Spar Gas, Inc. v. AP Propane, Inc., 91-6040

• Decision Date: 22 July 1992
• Docket Number: No. 91-6040,91-6040
• Citation: 972 F.2d 348
• Parties: NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. SPAR GAS, INC., Plaintiff-Appellant v. AP PROPANE, INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Sixth Circuit

Page 348

972 F.2d 348

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

SPAR GAS, INC., Plaintiff-Appellant v. AP PROPANE, INC., Defendant-Appellee

No. 91-6040.

United States Court of Appeals, Sixth Circuit.

July 22, 1992.

Before KENNEDY, DAVID A. NELSON and BATCHELDER, Circuit Judges.

BATCHELDER, Circuit Judge.

In the district court, the plaintiff-appellants, Mary Ann Catron, Oval Hitchcock, and Lyle Catron ("Appellants"), ¹ moved to dismiss their lawsuit without prejudice. The district court ordered that dismissal would be without prejudice only upon Appellants' paying the costs and reasonable attorneys' fees of the defendant-appellee, AP Propane, Inc. ("AP"). When the Appellants failed to pay the costs and attorneys' fees of AP as required, the court dismissed the case with prejudice. We affirm the district court's conditioning the dismissal without prejudice on payment of AP's costs and attorneys' fees, but reverse the court's determination relating to the fee award.

Shortly before the trial in this matter, the Appellants, proceeding pro se, ² requested a voluntary dismissal of their lawsuit without prejudice. The district court granted the motion conditioned upon their payment of the costs and reasonable attorneys' fees of AP. At the court's direction, AP filed a statement of fees and costs totalling $99,368.03. Appellants opposed that fee statement, arguing in part that the legal work AP had already performed would be reusable in the subsequent suit that Appellants planned to file. In a one-paragraph Memorandum, the district court concluded that AP's hours and expenses were reasonable and ordered Appellants to pay all of AP's fees before being permitted to dismiss their suit without prejudice. On September 4, 1991, the time allotted for Appellants to pay AP's fees having expired, the district court dismissed the case with prejudice.

This Court reviews the district court's decision on a Rule 41(a)(2) motion for an abuse of discretion. DWG Corp. v. Granada Investments, Inc., 962 F.2d 1201, 1202 (6th Cir.1992). We will not reverse the court's ruling unless we are left with the definite and firm conviction that the district court "committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors." McBee v. Bomar, 296 F.2d 235, 237 (6th Cir.1961); accord United States v. Frost, 914 F.2d 756, 765 (6th Cir.1990); Balani v. I.N.S., 669 F.2d 1157, 1160 (6th Cir.1982) (per curiam).

The district court here provided no explanation for his order denying the motion for an unconditional dismissal without prejudice, which makes it far more difficult for this court to review, even for an abuse of discretion. Nevertheless, after a careful review of the record provided to us on appeal, we find no abuse of discretion in the district court's order conditioning dismissal with prejudice on the Appellants' paying AP's reasonable costs and fees. Some of the factors to be considered in determining whether dismissal without prejudice is appropriate are the adequacy of the plaintiff's justification for requesting the dismissal and the prejudice to the defendant. As to the first of these, although Appellants' attorney had moved to withdraw in January, 1991, they waited until April, 1991, just two months before trial, before seeking voluntary dismissal. AP had every reason to believe the litigation would proceed on schedule, since no motion for substitution of counsel was filed. As for prejudice to the defendant, it is plain from the record that AP had incurred some expenses and fees that could not be used in subsequent litigation between the parties. Thus, it was altogether appropriate for the district court to condition a dismissal without prejudice on the Appellants' payment of AP's reasonable costs and fees. Therefore, we AFFIRM the district court's order of April 19, 1991, which conditioned dismissal with prejudice on Appellants' payment of AP's reasonable attorneys' fees and costs.

We disagree, however, with the district court's treatment of the fees issue. Under the "American Rule," awards of attorneys' fees are not appropriate except when authorized by statute, Alyeska Pipeline Serv. Co. v. Wilderness Society, 421 U.S. 240, 249-50, 95 S.Ct. 1612, 1618 (1975); or by court rules, see, e.g., Fed.R.Civ.P. 11, 30(g)(2), 37(a); or if there are exceptional circumstances that justify an exercise of the court's inherent power, Chambers v. NASCO, Inc., 111 S.Ct. 2123 (1990); see Alyeska Pipeline, 421 U.S. at 258-59, 95 S.Ct. at 1622. The rule in this circuit has long been that attorneys' fees are not awardable on a dismissal with prejudice, but are permitted against the dismissing party on a dismissal without prejudice, for the express purpose of "compensat[ing] the defendant for expenses in preparing for trial in the light of the fact that a new action may be brought in another forum." Smoot v. Fox, 353 F.2d 830, 833 (6th Cir.1965). ³ In all situations in which fees are permitted, whether by statute, or by court rule, or in the court's inherent power, the award is to serve a particular purpose, whether it is protecting the defendant from undue prejudice, sanctioning vexatious conduct, or other reasons.

The function served by conditioning a plaintiff's voluntary dismissal without prejudice upon payment of the defendant's attorneys' fees and costs is the protection of the defendant from prejudice resulting from the plaintiff's actions. Davis v. USX Corp., 819 F.2d 1270, 1273 (4th Cir.1987); Conafay v. Wyeth Laboratories, 793 F.2d 350, 353 (D.C.Cir.1986); LeCompte v. Mr. Chip, Inc., 528 F.2d 601, 604 (5th Cir.1976). Therefore, the district court's discretion in awarding costs and fees is limited "to imposing conditions that will alleviate the harm ... that the defendant will suffer if the motion is granted." McLaughlin v. Cheshire, 676 F.2d 855, 856 (D.C.Cir.1982); LeCompte, 528 F.2d at 604-05. Those courts which have addressed this issue have held that when a district court conditions voluntary dismissal without prejudice upon payment of a defendant's fees, the court should award only those fees representing legal work that could not be used in subsequent litigation on the same claims. Conafay v. Wyeth Laboratories, 841 F.2d 417, 419 (D.C.Cir.1988) (per curiam); Taragan v. Eli Lilly & Co., 838 F.2d 1337, 1340 (D.C.Cir.1988); Cauley v. Wilson, 754 F.2d 769, 772 (7th Cir.1985); Kern v. TXO Production Corp., 738 F.2d 968, 973 (8th Cir.1984); GAF Corp. v. Transamerica Ins. Co., 665 F.2d 364, 369-70 (D.C.Cir.1981).

The issue in this case is not, as the dissent would view it, simply whether the fees approved by the district court were reasonable, but whether, even though reasonable, they were appropriate and necessary to compensate the defendants for the harm which they would suffer if the dismissal without prejudice were granted. In approving every cost and fee incurred by AP, the district court in this matter neither identified which fees and costs represented work that could not be used in a subsequent lawsuit by Appellants, nor provided any basis for its apparent conclusion that in the context of this case an award of the full fee sought was necessary to protect the defendant from harm resulting from the dismissal without prejudice.

Very recently, this Court confronted a similar situation, although it involved the denial of attorneys' fees upon the granting of a motion for voluntary dismissal without prejudice. There we stated,

The difficulty we face is that the court's silence prohibits us from examining the soundness of its discretionary judgment. There may well be convincing reasons for denying the motion for costs. But unless such grounds are made explicit we cannot know for sure.

DWG Corp. v. Granada Investments, Inc., 962 F.2d 1201, 1202 (6th Cir.1992). The DWG case makes it clear that the district judge must at least state the reasons for his award of fees. ⁴

In the present case, the district court's wholesale approval of fees and costs transformed the 41(a)(2) award from a mechanism to protect the defendant into a penalty against the plaintiffs. The district court's failure to exercise its discretion to determine which costs and fees should be awarded to protect AP, constitutes an abuse of discretion. ⁵ See Vinci v. Consolidated Rail Corp., 927 F.2d 287, 288 (6th Cir.1991) (per curiam); LSLJ Partnership v. Frito-Lay, Inc., 920 F.2d 476, 479 (7th Cir.1990); see also Balani v. I.N.S., 669 F.2d 1157, 1161 (6th Cir.1982) (abuse of discretion can occur when decision is not explained). Therefore, we will remand this case to the district court so that it may exercise its discretion within the relatively broad parameters articulated above. The district court may choose to hold a hearing, request additional briefing, or use whatever other procedure it deems appropriate in the exercise of its discretion, to obtain the information and evidence necessary to its determination.

For the reasons stated above, we VACATE the judgment entered September 4, 1991, REVERSE the order of June 28, 1991, and REMAND for proceedings consistent with this opinion.

DAVID A. NELSON, Circuit Judge, concurring in part and dissenting in...