. R. Civ. P. 41(a), Plaintiff Keith Manufacturing Co. and Defendant Larry D. Butterfield hereby stipulate to dismissal of all claims pending in this action, with prejudice." ECF 32. The Court did not enter any judgment, decree, or other order in response to the parties' stipulation. Indeed, no order was necessary for the case to be dismissed based on the stipulation of the parties. Thus, the case simply terminated without court order after Plaintiff filed the stipulation of dismissal signed by all parties.
This result is consistent with Rule 41(a)(1)(A)(ii) of the Federal Rules of Civil Procedure. That rule provides in relevant part:
Fed. R. Civ. P. 41(a)(1)(A)(ii) (emphasis in original).
Butterfield cites the decision from the United States Supreme Court in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). In that case, the Supreme Court observed:
Cooter & Gell, 496 U.S. at 395-96, 110 S.Ct. 2447 (emphasis added).
Accordingly, the fact that this case has been dismissed, or terminated, does not divest the court of jurisdiction to resolve the parties' competing motions for attorney's fees as a collateral issue. See also Turner v. Vilsack, 2016 WL 1048893, at *3 (D. Or. March 14, 2016) (holding, in a case under the Equal Access to Justice Act, that a stipulated dismissal by the parties under Fed. R. Civ. P. 41(a)(1)(A)(ii) does not divest the district court of jurisdiction to award attorney's fees to the prevailing party, citing Cooter & Gell).
In support of his motion for attorney's fees, Butterfield argues that a stipulated dismissal with prejudice is an appealable order and, thus, a judgment for purposes of Rule 54. Butterfield cites an unpublished decision from the Ninth Circuit, Shaw v. Jar-Ramona Plaza, LLC, 673 Fed.Appx. 774 (9th Cir. Jan. 18, 2017), which holds: "A stipulated dismissal with prejudice is an appealable order." Id. at 775. The Ninth Circuit in Shaw supports that conclusion by citing Berger v. Home
In Berger v. Home Depot, a consumer (Berger) brought a putative class action against a home improvement store (Home Depot), alleging violations of California's Unfair Competition Law, California's Consumer Legal Remedies Act, and common law. Berger moved for class certification, which the district court denied. Berger then stipulated to the dismissal of his claims with prejudice and appealed. Because there was no allegation that Berger and Home Depot had entered into a settlement agreement, the Ninth Circuit concluded that Berger's "stipulated dismissal is sufficiently adverse to his interests to allow him to appeal." Berger, 741 F.3d at 1066.
Similarly, in Concha v. London, the Ninth Circuit held that "plaintiffs may appeal from a voluntary dismissal with prejudice, at least where the plaintiff is not acting pursuant to a settlement agreement intended to terminate the litigation." Concha, 62 F.3d at 1507 (emphasis in original). According to the Ninth Circuit in Concha, the fact that the plaintiff did not have a settlement agreement distinguished Concha from the Ninth Circuit's earlier decision in Seidman v. City of Beverly Hills, 785 F.2d 1447 (9th Cir. 1986). Concha, 62 F.3d at 1507.
In Seidman, a car owned by Seidman had been towed and impounded because of expired registration. Seidman then brought a putative civil rights class action against the City of Beverly Hills and a towing company. Seidman alleged a constitutional violation based on the fact that his the car has been taken without the city, or its agent (the towing company), providing notice of opportunity for a post-seizure hearing. The district court denied Seidman's motion for class certification. Seidman then settled his individual claims with the defendants, but reserved his right to appeal "any of the adverse rulings made against him at trial." Seidman, 785 F.2d at 1448. Although the case never went to trial, Seidman appealed the district court's denial of his motion for class certification. In dismissing Seidman's appeal for lack of appellate jurisdiction, the Ninth Circuit held: "A plaintiff may not appeal a voluntary dismissal [under Rule 41(a)(1)] because it is not an involuntary adverse judgment against him." Id.
In Microsoft Corp. v. Baker, the Supreme Court abrogated the Ninth Circuit's holding in Berger v. Home Depot. 137 S.Ct. at 1711-12, 2017 WL 2507341, at *10. In Microsoft, consumers brought a putative class action against the manufacturer of a video game console. The district court entered an order striking the consumers' class allegations. The consumers then petitioned the Ninth Circuit under Rule 23(f) of the Federal Rules of Civil Procedure for permission to appeal the district court's ruling, but the Ninth Circuit denied the petition. Rather than continuing to litigate, the consumers moved to dismiss their case with prejudice, and the district court entered a final order and judgment to that effect. Quoting Berger, the Ninth Circuit held that because the stipulated dismissal did not involve a settlement, the action was sufficiently adverse to be an appealable final decision. On the merits, the Ninth Circuit ruled that the district court had abused its discretion in striking the class allegations. Id.
The Supreme Court granted certiorari to resolve a conflict among the Circuits.
As previously noted, Rule 54(d)(2)(A) requires that a claim for attorney's fees be made by motion (except under certain circumstances not relevant here). Rule 54(d)(2)(B)(i) requires that such a motion be filed no later than 14 after entry of judgment. This latter provision implies that a judgment is a prerequisite for obtaining an award of attorney's fees under Rule 54. The next provision in Rule 54 makes that requirement explicit.
Rule 54(d)(2)(B)(ii) states that a motion for attorney's fees must "specify the judgment and the statute, rule, or other grounds entitling the movant to the award." (Emphasis added.) Thus, there must be a judgment for a party to be entitled to recover attorney's fees under Rule 54, although "judgment" is defined in that rule to include "a decree and any order from which an appeal lies." Fed. R. Civ. P. 54(a). Because there is no document labeled "Judgment" in this case and no decree entered by the court and because a stipulated judgment of dismissal, even with prejudice, is not an appealable order, as recently determined by the Supreme Court in Microsoft v. Baker, there is no Judgment in this case for purposes of Rule 54. Thus, a prerequisite for an award of attorney's fees under Rule 54 is missing.
Although the Court could end its analysis of the pending motions for attorney's fees at this point, in light of the fact that the Supreme Court's decision in Microsoft v. Baker is quite recent and has not yet been applied in the context of motions for attorney's fees under Rule 54, prudence suggests that the Court also evaluate Keith's argument that neither Butterfield nor Keith is a prevailing party in this case. The Court turns to that issue next.
Rule 54 provides that costs — other than attorney's fees — should generally be allowed to the prevailing party. Fed. R. Civ. P. 54(d)(1). The term "prevailing party,"
Keith's third claim alleged that Butterfield breached his employment contract with Keith. In his second amended complaint, Keith alleged that he was entitled to contract damages and "[a]n award of attorney's fees and costs pursuant to the terms of the 2004 employment agreement." ECF 21 at 15. The parties' contract provides: "In case litigation is instituted, rising directly or indirectly out of this Agreement, the losing party shall pay to the prevailing party his or her reasonable attorney's fees, both at trial and appellate levels." ECF 34-1 at 9 (emphasis added). The contract further provides that it is governed by Oregon law. Id. at 8.
Or. Rev. Stat. § 20.096 states, in relevant part:
(Emphasis added.)
The relevant question now becomes whether, as a result of the filing of the parties' Stipulation of Dismissal with Prejudice, Butterfield is the prevailing party on Keith's claim of breach of contract. If federal law were to apply to this question, the Supreme Court's decision in Buckhannon Board and Care Home, Inc. v. W. Va. Dept. of Health and Human Resources, 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001), likely would provide the answer. In that case, the Supreme Court interpreted the term "prevailing party" in the context of two federal laws, the Fair Housing Amendments Act and the Americans with Disabilities Act, and rejected the "catalyst theory" as applied to those laws in determining whether someone is a prevailing party. The Supreme Court provided the following background:
Buckhannon, 532 U.S. at 602-603, 121 S.Ct. 1835 (citations and footnotes omitted) (emphasis in original).
The Supreme Court then held:
Buckhannon, 532 U.S. at 605-606, 121 S.Ct. 1835 (emphasis added) (citations and footnotes omitted).
Federal law, however, does not apply to the question of whether a party is entitled to recover attorney's fees in a diversity case, or when state law provides the rule of decision. See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 259 n.31, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975) ("[I]n an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed." (quotation marks omitted) (brackets in original). Thus, the Court evaluates whether Oregon law provides a definition of "prevailing party" that may inform these circumstances. It does.
Rule 54 A(1) of the Oregon Rules of Civil Procedure ("ORCP") provides a mechanism under which a plaintiff separately, or all appearing parties by stipulation, may obtain the voluntary dismissal without court order of a lawsuit pending in Oregon state court. The substance and procedure is virtually identical to that found in Rule 54 of the Federal Rules of Civil Procedure, except for two differences.
ORCP 54A(3) (emphasis added). Thus, under Oregon law, after a plaintiff files a notice of voluntary dismissal (either with or without prejudice) under ORCP 54A(1), the defendant generally is the prevailing party, pursuant to ORCP 54A(3). See Attaway, Inc. v. Saffer, 95 Or.App. 481, 484, 770 P.2d 596, 598 (1989) ("The trial court correctly found that defendant was the prevailing party under ORCP 54A(3).").
It seems odd, however, to rely on an Oregon Rule of Civil Procedure as part of a substantive determination whether a party in a federal lawsuit is a "prevailing party" under Oregon law. Federal courts sitting in diversity (or when the rule of decision over a claim is governed by state law) apply state substantive law and federal procedural law. Hanna v. Plumer, 380 U.S. 460, 465-66, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). The determination, however, of whether someone is a prevailing party and thus entitled to fee-shifting (as well as the method of calculating the appropriate fee) is an inherent part of the substantive state right to the fee. See Mangold v. California Pub. Utils. Comm'n, 67 F.3d 1470, 1478 (9th Cir. 1995) ("Whether to hold a hearing is a matter of court administration, whereas calculation of the amount of the fee is bound up in the substantive state right.").
Thus, under Oregon law, Butterfield is the prevailing party with regard to Keith's claim of breach of contract, based on the filing of the parties' Stipulation of Dismissal with Prejudice. But for the procedural barrier identified in the preceding section relating to the absence of a judgment, as that term is understood under Rule 54 of the Federal Rules of Civil Procedure, Butterfield would have been entitled to his reasonable attorney's fees incurred in defending against Keith's claim of breach of contract.
Keith's fourth claim alleged that Butterfield misappropriated Keith's trade secrets in violation of Oregon law. Under Oregon's trade secret law, a prevailing party may recover reasonable attorney's fees only under the following circumstances:
Or. Rev. Stat. § 646.467. For the same reasons that Butterfield is the prevailing party in Keith's state law claim of breach of contract, Butterfield also is the prevailing party in Keith's state law claim of trade secret misappropriation. Being a prevailing party here, however, is insufficient to warrant fee-shifting under Oregon's trade secret law.
The Court has reviewed the parties' submissions. Butterfield has not shown that Keith's claim of misappropriation was made in bad faith. In addition, the other two conditions that might support an award of attorney's fees in other circumstances are inapplicable in this case. Accordingly, Butterfield is not entitled to an award of attorney's fees on Keith's claim of trade secret misappropriate, notwithstanding Butterfield's status as a prevailing party under Oregon law.
Keith's first and second claims sought, respectively, declarations of noninfringement of the '520 patent and invalidity of that patent. After Butterfield provided his Covenant Not to Sue, the Court granted Butterfield's motion to dismiss these claims as moot and for lack of subject matter jurisdiction. Butterfield does not contend that he is the prevailing party on these claims.
Keith's fifth claim, however, sought an order directing the U.S. Patent and Trademark Office to amend the '520 patent properly to name the inventors of that patent. Butterfield contends that he is the prevailing party under this federal patent claim, and he seeks attorney's fees under 35 U.S.C. § 285. That federal patent statute provides:
35 U.S.C. § 285.
The issue of a whether a party is a prevailing party under 35 U.S.C. § 285 (the fee provision under the Patent Act) is a question of Federal Circuit law. SSL Servs., LLC v. Citrix Sys., Inc., 769 F.3d 1073, 1086 (Fed. Cir. 2014) ("In a patent case, Federal Circuit law governs the determination of which party has prevailed."). In support of Butterfield's argument that he is the prevailing party with respect to Keith's claim for correction of patent inventorship, Butterfield cites the Federal Circuit's decision in Power Mosfet Technologies, LLC v. Siemens AG, 378 F.3d 1396 (Fed. Cir. 2004). In that case, the Federal Court found that a particular party had prevailed and stated: "The dismissal of a claim with prejudice, however, is a judgment on the merits under the law of the Federal Circuit." Id. at 1416. Even though Power Mosfet was decided after the Supreme Court's decision in Buckhannon, the Federal Circuit in Power Mosfet did not mention Buckhannon. A later decision from the Federal Circuit, however, did.
In RFR Industries, Inc. v. Century Steps, Inc., 477 F.3d 1348 (Fed. Cir. 2007), the Federal Circuit applied Buckhannon to the prevailing party fee provision in the Patent Act, 35 U.S.C. § 285. RFR voluntarily dismissed its case under Rule 41(a)(1)(i) (the predecessor to current Rule 41(a)(1)(A)(i)), before Century served its answer. Century then filed a motion for attorney's fees. Citing Buckhannon, the Federal Circuit in RFR stated:
RFR, 477 F.3d at 1353 (emphasis added).
In the pending case, Butterfield argues that the filing of a stipulation of dismissal with prejudice changes the legal relationship of the parties. This appears to be correct because Keith may no longer bring a new action against Butterfield on the same claim or the same set of operative facts, under the doctrine of res judicata. The Federal Circuit in RFR, however, following the reasoning of the Supreme Court in Buckhannon, held that there must be something more than merely a change in the legal relationship of the parties — such a change must have a sufficient judicial imprimatur to constitute a judicially sanctioned change. When claims are dismissed simply by the filing of a voluntary dismissal (either with or without prejudice), there is no judicial imprimatur to constitute a judicially sanctioned change. This was the same result reached in a well-reasoned Report and Recommendation by U.S. Magistrate Judge Karla R. Spaulding in F4W, Inc. v. TracStar Systems, Inc., Case No. 6:12-cv-1539-Orl-28KRS, 2015 WL 12838856 (M.D. Fla. April 3, 2015), adopted by U.S. District Judge John Antoon II, 2015 WL 12840464 (M.D. Fla. June 18, 2015). Thus, Butterfield is not the prevailing party on Keith's fifth claim.
Further, even if Butterfield were the prevailing party on Keith's fifth claim, the exceptional circumstances required for an award of attorney's fees in a patent case under § 285 are lacking. In Octane Fitness, LLC v. Icon Health & Fitness, Inc., ___ U.S. ___, 134 S.Ct. 1749, 188 L.Ed.2d 816 (2014), the Supreme Court stated:
Octane, 134 S.Ct. at 1756. Under the totality of the circumstances presented in the pending case, including Butterfield's Covenant Not to Sue, the Court does not believe that this case stands out from others with respect to the substantive strength of either party's litigating position or any unreasonable manner in which the case was litigated. Thus, attorney's fees would be inappropriate under § 285, even if Butterfield were the prevailing party.
Keith argues that because this action was voluntarily dismissed by stipulation under Rule 41(a), it does not meet the definition of "Judgment" set forth in Rule 54. The Court agrees. Keith adds, however, that if the Court were to disagree, then Keith conditionally moves for its attorney's fees as the prevailing party under its first two claims, seeking declaratory relief under the Patent Act. Keith argues that when the Court dismissed Keith's first two
In response, Butterfield cites several district court decisions holding that when declaratory judgment patent claims are dismissed for lack of subject matter jurisdiction based on a covenant not to sue voluntarily provided to the plaintiff by the patent owner, the plaintiff is not considered a prevailing party. See, e.g., In re Columbia Univ. Patent Litig., 343 F.Supp.2d 35, 49 (D. Mass. 2004) ("While [Defendant's] covenant not to sue is a form of voluntary conduct that accomplishes the major part of what the plaintiffs sought to achieve in these lawsuits, they have received no relief from the court on the merits of their claims. They are, therefore, not prevailing parties for the purposes of § 285.") (citing Inland Steel Co. v. LTV Steel Co., 364 F.3d 318, 320 (Fed. Cir. 2004)); see also HTC Corp. v. Tech. Props. Ltd., 2014 WL 3706617, at *4 (N.D. Cal. July 21, 2014) ("District courts, including this one, have held that where a declaratory judgment defendant divests the court of subject matter jurisdiction over the case, either by disclaiming the patent at issue or by filing a covenant not to sue — and the court dismisses the claims without prejudice — the plaintiff is not the prevailing party.") (citing cases). Nowhere in Keith's submissions regarding attorney's fees does Keith address either Columbia or HTC.
In addition, even if Keith were a prevailing party on its first two claims, the Court, viewing the totality of the circumstances in this case, as discussed above, does not believe that this case stands out from others with respect to the substantive strength of either party's litigating position or any unreasonable manner in which the case was litigated. Thus, attorney's fees would be inappropriate under § 285, even if Keith were the prevailing party on its first two claims.
Defendant Larry D. Butterfield's Motion for Attorney's Fees (ECF 33) is DENIED. Similarly, Plaintiff Keith Manufacturing Co.'s Motion for Attorney's Fees (ECF 35) is DENIED.
