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In the midst of reviewing the propriety of derivative representation under New York law, the Second Circuit joined a fray among its sister Circuits by allowing the recovery of attorneys’ fees under FRCP 41(d).
Horowitz v. 148 South Emerson Assocs. LLC, No. 163912 (2d Cir. April 20, 2018), was “one in a series of bitterly contested suits” involving the ownership and operation of the Montauk hotspot, The Sloppy Tuna. The instant litigation followed three suits in federal and state courts in Georgia and New York regarding the ongoing use of The Sloppy Tuna’s trademarks. After a slew of motions, the Eastern District of New York ordered the plaintiff to pay the costs, including attorneys’ fees, that its adversary incurred in defending the previously dismissed Georgia state action under FRCP 41(d), which provides: “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 … may order the plaintiff to pay all or part of the costs of that previous action…”
On appeal, the Second Circuit first determined that the district court did not abuse its discretion in holding the two cases are based on the same claims, and then turned to the propriety of its conclusion that “costs” in FRCP 41(d) may include attorneys’ fees. Noting that it had yet to address the question, the Second Circuit recognized that the issue had split its sister Circuits, as the Sixth Circuit concludes fees are never available under the rule, the Eighth and Tenth Circuits hold that fees may be awarded, and the Fourth, Fifth, and Seventh Circuits adopt a hybrid approach that prohibits fees unless the statute serving as the basis for the original suit permits fees.
Agreeing with the Eighth and Tenth Circuits in permitting fees under the rule, the Second Circuit reasoned that the entire FRCP 41 scheme would be undermined if an award of attorneys’ fees were precluded. It noted that the purpose of the rule is to “serve as a deterrent to forum shopping and vexatious litigation” and that the targets of such deterrence would be litigants that “file complaints and quickly dismiss them, perhaps in reaction to initial unfavorable rulings, or hoping for a subsequent case assignment to a judge they view as more favorable.” In affirming the district court’s order, the Second Circuit noted that the case was a prime example of this policy, as the mere $75 in costs would not effectively deter the plaintiff from “forum shopping or otherwise embarking on a course of vexatious litigation.”