Madison Oslin Inc v. Interstate Resources, Inc. et al

Filing 156

MEMORANDUM AND ORDER granting in part and denying in part 141 Motion for Attorney Fees. Signed by Judge Marvin J. Garbis on 11/30/2015. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
MADISON OSLIN, INC.,
et al.,
Plaintiffs

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vs.

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INTERSTATE RESOURCES, INC.,
et al.,
Defendants

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CIVIL ACTION NO. MJG-12-3041

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MEMORANDUM AND ORDER RE: FEE AWARD
The Court has before it Defendants’ Motion For Attorneys’
Fees [ECF No. 141], and the materials submitted relating
thereto.

I.

The Court finds that a hearing is unnecessary.

BACKGROUND
On March 25,1 the Court granted summary judgment to

Defendants [ECF No. 136] and entered Judgment [ECF No. 137]
dismissing all claims with costs.

On April 6, Plaintiffs filed

a Notice of Appeal [ECF No. 138].

On April 8, Defendants filed

their Bill of Costs, seeking costs of $43,055.50 and the instant
Motion for Legal Fees [ECF No. 141].

On April 22, Plaintiffs

filed their response to the Bill of Costs [ECF No. 142] seeking
a stay of consideration of the Bill of Costs and objecting to
$34,670.55 of the claimed costs.
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All date references herein are to the year 2015.

On May 1, Defendants filed a motion [ECF No. 143] to
require Plaintiffs to post a bond to secure payment of costs and
legal fees.

On July 2, the Court issued the Memorandum and

Order Re: Bond [ECF No. 151] denying the stay and ordering
Plaintiffs to post security in the amount of $8,384.95 (the
undisputed amount of Defendants’ costs).

On July 10, Plaintiffs

posted security in the amount of $8,384.95 as ordered.
In the Memorandum and Order Re: Bond [ECF No. 151], the
Court required Plaintiffs to respond to Defendants’ Motion for
Attorneys’ Fees [ECF No. 141], including “a statement of the
reasons why Defendants would not be entitled to a fee award
pursuant to the Alabama Litigation Accountability Act.”
ECF No. 151.

II.

Mem. 6,

Plaintiffs have done so.

PROCEDURAL SETTING
The instant case is a diversity action.

Therefore the

pertinent state law governs the award of attorneys’ fees.

See

Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 631 (4th
Cir. 1999)(applying state law to determine whether an award of
attorneys’ fees was warranted); see also Bistro of Kansas City,
Mo., LLC v. Kansas City Live Block 125 Retail, LLC, No. CIV.A.
ELH-10-2726, 2013 WL 6198836, at *5 (D. Md. Nov. 26, 2013)(“In a
diversity action, such as this one, a parties’ right to recover

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attorneys’ fees is ordinarily governed by state law.”(internal
quotation marks and citations omitted)).
Plaintiffs sued under the Alabama Trade Secrets Act, and
the parties agree that Alabama law applies to the contract-based
claims.

“Alabama follows the American rule, whereby attorney

fees may be recovered if they are provided for by statute or by
contract . . . .” Jones v. Regions Bank, 25 So.3d 427, 441 (Ala.
2009) (citations omitted).

III. DISCUSSION
In this action, Defendants seek an award of attorneys’ fees
relating to their to their defense of the claims asserted
pursuant to Alabama Trade Secrets Act, Ala. Code § 8-27-1 et
seq. (“ATSA”) and under the Alabama Litigation Accountability
Act, Ala. Code § 12-19-270 et seq. (“ALAA”).

A.

Alabama Trade Secrets Act

The ATSA provides for:
Reasonable attorney’s fees to the
prevailing party if:
a. A claim of actual or threatened
misappropriation is made or resisted in
bad faith
Ala. Code § 8-27-4(a)(2).

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There is no definition of “bad faith” in the statute.

The

Supreme Court of Alabama, however, has held that the term “means
the same as the phrase ‘without substantial justification’ in
the ALAA.”

Ex parte Waterjet Sys., Inc., 758 So. 2d 505, 509

(Ala. 1999)(noting that the definition is consistent with the
federal courts’ definition under the bad-faith exception to the
American Rule).

“The phrase ‘without substantial justification’

. . . means that [the claim] is frivolous, groundless in fact or
in law, or vexatious, or interposed for any improper purpose,
including without limitation, to cause unnecessary delay or
needless increase in the cost of litigation, as determined by
the court.”

Id. (citing § 12–19–271(1)).

“The string of words

used to define ‘without substantial justification’ in § 12–19–
271(1) is presented in the alternative.”

Morrow v. Gibson, 827

So. 2d 756, 761 (Ala. 2002).
Defendants contend that Plaintiffs’ trade secret claim was
“groundless in fact.”

As stated in the Memorandum & Order Re:

Summary Judgment [ECF No. 136], there are ample grounds for the
conclusion, reached therein, that there was no substantial
justification for claiming that Defendants misappropriated any
trade secrets.


For example :

Plaintiffs owned patents that contained an enabling
disclosure of the process that purportedly
constituted a trade secret;

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

Plaintiffs provided instruction to outsiders,
customers, and prospective customers regarding the
purported trade secret methods;



Plaintiffs produced no evidence that disclosures to
Defendants were protected by confidentiality
agreements;



Plaintiffs described the purported “secret” method in
open court in a previous lawsuit;



Plaintiffs published the purported “secret” method in
a YouTube video generally available on the Internet.

When granting Defendants summary judgment, the Court held
that there was “no evidence adequate to enable a reasonable jury
to find that the purported trade secrets were secret at any time
relevant to the instant case.”2

Id. at 11-12.

Accordingly, the Court finds that the trade secret claim
was filed without substantial justification because it is
“groundless in fact.”

Defendants shall be awarded attorneys’

fees related to the defense of the ATSA claim.

B.

Alabama Litigation Accountability Act

The ALAA provides, in pertinent part:
Except as otherwise provided in this
article, in any civil action commenced or
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The Court also noted that there were “serious questions
presented regarding whether any information was
‘misappropriated’ or whether the claim was brought within the
statute of limitations period.” Id. at 12, n.9. It was not
necessary to address those issues since Plaintiffs could not
establish that it had a trade secret to be protected.

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appealed in any court of record in this
state, the court shall award, as part of its
judgment and in addition to any other costs
otherwise assessed, reasonable attorneys’
fees and costs against any attorney or
party, or both, who has brought a civil
action, or asserted a claim therein, or
interposed a defense, that a court
determines to be without substantial
justification, either in whole or part . . .
.
Ala. Code § 12-19-272(a).
Plaintiffs assert that this Court is without jurisdiction
to consider a claim made by Defendants under the ALAA because
Defendants did not make their claim for legal fees prior to the
entry of final judgment.
Alabama courts have held that “[t]he ALAA does not ‘create
a new or separate cause of action that can be brought after a
case is litigated and given a final adjudication on the
merits.’”

Terminix Int’l Co., L.P. v. Scott, 142 So. 3d 512,

528 (Ala. 2013)(quoting Casey v. McConnell, 975 So.2d 384 (Ala.
Civ. App. 2007)); see also Cain v. Strachan, 68 So. 3d 854, 858
(Ala. Civ. App. 2011)(“The statute ‘does not create a new or
separate cause of action to be brought after a case is litigated
and given a final adjudication on its merits; rather, it
indicates that the motion must be made during the pendency of
the case.’”

quoting McDorman v. Archer, 678 So. 2d 112 (Ala.

Civ. App. 1995)).

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This does not mean that a court cannot hold a separate
hearing on an ALAA petition after the entry of final judgment on
the merits, but the claim must have been made prior to final
judgment, and the court must have retained jurisdiction for that
purpose.

Gonzalez, LLC v. DiVincenti, 844 So. 2d 1196, 1201

(Ala. 2002).

“Otherwise, a final judgment puts an end to all

controversies litigated or which ought to have been litigated
within the particular controversy.”

Id. at 1201-02 (citations

omitted).
In the instant case, the instant motion was procedurally
timely because it was filed within 14 days after entry of
judgment, as required by Fed. R. Civ. P. 54 and Rule 109 of the
Rules of the United States District Court for the District of
Maryland (“Local Rules”).

However, it is untimely

(substantively or jurisdictionally) by virtue of the ALAA
requirement that a fee award under that statute must be based
upon a motion filed prior to the entry of judgment.

C.

Further Proceedings

In the Memorandum and Order re: Bond [ECF No. 151], the
Court noted Plaintiffs’ contention that legal fees awarded
pursuant to the ATSA are not recoverable as costs.

The Eleventh

Circuit has stated that “the [Alabama] Trade Secrets Act does

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not award attorneys’ fees to the prevailing party as part of
costs; rather, it makes attorneys’ fees an additional penalty
for willful misappropriation.”

Util. Automation 2000, Inc. v.

Choctawhatchee Elec. Co-op., Inc., 298 F.3d 1238, 1245 (11th
Cir. 2002).

However, even though an award of legal fees

pursuant to the ATSA is characterized as a penalty rather than a
cost, it may be appropriate to consider requiring the posting of
security for such an award.

Under the circumstances, the Court

shall hear from the parties and consider whether to proceed to
determine either the precise amount of the ATSA legal fee award
to date or an amount that would fairly constitute the minimal
reasonable award.

IV.

CONCLUSION
For the foregoing reasons:
1.

Defendants’ Motion for Attorneys’ Fees [Document
151] is GRANTED IN PART and DENIED IN PART.
a.

2.

Defendants are awarded their reasonable
attorneys’ fees pursuant to the Alabama
Trade Secrets Act but not the Alabama
Litigation Accountability Act.

By December 15, 2015, Defendants shall state
their position regarding the determination of the
amount of said award to date and/or the
determination of an amount that would fairly
constitute the minimal reasonable award
foreseeable.

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3.

By January 4, 2016, Plaintiffs shall file any
response to Defendants’ submission.

SO ORDERED, on Monday, November 30, 2015.

/s/__________
Marvin J. Garbis
United States District Judge

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