Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Walters v. Townsend Farms, Inc.

United States District Court, D. Colorado

January 20, 2015

MICHAEL WALTERS and LISA WALTERS, a married couple, Plaintiffs,
v.
TOWNSEND FARMS, INC., an Oregon corporation doing business in Colorado; PURELY POMEGRANATE, INC., a California corporation; FALLON TRADING CO., INC., a Pennsylvania corporation doing business in Colorado; UNITED JUICE CORP., a New Jersey corporation doing business in Colorado; and DOES 5-100, inclusive, Defendants.

RECOMMENDATION REGARDING DEFENDANT PURELY POMEGRANATE'S MOTION FOR FEES AND COSTS

CRAIG B. SHAFFER, Magistrate Judge.

This motion comes before the court on Defendant Purely Pomegranate Inc.'s (Purely Pomegranate) Motion for Fees and Costs (doc #72). The motion seeks attorneys fees and costs for Purely Pomegranate's defense of claims brought by Plaintiffs Michael and Lisa Walters ("Plaintiffs" or "the Walters") arising from a Hepatitis A outbreak in Colorado. On August 6, 2014, the district court referred the pending motion to this Magistrate Judge. I have reviewed the instant motion and briefs (and attachments), the entire case file, and the applicable law, and am sufficiently advised in the premises.

STATEMENT OF THE CASE

In their original Complaint (doc. #6) filed on June 20, 2013 in the District Court for Arapahoe County, Colorado, Plaintiffs alleged that Michael Walters contracted Hepatitis A by consuming Townsend Farms Organic Antioxidant Blend, a frozen berry and pomegranate seed mix sold by Defendant Townsend Farm, an Oregon corporation. Defendant Purely Pomegranate, a California corporation, manufactures, distributes, and sells pomegranate products. Purely Pomegranate shipped Turkish pomegranate seeds to Townsend Farms for its antioxidant blend. From April 29, 2013 to September 23, 2013, a Hepatitis A outbreak infected 162 people in ten western states, including Colorado. The Centers for Disease Control and Prevention determined that the pomegranate seeds in the Townsend Farms Organic Antioxidant Blend caused the outbreak. Claiming that Michael Walters contracted Hepatitis A in conjunction with this outbreak, Plaintiffs brought suit against Townsend Farms, Purely Pomegranate and others, asserting claims for strict liability, negligence, negligence per se and breach of warranties.[1] The instant lawsuit is one of at least sixteen cases filed in the wake of this Hepatitis A outbreak (doc. #3).

After the Walters initiated this action, Purely Pomegranate removed the case to federal court on October 4, 2013 (doc. #1) on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a). On January 13, 2014, Purely Pomegranate moved to dismiss (doc. #37) for lack of personal jurisdiction, arguing that it does not have sufficient contacts with Colorado and did not purposefully direct its activities towards Colorado and its residents.[2] Plaintiffs' Response in Opposition (doc. #51), filed on March 7, 2014, [3] invoked Colorado's long arm statute, C.R.S. § 13-1-124, which allows personal jurisdiction where tortious misconduct in another state causes injury within Colorado. In its July 2, 2014 Reply in Support of Motion to Dismiss (doc. #63), Purely Pomegranate referenced a related case, Faber v. Townsend Farms, No. 13-cv-02423-RBJ, 2014 WL 2892249 (D. Colo. June 26, 2014), which involved the same defendants and legal claims arising from the 2013 Hepatitis A outbreak.[4] Id. at *1-2. The district court in Faber granted Defendant Purely Pomegranate's motion to dismiss after finding that company's connection with Colorado was too tenuous to support either general or specific jurisdiction under Colorado's long arm statute and federal due process standards.[5]

On July 22, 2014, I held a hearing on Purely Pomegranate's motion to dismiss in this action. At that hearing (doc. #66), Plaintiffs' counsel explained that his clients were asserting specific jurisdiction under the Colorado long-arm statute. In response, this court noted the United States Supreme Court's recent decision in Walden v. Fiore, ___ U.S. ___, 134 S.Ct. 1115, 1121 (2014), which held that to satisfy the due process clause, defendants must have a "substantial connection with the forum state" through "contacts the defendant himself creates with the forum State." After further colloquy with the court, Plaintiff's counsel indicated that the Walters would be voluntarily dismissing this case and pursuing their claims in California.[6]

On July 24, 2014, I issued a Recommendation (doc. #68) that Purely Pomegranate be dismissed from this action without prejudice for lack of personal jurisdiction after concluding that Plaintiffs had not come forward with sufficient facts to demonstrate that Defendant had sufficient minimum contacts with Colorado to satisfy the due process standard. On July 25, 2014, the parties filed, pursuant to Fed.R.Civ.P. 41(a)(1)(A)(ii), [7] a Stipulated Dismissal Without Prejudice of All Claims (doc. #70) asserted in this case. That filing specifically acknowledged that "Defendant Purely Pomegranate may file a motion for costs and fees for the Court's consideration in accordance with the Federal Rules of Civil Procedure." With the instant Motion for Fees and Costs, Purely Pomegranate requests $36, 379 in attorneys fees and $630.30 in costs.

ANALYSIS

In moving to recover attorney fees incurred in this action, Purely Pomegranate invokes both Fed.R.Civ.P. 41(d) and C.R.S. § 13-17-201. The Walters argue, in response, that their voluntary dismissal of the claims against Purely Pomegranate "was not pursuant to Rule 12, and only the refiling of this case in Colorado with a finding that it was vexatious would arguably subject the Plaintiffs to a Rule 41(d) fee and cost obligation." To the contrary, Defendant contends

This is exactly the type of case where an award of attorneys' fees and costs is appropriate and justified given Plaintiffs' counsels' gamesmanship which resulted in [Defendant] unnecessarily incurring substantial fees and costs in relation to the retention of Colorado counsel and seeking dismissal of this improperly filed action.[8] Only after Purely Pomegranate's California counsel incurred the cost of defending this action, filing the Rule 12(b)(2) motion, preparing for oral argument, and traveling to Colorado and arguing the motion, did Plaintiffs' counsel inform Purely Pomegranate that he would voluntarily dismiss the action pursuant to Rule 41 after oral argument when the Court informed the parties that it would recommend Purely Pomegranate's motion be granted.

"Under the American Rule, absent a statute or enforceable contract, a prevailing litigant is ordinarily not entitled to collect reasonable attorney fees from the loser." Aguinaga v. United Food and Commercial Workers International Union, 993 F.2d 1480, 1481 (10th Cir. 1993) (citing Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975)). However, the Tenth Circuit has held that in an action predicated on diversity jurisdiction, attorney fees statutes are considered substantive, rather than procedural, law. Jones v. Denver Post Corp., 203 F.3d 748, 757 (10th Cir. 2000). See also Zerr v. Johnson, 120 F.3d 272, at *2 n.4 (10th Cir. July 29, 1997) (Table) (holding that C.R.S. § 13-17-201 "is equally applicable where a federal diversity tort claim brought pursuant to Colorado law is dismissed pursuant to Fed.R.Civ.P. 12(b)"); Jones v. Haga, No. 05-cv-02268-PSF-CBS, 2007 WL 433126, at *1 (D. Colo. Feb. 2, 2007) (applying C.R.S. § 13-17-201 after noting that state attorneys' fees statutes are substantive law for diversity purposes). Thus, initially I look to Colorado law, and more specifically C.R.S. § 13-17-201, in resolving Purely Pomegranate's request for attorney fees. A. C.R.S. §§ 13-17-201 and 13-16-113(2)

Colorado Revised Statute § 13-17-201, and its companion provision § 13-16-113(2), [9] mandate the award of attorney fees and costs where a tort action is dismissed "prior to trial under rule 12(b) of the Colorado rules of civil procedure." Crandall v. City of Denver, 238 P.3d 659, 662-63 (Colo. 2010) (declining to reduce an attorney fee award simply because certain of the attorneys' work might be useful in companion litigation). Cf. Kreft v. Adolph Coors Co., 170 P.3d 854, 859 (Colo.App. 2007) (holding that "[a]n award of attorney fees is mandatory when a trial court dismisses a tort action under C.R.C.P. 12(b)."). As the Colorado Supreme Court acknowledged in Crandall, 238 P.3d at 663, §§ 13-17-201 and 13-16-113(2) contain "no language that suggest anything other than a mandatory award" and leave "nothing to the discretion of the trial court except to determine what is a reasonable fee." That statutory interpretation is consistent with the Colorado legislature's intent to "discourage the unnecessary litigation of tort claims." Jaffe v. City and Cnty. of Denver, 15 P.3d 806, 813 (Colo.App. 2000).

However, because these statutory provisions stand in derogation of the American Rule, they must be strictly construed. See Sotelo v. Hutchens Trucking Co., 166 P.3d 285, 287 (Colo.App. 2007) (citing City of Wheat Ridge v. Cerveny, 913 P.2d 1110, 1114 (Colo. 1996) (in light of the American Rule, a fee-shifting provision will not be construed as mandatory unless its directive is specific and clear)). In addressing the scope of § 13-17-201, the Colorado Supreme Court has explained that lower courts should "employ the traditional rules of statutory construction in order to ascertain and give effect to the intent of the General Assembly." Crandall, 238 P.3d at 662 (in construing the express statutory language at issue, the court should "giv[e] words and phrases their commonly accepted and understood meaning").

Following that mandate, I find that Defendant Purely Pomegranate cannot successfully invoke § 13-17-201 or § 13-16-113(2) under the particular facts in this case. It cannot be fairly disputed that the claims against Purely Pomegranate in this case were dismissed without prejudice pursuant to Rule 41(a)(1)(A)(ii), not Rule 12(b)(2).[10] That fact alone defeats Defendant's reliance on Colorado's fee and cost-shifting statutes. I acknowledge that my Recommendation of July 24, 2014 concluded that the Walters had failed to come forward with sufficient facts to establish personal jurisdiction over Purely Pomegranate in this forum. However, 28 U.S.C. § 636(b)(1)(A) and (c) precludes a magistrate judge from deciding a motion to involuntarily dismiss an action except upon the consent of the parties. Therefore, my Recommendation had no dispositive effect as of July 25, 2014, when the parties stipulated to the dismissal of the entire action pursuant to Rule 41(a)(1)(A)(ii). If Purely Pomegranate wished to pursue cost-shifting under § 13-17-201 and § 13-16-113(2), it should have refused the stipulation offered by the Walters and hoped that the district judge would adopt my analysis after additional expense and delay.[11] The Colorado Supreme Court directs me to strictly construe §§ 13-17-201 and § 13-16-113(2), and the claims against Purely Pomegranate were not dismissed pursuant to Rule 12(b).

I also note that several courts, both trial and appellate, have held that a plaintiff may "avoid liability for attorney fees by voluntarily dismissing or by stipulating to the dismissal of the action, or by confessing the defendant's C.R.C.P. 12(b) motion to dismiss." See, e.g., Tunget v. Board of County Commissioners of Delta County., 992 P.2d 650, 653 (Colo.App. 1999). Cf. Crow v. Penrose-St. Francis Healthcare System, 262 P.3d 991, 998 (Colo.App. 2011) ("A party may avoid liability by seeking a voluntary dismissal or confession of the defendant's motion."); Houdek v. Mobil Oil. Corp., 879 P.2d 417, 425 (Colo.App. 1994) ("By implication, § 13-17-201 allows a plaintiff to escape liability for attorney fees by seeking a voluntary dismissal or by filing a stipulation of dismissal[.]").

In Zerr, 120 F.3d 272, at *3, the Tenth Circuit affirmed the district court's denial of attorney fees, holding that the voluntary dismissal exception under § 13-17-201 was properly applied to preclude defendant from recovering attorney fees where the plaintiff confessed the defendant's motion to dismiss and filed a voluntary dismissal. The Tenth Circuit further concluded that the exception for voluntary dismissal was not limited to situations "where the confession or stipulation of dismissal is filed immediately following the motion to dismiss, " but would also extend to "defendant's expenditure of additional resources beyond the filing of its motion to dismiss." Id . Compare The Meadows at Buena Vista, Inc. v. Arkansas Valley Publishing Co., No. 10-cv-02871-MSK-KMT, 2012 WL 4442737, at *3 n.5 (D. Colo. Sept. 26, 2012) (while the court acknowledged that § 13-17-201 entitled the defendant to an award of fees in the wake of the order granting defendant's Rule 12(b)(6) motion, it also noted that "[a]t no time did the Plaintiffs seek a voluntarily dismissal of its claims or confess the dismissal of the claims, " which would have "avoided an award of fees").[12] For the foregoing reasons, Defendant's request for fees and costs under C.R.S. § 13-17-201 and § 13-16-113(2) should be denied.

B. Fed.R.Civ.P. 41

Defendant Purely Pomegranate argues, in the alternative, that the court should award fees and costs pursuant to Rule 41(d). According to Defendant, "Rule 41(d) does not specify which court - the court presiding over the original action or the court presiding over the second action - decides the motion for costs." Purely Pomegranate maintains that fees and costs should be awarded by this district court because the Walters' action has been dismissed, "Plaintiffs have now filed the identical action against Purely Pomegranate in California, " all of the costs incurred by Defendant's Colorado counsel and the vast majority of costs and fees incurred by California counsel will not be useful to the newly filed litigation in California, and finally because "Plaintiffs' counsels conduct in this case was vexatious." See Defendant's Reply in Support of Motion for Attorneys' Fees and Costs (doc. #75) at 3. I believe these arguments are better raised in the Central District of California.

My research reveals that I am not the first federal judge to address the applicability of Rule 41 in litigation involving Purely Pomegranate. While the parties, and their attorneys, have not brought these other decisions to my attention, I find the analysis employed by my colleagues to be instructive.

In Caldwell v. Townsend Farms, Inc., [13] No. 13-00408-SOM-RLP, 2014 WL 3809653 (D. Hawai'i July 31, 2014), Purely Pomegranate's counsel argued that fees and costs should be awarded pursuant to Rule 41(a) and (d) as a condition of the plaintiffs' voluntary dismissal. In denying that request, the court in Caldwell noted that Rule 41(d) was not applicable because

it applies when a "plaintiff who previously dismissed an action in any court files an action based on or including the same claim against the same defendant." Nothing in the record establishes that the Caldwells have previously dismissed a related action.

Id. at *3 (emphasis in original). As for Rule 41(a)(1), the court conceded that the "Caldwell's counsel may have filed separate actions in nine different districts on behalf of other clients, but there is no evidence that the Caldwells have done so." Id. (emphasis in original). Moreover, "[c]ourts impose few or no conditions early in the case when the defendant faces, at most, the mere prospect of relitigation in another forum." Id.

More recently, in Lee v. Townsend Farms, Inc., [14] No. 1:13-cv-00388-BLW, 2014 WL 7149613 (D. Idaho Dec. 15, 2014), the district court rejected Purely Pomegranate's argument that Rule 41(d) fees and costs should be awarded by the court that presided over the first-filed but subsequently dismissed action. After noting that Lee had been named more recently as a plaintiff in the class action pending in the United States District Court for the Central District of California, the court explained,

The decision whether to impose costs is within the discretion of the trial court. Wright & Miller, Federal Practice and Procedure § 2375 (3d ed. 2008). The purpose of the rule is to prevent the maintenance of vexatious law suits and to secure, where such suits are shown to have been brought repetitively, payment of costs for prior instances of such vexatious conduct. United Transp. Union v. Maine Central R.R., 107 F.R.D. 391, 292 (D. Me. 1985).
Although the award of attorney fees under this provision is discretionary, the language of Rule 41(d) suggests that that discretion should be exercised by the court with jurisdiction over the pending action - here the United States District Court of the Central District of California. Rule 41(d) states that the court may order costs of that previous action and may stay the proceedings. A plain reading of this rules shows that the court with the power to order costs is the same court with the power to stay proceedings. This court has no power to stay proceedings pending in the Central District of California.
The court has found no case suggesting that it is the court presiding over the dismissed action which should award costs under Rule 41(d). In fact, all cases found by the Court and cited by Purely Pomegranate point to the opposite conclusion. See, e.g., Esquivel v. Aran, 913 F.Supp. 1382 (C.D. Cal. 1996) (Rule 41(d) motion considered by court presiding over pending action); Jurin v. Google, Inc., 695 F.Supp.2d 1117 (E.D Cal. 2010) (same); Lloyd v. Pacificorp, No. CV 090360-ST, 2009 WL 2392993 (D. Or. July 31, 2009) (same); Bran v. Sun Pac Farming Coop., No. CVF 06-0871 LJO TAG, 2007 WL 781865 (E.D. Cal. Mar. 13, 2007) (same).

Id. at *1-2. While I am not aware of any Tenth Circuit decisions that address this specific issue, I find the logic in Chief Judge Winmill's analysis in Lee compelling.

Having one district court address all the Rule 41(d) claims in all the related (and previously dismissed lawsuits) is particularly appropriate in light of the billing statements presented by Purely Pomegranate in this case. As previously noted, the motion to dismiss and related reply brief filed by Defendant in this action were virtually identical to the papers filed by Purely Pomegranate in Faber. The billing entries submitted in support of Defendant's request for attorneys fees in this case reflect that Defendant's national firm is seeking, for the period from August 29, 2013 through December 17, 2013, $10, 579 in attorneys fees reflecting 33.66 hours spend in researching Rule 12(b)(2) and drafting and revising the briefs in Faber. [15] All of that work was performed before a motion to dismiss was filed in the instant case. From my review of the Carroll firm's billing statements, it appears that Mr. Binion (who I presume was Purely Pomegranate's lead counsel in all of these case) is requesting $18, 964.50 for 54.66 hours devoted to researching, drafting, and revising the motions to dismiss (and related briefs) in Faber and Walters. Some of that same research and drafting may well have been utilized in other related cases brought against Purely Pomegranate. The district court in the Central District of California is in a far better position to decide whether or to what extent the fees and costs associated with that recycled research and drafting should be allocated among the various plaintiffs.

CONCLUSION

Accordingly, for the foregoing reasons, I recommend that Defendant Purely Pomegranate Inc.'s Motion for Fees and Costs be denied with prejudice to the extent that it seeks recovery under C.R.S. §§ 13-17-201 and 13-16-113(2). I further recommend that Defendant's Motion be denied, without prejudice, to the extent Purely Pomegranate seeks fees and costs under Rule 41(a) or (d). The latter claims are better brought in the Central District of California.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.