C-Tech Corporation v. Aversion Technologies et al
Filing
33
MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/7/12. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
C-TECH CORPORATION
:
v.
:
Civil Action No. DKC 11-0983
:
AVERSION TECHNOLOGIES, et al.
:
MEMORANDUM OPINION
Presently pending and ready for review in this breach of
contract case are two motions:
a motion for voluntary dismissal
with prejudice filed by Plaintiff C-Tech Corporation (“C-Tech”)
(ECF
No.
28)
and
a
motion
filed
by
Defendant
Aversion
Technologies, Inc. (“Aversion”) seeking partial summary judgment
on
its
contractual
counterclaim
for
litigation
costs
and
attorneys’ fees (ECF No. 30).
Also pending is a request for
statutory
Aversion
Tutini.1
attorneys’
fees
by
and
Defendant
Peter
The issues have been fully briefed, and the court now
rules, no hearing being deemed necessary.
Local Rule 105.6.
For the following reasons, the motion for voluntary dismissal
with prejudice will be granted; the motion for partial summary
judgment
1
on
Aversion’s
counterclaim
for
litigation
costs
and
As set forth below, Aversion and Defendant Peter Tutini
filed a single brief addressing attorneys’ fees (ECF No. 30),
but it contains two distinct issues that will be addressed
separately.
attorneys’ fees will be granted in part and denied in part; and
the request for statutory attorneys’ fees will be denied.2
I.
Background
A.
Factual Background
The following facts are uncontroverted.
corporation
based
distributor
agreement
Maryland
in
corporation,
India,
(“the
on
entered
into
Agreement”)
November
1,
C-Tech, a foreign
an
with
2006.
Aversion,
Mr.
Aversion prepared the final draft of the Agreement.
the
Agreement,
Aversion
agreed
to
act
as
exclusive
Tutini
a
at
Pursuant to
the
exclusive
distributor of certain C-Tech products in North America, Central
America,
and
South
America,
as
well
distributor in other geographic areas.
as
a
non-exclusive
Aversion also agreed:
(1) to promote and sell C-Tech’s products, including Rodrepel, a
rodent
repellant
containing
denatonium
benzoate;
(2)
“not
to
sell any product competitive to C-Tech’s products”; (3) to keep
C-Tech’s
proprietary
information
“in
the
strictest
of
confidence”; and (4) not to “use” or “disclose” any confidential
information without the prior written consent of C-Tech, both
during the term of the Agreement “or at any time subsequent
thereto.”
(ECF No. 1-1 ¶¶ 1, 2.5, 2.6).
2
The parties mutually
Defendants also filed a motion to dismiss and for summary
judgment on Plaintiff’s claims. (ECF No. 26). That motion will
be denied as moot.
2
terminated
Aversion
the
Agreement
could
continue
January
30,
on
to
June
sell
20,
2007,
Rodrepel
on
but
a
agreed
that
non-exclusive
basis.
On
2008,
Aversion
submitted
a
trademark
application for Rodrepel, a product developed by C-Tech, to the
United States Patent and Trademark Office, which was granted on
November 18, 2008.
After negotiations between the parties, C-
Tech paid Aversion $3,500 on November 17, 2009 in exchange for
an
assignment
of
the
Rodrepel®
trademark.
At
some
point
thereafter, Aversion began marketing and selling a product known
as Repela, a rodent repellent that, like Rodrepel®, contains
denatonium benzoate.
B.
Procedural Background
On April 14, 2011, C-Tech filed a complaint in this court
against Aversion and Mr. Tutini, alleging counts for breach of
contract, common law trademark infringement, violations of the
Lanham Act, 15 U.S.C. § 1125(a)(1)(B), unfair competition under
Maryland
law,
and
violations
of
the
Maryland
Uniform
Trade
Secrets Act, Md. Code, Com. Law §§ 11-1201 et seq. (“MUTSA”).
(ECF No. 1).
On July 13, 2011, Defendants filed an answer to
the complaint, and Aversion asserted a counterclaim against CTech
seeking
its
“reasonable
costs
of
litigation,”
including
“its attorney’s fees, costs, expert witness fees, and expenses.”
(ECF No. 5).
3
Following
the
entry
of
a
scheduling
order,
the
parties
engaged in discovery and agreed to the entry of a stipulated
protective order on October 25, 2011.
close
of
discovery
on
January
18,
(ECF No. 20).
2012,
After the
Defendants
filed
a
motion to dismiss and for summary judgment on January 24, 2012.
(ECF No. 26).
On March 5, 2012 — the court-extended deadline for C-Tech’s
opposition to Defendants’ motion — C-Tech filed a motion for
voluntary dismissal of its complaint with prejudice, citing the
poor health of its principal, “among other things.”
28).
(ECF No.
On March 22, 2012, Defendants filed a response to the
motion for voluntary dismissal in which (1) Aversion moved for
partial
summary
judgment
on
its
counterclaim,
seeking
a
determination of C-Tech’s liability for its litigation costs and
attorneys’
fees
and
(2)
both
Defendants
requested
fees pursuant to the Lanham Act and the MUTSA.
C-Tech
filed
summary
an
judgment
opposition
and
to
to
Aversion’s
Defendants’
(ECF No. 30).3
motion
request
attorneys’
for
for
partial
statutory
attorneys’ fees (ECF No. 31), and Defendants filed a reply (ECF
No. 32).
3
Defendants note their intent to file documentation to
support
the
reasonableness
of
their
attorneys’
fees
in
accordance with Local Rule 109 if C-Tech is held liable for such
fees. (See ECF No. 30, at 5).
4
II.
Motion for Voluntary Dismissal
C-Tech moves for voluntary dismissal of its claims pursuant
to Rule 41(a)(2) of the Federal Rules of Civil Procedure, which
allows for dismissal by court order after the opposing party has
served
either
without
the
an
answer
consent
or
of
motion
all
for
summary
parties
who
judgment
and
appeared.4
have
Typically, the decision to grant or deny a voluntary dismissal
under Rule 41(a)(2) is a matter of discretion to be guided by
certain factors, including the potential prejudice to the nonmoving party.
Howard v. Inova Health Care Servs., 302 F. App’x
166, 178-79 (4th Cir. 2008).
Where,
as
here,
a
plaintiff’s
Rule
41(a)(2)
motion
“specifically request[s] dismissal with prejudice, it has been
held
that
Charles
A.
the
district
Wright
(emphases added).
&
court
Arthur
must
R.
grant
Miller
§
that
2367
request.”
(3d
ed.
9
2008)
Indeed, that C-Tech seeks “dismissal with
prejudice is of paramount importance,” F.D.I.C. v. Becker, 166
F.R.D. 14, 15 (D.Md. 1996), because a voluntary dismissal with
prejudice
under
Rule
41(a)(2)
operates
as
adjudication on the merits of the dismissed claim,”
4
“a
complete
Harrison v.
By contrast, Rule 41(a)(1) allows a plaintiff to dismiss
an action voluntarily without a court order by filing either
(1) a notice of dismissal, so long as the opposing party has not
filed an answer or motion for summary judgment, or (2) a
stipulation of dismissal signed by all parties who have appeared
in the case.
5
Edison Bros. Apparel Stores Inc., 924 F.2d 530, 534 (4th Cir.
1991).
Absent a specific order by the court, dismissal with
prejudice “is subject to the usual rules of res judicata.”
9
Wright & Miller § 2367; see also McLean v. United States, 566
F.3d 391, 407 (4th Cir. 2009) (“A dismissal with prejudice is a
complete adjudication of the issues presented by the pleadings
and
is
a
bar
to
a
further
action
(internal quotation marks omitted).
plaintiff
may
not
appeal
the
between
the
parties.”)
Moreover, “[n]ormally, a
dismissal
of
his
prejudice, which is granted on his own motion.”
suit
with
Distaff, Inc.
v. Springfield Contracting Corp., 984 F.2d 108, 110 (4th Cir.
1993) (citing United States v. Proctor & Gamble Co., 356 U.S.
677, 680 (1958)).
Given that dismissal with prejudice of C-Tech’s complaint
insulates Defendants from further litigation arising out of the
dismissed claims, any injustice that Defendants might otherwise
suffer “is significantly lessened.”
Becker, 166 F.R.D. at 15.
Indeed, although they question the “eleventh hour” timing of CTech’s voluntary dismissal and refused to sign a stipulation of
voluntary dismissal at C-Tech’s request, Defendants agree that
dismissal
with
prejudice
is
“probably
the
most
appropriate
course of action here,” notwithstanding the pendency of their
motion to dismiss and for summary judgment on C-Tech’s claims.
(ECF No. 30, at 4).
6
Because
district
courts
ordinarily
“must”
grant
a
plaintiff’s request for voluntary dismissal with prejudice and
because Defendants here have not offered any argument that such
a dismissal would prejudice their rights, C-Tech’s Rule 41(a)(2)
motion will be granted.
The question remains, however, as to whether any conditions
should be attached to the dismissal of the complaint.
Rule
41(a)(2) affords discretion to order dismissal “upon such terms
and
conditions
41(a)(2).
as
the
court
Defendants
condition:
deems
proper.”
explicitly
request
Fed.R.Civ.P.
only
one
such
that C-Tech, a foreign corporation without any known
presence in the United States, be ordered to furnish a bond or
some
other
assurance
that
Plaintiff
entered in Defendants’ favor.
will
pay
any
judgment
(ECF No. 30, at 4 n.3).
Because
C-Tech will not be held liable for any of Defendants’ attorneys’
fees and because C-Tech does not dispute its obligation to pay
Aversion’s
reasonable
litigation
costs
(excluding
attorneys’
fees), Defendants’ request for a bond will be denied.
As
explained
attorneys’
Although
fees
not
Defendants’
below
in
pursuant
framed
statutory
as
Section
to
a
the
IV,
Lanham
request
entitlement
Defendants
to
Act
under
and
also
the
Rule
attorneys’
fees
seek
MUTSA.
41(a)(2),
will
be
analyzed under Rule 41(a)(2) because that is the only means by
which such fees could be awarded at this stage.
7
For the reasons
set forth in Section IV, Defendants’ request will be denied and
the dismissal of C-Tech’s complaint will not be conditioned on
an award of attorneys’ fees.
III. Aversion’s Motion for Partial Summary Judgment on Its
Contractual Counterclaim for Attorneys’ Fees
In
its
motion
contractual
for
counterclaim
determination
of
partial
(ECF
C-Tech’s
summary
No.
judgment
30),
liability
Aversion
for
its
on
its
seeks
a
reasonable
litigation costs, including attorneys’ fees.5
As
the
parties
acknowledge,
Maryland
law
governs
the
resolution of this dispute pursuant to Paragraph 4.16 of the
Agreement.
common
law
(See ECF No. 1-1, at 6).
“American
Rule,”
which
Maryland follows the
states
that,
generally,
a
prevailing party is not awarded attorneys’ fees “unless (1) the
parties
to
a
contract
have
an
agreement
to
that
effect,
(2) there is a statute that allows the imposition of such fees,
(3) the wrongful conduct of a defendant forces a plaintiff into
5
Although Defendants’ opening and reply briefs refer to the
counterclaim as being “theirs” (e.g., ECF No. 30, at 1; ECF No.
32, at 1), Aversion alone asserts the contractual counterclaim
(ECF No. 5, at 10), likely because Mr. Tutini was not a party to
the Agreement.
Accordingly, the motion for partial summary
judgment on the counterclaim likewise will be construed as being
brought
by
Aversion
alone.
Additionally,
because
the
counterclaim is titled “Breach of Contract,” Defendants’
statutory arguments will not be considered in ruling on
Aversion’s motion for partial summary judgment but instead will
be construed as constituting a separate request for attorneys’
fees by both Defendants that will be addressed in Section IV.
8
litigation with a third party, or (4) a plaintiff is forced to
defend against a malicious prosecution.”
Nova Research, Inc. v.
Penske Truck Leasing Co., 405 Md. 435, 445 (2008) (internal
quotation marks and citation omitted).
Aversion
superseded
contends
in
this
that
case
the
based
American
on
Rule
Paragraph
has
4.17
of
been
the
Agreement, which provides that “[i]n the event that litigation
is instituted to enforce any provision of this Agreement, the
prevailing party in such action shall be entitled to recover its
reasonable costs of such litigation.”
Aversion
argues
that
the
phrase
(ECF No. 1-1, at 6).
“reasonable
costs
of
litigation” encompasses its reasonable attorneys’ fees.
No. 30, at 4-6; ECF No. 32, at 3-5).
such
(ECF
Although C-Tech concedes
that Paragraph 4.17 justifies an order awarding Aversion its
“reasonable costs of [] litigation,” Plaintiff maintains that
such costs do not include attorneys’ fees.
23).6
(ECF No. 31, at 21-
As set forth below, C-Tech has the better argument.
In order to award attorneys’ fees based on a contractual
provision, the contract between the parties must “specifically
6
C-Tech does not dispute that Aversion is a “prevailing
party” within the meaning of Paragraph 4.17.
In fact, C-Tech
affirmatively concedes that point at numerous points in its
brief.
(See, e.g., ECF No. 31, at 19, 20).
In light of this
concession, it is not necessary to decide whether granting a CTech’s unopposed Rule 41(a)(2) motion for voluntary dismissal
with prejudice renders Aversion a “prevailing party” under
Maryland law.
9
authorize” recovery of such fees.
Thomas v. Capital Med. Mgt.
Assocs., LLC, 189 Md.App. 439, 468 (2009) (citing Maxima Corp.
v.
6933
Arlington
(1994)).
Dev.
Ltd.
P’ship,
100
Md.App.
441,
452
Under the objective theory of contract interpretation,
which applies in Maryland, a court must “give effect to the
plain
meaning
specific
provision
contract.”
(2011).
of
an
in
unambiguous
light
of
term,
the
and
will
language
of
evaluate
the
a
entire
Weichert Co. of Md., Inc. v. Faust, 419 Md. 306, 324
Contract terms must be construed according to their
“customary, ordinary and accepted meaning,” regardless of the
parties’ intentions at the time the contract was formed.
Research,
405
Md.
at
448.
Therefore,
when
Nova
interpreting
a
contract, the court’s task is to “determine from the language of
the agreement itself what a reasonable person in the position of
the parties would have meant at the time it was effectuated.”
Calomiris v. Woods, 353 Md. 425, 436 (1999) (internal quotation
marks omitted); see also Capital Select Realtors, LLC v. NRT
Mid-Atl.,
theory
LLC,
of
197
contract
Md.App.
698,
711
interpretation]
(2011)
encourages
(“The
[objective
parties
to
use
language as precisely as possible, so as to forestall costly
inquiries into their subjective intentions.”).
Absent
a
finding
of
ambiguity,
parol
evidence
parties’ intent or meaning should not be considered.
of
the
Beale v.
Am. Nat’l Lawyers Ins. Reciprocal, 379 Md. 643, 660 (2004); see
10
also Higgins v. Barnes, 310 Md. 532, 537 (1987) (“[E]vidence is
inadmissible to vary, alter, or contradict a contract that is
complete
and
unambiguous.”).
“Ambiguity
arises
if,
to
a
reasonable person, the language used is susceptible of more than
one meaning or is of doubtful meaning.”
Anderson Adventures,
LLC v. Sam & Murphy, Inc., 176 Md.App. 164, 178 (2007) (internal
quotation marks and citation omitted).
“[I]t is well-settled
that a contract is not ambiguous merely because of a controversy
concerning
the
proper
interpretation
of
its
terms.”
B
&
P
Enters. v. Overland Equip. Co., 133 Md.App. 583, 605 (2000)
(citing Lerner Corp. v. Three Winthrop Props., Inc., 124 Md.App.
679, 685 (1999)).
In this case, the term that must be construed — “reasonable
costs
of
Dictionary
such
litigation”
defines
—
is
“litigation
not
costs”
ambiguous.
as
“[t]he
Black’s
Law
expenses
of
litigation, prosecution, or other legal transaction, esp. those
allowed in favor of one party against the other” and further
notes that “[s]ome but not all states allow parties to claim
attorney’s fees as a litigation cost.”
(9th ed. 2009).
Black’s Law Dictionary
Maryland decidedly is not one of those states.
For more than a century, “[i]t [has been] well settled in this
state that the costs of a suit do not, apart from statutory
direction, include the counsel fees of the successful party,”
and that attorneys’ fees are “not part of the costs of the suit,
11
in the ordinary sense.”
A.
63,
63
(Md.
Singer v. Fid. & Deposit Co. of Md., 54
1903).
Thus,
in
Maryland,
the
customary,
ordinary and accepted meaning of the term “reasonable costs of
such
litigation”
does
not
include
attorneys’
fees.
Because
Paragraph 4.17 is unambiguous, there is no need to consider
parol evidence of the parties’ intent.7
The
Maryland
cases
cited
by
Aversion
to
support
its
argument that the term “reasonable costs of such litigation”
unambiguously includes attorneys’ fees are not apposite.
In
Brady v. Dilley, the court held that attorneys’ fees incurred by
a trustee in connection with the sale of a trust property were
allowable under a term in the deed of trust permitting recovery
of
“just
and
reasonable
expenses,
costs,
charges
commissions” attendant to the trust’s administration.
570, 582 (1867).
and
27 Md.
Brady is irrelevant to the construction of the
Agreement here for two reasons.
First, the deed of trust in
Brady mentioned “costs” without any reference to “litigation,”
distinguishing it from the use of “costs” in Paragraph 4.17.
7
Even if the term “reasonable costs of such litigation”
were ambiguous, Maryland law would require Paragraph 4.17 to be
construed against Aversion because Mr. Tutini, as the undisputed
drafter of the Agreement, could have made the language of the
provision clearer by explicitly referencing “attorneys’ fees.”
See King v. Bankerd, 303 Md. 98, 106 (1985) (“[A]mbiguities in
an instrument are resolved against the party who made it or
caused it to be made, because that party had the better
opportunity to understand and explain his meaning.”).
12
See id.
Second, the deed of trust included broader language by
also referring to the availability of “expenses,” “charges,” and
“commissions,” and the court’s holding did not make clear which
particular term or combination of terms it relied on to uphold
the award of attorneys’ fees.
Also
Maryland
unavailing
Court
of
Id.
is
Aversion’s
Appeals
cases
reliance
addressing
on
the
the
trio
of
recovery
of
attorneys’ fees in the context of indemnity agreements:
Jones
v. Calvin B. Taylor Banking Co., 253 Md. 430 (1969), Atlantic
Contracting & Material Co., Inc. v. Ulico Casualty Co., 380 Md.
285 (2004), and Nova Research, Inc. v. Penske Truck Leasing Co.,
405 Md. 435 (2008).
In
Jones,
a
mobile-home
manufacturer
entered
into
a
financing agreement with a bank, pursuant to which the bank
accepted assignment of the manufacturer’s accounts receivables
and the responsibility for paying its suppliers.
431-32.
253 Md. at
In exchange, the manufacturer’s officers executed a
note guaranteeing the bank against any loss resulting from the
arrangement.
Id.
After the manufacturer was adjudged bankrupt,
the bankruptcy trustee obtained a judgment against the bank to
recover amounts it received pursuant to the agreement.
436.
its
Id. at
The bank then sued the manufacturer’s officers to recover
losses,
including
bankruptcy proceedings.
the
attorneys’
Id. at 437.
13
fees
incurred
in
the
The Maryland Court of
Appeals upheld the lower court’s award of attorneys’ fees based
on
the
“general
rule
[that],
unless
the
indemnity
contract
provides otherwise, an indemnitee is entitled to recover, as
part of the damages, reasonable attorneys’ fees.”
Id. at 411.
Importantly, the Jones court did not construe any contractual
language to reach its holding; instead, the court created a new
exception
to
the
provision
based
on
American
Rule
principles
by
of
implying
a
fee-shifting
indemnification.
See
Nova
Research, 405 Md. at 446 (explaining that the “implied indemnity
exception” to the American Rule originated in Jones).
Because
neither party contends that the Agreement between C-Tech and
Aversion is one for indemnity, Jones is irrelevant to Aversion’s
contractual counterclaim for attorneys’ fees.
Nor
can
Contracting.
involve
the
subcontractor
Aversion’s
position
be
supported
by
Atlantic
In contrast to Jones, Atlantic Contracting did
construction
promised
to
of
contractual
indemnify
its
language.
surety
There,
against
a
all
“loss,” defined as:
Any and all damages, costs, charges, and
expenses of any kind, sustained or incurred
by [the surety] in connection with or as a
result of: (1) the furnishing of any Bonds;
and
(2)
the
enforcement
of
this
[indemnification] Agreement.
Atlantic
Contracting,
380
Md.
at
302.
Pursuant
to
this
definition, the surety sued the subcontractor to recover amounts
14
paid pursuant to the bond, as well as attorneys’ fees incurred
in suing to enforce the agreement.
Id. at 296.
The Court of
Appeals held that “under the terms of the indemnity agreement,”
the subcontractor was “obligated by contract” to pay the surety
for
“the
sums
it
incurred
to
enforce
the
agreement,
included its attorneys’ fees, costs, and expenses.”
which
Id. at 316.
This holding has no relevance here because the definition of
“loss” at issue in Atlantic Contracting is distinguishable from
the language of Paragraph 4.17 in two critical ways.
although
the
included
a
“charges,”
Agreement.
definition
number
and
of
of
“loss”
“expenses”
–
that
“costs,”
terms
additional
included
e.g.,
are
–
not
First,
it
also
“damages,”
mentioned
in
the
Second, each of the aforementioned terms was also
modified by the phrase “any and all,” id. at 302, making the
definition of “loss” much broader than the language used by the
parties in Paragraph 4.17.
Finally,
misplaced.
Aversion’s
reliance
on
Nova
Research
also
is
Nova Research addressed whether an indemnitee can
recover first-party attorneys’ fees (i.e., those fees incurred
to
enforce
the
terms
not
of
the
include
indemnity
agreement
does
an
recovery.
See 405 Md. at 444-58.
express
agreement)
provision
where
the
for
such
The Court of Appeals first
noted that the implied indemnity exception to the American Rule
established in Jones applies only to the recovery of attorneys’
15
fees incurred in defending against third-party actions and “does
not
accurately
settle
the
matter”
for
first-party
attorneys’
fees, which is “a question to be answered by interpretation of
the
contract.”
omitted).
Id.
at
447,
449
(internal
quotation
marks
The agreement at issue in Nova Research required the
customer
of
a
harmless
[the
rental
truck
company]
.
.
company
.
to
from
“indemnify,
and
against
and
all
hold
loss,
liability and expense caused or arising out of [the customer’s]
failure to comply with the terms of this Agreement.”
450.
Id. at
The court held that this did not constitute the type of
“express fee shifting provision” that is required in the firstparty context.
Id. at 451.
Significantly
Aversion
notes,
here,
observe
the
that
Nova
the
Research
implied
court
indemnity
did,
as
exception
established by Jones “aligns us with those states that do not
strictly require the phrase ‘attorneys’ fees’ in a contract to
override the American Rule,” but then declined to extend this
principle beyond the implied-indemnity exception for third-party
attorneys’ fees because, otherwise, “the exception would swallow
the rule.”
Id. at 452.
The court explained that its holding
“comports with the generally accepted rule, requiring that a
contract
provision
[enforcing
the
must
terms
of
call
the
for
fee
agreement
recovery
itself]
overcome the application of the American rule.”
16
expressly
in
order
for
to
Id. at 453.
Hence, Nova Research does not, as Aversion contends, support
that
the
term
“reasonable
costs
of
unambiguously includes attorneys’ fees.
confirms
that
“majority
Maryland
courts”
of
follows
that
the
such
litigation”
Rather, Nova Research
approach
“contractual
adopted
by
attorney’s
a
fees
provisions must be strictly construed to avoid inferring duties
that the parties did not intend to create.”
Id. at 455, 458
(internal quotation marks and citation omitted); cf. Talley v.
Talley,
317
Md.
428,
438-39
(1989)
(“The
power
to
award
attorney’s fees, being contrary to the established practice in
this
country,
may
be
expressly
conferred
but
will
not
be
presumed from general language.”).
Aversion also mistakenly contends that, if Paragraph 4.17
is not interpreted to encompass attorneys’ fees, the provision
would be rendered meaningless because a “prevailing party” is
already entitled to its costs in both federal court, pursuant to
Federal Rule of Civil Procedure 54(d) and 28 U.S.C. § 1920, and
state court, pursuant to Maryland Rules 2-603(a) and 3-603(a).
(ECF No. 30, at 5).
Maryland does subscribe to the “general
rule” that courts must “avoid interpreting contracts in a way
that renders its provisions superfluous.”
442.
Contrary
to
Aversion’s
argument,
Calomiris, 353 Md. at
however,
construing
Paragraph 4.17 to exclude attorneys’ fees does not render the
provision
merely
duplicative
of
17
existing
law.
Indeed,
the
contractual
clause
is
distinguishable
from
the
statutes
and
regulations cited by Aversion in two respects.
First, the taxable costs available to a prevailing civil
litigant pursuant to statute and rule typically are limited.
See, e.g., Taniguchi v. Kan Pac. Saipan, Ltd., --- U.S. ---, 132
S.Ct.
1997,
2006
(2012)
(reaffirming
the
“narrow
scope
of
taxable costs” available under 28 U.S.C. § 1920, the text of
which is limited to “relatively minor, incidental expenses”).
For example, in Taniguchi, the United States Supreme Court held
that
the
reference
in
28
U.S.C.
§
1920
to
“compensation
of
interpreters” does not permit a prevailing party to recover the
costs associated with document translation because “the ordinary
meaning of ‘interpreter’ is someone who translates orally from
one language to another.”
restrictions
on
the
Id. at 2007.
“reasonable
costs
There are no comparable
of
.
.
.
litigation”
available pursuant to the Agreement, such that Aversion may be
entitled to an award of certain litigation costs that would not
be taxable under Rule 54(d).
Indeed, if Paragraph 4.17 were
interpreted to be limited to those costs available pursuant to
statute or rule, the provision would be rendered superfluous.
See,
e.g.,
Best
Buy
Stores
v.
Developers
Diversified
Realty
Corp., No. 05–2310, 2011 WL 1321391, at *10-11 (D.Minn. Feb. 1,
2011)
(agreeing
that
a
contract
clause
providing
for
the
recovery of “legal costs” does not include attorneys’ fees but
18
also
holding
that
the
clause
is
not
limited
to
those
costs
available under 28 U.S.C. § 1920 because a contrary construction
would render the provision surplusage).
Second, because Paragraph 4.17 mandates that the prevailing
party “shall be entitled to recover its reasonable costs of such
litigation,” the provision also eliminates the discretion that a
court typically has to deny an award of costs to a prevailing
litigant.
For example, in Maryland, “allowance of . . . costs
[pursuant to Md. Rule 2-603] is within the discretion of the
Court.”
Bahena
v.
Foster,
164
Md.App.
275,
286
(2005).
Likewise, “the federal courts are free to pursue a case-by-case
approach [to award costs pursuant to Rule 54(d)] and to make
their decisions on the basis of the circumstances and equities
of each case.”
9 Wright & Miller § 2367.
By contrast, the use
of “shall” makes an award of costs to a prevailing party under
the Agreement non-discretionary.
Therefore, it cannot be said
that
to
construing
renders
the
Paragraph
provision
4.17
duplicative
exclude
of
the
attorneys’
statutes
and
fees
rules
cited by Aversion.
In sum, although Paragraph 4.17 entitles Aversion to its
“reasonable
costs
include
its
partial
summary
of
attorneys’
[this]
litigation,”
fees.
judgment
on
To
that
Aversion’s
granted in part and denied in part.
19
such
end,
costs
the
do
not
motion
for
counterclaim
will
be
Because the costs to which
Aversion is entitled to recover from C-Tech may extend beyond
those
normally
recoverable
and
taxable
by
the
clerk,
the
petition shall be submitted to the undersigned, and not to the
clerk.
Nevertheless, as set forth in the accompanying order,
Aversion will be directed to submit documentation as required by
Local Rule 109 within fourteen (14) days.
IV.
Defendants’ Request for Attorneys’ Fees
Aversion and Mr. Tutini also request their attorneys’ fees
pursuant to two statutes:
(1) the fee-shifting provision of the
MUTSA; and (2) Section 35(a) of the Lanham Act.
6-9).8
Defendants
did
not
specifically
(ECF No. 30, at
plead
a
claim
for
attorneys’ fees under either of these statutes in their answer,
and – as previously noted – the counterclaim filed by Aversion
asserted only a contractual right to attorneys’ fees.
(See ECF
No. 5).
Accordingly, such claims are barred pursuant to Fourth
Circuit
precedent
holding
that
8
attorneys’
fees
constitute
In their reply brief, Defendants also argue that C-Tech
has admitted to asserting “doomed claims” knowingly, such that
an award of attorneys’ fees is warranted as a sanction pursuant
to either Rule 11 of the Federal Rules of Civil Procedure or 28
U.S.C. § 1927. (ECF No. 32, at 3).
Defendants failed to raise
this argument in their opening brief, and it will not be
addressed here pursuant to the general rule in federal courts
that an argument raised for the first time in a reply brief will
not be considered.
Clawson v. FedEx Ground Package Sys., 451
F.Supp.2d 731, 734 (D.Md. 2006); see also United States v.
Williams, 445 F.3d 724, 736 n.6 (4th Cir. 2006).
Furthermore,
Rule 11 has its own procedural requirements, none of which have
been met here.
20
“special damages” that must be specifically pled pursuant to
Rule
9(g)
of
the
Federal
Rules
of
Civil
Procedure.
Atl.
Purchasers, Inc. v. Aircraft Sales, Inc., 705 F.2d 712, 716 n.4
(4th
Cir.
1983)
(noting
that
“attorneys’
fees
are
items
of
special damage for Rule 9(g) purposes”); see also Belk, Inc. v.
Meyer
Corp.,
U.S.,
No.
07-cv-168,
2010
WL
3474918,
at
*7
(W.D.N.C. Aug. 31, 2010) (adhering to Atlantic Purchasers as
“binding precedent” that barred a prevailing defendant’s claim
for attorneys’ fees under the Lanham Act where the defendant
filed a motion for attorneys’ fees under Rule 54(d) but had not
specifically
plead
its
statutory
right
to
such
do
fees
not
in
its
responsive pleadings).
Nonetheless,
request
although
attorneys’
fees
as
Defendants
a
condition
of
specifically
dismissal,
Rule
41(a)(2) allows for dismissal of C-Tech’s claims “on terms that
the court considers proper.”
where
a
prejudice,
motion
an
for
award
F.R.C.P. 41(a)(2).
voluntary
of
dismissal
attorneys’
fees
is
is
Ordinarily,
granted
not
with
appropriate
because there is no risk that the defendant can “be called upon
again
to
expense.”
defend”
and
thus
no
risk
of
“any
duplication
of
Lawrence v. Fuld, 32 F.R.D. 329, 331 (D.Md. 1963).
Courts have recognized two exceptions to this general principle:
(1) where the case involves “exceptional circumstances” and (2)
where
“there
is
independent
statutory
21
authority
for
such
an
award.”
9 Wright & Miller § 2366 (internal quotation marks and
citations omitted).
Because the fee-shifting provisions cited
by Defendants fall into this latter category, the merits of
Defendants’
statutory
requests
for
attorneys’
fees
will
be
addressed.
Cf. Belk, 2010 WL 3474918, at *7 (considering the
merits of a prevailing defendant’s claim for attorneys’ fees
under the Lanham Act based on Rule 54(c), which requires final
judgments – other than default judgments – to “grant the relief
to which each party is entitled, even if the party has not
demanded that relief in its pleadings”).
For the reasons set
forth below, an award of attorneys’ fees is not warranted under
either statute.
A.
Maryland Trade Secrets Act
First, Defendants insist that, as the prevailing parties in
this litigation, they are entitled to an award of attorneys’
fees under the MUTSA because C-Tech brought its trade secrets
claim in bad faith.9
Because Defendants have not met their
burden to offer clear evidence of bad faith, there is no basis
for such an award.
9
Here again, C-Tech does not question that Defendants are
“prevailing part[ies]” within the meaning of the MUTSA’s
attorneys’ fees provision. (See ECF No. 30, at 24-25). Because
Defendants
have
not
shown
that
C-Tech
brought
its
misappropriation claim in “bad faith” as required by the MUTSA,
the issue of whether Defendants are “prevailing” within the
meaning of the statute need not be reached.
22
The
MUTSA
bestows
courts
with
discretion
to
award
attorneys’ fees to a prevailing defendant where “[a] claim of
misappropriation is made in bad faith.”
§ 11-1204.
Md. Code, Com. Law
A prevailing defendant must offer “clear evidence
that the action [was] entirely without color and taken for other
improper
purposes
amounting
to
bad
faith,”
meaning
that
the
plaintiff prosecuted the action “vexatiously, wantonly, or for
oppressive reasons.”
Optic Graphics, Inc. v. Agee, 87 Md.App.
770, 789 (1991), cert. denied, 324 Md. 658 (1991).
Materials
Processing,
Inc.
v.
Kateleuna
GMBH
In Contract
Catalysts,
the
court predicted that the Maryland Court of Appeals would join
other jurisdictions in holding that “bad faith” exists where the
plaintiff (1)
brings an “objective[ly] specious[]” claim; and
(2)
in
engages
“subjective
maintaining” the claim.
(adopting
the
misconduct
in
bringing
or
222 F.Supp.2d 733, 744-45 (D.Md. 2002)
two-pronged
test
used
by
courts
interpreting
statutes that, like the MUTSA, are based on the Uniform Trade
Secrets Act).
Defendants posit that this action is factually similar to
Contract Materials, where a prevailing MUTSA defendant received
an award of attorneys’ fees.
Specifically, Defendants contend
that, as in Contract Materials, the evidence offered by C-Tech
“fall[s]
short
of
misappropriation
of
making
trade
even
secrets,”
23
a
prima
facie
indicating
the
case
of
objective
speciousness
of
its
MUTSA
claim.
(ECF
No.
32,
at
8).
Defendants also contend that C-Tech has engaged in subjective
misconduct by:
(1) continuing to pursue this action despite its
knowledge of Defendants’ judgment-proof status in an effort to
“put
[Defendants]
(2) demanding
exchange
out
that
for
of
business”
Defendants
dismissing
exit
the
(ECF
the
action
No.
chemical
(ECF
No.
30,
at
business
32,
at
7);
in
9);
(3) continuing to repeat allegations that it “knows it cannot
prove”
(id.);
and
(4) violating
the
protective
order
by
attaching a document marked “Highly Confidential” as an exhibit
to its opposition (id. at 9-10).
Despite
Defendants’
efforts
to
analogize
to
Contract
Materials, this case is factually distinguishable in a number of
critical
respects.
First,
unlike
the
plaintiff
in
Contract
Materials whose claim was deemed to be “utter[ly] lack[ing] [in]
substantive legal merit” from the outset, 222 F.Supp.2d at 746,
C-Tech offers some evidence in support of a prima facie claim of
misappropriation of trade secrets.
To prevail on such a claim,
Plaintiff
would
to
technology
in
ultimately
question
need
qualifies
as
show
a
that:
trade
(2) Defendants misappropriated the technology.
(1)
the
secret
and
See Diamond v.
T. Rowe Price Assocs., Inc., 852 F.Supp. 372, 412 (D.Md. 1994).
Information qualifies as a trade secret where it “(1) hold[s]
independent economic value because it is not generally known to
24
or
readily
ascertainable
by
others
who
stand
if
or
disclose
it,
and
economically
they
use
to
(2)
benefit
[is]
subject of reasonable efforts to maintain its secrecy.”
Graphics,
87
Md.App.
at
787.
“In
order
to
the
Optic
qualify
as
misappropriation under MUTSA, one must either acquire the trade
secret by improper means or disclose the trade secret without
express or implied consent.”
With
respect
to
Diamond, 852 F.Supp. at 412.
the
first
element,
C-Tech’s
principal
averred in a declaration that C-Tech shared certain proprietary
information
with
composition
of
Aversion,
Rodrepel®
including
that
the
allegedly
distinguishes
it
unique
from
denatonium benzoate-based rodent repellants on the market.
No. 31-1, Joshi Decl. ¶ 10).
other
(ECF
Such information might qualify as
a trade secret under Maryland law given that C-Tech appears to
have taken steps to maintain its secrecy via the confidentiality
provisions
of
the
parties’
Agreement.10
See,
e.g.,
Bond
v.
PolyCycle, Inc., 127 Md.App. 365, 375-76 (1999) (although other
companies used similar approaches to breaking down plastic, the
subject technology could be deemed a “trade secret” where the
10
Read together, Paragraphs 2.5 and 2.6 of the Agreement
prohibit Aversion from “us[ing] . . . any . . . information
[identified as proprietary or which, from the circumstances, in
good faith and good conscience, ought to be treated as
confidential]” during the term of the Agreement or “at any time
subsequent thereto.” (ECF No. 1-1 ¶¶ 2.5 & 2.6).
25
defendant’s knowledge of its formula stemmed from his experience
at the company rather than a general study of the marketplace).
In support of the second element of a MUTSA claim, C-Tech
offers evidence showing that Aversion sold a product that is
highly similar to Rodrepel®, including pages from the web site
of Aversion containing language that is obviously similar to CTech’s marketing materials for Rodrepel®.
12 with ECF No. 31-13).
(Compare ECF No. 31-
Such evidence gives rise to an arguably
plausible inference that Aversion, without the consent of CTech,
used
confidential
information
about
the
composition
of
Rodrepel® to sell a competing product, which could constitute a
violation of the MUTSA.
See, e.g., PolyCycle, 127 Md.App. at
379
former
(explaining
confidential
that
a
information
agent’s
acquired
during
unauthorized
the
use
of
course
of
the
agency relationship can constitute “misappropriation”).
The rebuttal evidence offered by Defendants in their motion
to dismiss or for summary judgment indicates that C-Tech likely
would not have been able to prevail on its MUTSA claim had it
filed an opposition to that motion. (See ECF No. 26).
the
current
record,
however,
it
cannot
be
said
Based on
that
“alleged” an MUTSA claim “in objective speciousness.”
C-Tech
Contract
Materials, 222 F.Supp.2d at 747.
Nor
does
the
record
support
a
conclusion
that
C-Tech
engaged in “subjective misconduct” by “maintaining” its MUTSA
26
claim
until
this
point.
In
Contract
Materials,
the
losing
plaintiff “continued to pursue” its meritless MUTSA claim after
losing on summary judgment and “in reckless disregard of [its]
speciousness,” as established by the prior ruling of the court.
Id.
at
745.
Here,
to
dismiss
decision”
by
contrast,
its
claims
C-Tech
made
voluntarily
a
“business
before
opposing
Defendants’ motion and before the issuance of any evidentiary
findings.
Because
determination
procedural
there
that
the
posture
has
been
MUTSA
of
claim
Contract
inapposite to the facts here.
no
comparable
lacks
evidentiary
merit,
the
renders
Materials
any
that
case
See also JLM Formation, Inc. v.
Form%8FPac, No. 04–1774, 2004 WL 1858132, at *2 (N.D.Cal. Aug.
19,
2004)
(explaining
that
where
a
plaintiff
voluntarily
dismisses its case prior to summary judgment or trial, it is
difficult to contend that it “maintained” or “prosecuted” its
trade secret claim so as to sustain a finding of “bad faith”).
What is more, the type of litigation misconduct held to
warrant an award of attorneys’ fees in Contract Materials is not
present
here.
established
discovery
There,
that
the
abuses,
the
plaintiff
including
requests
and
filing
Contract
Materials,
concrete
action
numerous
222
that
clear
by
and
had
convincing
committed
serving
F.Supp.2d
Defendants
27
at
motions
748.
point
“promiscuous”
overbroad
unsuccessful
to
discovery
to
Here,
as
evidence
compel.
the
evidence
only
of
“subjective
misconduct”
protective
order
by
is
C-Tech’s
attaching
a
Confidential” to its opposition.
document
in
question
is
an
alleged
violation
document
marked
of
the
“Highly
(ECF No. 32, at 9-10).
email
inquiry
from
an
The
Aversion
customer to Mr. Tutini asking for advice about how to combine
denatonium
birds.
benzoate
and
capsaicin
(See ECF No. 31-16).
oil
to
deter
mammals
and
The customer also inquired whether
Mr. Tutini “knew anything about” C-Tech or Rodrepel® based on
the similarities between an article authored by Aversion and a
white paper drafted by C-Tech.
Tutini:
products;
(See id.).
In response, Mr.
(1) offered “guesses” about the proper ratios for the
(2) confirmed
that
the
resulting
mixture
would
stable; and (3) indicated his familiarity with Rodrepel®.
id.)
be
(See
Although the inclusion of this document without filing a
motion to seal does violate the protective order and therefore
can serve as a basis for sanctions or other appropriate relief
(see ECF No. 18 ¶ 27), Defendants’ designation of this email
exchange as “Highly Confidential” is suspect.
The stipulated
protective order allows for a “Highly Confidential” designation
where the party believes, in good faith, that the information is
“highly confidential, proprietary or trade secret information”
that requires heightened protection.
(ECF No. 18 ¶ 5).
substance
—
of
this
email
exchange
i.e.,
how
Yet the
denatonimum
benzoate can be combined with other products sold by both C-Tech
28
and Aversion effectively to deter animals — is precisely the
type of information that Defendants argue is not a trade secret
because of its availability in the public domain.
26, at 12-16).
faith
As it is not clear that Defendants had a good
basis
Confidential”
(See ECF No.
for
in
designating
the
first
the
instance,
document
C-Tech’s
as
“Highly
violation
is
readily distinguishable from the egregious discovery abuses at
issue in Contract Materials and does not warrant an award of
attorneys’ fees under the MUTSA.
Because
Defendants
have
not
met
their
burden
to
offer
“clear evidence” that C-Tech brought a trade secretes claim that
was “entirely without color,” Optic Graphics, 87 Md.App. at 789,
Defendants’ motion for an award of attorneys’ fees under the
MUTSA will be denied.
B.
Section 35(a) of the Lanham Act
Defendants’ argument that they are entitled to attorneys’
fees pursuant to the Lanham Act also fails.
Section 35(a) of
that statute provides that a court may award attorneys’ fees to
the
prevailing
§ 117(a).11
party
in
“exceptional
cases.”
15
U.S.C.
Such an award is available equally to prevailing
11
Based on C-Tech’s characterization of the Defendants as
“prevailing” and because this is not an “exceptional case,” the
issue of whether Defendants are “prevailing part[ies]” for
purposes of Section 35(a) of the Lanham Act will not be reached.
29
plaintiffs and defendants.
The Scotch Whisky Ass’n v. Majestic
Distilling Co., Inc., 958 F.2d 594, 599 (4th Cir. 1992), cert.
denied,
506
U.S.
862
(1992)
(establishing
that,
unlike
a
prevailing plaintiff, a prevailing defendant is required to show
“[s]omething less than ‘bad faith’” to prove an “exceptional
case”).12
Relevant factors
to be considered in determining
“exceptional[ism]” include whether the losing party engaged in
economic coercion, advanced groundless arguments, or failed to
cite controlling law.
Ale House Mgmt., Inc. v. Raleigh Ale
House, Inc., 205 F.3d 137, 144 (4th Cir. 2000).
In sum, the
court must “determine, in light of the entire case, whether [the
losing party’s] claims and assertions were so lacking in merit
that the action as a whole was ‘exceptional.’”
Retail Servs.,
Inc. v. Freebies Publishing, 364 F.3d 535, 551 (4th Cir. 2004).
Hence, an award of attorneys’ fees pursuant to Section 35(a)
“[is] not to be made as a matter of course, but rather as a
matter of the court’s considered discretion.”
Ale House, 205
F.3d at 144.
12
In Retail Services, Inc. v. Freebies Publishing, the
Fourth Circuit recognized that “[t]his double standard of proof
may ultimately prove infirm under Fogerty v. Fantasy, Inc., 510
U.S. 517, 522–26 (1994), which rejected a standard that
differentiated between plaintiffs and defendants for the
recovery of attorney fees in the copyright context.”
364 F.3d
th
535, 551 (4
Cir. 2004).
The court declined, however, to
“decide whether Fogerty requires us to apply a uniform standard
under 15 U.S.C.A. § 1117(a).” Id.
30
Defendants assert that the Lanham Act claim asserted by CTech is “bereft of factual and legal support” because Plaintiff
has done no more than establish that Aversion sells a product
that is similar to Rodrepel®, and the Lanham Act does not exist
to “prevent the marketing of similar products.”
10-11).
(ECF No. 32, at
C-Tech rejoins that it filed the Lanham Act claim in
good faith based on Defendants’ promotion of a product similar
to Rodrepel® that uses a “slightly revised version of C-Tech’s
website.”
suffered
(ECF No. 31, at 25).
damage
as
a
result
C-Tech also alleges that it
of
Defendants’
marketing
of
competing products, including a one-year delay in finalizing a
contract with a major distributor that had discovered Aversion’s
activities.
(Id.).
In light of C-Tech’s seemingly scant evidence and vague
arguments, it may well be that Defendants’ motion to dismiss or
for summary judgment on C-Tech’s Lanham Act claim would have
been granted had Plaintiff not opted voluntarily to dismiss its
claims with prejudice.
Yet, in the absence of such a ruling and
without C-Tech having responded in full to the substance of
Defendants’ motion, there is no basis for concluding, based on
the
present
record,
that
C-Tech’s
Lanham
Act
claim
is
lacking in merit” as to render this action “exceptional.”
“so
A
comparison of the web sites of C-Tech and Aversion reveals very
similar language, providing some support for C-Tech’s allegation
31
that Defendants’ actions “have resulted in the misappropriation
of and intrusion upon C-Tech’s goodwill and business reputation”
as
alleged
in
C-Tech’s
complaint.
(ECF
No.
1,
at
14).
Similarly, although Defendants contend that C-Tech pursued this
action to force Aversion out of business, Defendants have not
offered
any
evidence
communications
—
between
other
the
than
parties
what
in
appear
be
context
the
to
of
confidential settlement negotiations (see ECF No. 30-1) — that
clearly establishes “economic coercion” by C-Tech.
Mgmt., 305 F.3d at 144.
Ale House
Accordingly, a discretionary award of
attorneys’ fees pursuant to Section 35(a) of the Lanham Act is
not warranted.
V.
Conclusion
For
dismissal
granted;
the
with
the
foregoing
reasons,
prejudice
motion
for
filed
by
partial
the
motion
Plaintiff
summary
for
voluntary
C-Tech
judgment
will
be
filed
by
Aversion on its counterclaim will be granted in part and denied
in
part;
and
the
request
Defendants will be denied.
for
statutory
attorneys’
fees
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
32
by
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