Eleventh Circuit Considers Issue of First Impression Regarding Rule 41(d) Awards of Costs

Although parties generally bear their own costs upon voluntary dismissal of a federal case, there are, as with most rules, exceptions. For example, pursuant to Federal Rule of Civil Procedure 41(d), if a plaintiff voluntarily dismisses an action and then files a second action “based on or including the same claim,” the court may: (1) “order the plaintiff to pay all or part of the costs of that previous action”; and (2) “stay the proceedings until the plaintiff has complied” with the order awarding costs. But suppose a plaintiff voluntarily dismisses a case filed in federal court and subsequently commences a second suit “based on or including the same claim” in state court. Does Rule 41(d) apply? In Sargeant v. Hall, the Eleventh Circuit held that it does not. 2020 WL 994740 (11th Cir. Mar. 2, 2020).

Plaintiff Harry Sargeant filed a complaint in federal court against Defendant Daniel Hall and others for allegedly conspiring to obtain sensitive information from a computer server and email account. The parties were not diverse, but Sargeant alleged both federal and state law claims. Hall moved to dismiss the claims against him, and the district court assigned the motion to a magistrate judge, who issued a report recommending Hall’s motion be granted. Before the district court adopted the recommendation and dismissed Hall’s claims, Hall filed a notice of voluntary dismissal and, three weeks later, filed suit in Florida state court based on the same allegations of wrongdoing. In the newly filed case, Hall did not allege federal claims, thus precluding removal.

Thereafter, Hall moved in the closed federal case to recover the costs of that action pursuant to Rule 41(d). The district court, upon the recommendation of a magistrate judge, denied the motion holding that the plain language of Rule 41(d) contemplates the second action must be filed in federal court. Determining factors included, among other things, that Rule 41(d)(2) provides that the district court “may stay the proceedings until the plaintiff has complied” with the order awarding costs. This language would be superfluous if Rule 41(d) applies when the second action is filed in state court because, with very few exceptions, federal courts do not have authority to stay state court proceedings.

On appeal, the Eleventh Circuit agreed with the district court’s reasoning, holding that “the better reading of Rule 41(d) is that the motion for costs must be submitted in the second action, which must have been filed in federal court.” Defendants facing similar circumstances should note that the court explicitly declined to address whether Rule 41(d) applies when the second action is filed in state court and then successfully removed to federal court. In those circumstances, an award of costs under Rule 41(d) may be warranted.

Posted by John Sharpe.

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