K-Flex USA, L.L.C. v. Armacell, LLC

Filing 52

ORDER denying 42 Motion for Attorney Fees. Signed by Chief US District Judge Terrence W. Boyle on 3/4/2019. (Stouch, L.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:17-CV-279-BO
K-FLEX USA, L.L.C.,

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Plaintiff,
V.

ARMACELL, LLC,
Defendant.

ORDER

This cause comes before the court on defendant's motion for an award of attorneys' fees.
[DE 42]. The matter has been fully briefed and is ripe for disposition. For the following reasons,
defendant's motion [DE 42] is DENIED.
BACKGROUND
The parties are manufacturers of foam pipe insulation. At the time this action was filed,
plaintiff exclusively manufactured elastomeric foam, which is derived from rubber. 1 Defendant
manufactures both elastomeric foam and polyethylene foam. Plaintiff worked with a particular
distributor-Sunbelt, Inc.-for several years. But in early 2017, Sunbelt began working with
defendant, and almost immediately thereafter terminated its relationship with plaintiff. On the
basis of the sudden termination and other perceived irregularities, plaintiff alleged that the
termination was due to defendant's coercion. That allegation formed the basis of plaintiffs
complaint. Plaintiff brought suit for violations of the Sherman Antitrust Act, Clayton Antitrust
Act, and, most relevant to the instant motion, North Carolina's Unfair and Deceptive Trade
Practices Act (UDTPA). [DE 1].

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Plaintiff has since begun manufacturing polyethylene foam, too.

In August 2017, defendant moved to dismiss plaintiffs complaint. [DE 11]. A hearing was
held before the undersigned on October 5, 2017 in Raleigh, North Carolina. [DE 22]. After the
hearing, the Court denied defendant's motion to dismiss. [DE 23]. Following the discovery period,
in September 2018, plaintiff moved to voluntarily dismiss its complaint without prejudice. [DE
32]. Defendant responded in opposition, arguing that the plaintiffs claims sliould be dismissed

with prejudice or, alternatively, that defendant should be awarded costs and attorneys' fees as part
of the dismissal without prejudice. [DE 36]. In December 2018, plaintiffs consented to a voluntary
dismissal of this action with prejudice. [DE 39, 40]. That same month, defendant moved for an
award of attorneys' fees. [DE 42].
DISCUSSION
Defendant moves for an award of attorneys' .fees under N.C. Gen. Stat. § 75-16.1, which
authorizes trial judges to award fees in UDTPA cases. More specifically, North Carolina law
provides that "[i]n any suit instituted by a person who alleges that the defendant violated G.S. 751.1, the presiding judge may, in his discretion, allow a reasonable attorney fee to the duly licensed
attorney representing the prevailing party ... upon a finding by the presiding judge that ... (2)
The party instituting the suit knew, or should have known the action was frivolous and malicious."
N.C. Gen. Stat.§ 75-16.1. The Court must support an award of fees by making findings of fact·
that the claimant knew or should have known that the action was frivolous and malicious and that
the attorney fee award is reasonable, including findings regarding the time and labor expended,
the skill required to perform the services rendered, the customary fee for like work, and the
experience and ability of the attorneys. McKinnon v. CV Indus., Inc., 745 S.E.2d 343, 350-51
(N.C. Ct. App. 2013); Cotton v. Stanley, 380 S.E.2d 419, 421 (N.C. Ct. App. 1989). An award of

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fees under§ 75-16.l is within the sound discretion of the trial judge. Birmingham v. H&H Home

Consultants and Designs, Inc., 65.8 S.E.2d 513, 518 (N.C. Ct. App. 2008).
The Court, in its discretion, finds that no award of attorneys' fees is merited in this case.
Plaintiffs antitrust claims and UDTP A claim were sufficient to survive defendant's motion to
dismiss, which received a hearing before the undersigned. Following extensive discovery, plaintiff
attempted to voluntarily dismiss all of its claims without prejudice. Given the advanced stage of
the litigation and the costs incurred by defendant until that point, however, the Court determined
that if such a dismissal were to be permitted, it would have to be accompanied by taxable costs
and attorneys' fees as conditions of dismissal. Instead, plaintiff consented to a voluntary dismissal

with prejudice. Plaintiff argues that no award of attorneys fees is appropriate because the voluntary
dismissal did not make defendant a "prevailing party" under§ 75-16.1. But the Court needs not
consider whether the voluntary dismissal with prejudice makes defendant a "prevailing party"
because, even if the requirements of the statute are met, the Court finds that no award is justified
in this action.
Defendant has not demonstrated that plaintiff knew or should have known that the action
was frivolous and malicious. Defendant argues that that plaintiffs suit was unsupported by the
evidence and filed and maintained without just cause. For support, defendant relies on

Laschkewitch v. Legal & General Am., Inc., No. 5:15-CV-251-D, 2017 WL 4976442, at *2
(E.D.N.C. Nov. 1, 2017), where the Court granted attorneys' fees to a prevailing party following
an award of summary judgment. In another case defendant relies upon, Castle McCulloch, Inc. v.

Freedman, 610 S.E.2d 416 (2005), fees were granted following a directed verdict at the close of
evidence at trial. In this case, however, plaintiff voluntarily dismissed its claims. The Court never
made findings of fact or reviewed any of the evidence generated in discovery. And w~~le the fact

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that defendant's motion to dismiss was denied, following a hearing, does not conclusively resolve
the issue of whether plaintiff knew or should have known the action was frivolous, it does suggest
that the allegations were not wholly without legal support.
Plaintiff, on the other hand, has supplied good-faith reasons for bringing this antitrust
action. Plaintiff filed suit following the termination, under circumstances that it deemed suspect,
of its fifteen-year business relationship with a third-party corporation. Plaintiff has also estimated
that at the time the action was filed, defendant controlled more than 90% of the United States
market for polyethylene insulation. Since the lawsuit began, plaintiff has taken other actions to
mitigate what it viewed as defendant's unfair competitio11 practices, including starting
manufacturing polyethylene insulation itself. Plaintiff also asserts that, during the course of
discovery, it became clear that the scope and costs 0f litigation were not in plaintiff's interest, and
in light of the mitigation and changed circumstances, "made a decision to focus on its business
instead of continued litigation." [DE 42-1]. Plaintiff submits that part of its rationale for ending
the suit was its concern with damaging industry relationships by taking depositions of ?ther parties
relevant to its antitrust claims. In support of its motion for fees, defendant argues simply that
plaintiff "began and continued this lawsuit to injure [defendant], not to protect competition," and
"consistently refused to produce evidence supporting its allegations." [DE 43, p. 12]. But given
the parties' dueling allegations, and given the fact that the case was voluntarily dismissed prior to
any presentation of evidence-with prejudice, to prevent future harm to defendant-to award
attorneys' fees would be inappropriate.
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In consideration of the particular circumstances of the case, including the voluntary
dismissal which truncated the proceedings, and given defendant's failure' to demonstrate that the

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action was frivolous and malicious, the Court in its discretion finds that no award of attorneys'
fees is merited. Defendant's motion must be denied.
CONCLUSION
For the above reasons, defendant's motion for an award of attorneys' fees [DE 42] is
DENIED.

SO ORDERED, this

!j_ day of March, 2019.
'

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TRRENCEW:B0YLE
CHIEF UNITED STATES DISTRI{;;Jl]I)(ffi

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