Keith Manufacturing Co. v. Butterfield
Opinion and Order - Defendant Larry D. Butterfield's Motion for Attorney's Fees (ECF 33 ) is DENIED. Similarly, Plaintiff Keith Manufacturing Co.'s Motion for Attorney's Fees (ECF 35 ) is DENIED. Signed on 6/26/2017 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
KEITH MANUFACTURING, CO.,
Case No. 3:15-cv-02008-SI
OPINION AND ORDER
LARRY D. BUTTERFIELD,
Bruce A. Kaser, VANTAGE LAW, PLLC, 420 Front Street, Issaquah, WA 98027; Gordon W.
Stewart, STEWART LAW OFFICES, 2145 Wells Street, Suite 105, Wailuku, HI 96793. Of
Attorneys for Plaintiff.
Shawn J. Kolitch, KOLISCH HARTWELL, PC, 200 Pacific Building, 520 SW Yamhill Street,
Portland, OR 97204. Of Attorneys for Defendant.
Michael H. Simon, District Judge.
Keith Manufacturing Co. (“Keith”) brought this lawsuit against its former employee
Larry D. Butterfield (“Butterfield”). Eighteen months later, the parties stipulated to the dismissal
of all claims with prejudice. The stipulation was silent on the issue of attorney’s fees. Twelve
days after Keith filed the stipulated dismissal, Butterfield filed a motion for attorney’s fees under
Rule 54 of the Federal Rules of Civil Procedure. That rule permits a prevailing party to move for
attorney’s fees within fourteen days after entry of judgment. Butterfield argues that a stipulated
PAGE 1 – OPINION AND ORDER
dismissal with prejudice is an appealable order and thereby qualifies as a judgment for purposes
of Rule 54. Butterfield also argues that because Keith dismissed its claims with prejudice,
Butterfield is the prevailing party.
Keith opposes Butterfield’s motion and raises three arguments. First, Keith argues that
the filing of the voluntary dismissal by stipulation ends the lawsuit and, thus, divests the Court of
jurisdiction to award attorney’s fees. Second, Keith argues that a motion for attorney’s fees under
Rule 54 requires a judgment and a voluntary dismissal by stipulation is not a judgment because it
is not an appealable order. Third, Keith argues that no one in this case is a prevailing party and,
thus, Butterfield is not entitled to recover attorney’s fees. Finally, Keith has filed its own
conditional motion for attorney’s fees, asserting that if the Court rejects Keith’s arguments
regarding the unavailability of attorney’s fees in this case, then Keith is entitled to recover its
attorney’s fees as a prevailing party, either instead of Butterfield or in addition to Butterfield. For
the reasons stated below, the Court concludes that: (1) the Court has jurisdiction to resolve the
parties’ cross-motions for attorney’s fees; and (2) attorney’s fees are not available to either party
because, based on a recent decision from the Supreme Court, a voluntary dismissal by stipulation
(even with prejudice) is not an appealable order and, thus, not a judgment for purposes of
Rule 54. Accordingly, the Court denies both parties’ motions for attorney’s fees.
On October 23, 2015, Keith filed this lawsuit against its former employee Butterfield.
According to Keith, during Butterfield’s employment with Keith, Butterfield filed a patent
application that led to the issuance of U.S. Patent No. 9,126,520 (“the ’520 patent”). Keith
alleges that Butterfield’s patent application was based on inventions made in cooperation with
one or more of Keith’s employees during the course of Butterfield’s employment and used
Keith’s trade secrets. Keith further alleges that Butterfield breached his employment contract
PAGE 2 – OPINION AND ORDER
with Keith by sending a demand letter to Keith in which Butterfield threatened to sue for
infringement of the ’520 patent unless Keith withdrew certain products from the market. In this
lawsuit, Keith asserted five claims against Butterfield: (1) declaratory judgment of
noninfringement of the ’520 patent; (2) declaratory judgment of invalidity of the ’520 patent;
(3) breach of contract; (4) trade secret misappropriation; and (5) correction of inventorship of the
’520 patent, seeking to add one or more of Keith’s employees as named inventors.
On May 3, 2016, Keith filed its second amended complaint. On May 16, 2016,
Butterfield sent to Keith a covenant not to sue (the “Covenant Not to Sue”). The preamble to
Butterfield’s Covenant Not to Sue states that “Keith’s advertisement and sale of its
products . . . do not infringe and are not likely ever to infringe Butterfield’s patent rights at a
level sufficient to warrant the substantial time and expense of continued litigation.” ECF 23-1
at 2. Butterfield’s Covenant Not to Sue continues, in relevant part:
Butterfield for and on behalf of himself, his “LoadBacker”
business, licensees, contract manufacturers, assigns and/or all other
related business entities, as well as any of their predecessors,
successors, directors, officers, employees, agents, attorneys,
representatives and employees of such entities hereby
unconditionally and irrevocably covenants to refrain from making
any claims(s) or demand(s), or from commencing, causing, or
permitting to be prosecuted any action in law or equity, against
Keith or any of its parents, subsidiaries, divisions, related
companies, affiliated companies, assigns, and/or other related
business entities, as well as any of their predecessors, successors,
directors, officers, employees, agents, attorneys, representatives
and employees of such entities, on account of any possible cause of
action involving infringement of U.S. Patent No. 9,126,520 based
on the manufacture, use, sale, offer for sale or importation of any
Keith product, including without limitation the Keith BSH-58
“Bulk Sweep” product, any predecessor version thereof, any
colorable imitation thereof, or any other prior or future Keith
product, regardless of whether that product is manufactured,
distributed, used, offered for sale, sold, imported or exported
before or after the Effective Date of this Covenant.
PAGE 3 – OPINION AND ORDER
The following day, May 17, 2016, Butterfield filed a motion to dismiss four of Keith’s
claims, excluding only the claim for correction of inventorship. Butterfield argued that his
Covenant Not Sue renders moot Keith’s claims that sought a declaration of noninfringement of
the ’520 patent and a declaration of invalidity of the ’520 patent. Butterfield also argued that the
applicable statutes of limitation and the doctrine of laches bars Keith’s claims for breach of
contract and trade secret misappropriation. On August 2, 2016, the Court granted in part and
denied in part Butterfield’s motion to dismiss. The Court ruled that Keith’s declaratory judgment
patent claims are moot in light of Butterfield’s unconditional and irrevocable Covenant Not to
Sue, but Keith’s state claims for breach of contract and trade secret misappropriation may
proceed. Two weeks later, on August 16, 2016, Butterfield filed his answer to Keith’s second
amended complaint. On April 21, 2017, more than eight months after the Court issued its ruling
on Butterfield’s motion to dismiss, the parties filed a Stipulation of Dismissal with Prejudice.
The parties’ stipulation was silent on the issue of costs1 and attorney’s fees.
Butterfield moves for an award of attorney’s fees pursuant to Fed. R. Civ. P. 54(d), Or.
Rev. Stat. § 20.096, Or. Rev. Stat. § 646.467, and 35 U.S.C. § 285. Rule 54(d)(2) of the Federal
Rules of Civil Procedure provides, in relevant part:
A claim for attorney’s fees . . . must be made by motion . . . . [T]he
motion must be filed no later than 14 days after the entry of
judgment [and] specify the judgment and the statute, rule, or other
grounds entitling the movant to the award . . . .”
Fed. R. Civ. P. 54(d)(2) (emphasis added) (headings omitted). Rule 54(a) defines “judgment” as
follows: “‘Judgment’ as used in these rules includes a decree and any order from which an
Neither Butterfield nor Keith seeks costs against the other.
PAGE 4 – OPINION AND ORDER
appeal lies.” Fed. R. Civ. P. 54(a). In this case, there was no document labeled “Judgment,” and
the Court did not enter any decree or order; nor was one requested by any party.
Keith opposes Butterfield’s motion for attorney’s fees on three grounds. First, Keith
argues that a stipulation of dismissal pursuant to Rule 41(a)(1)(A)(ii) is self-executing and
divests the Court of jurisdiction over the case, including jurisdiction to consider a motion for
attorney’s fees. Second, Keith argues that a motion for attorney’s fees under Rule 54 requires a
judgment and a voluntary dismissal by stipulation is not a judgment because it is not an
appealable order. Third, Keith argues that Butterfield was not the “prevailing party” on any claim
asserted in this case.
A. Whether a Court May Consider a Motion for Attorney’s Fees after a Case Ends
Eighteen months after Keith commenced this lawsuit, Keith filed a Stipulation of
Dismissal with Prejudice, signed by both Keith and Butterfield. The parties’ stipulation states:
“Pursuant to Fed. R. Civ. P. 41(a), Plaintiff Keith Manufacturing Co. and Defendant Larry D.
Butterfield hereby stipulate to dismissal of all claims pending in this action, with prejudice.”
ECF 32. The Court did not enter any judgment, decree, or other order in response to the parties’
stipulation. Indeed, no order was necessary for the case to be dismissed based on the stipulation
of the parties. Thus, the case simply terminated without court order after Plaintiff filed the
stipulation of dismissal signed by all parties.
This result is consistent with Rule 41(a)(1)(A)(ii) of the Federal Rules of Civil Procedure.
That rule provides in relevant part:
Rule 41. Dismissal of Action
(a) Voluntary Dismissal.
(1) By the Plaintiff.
PAGE 5 – OPINION AND ORDER
(A) Without a Court Order. Subject to Rules 23(e), 23.1(c),
23.2, and 66 and any applicable federal statute, the plaintiff may
dismiss an action without a court order by filing:
(ii) a stipulation of dismissal signed by all parties who have
Fed. R. Civ. P. 41(a)(1)(A)(ii) (emphasis in original).2
Keith cites a case from the Eleventh Circuit for the proposition that a stipulation of
dismissal by the parties pursuant to Rule 41(a)(1)(A)(ii) is “self-executing and dismisses the case
upon filing.” Anago Franchising, Inc. v. Shaz, LLC, 677 F.3d 1272, 1277 (11th Cir. 2012)
(“Most of our sister circuits have directly or implicitly found, in published and unpublished
opinions, that a stipulation filed under Rule 41(a)(1)(A)(ii) is self-executing and dismisses the
case upon filing.”) (citing cases). This Court agrees. Thus, the filing by Keith of the Stipulation
of Dismissal with Prejudice, signed by all parties, is self-executing and operates to dismiss, or
terminate, the lawsuit brought by Keith against Butterfield.3 This conclusion, however, does not
resolve the question of whether a federal court retains jurisdiction to address collateral matters,
including a motion for attorney’s fees, after a case has been dismissed, or terminated.
Rules 23(e), 23.1(c), 23.2, and 66 of the Federal Rules of Civil Procedure are not
relevant to any of the issues pending before the Court.
The Stipulation of Dismissal with Prejudice signed by Keith and Butterfield recites only
Fed. R. Civ. P. 41(a). No provision in Rule 41(a), other than Rule 41(a)(1)(A)(ii), however,
applies in this case. Rule 41(a)(1)(A)(i) does not apply because Butterfield had previously filed
an answer. Rule 41(a)(1)(B) does not apply because there has been no previously dismissed
action on or including the same claim; thus, the dismissal does not operate as an adjudication on
the merits. Rule 41(a)(2) does not apply because there has been no court order dismissing this
case. Thus, the Stipulation of Dismissal with Prejudice that is at issue necessarily is under
PAGE 6 – OPINION AND ORDER
Butterfield cites the decision from the United States Supreme Court in Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384 (1990). In that case, the Supreme Court observed:
It is well established that a federal court may consider collateral
issues after an action is no longer pending. For example, district
courts may award costs after an action is dismissed for want of
jurisdiction. See 28 U.S.C. § 1919. This Court has indicated that
motions for costs or attorney’s fees are “independent proceeding[s]
supplemental to the original proceeding and not a request for a
modification of the original decree.” Sprague v. Ticonic National
Bank, 307 U.S. 161, 170, 59 S.Ct. 777, 781, 83 L.Ed. 1184 (1939).
Thus, even “years after the entry of a judgment on the merits” a
federal court could consider an award of counsel fees. White v.
New Hampshire Dept. of Employment Security, 455 U.S. 445, 451,
n. 13, 102 S.Ct. 1162, 1166, n. 13, 71 L.Ed.2d 325 (1982).
Cooter & Gell, 496 U.S. at 395-96 (emphasis added).
Accordingly, the fact that this case has been dismissed, or terminated, does not divest the
court of jurisdiction to resolve the parties’ competing motions for attorney’s fees as a collateral
issue. See also Turner v. Vilsack, 2016 WL 1048893, at *3 (D. Or. March 14, 2016) (holding, in
a case under the Equal Access to Justice Act, that a stipulated dismissal by the parties under Fed.
R. Civ. P. 41(a)(1)(A)(ii) does not divest the district court of jurisdiction to award attorney’s fees
to the prevailing party, citing Cooter & Gell).
B. Whether a stipulated dismissal with prejudice is an appealable order
In support of his motion for attorney’s fees, Butterfield argues that a stipulated dismissal
with prejudice is an appealable order and, thus, a judgment for purposes of Rule 54. Butterfield
cites an unpublished decision from the Ninth Circuit, Shaw v. Jar-Ramona Plaza, LLC, 673 F.
App’x. 774 (9th Cir. Jan. 18, 2017), which holds: “A stipulated dismissal with prejudice is an
appealable order.” Id. at 775. The Ninth Circuit in Shaw supports that conclusion by citing
Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1065-66 (9th Cir. 2014), and Concha v.
London, 62 F.3d 1493, 1507 (9th Cir.1995). Shaw, 673 F. App’x. at 775. The Supreme Court,
PAGE 7 – OPINION AND ORDER
however, recently abrogated Berger (and, by implication Concha) on precisely this point.
Microsoft Corp. v. Baker, --- S.Ct. ---, 2017 WL 2507341 (June 12, 2017). Some background
will be helpful.
In Berger v. Home Depot, a consumer (Berger) brought a putative class action against a
home improvement store (Home Depot), alleging violations of California’s Unfair Competition
Law, California’s Consumer Legal Remedies Act, and common law. Berger moved for class
certification, which the district court denied. Berger then stipulated to the dismissal of his claims
with prejudice and appealed. Because there was no allegation that Berger and Home Depot had
entered into a settlement agreement, the Ninth Circuit concluded that Berger’s “stipulated
dismissal is sufficiently adverse to his interests to allow him to appeal.” Berger, 741 F.3d
Similarly, in Concha v. London, the Ninth Circuit held that “plaintiffs may appeal from a
voluntary dismissal with prejudice, at least where the plaintiff is not acting pursuant to a
settlement agreement intended to terminate the litigation.” Concha, 62 F.3d at 1507 (emphasis in
original). According to the Ninth Circuit in Concha, the fact that the plaintiff did not have a
settlement agreement distinguished Concha from the Ninth Circuit’s earlier decision in Seidman
v. City of Beverly Hills, 785 F.2d 1447 (9th Cir. 1986). Concha, 62 F.3d at 1507.
In Seidman, a car owned by Seidman had been towed and impounded because of expired
registration. Seidman then brought a putative civil rights class action against the City of Beverly
Hills and a towing company. Seidman alleged a constitutional violation based on the fact that his
the car has been taken without the city, or its agent (the towing company), providing notice of
opportunity for a post-seizure hearing. The district court denied Seidman’s motion for class
certification. Seidman then settled his individual claims with the defendants, but reserved his
PAGE 8 – OPINION AND ORDER
right to appeal “any of the adverse rulings made against him at trial.” Seidman, 785 F.2d at 1448.
Although the case never went to trial, Seidman appealed the district court’s denial of his motion
for class certification. In dismissing Seidman’s appeal for lack of appellate jurisdiction, the Ninth
Circuit held: “A plaintiff may not appeal a voluntary dismissal [under Rule 41(a)(1)] because it
is not an involuntary adverse judgment against him.” Id.
In Microsoft Corp. v. Baker, the Supreme Court abrogated the Ninth Circuit’s holding in
Berger v. Home Depot. 2017 WL 2507341, at *10. In Microsoft, consumers brought a putative
class action against the manufacturer of a video game console. The district court entered an order
striking the consumers’ class allegations. The consumers then petitioned the Ninth Circuit under
Rule 23(f) of the Federal Rules of Civil Procedure for permission to appeal the district court’s
ruling, but the Ninth Circuit denied the petition. Rather than continuing to litigate, the consumers
moved to dismiss their case with prejudice, and the district court entered a final order and
judgment to that effect. Quoting Berger, the Ninth Circuit held that because the stipulated
dismissal did not involve a settlement, the action was sufficiently adverse to be an appealable
final decision. On the merits, the Ninth Circuit ruled that the district court had abused its
discretion in striking the class allegations. Id.
The Supreme Court granted certiorari to resolve a conflict among the Circuits. In its
ruling on the merits, the Supreme Court held that a federal court of appeals does not have
jurisdiction under 28 U.S.C. § 1291 to review an order denying class certification (or striking
class allegations) after the named plaintiffs have voluntarily dismissed their claims with
prejudice. Id. at *10. Whether the parties had entered into a settlement agreement or not was
irrelevant to the issue of appellate jurisdiction. Thus, after the Supreme Court’s decision in
PAGE 9 – OPINION AND ORDER
Microsoft v. Baker, a voluntary dismissal with prejudice, even in the absence of a settlement
agreement, is not an appealable order.
As previously noted, Rule 54(d)(2)(A) requires that a claim for attorney’s fees be made
by motion (except under certain circumstances not relevant here). Rule 54(d)(2)(B)(i) requires
that such a motion be filed no later than 14 after entry of judgment. This latter provision implies
that a judgment is a prerequisite for obtaining an award of attorney’s fees under Rule 54. The
next provision in Rule 54 makes that requirement explicit.
Rule 54(d)(2)(B)(ii) states that a motion for attorney’s fees must “specify the judgment
and the statute, rule, or other grounds entitling the movant to the award.” (Emphasis added.)
Thus, there must be a judgment for a party to be entitled to recover attorney’s fees under
Rule 54, although “judgment” is defined in that rule to include “a decree and any order from
which an appeal lies.” Fed. R. Civ. P. 54(a). Because there is no document labeled “Judgment” in
this case and no decree entered by the court and because a stipulated judgment of dismissal, even
with prejudice, is not an appealable order, as recently determined by the Supreme Court in
Microsoft v. Baker, there is no Judgment in this case for purposes of Rule 54. Thus, a
prerequisite for an award of attorney’s fees under Rule 54 is missing.4
This is not an unreasonable result. Stipulated dismissals with prejudice often expressly
state that no party may recover costs or attorney’s fees from any other party. There does not
appear to be any good reason to be silent on that issue, unless one deliberately wants to create
uncertainty. If a defendant wanted to withhold its agreement to a proposed stipulated dismissal
(with or without prejudice) unless the plaintiff agreed to pay the defendant’s attorney’s fees, this
issue could easily be made part of the negotiation that either results in a stipulated dismissal or
fails to reach agreement. Further, if a defendant wanted to preclude the plaintiff from unilaterally
dismissing a case in the absence of an agreement to pay attorney’s fees, Rule 41(a)(1)(A)(i)
provides the mechanism. Under this rule, all that a defendant need do is answer the complaint (or
move for summary judgment). If that happens, a plaintiff may not voluntarily dismiss an action
without court order. Further, Rule 41(a)(2) provides that when an action is dismissed by court
order at the plaintiff’s request, the court has the authority to order dismissal “on terms that the
PAGE 10 – OPINION AND ORDER
Although the Court could end its analysis of the pending motions for attorney’s fees at
this point, in light of the fact that the Supreme Court’s decision in Microsoft v. Baker is quite
recent and has not yet been applied in the context of motions for attorney’s fees under Rule 54,
prudence suggests that the Court also evaluate Keith’s argument that neither Butterfield nor
Keith is a prevailing party in this case. The Court turns to that issue next.
C. Whether Butterfield is a prevailing party
Rule 54 provides that costs—other than attorney’s fees—should generally be allowed to
the prevailing party. Fed. R. Civ. P. 54(d)(1). The term “prevailing party,” however, does not
appear anywhere else in the text of Rule 54. Instead, in the context of attorney’s fees, Rule 54
directs that the motion must specify “the statute, rule, or other grounds entitling the movant to
the award.” Fed. R. Civ. P. 54(d)(2)(B)(ii). Thus, for any claim for which an award of attorney’s
fees is sought, the Court must consider the specific statute, rule, or other ground cited, whether
under federal or state law.5 In this case, Butterfield cites as his authority for recovering attorney’s
fees the following statutes: Or. Rev. Stat. § 20.096, Or. Rev. Stat. § 646.467, and 35 U.S.C.
§ 285. The Court considers Butterfield’s arguments for prevailing party attorney’s fees
separately under each statute.
1. Or. Rev. Stat. § 20.096—Keith’s Claim for Breach of Contract
Keith’s third claim alleged that Butterfield breached his employment contract with Keith.
In his second amended complaint, Keith alleged that he was entitled to contract damages and
“[a]n award of attorney’s fees and costs pursuant to the terms of the 2004 employment
court considers proper.” This can include a requirement that the plaintiff pay a defendant’s
attorney’s fees (or vice versa, when appropriate).
When considering the merits of a motion for attorney’s fees for claims based on state
law, a federal court must follow relevant state law. Swallow Ranches, Inc. v. Bidart, 525
F.2d 995, 999 (9th Cir. 1975).
PAGE 11 – OPINION AND ORDER
agreement.” ECF 21 at 15. The parties’ contract provides: “In case litigation is instituted, rising
directly or indirectly out of this Agreement, the losing party shall pay to the prevailing party his
or her reasonable attorney’s fees, both at trial and appellate levels.” ECF 34-1 at 9 (emphasis
added). The contract further provides that it is governed by Oregon law. Id. at 8.
Or. Rev. Stat. § 20.096 states, in relevant part:
In any action or suit in which a claim is made based on a contract
that specifically provides that attorney fees and costs incurred to
enforce the provisions of the contract shall be awarded to one of
the parties, the party that prevails on the claim shall be entitled to
reasonable attorney fees . . . .
The relevant question now becomes whether, as a result of the filing of the parties’
Stipulation of Dismissal with Prejudice, Butterfield is the prevailing party on Keith’s claim of
breach of contract. If federal law were to apply to this question, the Supreme Court’s decision in
Buckhannon Board and Care Home, Inc. v. W. Va. Dept. of Health and Human Resources, 532
U.S. 598 (2001), likely would provide the answer. In that case, the Supreme Court interpreted the
term “prevailing party” in the context of two federal laws, the Fair Housing Amendments Act
and the Americans with Disabilities Act, and rejected the “catalyst theory” as applied to those
laws in determining whether someone is a prevailing party. The Supreme Court provided the
In the United States, parties are ordinarily required to bear their
own attorney’s fees—the prevailing party is not entitled to collect
from the loser. . . . Under this “American Rule,” we follow “a
general practice of not awarding fees to a prevailing party absent
explicit statutory authority.” . . . Congress, however, has
authorized the award of attorney’s fees to the “prevailing party” in
numerous statutes in addition to those at issue here, such as the
Civil Rights Act of 1964, . . . the Voting Rights Act Amendments
of 1975, . . . and the Civil Rights Attorney’s Fees Awards Act of
1976 . . . .
PAGE 12 – OPINION AND ORDER
In designating those parties eligible for an award of litigation costs,
Congress employed the term “prevailing party,” a legal term of art.
Black’s Law Dictionary 1145 (7th ed.1999) defines “prevailing
party” as “[a] party in whose favor a judgment is rendered,
regardless of the amount of damages awarded .—Also
termed successful party.” This view that a “prevailing party” is one
who has been awarded some relief by the court can be distilled
from our prior cases.
Buckhannon, 532 U.S. at 602-603 (citations and footnotes omitted) (emphasis in original).
The Supreme Court then held:
We have only awarded attorney’s fees where the plaintiff has
received a judgment on the merits, . . . or obtained a court-ordered
consent decree, . . .—we have not awarded attorney’s fees where
the plaintiff has secured the reversal of a directed verdict, . . . or
acquired a judicial pronouncement that the defendant has violated
the Constitution unaccompanied by “judicial relief,” . . . . Never
have we awarded attorney’s fees for a nonjudicial “alteration of
Buckhannon, 532 U.S. at 605-606 (emphasis added) (citations and footnotes omitted).6 Thus, if
federal law were to apply to a defendant’s motion for attorney’s fees for defending against the
plaintiff’s state claim of breach of contract, then a defendant who benefits when a plaintiff files a
stipulated dismissal (even with prejudice) likely would not be a “prevailing party,” as
Buckhannon interprets that term, because there was no judicial alteration of actual
But see Buckhannon, 532 U.S. at 623 (Ginsburg, J., joined by Stevens, Souter, and
Breyer, JJ., dissenting) (“In my view, the ‘catalyst rule,’ as applied by the clear majority of
Federal Circuits, is a key component of the fee-shifting statutes Congress adopted to advance
enforcement of civil rights. Nothing in history, precedent, or plain English warrants the anemic
construction of the term ‘prevailing party’ the Court today imposes.”)
The Court uses the word “likely” only because the filing of a stipulated dismissal with
prejudice, although not immediately constituting a judicial alteration of actual circumstances,
would almost certainly result in a future judicial alteration of actual circumstances if the plaintiff
were to sue the defendant again on the same claim or the same set of operative facts and the
defendant were to move to dismiss under the doctrine of res judicata.
PAGE 13 – OPINION AND ORDER
Federal law, however, does not apply to the question of whether a party is entitled to
recover attorney’s fees in a diversity case, or when state law provides the rule of decision. See
Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 259 n.31 (1975) (“[I]n an ordinary
diversity case where the state law does not run counter to a valid federal statute or rule of court,
and usually it will not, state law denying the right to attorney’s fees or giving a right thereto,
which reflects a substantial policy of the state, should be followed.” (quotation marks omitted)
(brackets in original). Thus, the Court evaluates whether Oregon law provides a definition of
“prevailing party” that may inform these circumstances. It does.
Rule 54 A(1) of the Oregon Rules of Civil Procedure (“ORCP”) provides a mechanism
under which a plaintiff separately, or all appearing parties by stipulation, may obtain the
voluntary dismissal without court order of a lawsuit pending in Oregon state court. The
substance and procedure is virtually identical to that found in Rule 54 of the Federal Rules of
Civil Procedure, except for two differences. First, ORCP 54 A(1) concludes: “Upon notice of
dismissal or stipulation under this subsection, a party shall submit a form of judgment and the
court shall enter a judgment of dismissal.” Second, and most relevant to the pending dispute,
ORCP 54 A(3), provides:
Costs and disbursements. When an action is dismissed under this
section, the judgment may include any costs and disbursements,
including attorney fees, provided by contract, statute, or rule.
Unless the circumstances indicate otherwise, the dismissed party
shall be considered the prevailing party.
ORCP 54 A(3) (emphasis added). Thus, under Oregon law, after a plaintiff files a notice of
voluntary dismissal (either with or without prejudice) under ORCP 54 A(1), the defendant
generally is the prevailing party, pursuant to ORCP 54 A(3). See Attaway, Inc. v. Saffer, 95 Or.
App. 481, 484, 770 P.2d 596, 598 (1989) (“The trial court correctly found that defendant was the
prevailing party under ORCP 54 A(3).”).
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It seems odd, however, to rely on an Oregon Rule of Civil Procedure as part of a
substantive determination whether a party in a federal lawsuit is a “prevailing party” under
Oregon law. Federal courts sitting in diversity (or when the rule of decision over a claim is
governed by state law) apply state substantive law and federal procedural law. Hanna v.
Plumer, 380 U.S. 460, 465-66 (1965). The determination, however, of whether someone is a
prevailing party and thus entitled to fee-shifting (as well as the method of calculating the
appropriate fee) is an inherent part of the substantive state right to the fee. See Mangold v.
California Pub. Utils. Comm’n, 67 F.3d 1470, 1478 (9th Cir. 1995) (“Whether to hold a hearing
is a matter of court administration, whereas calculation of the amount of the fee is bound up in
the substantive state right.”).
Thus, under Oregon law, Butterfield is the prevailing party with regard to Keith’s claim
of breach of contract, based on the filing of the parties’ Stipulation of Dismissal with Prejudice.
But for the procedural barrier identified in the preceding section relating to the absence of a
judgment, as that term is understood under Rule 54 of the Federal Rules of Civil Procedure,
Butterfield would have been entitled to his reasonable attorney’s fees incurred in defending
against Keith’s claim of breach of contract.8 As discussed previously, however, because no
judgment (including any appealable order) has been entered in this case, federal procedural rules
preclude an award of attorney’s fees to any party.
Butterfield seeks a total award of $63,000 in attorney’s fees, but he has not yet provided
a detailed accounting of fees incurred. Thus, the Court cannot perform at this time a review of
the reasonableness of that fee request, especially in the context of allowing fees only for
Butterfield’s defense of Keith’s breach of contract claim. Butterfield offers to provide a “detailed
accounting of fees incurred” upon “an indication from the Court that Butterfield is entitled to
fees.” ECF 33 at 10. Based on the Court’s ruling in this Opinion and Order, however,
Butterfield’s supplemental submission is not needed at this time. If the Ninth Circuit were to
view the analysis differently, this Court would permit Butterfield to supplement his motion after
PAGE 15 – OPINION AND ORDER
2. Or. Rev. Stat. § 646.467—Keith’s Claim for Trade Secret Misappropriation
Keith’s fourth claim alleged that Butterfield misappropriated Keith’s trade secrets in
violation of Oregon law. Under Oregon’s trade secret law, a prevailing party may recover
reasonable attorney’s fees only under the following circumstances:
The court may award reasonable attorney fees to the prevailing
party if: (1) A claim of misappropriation is made in bad faith;
(2) A motion to terminate an injunction is made or resisted in bad
faith; or (3) Willful or malicious misappropriation is found by the
court or jury.
Or. Rev. Stat. § 646.467. For the same reasons that Butterfield is the prevailing party in Keith’s
state law claim of breach of contract, Butterfield also is the prevailing party in Keith’s state law
claim of trade secret misappropriation. Being a prevailing party here, however, is insufficient to
warrant fee-shifting under Oregon’s trade secret law.
The Court has reviewed the parties’ submissions. Butterfield has not shown that Keith’s
claim of misappropriation was made in bad faith. In addition, the other two conditions that might
support an award of attorney’s fees in other circumstances are inapplicable in this case.
Accordingly, Butterfield is not entitled to an award of attorney’s fees on Keith’s claim of trade
secret misappropriate, notwithstanding Butterfield’s status as a prevailing party under Oregon
3. 35 U.S.C. § 285—Keith’s Patent Claims
Keith’s first and second claims sought, respectively, declarations of noninfringement of
the ’520 patent and invalidity of that patent. After Butterfield provided his Covenant Not to Sue,
the Court granted Butterfield’s motion to dismiss these claims as moot and for lack of subject
matter jurisdiction. Butterfield does not contend that he is the prevailing party on these claims.
Keith’s fifth claim, however, sought an order directing the U.S. Patent and Trademark
Office to amend the ’520 patent properly to name the inventors of that patent. Butterfield
PAGE 16 – OPINION AND ORDER
contends that he is the prevailing party under this federal patent claim, and he seeks attorney’s
fees under 35 U.S.C. § 285. That federal patent statute provides:
The court in exceptional cases may award reasonable attorney fees
to the prevailing party.
35 U.S.C. § 285.
The issue of a whether a party is a prevailing party under 35 U.S.C. § 285 (the fee
provision under the Patent Act) is a question of Federal Circuit law. SSL Servs., LLC v. Citrix
Sys., Inc., 769 F.3d 1073, 1086 (Fed. Cir. 2014) (“In a patent case, Federal Circuit law governs
the determination of which party has prevailed.”). In support of Butterfield’s argument that he is
the prevailing party with respect to Keith’s claim for correction of patent inventorship,
Butterfield cites the Federal Circuit’s decision in Power Mosfet Technologies, LLC v. Siemens
AG, 378 F.3d 1396 (Fed. Cir. 2004). In that case, the Federal Court found that a particular party
had prevailed and stated: “The dismissal of a claim with prejudice, however, is a judgment on the
merits under the law of the Federal Circuit.” Id. at 1416. Even though Power Mosfet was decided
after the Supreme Court’s decision in Buckhannon, the Federal Circuit in Power Mosfet did not
mention Buckhannon. A later decision from the Federal Circuit, however, did.
In RFR Industries, Inc. v. Century Steps, Inc., 477 F.3d 1348 (Fed. Cir. 2007), the Federal
Circuit applied Buckhannon to the prevailing party fee provision in the Patent Act, 35 U.S.C.
§ 285. RFR voluntarily dismissed its case under Rule 41(a)(1)(i) (the predecessor to current
Rule 41(a)(1)(A)(i)), before Century served its answer. Century then filed a motion for attorney’s
fees. Citing Buckhannon, the Federal Circuit in RFR stated:
We hold that a plaintiff’s voluntary dismissal without prejudice
pursuant to Rule 41(a)(1)(i) does not bestow “prevailing party”
status upon the defendant. In order for a defendant to be said to
have “prevailed” as the result of a Rule 41 dismissal, the dismissal
must have “sufficient judicial imprimatur to constitute a ‘judicially
sanctioned change in the legal relationship of the parties.’”
PAGE 17 – OPINION AND ORDER
RFR, 477 F.3d at 1353 (emphasis added).
In the pending case, Butterfield argues that the filing of a stipulation of dismissal with
prejudice changes the legal relationship of the parties. This appears to be correct because Keith
may no longer bring a new action against Butterfield on the same claim or the same set of
operative facts, under the doctrine of res judicata. The Federal Circuit in RFR, however,
following the reasoning of the Supreme Court in Buckhannon, held that there must be something
more than merely a change in the legal relationship of the parties—such a change must have a
sufficient judicial imprimatur to constitute a judicially sanctioned change. When claims are
dismissed simply by the filing of a voluntary dismissal (either with or without prejudice), there is
no judicial imprimatur to constitute a judicially sanctioned change. This was the same result
reached in a well-reasoned Report and Recommendation by U.S. Magistrate Judge Karla R.
Spaulding in F4W, Inc. v. TracStar Systems, Inc., Case No. 6:12-cv-1539-Orl-28KRS (M.D. Fla.
April 3, 2015), adopted by U.S. District Judge John Antoon II, 2015 WL 12840464 (M.D. Fla.
June 18, 2015). Thus, Butterfield is not the prevailing party on Keith’s fifth claim.
Further, even if Butterfield were the prevailing party on Keith’s fifth claim, the
exceptional circumstances required for an award of attorney’s fees in a patent case under § 285
are lacking. In Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749 (2014), the
Supreme Court stated:
We hold, then, that an “exceptional” case is simply one that stands
out from others with respect to the substantive strength of a party’s
litigating position (considering both the governing law and the
facts of the case) or the unreasonable manner in which the case
was litigated. District courts may determine whether a case is
“exceptional” in the case-by-case exercise of their discretion,
considering the totality of the circumstances. As in the comparable
context of the Copyright Act, “‘[t]here is no precise rule or formula
for making these determinations,’ but instead equitable discretion
PAGE 18 – OPINION AND ORDER
should be exercised ‘in light of the considerations we have
Octane, 134 S. Ct. at 1756. Under the totality of the circumstances presented in the pending case,
including Butterfield’s Covenant Not to Sue, the Court does not believe that this case stands out
from others with respect to the substantive strength of either party’s litigating position or any
unreasonable manner in which the case was litigated. Thus, attorney’s fees would be
inappropriate under § 285, even if Butterfield were the prevailing party.
D. Keith’s Conditional Motion for Attorney’s Fees
Keith argues that because this action was voluntarily dismissed by stipulation under
Rule 41(a), it does not meet the definition of “Judgment” set forth in Rule 54. The Court agrees.
Keith adds, however, that if the Court were to disagree, then Keith conditionally moves for its
attorney’s fees as the prevailing party under its first two claims, seeking declaratory relief under
the Patent Act. Keith argues that when the Court dismissed Keith’s first two claims as moot on
the basis of Butterfield’s Covenant Not to Sue, ECF 30, that order changed the legal relationship
between the parties sufficient to result in Keith becoming the prevailing party for those two
claims. It was not, however, the Court’s order dismissing Keith’s claims that changed the parties’
legal relationship; it was Butterfield’s Covenant Not to Sue. Nevertheless, Keith argues that the
Court’s decision recognizing the legal effect of Butterfield’s Covenant Not to Sue is sufficient
In response, Butterfield cites several district court decisions holding that when
declaratory judgment patent claims are dismissed for lack of subject matter jurisdiction based on
a covenant not to sue voluntarily provided to the plaintiff by the patent owner, the plaintiff is not
considered a prevailing party. See, e.g., In re Columbia Univ. Patent Litig., 343 F. Supp. 2d 35,
49 (D. Mass. 2004) (“While [Defendant’s] covenant not to sue is a form of voluntary conduct
PAGE 19 – OPINION AND ORDER
that accomplishes the major part of what the plaintiffs sought to achieve in these lawsuits, they
have received no relief from the court on the merits of their claims. They are, therefore, not
prevailing parties for the purposes of § 285.”) (citing Inland Steel Co. v. LTV Steel Co., 364
F.3d 318, 1320 (Fed. Cir. 2004)); see also HTC Corp. v. Tech. Props. Ltd., 2014 WL 3706617,
at *4 (N.D. Cal. July 21, 2014) (“District courts, including this one, have held that where a
declaratory judgment defendant divests the court of subject matter jurisdiction over the case,
either by disclaiming the patent at issue or by filing a covenant not to sue—and the court
dismisses the claims without prejudice—the plaintiff is not the prevailing party.”) (citing cases).
Nowhere in Keith’s submissions regarding attorney’s fees does Keith address either Columbia or
In addition, even if Keith were a prevailing party on its first two claims, the Court,
viewing the totality of the circumstances in this case, as discussed above, does not believe that
this case stands out from others with respect to the substantive strength of either party’s litigating
position or any unreasonable manner in which the case was litigated. Thus, attorney’s fees would
be inappropriate under § 285, even if Keith were the prevailing party on its first two claims.
Defendant Larry D. Butterfield’s Motion for Attorney’s Fees (ECF 33) is DENIED.
Similarly, Plaintiff Keith Manufacturing Co.’s Motion for Attorney’s Fees (ECF 35) is DENIED.
IT IS SO ORDERED.
DATED this 26th day of June, 2017.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge
PAGE 20 – OPINION AND ORDER
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