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Keith Manufacturing, Co. v. Butterfield

United States District Court, D. Oregon

June 26, 2017

KEITH MANUFACTURING, CO., Plaintiff,
v.
LARRY D. BUTTERFIELD, Defendant.

          Bruce A. Kaser, Vantage Law, PLLC; Gordon W. Stewart, Stewart Law Offices Of Attorneys for Plaintiff.

          Shawn J. Kolitch, Kolisch Hartwell, PC, Of Attorneys for Defendant.

          OPINION AND ORDER

          Michael H. Simon United States 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.

         BACKGROUND

         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 inventions made in cooperation with one or more of Keith's employees during the course of Butterfield's employment and used Keith's trade secrets. Keith further alleges that Butterfield breached his employment contract with Keith by sending a demand letter to Keith in which Butterfield threatened to sue for infringement of the '520 patent unless Keith withdrew certain products from the market. In this lawsuit, Keith asserted five claims against Butterfield: (1) declaratory judgment of noninfringement of the '520 patent; (2) declaratory judgment of invalidity of the '520 patent; (3) breach of contract; (4) trade secret misappropriation; and (5) correction of inventorship of the '520 patent, seeking to add one or more of Keith's employees as named inventors.

         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:

Butterfield for and on behalf of himself, his “LoadBacker” business, licensees, contract manufacturers, assigns and/or all other related business entities, as well as any of their predecessors, successors, directors, officers, employees, agents, attorneys, representatives and employees of such entities hereby unconditionally and irrevocably covenants to refrain from making any claims(s) or demand(s), or from commencing, causing, or permitting to be prosecuted any action in law or equity, against Keith or any of its parents, subsidiaries, divisions, related companies, affiliated companies, assigns, and/or other related business entities, as well as any of their predecessors, successors, directors, officers, employees, agents, attorneys, representatives and employees of such entities, on account of any possible cause of action involving infringement of U.S. Patent No. 9, 126, 520 based on the manufacture, use, sale, offer for sale or importation of any Keith product, including without limitation the Keith BSH-58 “Bulk Sweep” product, any predecessor version thereof, any colorable imitation thereof, or any other prior or future Keith product, regardless of whether that product is manufactured, distributed, used, offered for sale, sold, imported or exported before or after the Effective Date of this Covenant.

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 filed a Stipulation of Dismissal with Prejudice. The parties' stipulation was silent on the issue of costs[1] and attorney's fees.

         DISCUSSION

         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:

A claim for attorney's fees . . . must be made by motion . . . . [T]he motion must be filed no later than 14 days after the entry of judgment [and] specify the judgment and the statute, rule, or other grounds entitling the movant to the award . . . .”

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.

         A. Whether a Court May Consider a Motion for Attorney's Fees after a Case Ends

         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:

Rule 41. Dismissal of Action
(a) Voluntary Dismissal.
(1) By the Plaintiff.
(A) Without a Court Order. Subject to Rules 23(e), 23.1(c), 23.2, and 66 and any applicable federal statute, the plaintiff may dismiss an action without a court order by filing:
(ii) a stipulation of dismissal signed by all parties who have appeared.

Fed. R. Civ. P. 41(a)(1)(A)(ii) (emphasis in original).[2]

         Keith cites a case from the Eleventh Circuit for the proposition that a stipulation of dismissal by the parties pursuant to Rule 41(a)(1)(A)(ii) is “self-executing and dismisses the case upon filing.” Anago Franchising, Inc. v. Shaz, LLC, 677 F.3d 1272, 1277 (11th Cir. 2012) (“Most of our sister circuits have directly or implicitly found, in published and unpublished opinions, that a stipulation filed under Rule 41(a)(1)(A)(ii) is self-executing and dismisses the case upon filing.”) (citing cases). This Court agrees. Thus, the filing by Keith of the Stipulation of Dismissal with Prejudice, signed by all parties, is self-executing and operates to dismiss, or terminate, the lawsuit brought by Keith against Butterfield.[3] This conclusion, however, does not resolve the question of whether a federal court retains jurisdiction to address collateral matters, including a motion for attorney's fees, after a case has been dismissed, or terminated.

         Butterfield cites the decision from the United States Supreme Court in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990). In that case, the Supreme Court observed:

It is well established that a federal court may consider collateral issues after an action is no longer pending. For example, district courts may award costs after an action is dismissed for want of jurisdiction. See 28 U.S.C. § 1919. This Court has indicated that motions for costs or attorney's fees are “independent proceeding[s] supplemental to the original proceeding and not a request for a modification of the original decree.” Sprague v. Ticonic National Bank, 307 U.S. 161, 170, 59 S.Ct. 777, 781, 83 L.Ed. 1184 (1939). Thus, even “years after the entry of a judgment on the merits” a federal court could consider an ...

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