Opinion
Civil Action No. 1:20-cv-138
2020-06-23
CHERTOFF CAPITAL, LLC, Plaintiff, v. Jason SYVERSEN, et al., Defendants.
David Gordon Fiske, Fiske Law Group PLLC, Alexandria, VA, for Plaintiff. Philip John Harvey, Harvey & Binnall PLLC, Alexandria, VA, for Defendants Jason Syversen, Rampart Holdings, LLC. Ian R. Dickinson, Jason Cameron Hicks, Womble Bond Dickinson (US) LLP, Charlottesville, VA, Lela Marie Ames, Womble Bond Dickinson (US) LLP, Washington, DC, for Defendant Braes Capital, LLC.
David Gordon Fiske, Fiske Law Group PLLC, Alexandria, VA, for Plaintiff.
Philip John Harvey, Harvey & Binnall PLLC, Alexandria, VA, for Defendants Jason Syversen, Rampart Holdings, LLC.
Ian R. Dickinson, Jason Cameron Hicks, Womble Bond Dickinson (US) LLP, Charlottesville, VA, Lela Marie Ames, Womble Bond Dickinson (US) LLP, Washington, DC, for Defendant Braes Capital, LLC.
ORDER
T. S. Ellis, III, United States District Judge
This dispute arises out of a contract between plaintiff, Chertoff Capital, LLC ("Chertoff"), and defendants Jason Syversen and Rampart Holdings, LLC (collectively, the "Clients"). The contract states that Chertoff would provide exclusive investment banking advisory services to the Clients in connection with the Clients' potential management buyout ("MBO") of Siege Technologies, LLC ("Siege"). And in exchange for plaintiff's advisory services, the Clients agreed to pay plaintiff a fee upon the successful closing of the acquisition of Siege. According to the complaint, Syversen informed Chertoff on April 29, 2019 that Syversen had decided to work with Braes Capital, LLC ("Braes"), instead of Chertoff, to source the funding for the acquisition of Siege. The complaint alleges that Braes then acquired Siege on July 10, 2019. The complaint further asserts that the Clients acquired an undisclosed interest in Siege as part of Braes's acquisition. As a result of the Clients' participation in Braes's acquisition of Siege, the complaint alleges that the Clients owed Chertoff the fee pursuant to the contract, and that the Clients have not paid Chertoff the fee. In response to these alleged events, plaintiff has filed the instant complaint, alleging claims of (i) breach of contract against the Clients and (ii) intentional interference with contract against Braes. At issue now in this dispute is Braes's motion for costs and to stay proceedings pursuant to Rule 41(d), Fed. R. Civ. P.
The matter has been fully briefed and thus is ripe for disposition. For the reasons that follow, defendant's motion is granted in part and denied in part. Braes's motion is granted insofar as Braes is awarded costs of $1,795.48 and proceedings in this matter are stayed until plaintiff complies with this Order by paying Braes the costs awarded here. Braes's motion is denied in all other respects.
I.
To begin with, it is appropriate to set forth the procedural history of this case. On May 23, 2019, Chertoff filed a lawsuit against Braes and Jason Syversen in the Eastern District of Virginia (hereinafter, the "Prior Case"). See Chertoff Capital, LLC v. Braes Capital, LLC et al. , Civil Action No. 19-cv-631 (E.D. Va.). The complaint in the Prior Case alleged claims of (i) tortious interference with contract against Braes, (ii) tortious interference with business expectancy against Braes, (iii) common law business conspiracy against Braes and Syversen, (iv) statutory business conspiracy against Braes and Syversen, and (v) anticipatory breach of contract against Syversen. Moreover, the complaint in the Prior Case alleged nearly identical facts as the instant case, namely that Braes intentionally and improperly interfered with Chertoff's contract with Syversen and Rampart Holdings when Braes induced Syversen to breach the contract by working with Braes to acquire Siege and by refusing to pay Chertoff its fee pursuant to the contract.
On June 11, 2019, Syversen filed a motion to dismiss the Prior Case complaint for lack of jurisdiction, and on June 14, 2019, Braes filed a motion to dismiss the Prior Case complaint for lack of jurisdiction and for failure to state a claim. In response, Chertoff, on July 2, 2019, filed an amended complaint in the Prior Case pursuant to Rule 15(a)(1), Fed. R. Civ. P. On July 26, 2019, Braes and Syversen each filed a motion to dismiss the Prior Case amended complaint. On August 26, 2019, Braes and Syversen's motions to dismiss were referred to the Magistrate Judge for a Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).
On October 31, 2019, the Magistrate Judge issued a Report & Recommendation (the "Report"). The Report recommended that all of Chertoff's claims in the Prior Case be dismissed with prejudice. On November 14, 2019, Chertoff filed (i) objections to the Report and (ii) a motion for leave to file a second amended complaint. On November 22, 2019, prior to any ruling on the Report, Chertoff's objections to the Report, or Chertoff's motion for leave to file a second amended complaint, Chertoff filed a notice of voluntary dismissal without prejudice pursuant to Rule 41 (a)(1)(A)(i), Fed. R. Civ. P. The Prior Case was ordered dismissed without prejudice that same day pursuant to Rule 41(a)(1)(A)(i), Fed. R. Civ. P.
Then, on February 7, 2020, Chertoff filed the complaint in the instant action, alleging claims of (i) breach of contract against Syversen and Rampart Holdings, LLC and (ii) intentional interference with contract against Braes. Braes and Syversen were both defendants in the Prior Case, and the factual allegations in the complaint in the instant case are essentially identical to the factual allegations in the Prior Case. Specifically, the complaint here alleges that Braes acquired Siege on July 10, 2019, that the Clients acquired an undisclosed interest in Siege as part of Braes's acquisition, that the Clients therefore owed Chertoff the fee pursuant to the contract, and that the Clients have not paid Chertoff the fee that Chertoff claims it is owed. On April 17, 2020 Syversen and Rampart Holdings filed an answer to the complaint in the instant action. On May 1, 2020, Braes filed (i) a motion for costs and to stay proceedings pursuant to Rule 41(d), Fed. R. Civ. P. and (ii) a motion to dismiss the complaint for failure to state a claim and for lack of subject matter jurisdiction.
On May 28, 2020, an Order issued that directed the parties to show cause why this matter should not be transferred to the District of Delaware pursuant to 28 U.S.C. § 1404(a) because of the forum-selection clause in the contract at the heart of this dispute. See Chertoff Capital, LLC v. Braes Capital, LLC et al. , No. 20-cv-138, Dkt. 28 (E.D. Va. May 28, 2020). On June 11, 2020, Braes responded to the May 28, 2020 Order and stated that because Braes is not a party to the contract's forum-selection clause and is not subject to personal jurisdiction in the District of Delaware, transfer of plaintiff's claim against Braes is inappropriate under § 1404(a). Accordingly, disposition of Braes's motion for costs and to stay proceedings is now appropriate.
II.
Braes has filed the instant motion requesting an award of costs incurred in the Prior Case and a stay of the present case until those costs have been paid because the present case is essentially identical to the Prior Case. Braes argues that Chertoff dismissed the Prior Case voluntarily pursuant to Rule 41(a)(1)(A)(i), Fed. R. Civ. P., in order to avoid the potential adoption of the Magistrate Judge Report's adverse recommendations with respect to Chertoff's claims. Braes further argues that Chertoff exploited Rule 41, Fed. R. Civ. P., in order to refile the same claims that Chertoff had voluntarily dismissed only three months earlier. As a result of these events, Braes has filed the instant motion for an award of costs and a stay of these proceedings pursuant to Rule 41(d), Fed. R. Civ. P. For the reasons that follow, Braes's motion is granted in part and denied in part.
The Fourth Circuit has made clear that the purpose of Rule 41(d), Fed. R. Civ. P., is to deter an attempt to "gain any tactical advantage by dismissing and refiling the suit" and to deter "forum shopping and vexatious litigation." Andrews v. Am.'s Living Centers, LLC , 827 F.3d 306, 309 (4th Cir. 2016) (citations omitted). In this respect, Rule 41(d), Fed. R. Civ. P., provides that:
If a plaintiff who previously dismissed an action in any court files an action based on or including the same claim against the same defendant, the court:
(1) may order the plaintiff to pay all or part of the costs of that previous action; and
(2) may stay the proceedings until the plaintiff has complied.
Fed. R. Civ. P. 41(d). Rule 41(d), Fed. R. Civ. P., does not define the term "costs." Thus, in interpreting Rule 41(d), the Fourth Circuit has appropriately held that Rule 41(d) does not provide an award of attorney's fees as a matter of right. See Andrews v. Am.'s Living Centers, LLC , 827 F.3d 306, 311 (4th Cir. 2016). But the Fourth Circuit has held that Rule 41(d) permits the award of attorney's fees as costs in two circumstances: (i) where the underlying statute provides for attorney's fees and (ii) where a court makes a specific finding that the plaintiff acted "in bad faith, vexatious, wantonly, or for oppressive reasons." Id.
Here, Braes has moved for the award of $105,508.48 in costs, consisting of $103,713.00 in attorney's fees and $1,795.48 in costs. For the reasons that follow, Braes's motion is granted with respect to the award of $1,795.48 in costs. Braes's motion is denied with respect to the $103,713.00 in attorney's fees.
In seeking the award of the full $105,508.48 requested, Braes first argues that it is entitled to an award of attorney's fees because the statutory provisions underlying the Prior Case, Va. Code § 18.2-499 and 500, allow for the recovery of attorney's fees. But Fourth Circuit precedent makes clear that Braes's argument plainly fails in this respect. In Andrews , the Fourth Circuit declined to award attorney's fees to the defendant in that case under Rule 41(d) where the underlying statute—the Fair Labor Standards Act—provided for an award of attorney's fees to the plaintiff if the plaintiff prevailed, but was silent as to attorney's fees in suits where the defendant prevailed. See Andrews v. Am.'s Living Centers, LLC , 827 F.3d 306, 312 (4th Cir. 2016). Precisely this situation is presented here. Virginia Code § 18.2-500 provides that when a plaintiff prevails on a claim brought pursuant to Va. Code § 18.2-499 seeking monetary relief, the plaintiff "may ... recover ... the costs of suit, including a reasonable fee to plaintiff's counsel." Va. Code § 18.2-500(A). But importantly, § 18.2-500(A) is silent as to whether attorney's fees may be awarded in the event a defendant prevails against a compensatory damages claim. Accordingly, an award of attorney's fees under Rule 41(d) would be improper where, as here and in Andrews , the underlying statute, here Va. Code § 18.2-500(A), does not provide for an award of attorney's fees to the party seeking an award of costs. See Andrews , 827 F.3d at 312 (holding that the Fair Labor Standards Act does not provide a statutory basis to award attorney's fees under Rule 41(d) ).
Notably, in contrast to Va. Code § 18.2-500(A), Va. Code § 18.2-500(B) provides that a prevailing defendant may recover attorney's fees in an injunctive action brought pursuant to § 18.2-499. But here, plaintiff sought only monetary relief in the Prior Case; plaintiff did not seek injunctive relief. Thus, § 18.2-500(B) does not apply to Braes's motion for costs, and it is abundantly clear that the underlying statutory provision in the Prior Case is Section 18.2-500(A), which clearly does not provide for the award of attorney's fees to a prevailing defendant.
Braes next argues that it may be awarded attorney's fees under Rule 41(d) because plaintiff's conduct is vexatious. In this respect, the Fourth Circuit has defined vexatious as meaning "without reasonable or probable cause or excuse." Id. (quoting In re 1997 Grand Jury , 215 F.3d 430, 436 (4th Cir. 2000)) (quoting Black's Law Dictionary 1559 (7th ed. 1999)). Here, plaintiff has not offered any cause or excuse for its abrupt voluntary dismissal of the Prior Case before a ruling on the adverse recommendations in the Magistrate Judge's Report and its refiling of the same claim against Braes several months later. On this record, the only plausible inference is that plaintiff engaged in gamesmanship to avoid a ruling on the Magistrate Judge's Report in the Prior Case.
In any event, an award of $103,713,00 in attorney's fees is manifestly excessive in these circumstances and therefore inappropriate here. In the context of awarding costs to a prevailing party pursuant to Rule 54(d)(1), Fed. R. Civ. P., the Fourth Circuit has recognized that a request for excessive costs is an independent reason to deny a presumptive cost award. See Cherry v. Champion Intern. Corp. , 186 F.3d 442, 446 (4th Cir. 1999). Unlike Rule 54(d), there is no presumption in favor of awarding costs in the Rule 41(d) context. Instead, Rule 41(d) provides that the decision to order a plaintiff to pay the costs of a previous action is within the district court's discretion. See Rule 41(d), Fed. R. Civ. P. ("[T]he court ... may order the plaintiff to pay all or part of the costs of that previous action."). Here, defendant has provided no persuasive basis to justify the $103,713.00 that Braes allegedly spent on attorney's fees litigating the Prior Case, which plaintiff voluntarily dismissed in order to avoid a potentially adverse final ruling on Braes's threshold motion to dismiss. In fact, defendant has provided no support or detail concerning how the $103,713.00 figure has been calculated. In the Prior Case, no final ruling on Braes's threshold to dismiss had been issued at the time plaintiff voluntarily dismissed the case, and therefore, discovery had not yet even begun. Accordingly, on this record, defendant's request for $103,713.00 in attorney's fees is denied as excessive.
Although an award of $103,713.00 in attorney's fees is manifestly excessive in this case, an award of costs and a stay of proceedings pending payment of that award are both clearly warranted. The procedural history of this matter makes clear that plaintiff voluntarily dismissed the Prior Case in order to gain a tactical advantage by refiling the instant lawsuit. Specifically, plaintiff dismissed the Prior Case and refiled the instant, virtually identical, suit in order to avoid a potentially adverse ruling adopting the recommendations in the Magistrate Judge's Report in the Prior Case. In such circumstances, Rule 41(d) provides that a court may, within its discretion, order the plaintiff to pay all or part of the costs of that previous action and stay the proceedings until the plaintiff has complied. See Rule 41(d), Fed. R. Civ. P.; Andrews v. Am.'s Living Centers, LLC , 827 F.3d 306, 312 (4th Cir. 2016). Because plaintiff has attempted to gain a tactical advantage by dismissing the Prior Case and refiling its claim against Braes in the instant case, plaintiff is hereby ordered to pay Braes the costs of the Prior Case, $1,795.48, and it is further ordered that proceedings in this matter are stayed pending plaintiff's compliance with the payment of $1,795.48 to Braes as required by this Order.
Accordingly,
It is hereby ORDERED that defendant Braes Capital LLC's motion for costs (Dkt. 17) is GRANTED in part and DENIED in part. The motion is GRANTED insofar as Braes is hereby AWARDED $1,795.48 in costs and proceedings in this matter are STAYED until plaintiff has paid Braes $1,795.48. The motion is DENIED in all other respects.
It is further ORDERED that if plaintiff does not file a motion to lift the stay of proceedings that contains a sworn declaration that plaintiff has paid Braes $1,795.48 on or before July 22, 2020, plaintiff's claim against Braes will be dismissed, and this matter will proceed against the other two defendants. The Clerk shall provide a copy of this Order to all counsel of record.