New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
Commercial Litigation and Arbitration
« Back to Complex Lit Blog

Rule 41(a) and 41(d) 2-Dismissal Rules Don’t Apply If First Dismissal Is Involuntary — Inherent Power Sanctions Cannot Be Imposed Absent Notice They Are Under Consideration — “Fleeting References” in Motion Don’t Satisfy Due Process

Download PDF

Platinum Logistics, Inc. v. Platinum Cargo Logistics, Inc., 2017 WL 7689644 (9th Cir. 2017):

MEMORANDUM*

In this case, Platinum Logistics, Inc. brought its third suit against Platinum Cargo Logistics, Inc.. After Platinum Logistics filed the present action, Platinum Cargo requested and the district court awarded the costs (including attorney’s fees) that Platinum Cargo accrued in the second action. When Platinum Logistics failed to pay the award, the district court dismissed this third action with prejudice. Platinum Logistics now challenges both of these decisions. We have jurisdiction pursuant to 28 U.S.C. § 1291. We vacate and remand.

1. The district court awarded costs and attorney’s fees (accrued in the second action) pursuant to Federal Rule of Civil Procedure 41(d). Rule 41(d) provides that

[i]f 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.

By the plain language of the rule, a court may award costs only if the plaintiff voluntarily dismissed the prior action. Here, the second action was involuntarily dismissed without prejudice. Thus, the district court could not award costs accrued in the second action pursuant to Rule 41(d).

2. The district court failed to properly invoke its inherent power to award the costs and attorney’s fees accrued in the second action. Under our precedent, “the district court has the inherent authority to impose sanctions for bad faith, which includes a broad range of willful improper conduct.” Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001). However, when a court invokes its inherent power to impose sanctions, it triggers due process concerns. Roadway Exp., Inc. v. Piper, 447 U.S. 752, 767 n.14 (1980). Thus, Platinum Logistics was “entitled to notice, an opportunity to be heard and a finding of bad faith” prior to the district court awarding costs and attorney’s fees to Platinum Cargo under its inherent authority. See F.J. Hanshaw Enters., Inc. v. Emerald River Dev., Inc., 244 F.3d 1128, 1143 (9th Cir. 2001).

Platinum Logistics did not receive adequate notice that the court was considering inherent power sanctions nor did the court conduct a hearing on the matter. Platinum Cargo made fleeting references in its motion to the district court’s “inherent power,” but presented no argument on that issue. In its order, the district court noted that, as an alternative to Rule 41(d), it found “that [Platinum Logistic’s] conduct and tactics warrant payment of [Platinum Cargo’s] costs and fees ... as a sanction pursuant to the Court’s inherent power,” but also noted that Platinum Cargo “did not make such an argument.” Thus, Platinum Logistics did not receive adequate due process.

3. Platinum Cargo’s argument that the “two-dismissal” rule in Federal Rule of Civil Procedure 41(a) applies to the facts of this case lacks merit. Rule 41(a)(1)(A) provides that “the plaintiff may dismiss an action without a court order by filing ... a notice of dismissal ... or a stipulation of dismissal.” In addition, “if the plaintiff previously dismissed any federal or state-court action based on or including the same claim, a notice of dismissal operates as an adjudication on the merits.” Fed. R. Civ. P. 41(a)(1)(B) (emphasis added). Here, Platinum Logistics did not file a notice of dismissal in the second action. Thus, under the plain meaning of the rule, the dismissal of the second action was not an adjudication on the merits and the “two-dismissal” rule does not apply.

4. The district court dismissed the present action with prejudice when Platinum Logistics failed to pay the costs and fees awarded to Platinum Cargo. Because we vacate the award of costs and fees, we also vacate the district court’s order dismissing the present action.

 

VACATED and REMANDED

 

The parties shall bear their own costs on appeal.

 

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

1) Rule 11 Sanctions: “No First Amendment Exception to a Rule 11 Violation” — “[T]he First Amendment Covers Novel, Nonfrivolous Arguments, But Many Frivolous Arguments Are Also Novel” (Good Quotes) — Frivolous To Continue To Make Rejected Novel Arguments; (2) FRAP 38 Sanctions: District Court In Best Position to Set Sanctions, Attorney’s Fees and Costs

3 Prerequisites for Inherent Power and § 1927 Sanctions in Second Circuit: (1) Bad Faith, (2) Conduct That Is Entirely Without Color [Thus, An Ill-Motivated Colorable Position Appears to Be Protected in the Second Circuit], and (3) Improper Purpose— “To Gain A Strategic Advantage” Is An Improper Purpose — Due Process Satisfied by Opponent’s Motion and Multiple Court Conferences, After Which Target Was Allowed to Submit Additional Letters

Inherent Power Sanctions — Untimeliness as Laches — Laches Properly Applied to Deny Sanctions Motion — Note Waived Defenses to Laches

Rule 37(c)(1) Sanctions: Substantial Justification or Harmless Error (Ninth Circuit Factors) — Erie: When State Supreme Court Has Not Squarely Addressed an Issue, Circuit Must Predict How It Would Rule, Using Intermediate Appellate Decisions, Decisions from Other Jurisdictions, Statutes, Treatises And Restatements for Guidance

(1) Appellate Review of Inherent Power Sanctions (7th Circuit): Factual Findings Reviewed for Clear Error, Choice of Sanction for Abuse of Discretion — 4-Element Test for Reversal; (2) Sanctions and Class Actions: Monetary Sanctions Properly Imposed on Defendants for Improper Communications with Class Members (Represented Parties) — “[I]f The Class And The Class Opponent Are Involved In An Ongoing Business Relationship, Communications From The Class Opponent To The Class May Be Coercive” (Good Quote); (3) Monetary Sanctions under Goodyear v. Haeger: If Same Fact-Gathering Would Have Been Conducted Absent The Misconduct, No But-For Causation — But Only “Rough Justice” Required, “Not Accountant-Like Precision” (Good Quote) — Once Misconduct Is Clear, Time Spent Ferreting It Out Compensable under Goodyear; (4) Goodyear Did Not Overrule Long-Standing Rule That Courts May Impose Modest Civil Monetary Sanctions to Curb Litigation Abuse; (5) Appellate Jurisdiction Lacking Where Sanctioned Attorney Fails to File Notice of Appeal and Lawyer’s Intent to Appeal Not Apparent from Client’s Notice; (5) Rule 11 Improper Purpose — Party May Have Many Purposes for Pursuing Claim — As Long As Claim Is Supported by Good Faith Belief in the Merits, “A Parallel Reason Does Not Violate Rule 11” — To Deny A Motion for Sanctions, The District Court Need Not Address Every Argument: “Arguments Clearly Without Merit Can, And For The Sake Of Judicial Economy Should, Be Passed Over In Silence” (Good Quote); Non-Monetary Sanction on Counsel: Complete Twice The Required Amount Of Professional Responsibility Hours For Her Next Continuing Legal Education Cycle Imposed By The State Bar

(1) Spoliation: Sanctions Are Warranted Only If the Movant Establishes That A Reasonable Trier of Fact Could Find That The Destroyed Evidence Would Support A Claim Or Defense — § 1927 Sanctions: “Courts Often Refuse to Award Sanctions When Both Parties Contributed to the Waste of Judicial Resources” (Good Quote)

No Sanctions Imposed on Counsel Who Submitted A.I.-Generated Phony Cases Without Checking Them in Good Faith on The Mistaken Assumption They Had Been Provided by Highly Respected Co-Counsel Rather Than His Criminally-Convicted, Disbarred Client — No Sanctions on Client Who Had No Access to LEXIS or Westlaw to Check the Phony Cases and Submitted Them in Good Faith: “It Would Have Been Downright Irrational For Him To Provide Fake Cases For [His Lawyer] To Include In The Motion Knowing They Were Fake —

(1) Electronic Spoliation — Rule 37(e)(2) Dismissal Sanction — Temporal Proximity of Spoliation to Production Due Date = Circumstantial Evidence of Intent; (2) While Discovery Sanctions Are Reviewed For Abuse Of Discretion, Findings Of Fact Related To Discovery Sanctions Are Reviewed For Clear Error; (3) Dismissal under Rule 37(e)(2) Plus Attorney’s Fees under Inherent Power Appropriately Combined [But see 2015 Advisory Committee Note: “New Rule 37(e) … authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures. forecloses reliance on inherent authority or state law to determine when certain measures should be used.”]; (4) Compensatory Sanctions under Goodyear v. Haeger Appropriately Include Fees and Costs Resulting from Attempts to Settle Spoliation Motion

(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

(1) § 1927 and Inherent Power Sanctions — Extrajudicial Misconduct After Obtaining Verdict: Filing Lis Pendens Based on False Statements and in Violation of Governing Law, Filing Fraudulent Abstracts of Judgment That Represented They Had Been Court-Issued; (2) Rule 37 Sanctions for Baseless Motion to Compel Required Unless Target Shows That the Motion Was Substantially Justified Or Other Circumstances Make An Award Of Expenses Unjust

Archives
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

New York Office

© 2024 Joseph Hage Aaronson LLC  
Disclaimer | Attorney Advertising Notice | Legal Notice