Lottie TAGUPA, Petitioner/Plaintiff-Appellant, v. VIPDESK, Respondent/Defendant-Appellee.
No. SCWC-13-0002084.
Supreme Court of Hawai‘i.
June 29, 2015.
353 P.3d 1010
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, and WILSON JJ.
Opinion of the Court by POLLACK, J.
At issue in this case is the authority of a trial court to condition the voluntary dismissal of a complaint upon the plaintiff‘s payment of the defendant‘s attorney‘s fees and costs. We hold that such authority exists under the
I. BACKGROUND
1. District Court Complaint
On October 26, 2012, Lettie Tagupa, pro se, filed a standard form one-page complaint (Complaint) against VIPDesk in the District Court of the Third Circuit (district court). The Complaint asserted that “[o]n or about Jun 2010-Sep 2011, Defendant(s) owed money to Plaintiff(s) as follows: For time spent taking photos, creating, researching and writing blogs on travel recommendations and travel information for the sole purpose of supporting VIPdesk‘s marketing efforts.” The Complaint stated that the district court “ha[d] jurisdiction over this matter and venue [was] proper.”
In the Complaint, Tagupa initially indicated that the amount claimed was $35,000 and asked for judgment in that amount, but a handwritten amendment to her Complaint reduced the amount to $25,000.
2. Tagupa‘s Motion to Dismiss for Lack of Subject Matter Jurisdiction
On May 8, 2013, Tagupa, with newly acquired
VIPdesk filed a memorandum in opposition to Tagupa‘s motion to dismiss in which it argued that the district court had jurisdiction over Tagupa‘s claims. VIPdesk maintained that Tagupa‘s Complaint alleged claims that could arise solely out of Hawai‘i state law and that even if Tagupa intended to pursue a FLSA claim, the district court had subject matter jurisdiction over such a claim. Alternatively, VIPdesk requested, pursuant to the
3. District Court‘s Orders and Judgment
At a hearing on May 23, 2013, the district court granted Tagupa‘s motion to dismiss without prejudice, basing its decision not on lack of subject matter jurisdiction, but, rather, “on [Tagupa] wanting to file [the] case in federal court instead of state court.”4
At the hearing, Tagupa‘s counsel requested that no attorney‘s fees and costs be awarded to VIPdesk in light of Tagupa‘s pro se status at the time that she filed the Complaint. The district court found that Tagupa “admittedly filed [the case] in the wrong court” and expressed concern that “if pro se plaintiffs file complaints [and] the defendant hires an attorney to defend and spends a lot of time on the case [and] then plaintiff decides to get counsel [and] ... then states that they would like to file this claim in federal court, the defendant has incurred the expense of hiring an attorney to prepare it‘s [sic] defense.” The court concluded, “Defendant should not have to bear the expense because [Tagupa] filed in the wrong court.”
At the conclusion of the hearing, the district court awarded VIPdesk attorney‘s fees and costs pursuant to
On June 5, 2013, VIPdesk filed its motion for attorney‘s fees (attorney‘s fees motion) in which it maintained that it “incurred a total of $16,800.41 in attorney‘s fees (inclusive of general excise taxes) and $288.87 in costs defending this case in this Court.” Tagupa filed her memorandum in opposition on June 12, 2014. In her memorandum, Tagupa argued that VIPdesk should not be awarded attorney‘s fees as VIPdesk had not prevailed in the action, and there “ha[d] been no determination by this Court that [Tagupa‘s] legal claims are unreasonable, frivolous, meritless or vexatious.” Tagupa contended that the “work performed by [VIPdesk] will be used by [VIPdesk] in the furtherance of this case in Federal Court,” VIPdesk “will use the same discovery in the Federal Court case,” and VIPdesk was not prejudiced by the dismissal.
On June 17, 2013, the district court issued an Order Awarding Attorney‘s Fees, in which it granted VIPDesk‘s nonhearing attorney‘s fees motion and awarded VIPdesk the entire amount requested in the amount of $16,800.41 “as reaasonable attorney‘s fees” and $288.87 in costs, for a total amount of $17,089.28. The district court handwrote on the Order Awarding Attorney‘s Fees that “pursuant to
II. Appellate Proceedings
A. Briefs
In her Opening Brief, Tagupa argued that the district court erred in its Order Awarding Attorney‘s Fees. Tagupa contended that the district court granted VIPdesk‘s attorney‘s fees and costs prematurely, before the merits of the case had been decided and before a prevailing party was properly identified.
Tagupa noted that the district court awarded attorney‘s fees pursuant to Tagupa stated that her Complaint had been refiled in the federal district court as a FLSA class action and that it was, at that time, pending trial. Tagupa argued that based on the pending nature of the claim in federal court, the district court had no basis to make a determination as to whether her claim was frivolous, and, therefore, the district court abused its discretion in granting attorney‘s fees pursuant to Tagupa further claimed that the district court was “simply penalizing [Tagupa], a pro se party, for filing her complaint in the wrong court” and that this was not a proper purpose for an award of attorney‘s fees. Lastly, Tagupa argued that, as a general rule, each party is responsible for paying his or her own litigation expenses. VIPdesk next argued that the district court did not err in awarding VIPdesk‘s attorney‘s fees and costs under VIPdesk also argued that the pendency of Tagupa‘s federal court claim had no bearing on the issue of attorney‘s fees because the Order Awarding Attorney‘s Fees “was not based on the merits of [Tagupa‘s] FLSA claim but on the ‘jurisdictional amount’ of the claims that she brought in the [district court].” Lastly, VIPdesk contended that even if the district court erred by awarding VIPdesk attorney‘s fees and costs under The ICA issued its Summary Disposition Order (SDO) on August 12, 2014, which affirmed the Judgment and the Order Awarding Attorney‘s Fees. The ICA found that Tagupa‘s appeal lacked merit, specifically because the district court was expressly authorized under The ICA held that “in imposing conditions under Finally, based on its conclusion that there was no abuse of discretion in the award of attorney‘s fees pursuant to On October 30, 2014, Tagupa filed her Application seeking review of the ICA‘s SDO. Tagupa argues that there is no supporting authority under Hawai‘i law providing that Tagupa further argues that, contrary to VIPdesk filed a Response to Tagupa‘s Application, asking that Tagupa‘s Application be denied. VIPdesk argues that the ICA did not err in affirming the district court‘s award of attorney‘s fees and costs under Tagupa‘s motion to dismiss for lack of subject matter jurisdiction was converted by the district court into a voluntary dismissal by order of the court pursuant to Three issues are presented to this court: (1) whether the district court, after converting Tagupa‘s motion to a request for a voluntary dismissal under While this court has not previously addressed whether attorney‘s fees may be imposed as a term or condition of voluntary dismissal under Since Although the two Hawai‘i cases that address the imposition of terms and conditions under In Sapp, the plaintiffs filed a motion for voluntary dismissal under In light of the conditions imposed under Sapp and Moniz, including dismissal with prejudice, which is the harshest of sanctions,16 we hold that it is within the discretion of the trial court to require the payment of attorney‘s fees as a condition of dismissal under We note that although the trial court is permitted to award attorney‘s fees upon voluntary dismissal under While a trial court has discretion to impose terms and conditions when granting a motion for voluntary dismissal under When a plaintiff requests voluntary dismissal but does not mention conditions, the trial court can specify conditions on which it will allow dismissal, and “[i]f the conditions are too onerous, the plaintiff need not accept the dismissal on those terms.” Id. Not affording the plaintiff an opportunity to withdraw the motion for voluntary dismissal is tantamount to an abuse of discretion. See Sapp, 3 Haw.App. 509, 654 P.2d 883. In Sapp, discussed supra, the plaintiffs had identical actions pending in both state and federal courts for nearly a decade. Sapp, 3 Haw.App. at 512-13, 654 P.2d at 885-86. In the state action, the plaintiffs lost at trial and appealed. Id. On appeal, the judgment was vacated and the case was remanded for a new trial. Id. On remand, the plaintiffs opposed the defendants’ motion to set a trial date and subsequently filed a motion to dismiss the action without prejudice under The ICA found that the “defendants ha[d] undoubtedly been put to great expense in this matter” and “that [the] circumstances [of the case] amount to a quantum of prejudice to the defendant.” Id. Thus, the ICA concluded that the trial court was permitted to order, as a condition under The legal principle enunciated by the Sapp court—that plaintiffs should be given notice of the conditions that the court intends to impose upon dismissal, if any, and the opportunity to withdraw the request for dismissal if a plaintiff finds the conditions to be unacceptable—is broadly supported by cases from other jurisdictions. See Lau v. Glendora Unified Sch. Dist., 792 F.2d 929, 930 (9th Cir. 1986) (remanding the case “to allow the plaintiff a reasonable time within which to withdraw her motion for a voluntary dismissal and proceed to trial or consent to the dismissal despite the attachment of conditions“); Mortg. Guar. Ins. Corp. v. Richard Carlyon Co., 904 F.2d 298, 301 (5th Cir. 1990) (“Ordinarily, the plaintiff has the option to refuse a Accordingly, we hold that although a trial court has discretion to impose terms and conditions, including attorney‘s fees and costs, when granting a motion for voluntary dismissal under After the hearing, the court filed its order granting Tagupa‘s motion to dismiss, in which the court noted, inter alia, that VIPdesk “is to be awarded reasonable attorney‘s fees and costs incurred in defending this case in this Court.” Thereafter, VIPdesk indicated that it incurred a total of $16,800.41 in attorney‘s fees (inclusive of general excise taxes) and $288.87 in costs defending the case in the district court. Tagupa filed an opposition pleading, and the court awarded the full amount of VIPdesk‘s requested fees and costs. As Tagupa argued in her Application, because the court did not conduct a hearing on the amount of attorney‘s fees and costs it imposed upon dismissal of the case, Tagupa did not have “the opportunity to withdraw her converted ‘voluntary’ dismissal motion or [to] have the Order set aside on the grounds that the amount of the fees and costs would be too onerous.” Thus, the district court abused its discretion in the manner of its disposition of the motion to dismiss, and this case must be remanded to provide Tagupa with the opportunity to reject the terms and conditions of the dismissal order, withdraw the motion, and continue litigating the case at the district court, or accept the terms and conditions that may be imposed upon remand and have the case dismissed without prejudice. See Sapp, 3 Haw.App. at 514, 654 P.2d at 887; Lau, 792 F.2d at 930; Mortg. Guar. Ins. Corp., 904 F.2d at 301. As an additional ground for awarding attorney‘s fees in this case, the judge handwrote on the Order Awarding Attorney‘s Fees that the fees were awarded “pursuant to Pursuant to A frivolous claim is a “claim so manifestly and palpably without merit, so as to indicate bad faith on the [pleader‘s] part such that argument to the court was not required.” Coll v. McCarthy, 72 Haw. 20, 29-30, 804 P.2d 881, 887 (1991) (quoting Kawaihae v. Hawaiian Ins. Cos., 1 Haw.App. 355, 361, 619 P.2d 1086, 1091 (1980)). A finding of frivolousness is a high bar; it is not enough that a claim be without merit, there must be a showing of bad faith. See Canalez v. Bob‘s Appliance Serv. Ctr., Inc., 89 Hawai‘i 292, 300, 972 P.2d 295, 303 (1999) (in a personal injury action, even assuming that the plaintiff‘s counsel made untrue or inaccurate statements regarding the plaintiff‘s injuries, the claim was not deemed frivolous because there was no showing of bad faith); Lee v. Hawaii Pac. Health, 121 Hawai‘i 235, 246-47, 216 P.3d 1258, 1269-70 (App.2009) (although the plaintiff‘s arguments were without merit, the commencement of the action was not frivolous because the plaintiff did not act in bad faith). Here, other than the court‘s handwritten one-sentence notation on its order finding Tagupa‘s “jurisdiction amount” to be frivolous, the court made no other finding, written or otherwise, that Tagupa‘s claim was frivolous. Additionally, prior to the court‘s ruling on this ground, VIPdesk had never claimed that Tagupa‘s claim was frivolous; in fact, VIPdesk itself asserted that the claim could be brought in either the district court or federal court. When Tagupa filed her Complaint, pro se, she reduced the amount in controversy from $35,000 to $25,000 to bring her claim within the district court‘s jurisdiction. Although there is authority intimating that an excessive and unreasonable amount of damages may be an “indication of the frivolous and bad faith nature” of an action, Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 772 n. 8 (9th Cir.1986), VIPdesk cites no authority to suggest that choosing—for reasons of strategy, expense, or otherwise—to claim a lesser amount of damages than Tagupa may otherwise be entitled indicates frivolousness or bad faith. There is simply no evidence in the record that Tagupa filed her complaint and pursued her case in bad faith or that the amount of her claim was otherwise frivolous. Inasmuch as the record does not support the district court‘s conclusion that Tagupa‘s claim was frivolous so as to indicate bad faith on the pleader‘s part such that argument to the court was not required, the district court abused its discretion in granting attorney‘s fees pursuant to The district court erred in failing to provide Tagupa with the opportunity to withdraw her motion to dismiss. Accordingly, we vacate the district court‘s Judgment and the ICA Judgment on Appeal. Upon remand, the district court must determine the amount of attorney‘s fees and costs, if any, that is justified by the relevant equities in this case so as to accomplish substantial justice. See Moniz, 79 Hawai‘i at 500, 904 P.2d at 514; McCants v. Ford Motor Co., 781 F.2d 855, 857 (11th Cir.1986). Upon being informed of the conditions of a dismissal, if any, including the amount of attorney‘s fees and costs that she must pay VIPdesk, Tagupa will have the opportunity to withdraw the motion to dismiss if she finds the conditions unacceptable. See Moniz, 79 Hawai‘i at 500, 904 P.2d at 514; Sapp, 3 Haw.App. at 514, 654 P.2d at 887; 9 Wright & Miller, Federal Practice 3d § 2366, at 522-23. Because we vacate the judgment of the district court and remand this case to that court in order to provide Tagupa with the opportunity to withdraw the motion to dismiss, to provide guidance on remand, we briefly discuss the approach that should guide a trial court in setting the amount of attorney‘s fees and costs when they are made a condition of voluntary dismissal. See, e.g., Gap v. Puna Geothermal Venture, 106 Hawai‘i 325, 341-43, 104 P.3d 912, 928-30 (2004) (offering guidance to circuit court on remand as to setting appropriate sanction); Nelson v. Univ. of Haw., 97 Hawai‘i 376, 385 n. 6, 38 P.3d 95, 104 n. 6 (2001) (addressing evidentiary issues to provide guidance to the court on remand). Payment of attorney‘s fees and costs to a defendant is merely a species of the various terms and conditions that a trial court may impose upon a plaintiff‘s motion for voluntary dismissal. See 9 Wright & Miller, Federal Practice 3d § 2366, at 540 (stating that, aside from the “payment of money,” conditions may include a requirement “that the plaintiff produce documents or agree to allow any discovery in the dismissed action to be used in any subsequent Because the substantial justice standard is not susceptible to exact exposition, its application necessarily will produce different results depending on, and tailored to, the particular circumstances present in a case. The trial court should balance all of the “relevant equities” so as to “do justice between the parties in each case,” and if attorney‘s fees and costs are to be imposed, they should be reasonable and “deemed appropriate.” McCants, 781 F.2d at 857. For example, there might be instances where substantial justice is most effectively realized if the amount of attorney‘s fees and costs awarded excludes “expenses for items that will be useful in another action.” 9 Wright & Miller, Federal Practice 3d § 2366, at 532; see Westlands Water Dist., 100 F.3d at 97-98 (holding that “the defendants should only be awarded attorney fees for work which cannot be used in any future litigation of these claims“); McLaughlin v. Cheshire, 676 F.2d 855, 856-57 (D.C.Cir.1982) (“[W]here a plaintiff seeks voluntary dismissal in one forum to pursue pending litigation against the defendant in another forum, the defendant is not entitled to reimbursement for expenses incurred in preparing work product that has been or will be useful in the continuing litigation.“); Davis v. USX Corp., 819 F.2d 1270, 1276 (4th Cir.1987) (holding that there is no reason to award attorneys’ fees for work and resources that “will be easily carried over to litigation of the plaintiff‘s cause of action” in another jurisdiction); Thoubboron v. Ford Motor Co., 809 A.2d 1204, 1211 (D.C.2002) (“Attorney‘s fees and costs are limited to the amount expended for work that cannot be applied to the subsequent lawsuit concerning the same claims....“).22 The justification for excluding expenses for items that will be useful in another action is grounded in the twofold purpose of awarding attorney‘s fees and costs as a term or condition of voluntary dismissal: “to compensate the defendant for the unnecessary expense that the litigation has caused,” Cauley v. Wilson, 754 F.2d 769, 772 (7th Cir.1985), “and to deter vexatious litigation,” Bishop v. W. Am. Ins. Co., 95 F.R.D. 494, 495 (N.D.Ga.1982) (citing 5 J. Moore, J. Lucas & J. Wicker, Moore‘s Federal Practice §§ 41.05[1], 41.06 (2d ed. 1982)). Where the plaintiff is voluntarily dismissing an action in order to commence the same action in a different forum or jurisdiction, the defendant faces the risk of incurring duplicative litigation costs. See Cauley, 754 F.2d at 772; Taragan v. Eli Lilly & Co., 838 F.2d 1337, 1340 (D.C.Cir.1988). At the same time, because the defendant inevitably will have to defend against the same action, it would generally be inequitable to allow the defendant to recoup all attorney‘s fees and costs because some of them were expended for work and materials that can be carried over to, We therefore hold that in applying the substantial justice standard to the amount of attorney‘s fees and cost imposed as a condition to voluntary dismissal, the court should consider such factors as (1) the reasonableness of the amount of attorney‘s fees and costs; (2) whether another cause of action concerning the same subject matter is contemplated by the plaintiff against the defendant; (3) whether some work or materials produced for the case subject to dismissal could be utilized in the litigation of the later-filed case; and (4) the prejudicial effect of dismissal to the defendant beyond the prospect of subsequent litigation. In its motion for attorney‘s fees, VIPDesk submitted a summary of its fees and expenses incurred in defending against Tagupa‘s claims, totaling $16,800.41 in attorney‘s fees and $288.87 in costs. The court granted the full amount of VIPDesk‘s requested fees and costs, and it appears that the court simply accepted VIPDesk‘s accounting of fees and costs and did not engage in the requisite weighing of the relevant equities to arrive at its award to VIPDesk. See McCants, 781 F.2d at 857. The district court‘s order reflects no finding that the amount of attorney‘s fees and costs were calculated to accomplish substantial justice in light of the facts and circumstances of this case.24 Hence, upon remand, the district court should also consider the foregoing approach in setting the amount of attorney‘s fees and costs if the court, in its discretion, decides to impose such a condition for voluntary dismissal. Although we find that the trial court has discretion to impose attorney‘s fees as a term or condition of voluntary dismissal under B. ICA Summary Disposition Order
C. Application for Writ of Certiorari
III. DISCUSSION
A. Payment of Attorney‘s Fees as a Condition for Voluntary Dismissal under
B. Notice and Opportunity to Withdraw
C. Attorney‘s Fees for Frivolous Claims under
D. Remand to the District Court and Guidance in Determining Fees and Costs
IV. CONCLUSION
Notes
Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: (1) lack of jurisdiction over the subject matter....
Except as provided in paragraph (1) of this rule, an action shall not be dismissed at the plaintiff‘s instance save upon order of the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon that defendant of the plaintiff‘s motion to dismiss, the action shall not be dismissed against the defendant‘s objection unless the counterclaim can remain pending for independent adjudication by the court. Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice.
(b) In determining the award of attorneys’ fees and costs and the amounts to be awarded, the court must find in writing that all or a portion of the claims or defenses made by the party are frivolous and are not reasonably supported by the facts and the law in the civil action. In determining whether claims or defenses are frivolous, the court may consider whether the party alleging that the claims or defenses are frivolous had submitted to the party asserting the claims or defenses a request for their withdrawal as provided in subsection (c). If the court determines that only a portion of the claims or defenses made by the party are frivolous, the court shall determine a reasonable sum for attorneys’ fees and costs in relation to the frivolous claims or defenses.
HARMLESS ERROR. No error in either the admission or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court or by any of the parties is ground for granting a new trial or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. The court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.
Unless local conditions make it impracticable, each district court shall establish regular times and places, at intervals sufficiently frequent for the prompt dispatch of business, at which motions requiring notice and hearing may be heard and disposed of; but the judge at any time or place and on such notice, if any, as the judge considers reasonable may make orders for the advancement, conduct, and hearing of actions. To expedite its business, the court may make provisions by rule or order for the submission and determination of motions without oral hearing upon brief written statements of reasons in support and opposition.
(a) Voluntary dismissal: Effect thereof. (1) By plaintiff; by stipulation. An action may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before the return date as provided in
Rule 12(a) or service by the adverse party of an answer or of a motion for summary judgment, or (ii) by filing a stipulation of dismissal signed by all parties who have appeared in the action. Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice, except that a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of the United States, or of any state, territory or insular possession of the United States an action based on or including the same claim. (2) By order of court. Except as provided in paragraph (1) of this subdivision of this rule, an action shall not be dismissed at the plaintiff‘s instance save upon order of the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon that defendant of the plaintiff‘s motion to dismiss, the action shall not be dismissed against the defendant‘s objection unless the counterclaim can remain pending for independent adjudication by the court. Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice.
Sapp, 3 Haw.App. at 515, 654 P.2d at 884.[P]laintiffs had identical actions pending in federal and state courts since 1973 and 1974, respectively.... Lis pendens were filed by plaintiffs in 1974 and since then have encumbered 44 parcels of real property owned by defendants. The matter was tried once below and plaintiffs lost. After reversal and remand, defendants were prepared to go to trial again when plaintiffs made their [Rule 41(a)(2)] motion. Defendants have undoubtedly been put to great expense in this matter alone. We find that these circumstances amount to a quantum of prejudice to the defendant that supports the action of the court below.
Attorneys’ fees and costs in civil actions. (a) In any civil action in this State where a party seeks money damages or injunctive relief, or both, against another party, and the case is subsequently decided, the court may, as it deems just, assess against either party, whether or not the party was a prevailing party, and enter as part of its order, for which execution may issue, a reasonable sum for attorneys’ fees and costs, in an amount to be determined by the court upon a specific finding that all or a portion of the party‘s claim or defense was frivolous as provided in subsection (b). (b) In determining the award of attorneys’ fees and costs and the amounts to be awarded, the court must find in writing that all or a portion of the claims or defenses made by the party are frivolous and are not reasonably supported by the facts and the law in the civil action. (Emphases added).