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Golden v. Mentor Capital, Inc.

United States District Court, D. Utah

January 25, 2018

GENA GOLDEN, et al., Plaintiffs,
v.
MENTOR CAPITAL, INC., et al., Defendants MENTOR CAPITAL, INC., Third-Party Plaintiff,
v.
RICHARD GOLDEN, et al., Third-Party Defendants

          MEMORANDUM DECISION AND ORDER DISMISSING PLAINTIFFS' CLAIMS WITH PREJUDICE

          Jill N. Parrish District Judge

         Before the court is Plaintiffs' Rule 41 Motion to Dismiss with Prejudice and for Stay of Summary Judgment Briefing (ECF No. 152). The court previously granted Plaintiffs' request that it stay all briefing on Mentor Capital, Inc.'s Motion for Summary Judgment. For the reasons set forth below, the court grants the remainder of Plaintiffs' motion. Plaintiffs' claims are dismissed with prejudice as moot.

         I. BACKGROUND

         Plaintiffs Gena and Susan Golden have moved to dismiss their claims with prejudice. They contend that their claims are moot because Defendant Mentor Capital, Inc. has paid them the relief they seek in this action. Mentor agrees that Plaintiffs' claims should be dismissed with prejudice. But it contends that the dismissal should be conditioned on it being declared the prevailing party. Defendants Michael L. Labertew and Labertew & Associates do not oppose dismissal and have not asked the court to declare them prevailing parties as a condition to dismissal.

         II. DISCUSSION

         A. Dismissal Under Federal Rule of Civil Procedure 41(a)(2)

         Mentor contends that the court should dismiss Plaintiffs' claims on the condition that Mentor be declared a prevailing party. This will allow Mentor to seek costs and attorneys' fees. Plaintiffs oppose Mentor's request. Plaintiffs argue that Mentor should not be declared a prevailing party because it paid Plaintiffs the damages they seek in this case. The court agrees with Plaintiffs.

         Under Rule 41(a)(2), courts may dismiss an action, upon a plaintiff's request, “on terms the court considers proper.” This rule allows courts to dismiss a case on the condition that a defendant is declared a prevailing party. See AeroTech, Inc. v. Estes, 110 F.3d 1523, 1527-28 (10th Cir. 1997). Similarly, a court may dismiss a case on the condition that a defendant is awarded costs, attorneys' fees, or both. See Id. at 1526-28. The Tenth Circuit has held that “a defendant is a prevailing party under Rule 54 when, in circumstances not involving settlement, the plaintiff dismisses its case against the defendant, whether the dismissal is with or without prejudice.” Id. at 1527 (emphasis added) (quoting Cantrell v. Int'l Bhd. of Elec. Workers, 69 F.3d 456, 456 (10th Cir. 1995)).

         Here, Mentor Capital is not a prevailing party because it paid Plaintiffs the damages they seek in this action. Plaintiffs have moved to dismiss their claims with prejudice on the grounds that they have received the relief sought under their claims. Specifically, Mentor paid Plaintiffs the damages they seek in this action pursuant to a judgment in another case, see Mentor Capital Inc. v. Bhang Chocolate Co., No. 3:14-cv-03630-LB, ECF No. 55 at 2 (N.D. Cal. filed Aug. 11, 2014). This judgment allowed Plaintiffs to return their Mentor stock to Mentor in exchange for the consideration they paid for the stock. In short, Mentor returned to Plaintiffs the money they invested in Mentor.

         Consequently, Mentor Capital and Plaintiffs have not entered into a formal settlement agreement. But they have “settled” their claims because Mentor paid to Plaintiffs the damages they seek in this case. See Settle, Black's Law Dictionary (10th ed. 2014) (“2. To end or resolve (an argument or disagreement, etc.); to bring to a conclusion (what has been disputed or uncertain) <they settled their dispute>.”). The parties have come to a de facto settlement that allowed Plaintiffs to tender their shares to Mentor for the consideration they paid for those shares. Requiring the parties to enter into a formal settlement agreement to avoid the rule that a defendant is a prevailing party when the plaintiff dismisses a case against the defendant would produce an absurd result: Mentor would be declared the prevailing party despite the fact that it gave Plaintiffs the relief they requested. Thus, despite the fact that Plaintiffs seek to voluntarily dismiss their claims, Mentor is not a prevailing party because the parties have settled the claims at issue, thereby rending them moot.

         B. Costs Under Rule 54(d)(1)

         Although Mentor has not moved for costs at this time, the court turns to the issue of whether Mentor would be entitled to costs if it were a prevailing party. Rule 54(d)(1) provides that “[u]nless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney's fees-should be allowed to the prevailing party.” In short, Rule 54(d)(1) creates a “presumption that the district court will award costs to the prevailing party, ” and the “district court must provide a valid reason for not awarding costs to a prevailing party.” AeroTech, 110 F.3d at 1526.[1] A district court's denial of costs under Rule 54(d)(1) is reviewed for abuse of discretion. Id.

         While it is presumed that a district court will award costs to a prevailing party, there are a number of circumstances in which a district court may properly deny costs to a prevailing party. Id. For instance, “a denial of costs does not constitute an abuse of discretion when the prevailing party is only partially successful.” Id. (citing Cantrell, 69 F.3d at 459). The Tenth Circuit has also suggested that a district court may decline to award costs when “the prevailing party acted in bad faith, the prevailing party received only nominal damages, the nonprevailing party was indigent, the issues were close and difficult, or the costs were unreasonably high or unnecessary.” Id. (citing Cantrell, 69 F.3d at 459).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Here, even assuming that Mentor were declared a prevailing party, the court would not grant it costs under Rule 54(d)(1). Mentor was not even &ldquo;partially successful&rdquo; in this action. Shortly after the case was filed, Mentor unsuccessfully attempted to dismiss Plaintiffs&#39; claims. Mentor also unsuccessfully sought sanctions against Plaintiffs. Plaintiffs eventually prevailed, over Mentor&#39;s opposition, on their motion for partial summary judgment.[2] Plaintiffs have only now decided to dismiss their claims with prejudice because Mentor has paid them for their Mentor stock pursuant to a judgment in another case. This was also a “close and difficult case, ” weighing against an award of costs to either side. ...


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