United States of America, ex rel. v. Association of Behavior Consultants

— 1 — — 2 — — 3 — 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA — 6 — 7 UNITED STATES OF AMERICA, et al., Case No. 15-cv-01188-JCS 8 Plaintiffs, ORDER GRANTING DEFENDANTS' 9 v. MOTION FOR VOLUNTARY DISMISSAL OF COUNTERCLAIM 10 ASSOCIATION OF BEHAVIOR AND DENYING RELATOR'S MOTION CONSULTANTS, et al., FOR ATTORNEYS’ FEES AND COSTS — 11 — Defendants. Re: Dkt. Nos. 157, 164 — 12 — 13 Before the Court is Defendants Association of Behavior Consultants’ (“ABC”) and 14 William J. Palyo’s (“Palyo” and together, “Defendants”) motion for voluntary dismissal of their 15 counterclaim in this action pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure and 16 Relator Deborah Cullen’s (“Relator”) amended motion for attorneys’ fees. Having reviewed the 17 parties’ submissions, the Court concludes that these matters are suitable for decision without a 18 hearing. The Court GRANTS Defendants’ motion for voluntary dismissal and DENIES Relator’s 19 amended motion for attorneys’ fees. 20 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 21 Relator filed her complaint in this False Claims Act case on March 12, 2015 (the “Federal 22 Complaint”). Several days later, Relator filed a separate complaint against Defendants in the 23 Superior Court of California, County of Sonoma, Case No. SCV-256863 alleging: (1) wrongful 24 termination in violation of public policy; (2) whistleblower retaliation in violation of Cal. Lab. 25 Code § 1102.5; (3) whistleblower retaliation in violation of Cal. Gov’t Code § 12653; and (4) 26 failure to pay wages owed in violation of California Lab. Code §§ 201 and 203 (the “State 27 Complaint”). On February 5, 2016, the United States of America declined to intervene, and on 1 On or about March 4, 2016, the parties entered into a settlement agreement that partially 2 resolved Relator’s State Complaint (the “First Settlement Agreement”). On September 14, 2016, 3 the parties entered into another settlement that fully settled the remaining disputes that gave rise to 4 the State Complaint (the “Second Settlement Agreement”). Dkt. No. 99-1, Declaration of Bryan 5 L. Malone in support of Defendants’ Motion for Summary Judgment, Ex. C. The Second 6 Settlement Agreement contained a full release of claims Relator had or would have in the future 7 against Defendants that “in any way gr[ew] out of events . . . identified in [the State Complaint].” 8 Id., § 1.1. Relator “expressly waive[d] all rights she has, or may have, under Section 1542 of the 9 Civil Code of California . . . ” Id., § 1.5. The Second Settlement Agreement expressly applied to 10 “any individual and/or representative claims of whistleblower retaliation pursuant to the Federal 11 False Claims Act (31 U.S.C. §§ [sic] 3730(h) and the California False Claims Act (Cal. Gov. Code 12 § 12653).” Id., § 1.6. The release did “not extend to any claim or action, known or unknown, by 13 the United States or the State of California, or to any reward paid by the United States or the State 14 of California, pursuant to the Federal False Claims Act ( 31 U.S.C. §§ 3729 et seq.), the California 15 False Claims Act (Cal. Gov. Code §§ [sic] 12650), or any other federal or state statute or 16 regulation whereby a government entity claims entitlement to recover funds and pays to anyone a 17 reward for such recovery.” Id. The Second Settlement Agreement contained an indemnification 18 provision whereby [P]laintiff agrees to defend, indemnify, protect and hold the released 19 parties harmless from any and all liens, rights of subrogation, indemnification claims, contribution claims, defense claims, losses, 20 liability, actions, damages, causes of action, judgments, costs and expenses, including attorney’s fees, whatsoever made by or sustained 21 by or arising from any person, corporation, partnership, state or federal government, governmental agency, hospital, or any other 22 medical provider, health care provider, disability or insurance benefits provider, workers compensation carrier, Medicare, 23 Medicaid, Medi-Cal or any other entity arising in whole or in part out of the incident(s), or in any way connected to the allegations in this 24 action. 25 Id., § 4.3. After the parties entered into the Second Settlement Agreement, Relator requested 26 dismissal with prejudice of the state court case, which the clerk of court entered on November 7, 27 2016. 1 The Court lifted the seal on December 7, 2016 and ordered Relator to serve the Federal 2 Complaint on Defendants. On March 3, 2017, Defendants answered the Federal Complaint and 3 asserted the following counterclaims against Relator: (1) breach of contract; (2) express 4 indemnity; (3) implied indemnity; (4) contribution; and (5) a request for declaratory relief. 5 Defendants’ counterclaim is based upon the previously-executed settlement agreement. 6 Defendants argued that the release provision contained in the Second Settlement Agreement 7 applies to individual and/or representative claims of whistleblower retaliation pursuant to the 8 Federal False Claims Act (31 U.S.C.§§3730(h)) and the California False Claims Act (California 9 Government Code § 12653). In addition, Defendants argued that Relator agreed to indemnify and 10 hold harmless Defendants from any and all losses, liability, damages, causes of action, costs and 11 expenses, including attorney's fees, asserted from any person, government or agency arising out of 12 the incidents set forth in the allegations of the Federal Complaint. 13 On March 23, 2017, Relator moved to strike Defendants’ counterclaim under California’s 14 anti-SLAPP statute. On May 18, 2017, the Court denied Relator’s motion to strike Defendants’ 15 counterclaim. On June 13, 2017 and June 16, 2017, respectively, Relator filed a motion for relief 16 from the order denying Relator’s motion to strike Defendants’ counterclaim and a motion to 17 dismiss Defendants’ counterclaim. The Court denied both motions in an order dated September 1, 18 2017. Relator also filed a motion for summary judgment on Defendants’ counterclaim on August 19 1, 2017 but Relator later withdrew her motion for summary judgment on August 29, 2017. Dkt. 20 No. 83. Relator moved for Rule 11 sanctions against Defendants on the grounds that their 21 counterclaims were frivolous. The Court denied that motion on September 11, 2017. 22 On May 9, 2019, the Court granted Defendants’ motion for summary judgment on the 23 Federal Complaint but denied Defendants’ motion for summary judgment on the counterclaim. 24 The Court recognized that the parties dispute the meaning of the release and indemnification 25 provisions of the Second Settlement Agreement. Dkt. No. 133 at 25-30. The Court denied 26 summary judgment on the interpretation of the provisions, finding that Relator had raised, at a 27 minimum, a real dispute over how to properly interpret these provisions of the Second Settlement 1 not move for summary judgment on the counterclaim, the Court could only deny Defendants’ 2 motion. 3 On June 6, 2019, Relator filed a motion for partial new trial or in the alternative, to alter or 4 amend the judgment set forth in the Court’s May 9, 2019 Order. On July 18, 2019, the Court 5 denied Relator’s motion for partial new trial or in the alternative, to alter or amend the judgment 6 set forth in the Court’s May 9, 2019 Order. As a result of the Court’s order, Defendants’ 7 counterclaim is the only remaining claim in this action. 8 On November 19, 2019, Defendants filed a motion for voluntary dismissal of their 9 counterclaim without prejudice. On December 9, 2019, Relator filed an amended motion for 10 attorneys’ fees incident to the dismissal of the counterclaim. 11 II. LEGAL STANDARD 12 A. Legal Standard 13 Pursuant to Federal Rule of Civil Procedure 41(a)(2), a plaintiff may dismiss an action, 14 pursuant to an order of the court, and subject to any terms the court deems proper. Fed. R. Civ. P. 15 41(a)(2). This rule also applies to a counterclaim. Fed. R. Civ. P. 41(c). The decision to grant a 16 voluntary dismissal under Rule 41(a)(2) is within the sound discretion of the district court. 17 Westlands Water Dist. v. United States, 100 F.3d 94, 96 (9th Cir. 1996). “When ruling on a 18 motion to dismiss without prejudice, the district court must determine whether the defendant will 19 suffer some plain legal prejudice as a result of the dismissal.” Id. “Legal prejudice” is “prejudice 20 to some legal interest, some legal claim, some legal argument.” Id. at 97 . 21 III. DISCUSSION 22 Defendants are willing to dismiss their remaining counterclaim because the Court granted 23 summary judgment against the Federal Complaint but Relator will not stipulate to the dismissal. 24 In her opposition, Relator agrees that Defendants’ motion for voluntary dismissal should be 25 granted but “not without the appropriate consequences.” Dkt. No. 159 at 19. Relator argues that 26 her motion for summary judgment as to Defendants’ counterclaim was meritorious, should be 27 revisited, and granted. Id. at 19-20. Relator further argues that the Court should award her costs 1 Although not raised in her opposition, Relator argues in her motion for attorneys’ fees that the 2 dismissal should be with prejudice. Dkt. No.161 at 20. Therefore, the parties do not dispute 3 whether the counterclaim should be dismissed but merely what terms, if any, the Court should 4 impose. 5 A. Dismissal with or without prejudice 6 Rule 41(a)(2) provides that, unless otherwise specified in the court's order, the dismissal is 7 without prejudice. Whether a dismissal is to be with or without prejudice is discretionary with the 8 court. See Microhits, Inc. v. Deep Dish Prods., Inc., 510 F. App'x 611, 612 (9th Cir. 2013); 9 Burnette v. Godshall, 828 F.Supp. 1439, 1443 (N.D.Cal.1993), aff'd sub nom., Burnette v. 10 Lockheed Missiles & Space Co., 72 F.3d 766 (9th Cir.1995). Dismissal with prejudice may be 11 appropriate where “it would be inequitable or prejudicial to defendant to allow plaintiff to refile 12 the action.” Williams v. Peralta Cmty. Coll. Dist., 227 F.R.D. 538 , 539–40 (N.D. Cal. 2005) 13 (quoting Burnette, 828 F.Supp. at 1443 ). Factors that may be considered in determining whether a 14 dismissal should be with or without prejudice include: “(1) the defendant's effort and expense in 15 preparing for trial, (2) excessive delay and lack of diligence on the part of the plaintiff in 16 prosecuting the action, [and] (3) insufficient explanation of the need to take a dismissal.” Williams 17 v. Peralta Cmty. Coll. Dist., 227 F.R.D. 538, 540 (N.D. Cal. 2005) (quoting Burnette, 828 F.Supp. 18 at 1443-44 (internal quotation marks omitted)). 19 In Relator’s opposition, she argues that Defendants’ counterclaim is retaliatory and 20 frivolous, and requests the Court revisit various motions, including her withdrawn motion for 21 summary judgment. Dkt. No. 159 at 19-20. Relator’s request is in essence a motion for 22 reconsideration in violation of Civil Local Rule 7-9(c). Relator’s opposition and motion for 23 attorneys’ fees recycles arguments the Court has addressed three or four times prior.1 The Court 24 declines to disturb its previous rulings. Ariz. v. Cal., 460 U.S. 605, 618 (2014). Further, the Court 25 declines to revisit the motion for summary judgment Relator previously withdrew. Relator had the — 26 — 1 Relator has previously raised the arguments contained in her opposition to Defendants’ motion — 27 — for voluntary dismissal and in her motion for attorneys’ fees in Relator’s motion to strike, motion 1 opportunity to refile her motion for summary judgment but did not do so. The Court finds 2 Relator’s arguments are unpersuasive. 3 The Court then considers the factors outlined in Williams. Relator failed to address any of 4 these factors in her opposition. Here, discovery is closed, and the Court has ruled on motions for 5 summary judgment. Relator likely spent effort and expense opposing Defendants’ summary 6 judgment motions. However, the parties and their counsel never engaged in joint preparation of 7 documents or discussions for trial preparation or pre-trial hearing purposes. There is no evidence 8 that Defendants acted with excessive delay and lack of diligence in prosecuting their counterclaim. 9 Defendants filed a motion for summary judgment on their counterclaim even though Relator failed 10 to refile her withdrawn motion. After the Court denied Relator’s motion for a new trial, the parties 11 engaged in settlement discussions and conducted follow-up calls with Magistrate Judge Hixson. 12 Dkt. No. 157-2, Declaration of Bryan L. Malone in support of motion for voluntary dismissal of 13 counterclaim, ¶¶ 16,18. Defendants’ motion reasonably followed such discussions after Relator 14 would not stipulate to a voluntary dismissal of the counterclaim. Defendants’ explanation 15 regarding the need for a dismissal is likewise reasonable. Defendants state that their counterclaim 16 is the chief substantive affirmative defense to Relator’s Federal Complaint but with summary 17 judgment having been granted against the Federal Complaint, prosecution of the counterclaim is 18 not necessary. Id. at ¶ 19. Thus, the Court GRANTS Defendants’ motion for voluntary dismissal 19 without prejudice. 20 B. Attorneys’ Fees and Costs 21 A Court may condition a voluntary dismissal on the payment of fees and costs. 22 Stevedoring Servs. of Am. v. Armilla Int'l B.V., 889 F.2d 919 , 921 (9th Cir. 1989). However, it is 23 not an abuse of discretion for a court to refuse to require a party pay costs and attorneys’ fees as a 24 condition precedent to an order granting voluntary dismissal without prejudice. Id. “In 25 determining whether to award costs ... to [a] defendant[ ] after a voluntary dismissal without 26 prejudice, courts generally consider the following factors: (1) any excessive and duplicative 27 expense of a second litigation; (2) the effort and expense incurred by a defendant in preparing for 1 moving to dismiss.” Williams v. Peralta Cmty. Coll. Dist., 227 F.R.D. 538, 540 (N.D. Cal. April 2 28, 2005) (quoting 8 James Wm. Moore et al., Moore’s Federal Practice § 41.40[10][d][I] (3d ed. 3 1999)). The merits of the plaintiff’s case are also relevant. Id. When awarding fees or costs, only 4 those fees or costs incurred for the preparation of work product rendered useless by the dismissal 5 should be awarded as a condition of the voluntary dismissal. Koch v. Hankins, 8 F.3d 650 , 652 6 (9th Cir. 1993). Furthermore, Rule 41(a)(2) does not provides an independent base of authority 7 for sanctioning lawyers. Heckethorn v. Sunan Corp., 992 F.2d 240, 242 (9th Cir. 1993). 8 In her opposition to the motion for voluntary dismissal ofthe counterclaim, Relator argues 9 that she should be awarded her attorneys’ fees of more than $150,000. Dkt. No. 159 at 1. Relator 10 filed a separate motion for attorneys’ fees, which is essentially a copy and paste of her opposition, 11 arguing that the Court should award her attorneys’ fees pursuant to Fed. R. Civ. P. Rule 11(c), Cal. 12 Code Civ. P. § 425.16(c)(1) (the California Anti-SLAPP statute), and the Court’s inherent power. 13 Relator’s arguments that she should be awarded attorneys’ fees pursuant to Fed. R. Civ. P. 14 Rule 11(c), and Cal. Code Civ. P. § 425.16(c)(1) (the California Anti-SLAPP statute) are 15 unpersuasive. As discussed above, the Court previously denied Relator’s motion to strike 16 Defendants’ counterclaim under California’s anti-SLAPP statute, Relator’s motion for relief from 17 the order denying Relator’s motion to strike Defendants’ counterclaim, and Relator’s motion for 18 Rule 11 sanctions against Defendants on the grounds that their counterclaims were frivolous. 19 Relator attempted to resurrect her previously denied motions in her opposition to Defendants’ 20 motion for summary judgment on the counterclaim and the Court declined to revisit its previous 21 ruling. Dkt. No. 133 at 22-25. The Court likewise declines to revisit its previous ruling and finds 22 that Relator is not entitled to an award of attorneys’ fees and costs pursuant to Fed. R. Civ. P. Rule 23 11(c) or Cal. Code Civ. P. § 425.16(c)(1). 24 Relator also argues that the Court should award her fees and costs pursuant to the Court's 25 inherent power, because courts have inherent power to assess attorney fees against a party who has 26 acted “in bad faith, vexatiously, wantonly, or for oppressive reasons.” Alyeska Pipeline Service 27 Co. v. Wilderness Soc., 421 US 240, 258-259 (1975). However, in Alyeska, the court specifically 1 wantonly, or for oppressive reasons.” Alyeska Pipeline Service Co. v. Wilderness Soc., 421 US 2 240, 258-259 (1975) (emphasis added). Here, Defendants’ motion for summary judgment on the 3 Federal Complaint was successful and Relator is not a prevailing party as to the counterclaim 4 because Defendants seek a voluntary dismissal of the counterclaim. Further, Defendants did not 5 act in bad faith, vexatiously, wantonly, or for oppressive reasons. In its previous order, the Court 6 found that there was a triable issue on the scope of the provisions in the Second Settlement 7 Agreement. Dkt. No. 133 at 28-31. 8 Although Relator’s arguments are unpersuasive, the Court may still condition a dismissal 9 without prejudice on a payment of costs and fees. However, as an initial matter, Relator’s motion 10 for attorneys’ fees is not compliant with Local Rule 54-5(b) because her motion is not supported 11 by any declaration or affidavit. Civil L.R. 54-5(b). The moving papers do not contain a statement 12 of the services rendered by each person for whose services fees are claimed together with a 13 summary of the time spent by each person, and a statement describing the manner in which time 14 records were maintained. Id. The moving papers further lack a brief description of relevant 15 qualifications and experience and a statement of the customary hourly charges of each such person 16 or of comparable prevailing hourly rates or other indication of value of the services. Id. Relator 17 has failed to provide any information to allow the Court to determine the reasonableness of her 18 request, the excessive and duplicative expense of a second litigation, the effort and expenses 19 incurred in preparing for trial, and whether the fees and costs requested were incurred for the 20 preparation of work product rendered useless. In addition, there has been no demonstration that 21 Defendants’ case is entirely without merit, and no provision by the statute or contractual provision 22 entitles Relator to fees. Santa Rosa Mem'l Hosp. v. Kent, 688 F. App'x 492, 494 (9th Cir. 2017). 23 Accordingly, the Court DENIES Relator’s amended motion for attorneys’ fees and costs. 24 /// 25 /// 26 /// 27 /// 1 IV. CONCLUSION 2 The Court GRANTS Defendants’ motion for voluntary dismissal and DENIES Relator’s 3 amended motion for attorneys’ fees. The counterclaim is dismissed without prejudice. Each side 4 shall bear its own costs and fees. The Court hereby vacates the motion hearing date currently set 5 || for January 10, 2020. The Clerk of Court is directed to close the file in this matter. 6 IT IS SO ORDERED. 7 Dated: January 2, 2020 — 8 — ‘wz — 9 — 10 JOSEPH C. SPERO United States Magistrate Judge — 11 — — 12 — — 13 — — 15 — — 16 — = 17 Z 18 — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —