Rule 41(a)(1) of the Federal Rules of Civil Procedure allows a plaintiff to voluntarily dismiss an action without prejudice early in litigation.
Under Rule 41(d), however, 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 (2) may stay the proceedings until the plaintiff has complied.”
Defendants who assert Rule 41(d) often request attorney fees as part of the “costs of that previous action.”
In Adams v. Fox, decided on March 25, the U.S. District Court for the District of Nevada grappled with how to handle a motion for costs, including attorney fees, under Rule 41(d).1
The plaintiffs in Adams v. Fox initially filed a Nevada state court claim that was extensively litigated before being voluntarily dismissed. After dismissal of the state court claim, the plaintiffs filed a very similar case in Nevada federal court.
Upon filing of the federal case, the defendants filed a motion under Rule 41(d) seeking costs from the state case, including attorney fees. The court found that the U.S. Court of Appeals for the Ninth Circuit has not fully determined whether attorney fees may be awarded as part of costs under Rule 41(d).
The court explained that the Ninth Circuit has ruled that “costs” does not include attorney fees, but has not yet decided whether fees are available in instances of bad faith or if the underlying statute under which the action was based affirmatively defines “costs” to include fees.
Ultimately the court denied the request for fees under Rule 41(d) because there was insufficient evidence of bad faith or that the underlying state statute would be triggered.
The circuit courts that have addressed Rule 41(d) at the appellate level are split as to whether attorney fees are included as part of those “costs.” In the U.S. Courts of Appeals for the Third, Fourth, Fifth and Seventh Circuits, attorney fees are only included in the definition of “costs” under Rule 41(d) when the statute, under which the lawsuit was filed, defines “costs” to include fees.
The U.S. Courts of Appeals for the Second, Tenth, and Eighth Circuits grant district courts discretion to award attorney fees as part of costs under Rule 41(d).
The U.S. Court of Appeals for the Sixth Circuit, meanwhile, always excludes fees, and the Ninth Circuit has ruled that “costs” does not include attorney fees but has not yet decided whether fees are available if the underlying statute defines “costs” to include fees.
The U.S. Courts of Appeals for the First, Eleventh and D.C. Circuits have not yet addressed the issue.2 Each part of this three-way split separately explains its reasoning under Rule 41(d).
The “Underlying Substantive Statute Interpretation” of Rule 41(d)
In 2000, the U.S. Court of Appeals for the Seventh Circuit in Esposito v. Piatrowski ruled that attorney fees as part of costs under Rule 41(d) can only be included when “the substantive statute which formed the basis of the original suit allows for the recovery of such fees as costs.” The Third, Fourth and Fifth Circuits agree.3
This interpretation, which has been called the “underlying substantive statute interpretation” of Rule 41(d) by the Third Circuit, is based on the U.S. Supreme Court's 2018 Garza v. Idaho interpretation of the word “costs” in Rule 68 of the Federal Rules of Civil Procedure.4
In Marek v. Chesny in 1985, the Supreme Court determined that attorney fees are not included in the definition of “costs” under Rule 68 “absent congressional expressions to the contrary, where the underlying statute defines ‘costs' to include attorney[] fees.”5
The Supreme Court reasoned that “costs generally had not included attorney[] fees” under the American Rule, but that, starting in the late 1930s, exceptions had evolved “to allow attorney[] fees in particular situations.”6 The court noted that “most of the exceptions were found in federal statutes that directed courts to award attorney[] fees as part of costs in particular cases.”7
Adopting the underlying substantive statute interpretation with it's 2018 ruling in Garza v. Citigroup Inc., the Third Circuit found that the Supreme Court's reasoning in Marek can be extended to the interpretation of the term “costs” under Rule 41(d).8
The Third Circuit explained that “Marek, in addition to reaffirming the American Rule, provides a consistent rational for why the drafters of Rule 41(d) chose to leave ‘costs' undefined”: that “costs” was “intended to refer to all costs properly awardable under the relevant substantive statute or other authority.”9
Thus, ”‘costs' in Rule 41(d) includes attorney[] fees only, where the underlying statute defines ‘costs' to include attorney[] fees.”10 As Adams v. Fox noted, the Ninth Circuit has considered, but not yet adopted, this rule.11
The “Discretionary Interpretation” of Rule 41(d)
The Second, Tenth and Eighth Circuits have given district courts discretion to award attorney fees as part of costs under Rule 41(d) where the underlying statute evinces some intent to make fees available, even if the statute does not expressly contemplate fees.12
This interpretation is based on these circuits' findings that “the entire Rule 41(b) scheme would be substantially undermined were the awarding of attorney[] fees to be precluded,” as stated by the Second Circuit's 2018 ruling in Horowitz v. 148 South Emerson Associates LLC.13 The Second Circuit has explained why it allows district courts to award attorney fees as part of costs at their discretion, while the Eighth and Tenth Circuits have done so with little explanation.
In Horowitz, the Second Circuit concluded that “Rule 41(d) evinces an unmistakable intent for a district court to be free, in its discretion, to award attorney[] fees as part of costs.”14
The Second Circuit explained that, when a rule allows for “costs” but does not reference attorney fees, the case law makes two things clear: ”[f]irst, ‘costs' do not include attorney[] fees where the rule incorporates a statutorily enumerated list of ‘costs' that itself omits attorney[] fees,” and second, “where the term ‘costs' is entirely undefined ... we look to see if the statute otherwise evinces an intent to provide for attorney[] fees.”15
The court found that Rule 41(d) implicitly contemplates attorney fees because cases in the Rule 41(d) context are often “actions with minor costs to the adversary other than attorney[] fees, which may be substantial.”16
In the Second Circuit's view, preventing recovery of attorney fees “would [not] deter litigants ... from forum shopping or otherwise embarking on a course of vexatious litigation,” thus frustrating the purpose of Rule 41(d).17
The “Never Awardable Interpretation” of Rule 41(d)
In contrast, the Sixth Circuit has held that attorney fees are never available as part of costs under Rule 41(d).
In Rogers v. Wal-Mart Stores Inc. in 2000, the Sixth Circuit explained that the “reason is simple — the rule does not explicitly provide for [attorney fees].”18
In the Rogers decision, the Sixth Circuit explained that “the law generally recognizes a difference between the terms ‘costs' and ‘attorney fees' and we have no desire to conflate the two terms.”19 The Rogers court further explained that “several other provisions in the Federal Rules explicitly provide for recovery of attorney fees,” and that the Federal Rules are “ambiguous at best on the question of attorney fees” under Rule 41(d).20
The Sixth Circuit also recognized that “many courts have permitted an award of attorney fees under Rule 41(d),” but declined to adopt those courts' reasoning.
The Rogers court criticized the other circuits, stating that ”[t]hey rely on what they consider to be the policy behind the rule and, in our view, give too little weight to its plain language.”21
The Sixth Circuit concluded that because “Congress did not explicitly provide for attorney fees in Rule 41(d) ... we think it improper to essentially re-draft the rule ourselves by reading into it language that is not there.”22
Practice Tips for Recovering or Avoiding Fees under Rule 41(d)
Courts, like the district court in Adams v. Fox, are still grappling with how to interpret and apply Rule 41(d).
The circuit courts that have addressed Rule 41(d) have varied significantly in their interpretations of the rule. As such, practitioners should be aware of the varying interpretations of Rule 41(d) and be sure to tailor arguments to the appropriate circuit court.
Meanwhile, there may be flexibility in circuits where Rule 41(d) has not yet been addressed at the appellate level. Practitioners looking to increase the chances of a fee award under Rule 41(d) may be able to focus on the underlying statute.
If the underlying statute says that fees are available as part of costs, the practitioner can make the underlying statute the focus of the argument. If the underlying statute does contemplate awarding attorney fees, the practitioner can draw attention to any inappropriate conduct by the opposing party.
Courts generally agree that the purpose of Rule 41(d) is “to serve as a deterrent to forum shopping and vexatious litigation,” as the Eighth Circuit stated in U.S. v. Andrews in 2020.23 Thus, if there is evidence of forum shopping or vexatious litigation, a court may be more likely to award attorney fees.
Practitioners looking to decrease or avoid a fee award may be able to present a legitimate reason for dismissing and then refiling the case. If a practitioner can demonstrate that the purpose of the dismissal and refiling was not vexatious, a court may be less likely to award fees under Rule 41(d).
Footnotes
1. Adams v. Fox, No. 2:23-cv-00474, 2024 WL 1586252, at *8 (D. Nev. Mar. 25, 2024).
2. The Court of Appeals for the Federal Circuit addresses this issue applying the law of the regional circuit. See Realtime Adaptive Streaming LLC v. Netflix, Inc. , 41 F.4th 1372, 1377 (Fed. Cir. 2022). (“Because a district court's inherent power to impose sanctions in the form of attorneys' fees is not a substantive patent question, we apply the law of the regional circuit.”).
3. Esposito v. Piatrowski, 223 F.3d 497, 501 (7th Cir. 2000). See also Garza v. Citigroup Inc., 881 F.3d 277, 284 (3d Cir. 2018); Andrews v. America's Living Ctrs. LLC , 827 F.3d 306, 311 (4th Cir. 2016); Portillo v. Cunningham, 872 F.3d 728, 739 (5th Cir. 2017).
4. Garza, 881 F.3d at 284.
5. Marek v. Chesny, 473 U.S. 1, 9 (1985).
6. Id. at 8.
7. Id.
8. Garza, 881 F.3d at 283.
9. Id.
10. Id. at 284.
11. Moskowitz v. Am. Sav. Bank, F.S.B., 37 F.4th 538, 563–64 (9th Cir. 2022).
12. Horowitz v. 148 South Emerson Assocs. LLC. , 888 F.3d 13, 24 (2d Cir. 2018); Evans v. Safeway Stores Inc., 623 F.2d 121, 122 (8th Cir. 1980); Meredith v. Stovall , No. 99-3350, 216 F.3d 1087 (table), 2000 WL 807355, at *1 (10th Cir. June 23, 2000) (unpublished).
13. Horowitz, 888 F.3d at 25.
14. Id.
15. Id. (internal quotation marks omitted).
16. Id. at 26.
17. Id.
18. Rogers v. Wal-Mart Stores Inc., 230 F.3d 868, 874 (6th Cir. 2000).
19. Id.
20. Id. at 875.
21. Id.
22. Id. at 875–76.
23. Andrews, 827 F.3d at 309.
Originally published by Law360
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