Fed Circuit rejects Microsoft reasoning in attorneys’ fees suit

The US Court of Appeals for the Federal Circuit has overturned a lower court’s decision to reject a motion for attorneys’ fees, after concluding that the US Supreme Court’s ruling in Microsoft v Baker doesn’t apply.

In a  decision handed down yesterday, April 7, the Federal Circuit held that Microsoft was inapplicable in this case, despite the US District Court for the District of Oregon reasoning that under Microsoft a voluntary dismissal with prejudice is not a “judgment” as required by rule 54.

Under  rule 54 of the Federal Rules of Civil Procedure, which covers attorneys’ fees, a motion must be filed no later than 14 days after the entry of judgment. But, according to the Oregon court, a dismissal with prejudice is not a judgment so attorneys’ fees couldn’t be recovered.

“But in our view, Microsoft is inapplicable because judgment in the context of rule 54 does not raise the same concerns about finality and piecemeal litigation that animated the Supreme Court’s opinion in Microsoft,” said  Circuit Judge Todd Hughes, on behalf of the Federal Circuit.

In Microsoft, the Supreme Court held that federal courts of appeals lack jurisdiction to review a denial of class certification after plaintiffs have voluntarily dismissed their claims with prejudice.

Facts of the case

Back in October 2015, Keith Manufacturing sued its former employee after he filed a patent application, alleging that the patent was based on inventions made during Butterfield’s employment. The patent is now issued as US patent number 9,126,520.

In May the following year, Butterfield sent Keith Manufacturing a covenant not to sue.

Nearly one year later, in April 2017, the parties filed a stipulation of dismissal with prejudice. The stipulation was silent as to costs and attorneys’ fees and 12 days later, Butterfield moved for attorneys’ fees.

But, the district court denied his motion, concluding that rule 54 requires a judgment, which the rule defines as “a decree and any order from which an appeal lies”.

According to the Oregon court, the stipulation to dismiss with prejudice didn’t satisfy the judgment requirement because a stipulation to dismiss with prejudice is not an appealable order.

Butterfield appealed against the decision and, yesterday, the Federal Circuit sided with him, before vacating and remanding the decision.

Reasoning

Hughes said that inclusive language in rule 54 suggests that “judgment” includes more than just appealable orders.

He added although rule 54 posits a relationship between a judgment and its appealability, “this relationship exists for the prudential purpose of minimising piecemeal appellate litigation”.

According to the Federal Circuit, the Oregon court’s reliance on Microsoft went too far, because the “concerns that animated” the Microsoft decision are not present in this case.

“First, treating a voluntary stipulation with prejudice as a judgment for purposes of attorney’s fees under rule 54 will not invite parties to engage in piecemeal appellate litigation,” said Hughes.

He added: “And because both parties can move for attorney’s fees, permitting a rule 54 motion for attorney’s fees after a stipulated dismissal will not affect the overall balance of litigation.”

The suit was vacated and remanded.

Shawn Kolitch, partner at Kolitch Romano and Butterfield’s representative, said he was happy that the Federal Circuit recognised the inapplicability of Microsoft to his client’s situation.

"Specifically, I view our case as one of a relatively large company legally harassing a former employee who left and became a competitor. I never believed that Keith’s claims had any merit, and always thought Butterfield deserved to recover at least some of his attorneys’ fees when the case ended,” added Kolitch.

In Kolitch’s view, if the Federal Circuit had affirmed the district court, it would have induced parties to continue litigating claims they would otherwise agree to dismiss sooner.

“We would likely have appealed such a ruling to the Supreme Court,” he concluded.

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