Supplemental Jurisdiction Dismissal: Attorney’s Fees Not Allowable Because Dismissed Claims Could Be Refiled And No Alteration In Legal Relationship Between The Parties

 

Ninth Circuit Refrains from Deciding One Issue, Finds No Fee Entitlement After Without Prejudice Dismissal, and Cites Federal Case That May Vary From California State Law on an Inconvenient Forum Dismissal.

     Avery v. First Resolution Management Corp., Case No. 07-35726 (9^th Cir. Apr. 2, 2009) (for publication) presented several thorny issues on whether fee entitlement to a counter-defendant followed in the aftermath of a district court’s decision to dismiss a defendant’s state law-based counterclaim without prejudice (based on failure to exercise supplemental jurisdiction). The Ninth Circuit decided “no entitlement.”

     The first issue was whether the decision to decline to exercise subject matter over the state law claim meant that state law or federal law controlled counter-defendant’s entitlement to attorney’s fees on the state law counterclaim. The Ninth Circuit cited a decision indicating that state law controlled in a situation where supplemental jurisdiction was exercised over a state law claim. (MRO Commc’ns, Inc. v. AT&T Co., 197 F.3d 1276, 1281 (9^th Cir. 1999).) However, the federal court of appeals did not have to decide the issue because it found no entitlement to fees under either standard (applying both New Hampshire and federal law).

     Specifically, “we have not found any case in which a New Hampshire court held a party is entitled to attorney’s fees when a claim against it is dismissed without prejudice.” (Slip Opn., at p. 3980.) Similarly, under federal law, the Ninth Circuit found that fee entitlement only flows from some alteration in the legal relationship of the parties—with a party not prevailing where the without prejudice dismissal could result in the refiling of the permissive state law counterclaims. (Oscar v. Alaska Dep’t of Educ. & Early Dev., 541 F.3d 978, 982 (9^th Cir. 2008) [no prevailing party because defendant “remain[ed] at risk that Oscar will re-file his IDEA claim in federal court”]; Dattner v. Conagra Foods, Inc., 458 F.3d 98, 103 (2d Cir. 2006) [denial of fees in forum non conveniens situation because “a dismissal {on that ground did} not, after all, immunize a defendant from the risk of further litigation on the merits of a plaintiff’s claims”].)

     BLOG OBSERVATION—Dattner, the forum non conveniens case cited by the Avery panel, may be divergent from the California rule on the subject. In Profit Concepts Mgt., Inc. v. Griffith, 162 Cal.App.4^th 950 (2008) [see our May 11, 2008 post], the Fourth District, Division 3 [per Fybel, J.] decided that an order granting a motion to quash for lack of personal jurisdiction was final for Civil Code section 1717 fees even though plaintiff could refile the suit in another forum. This result does seem to diverge from Dattner, although Profit Concepts involved a dismissal based on lack of personal jurisdiction rather than grounded upon forum non conveniens. It will be interesting to see whether a California appellate court, in dealing with an inconvenient forum dismissal with section 1717 at play, will follow Dattner or Profit Concepts.