United States: Plaintiff Attorney Failure To Perform Meaningful Pre-Suit Investigation Warrants Fee Award, Even After Voluntary Dismissal With Prejudice

We're not fans of dinner party chatter, especially when we're berated for defending alleged corporate deviltry against widows and orphans. We'd just as soon find another corner of the room and another stiff pour of Lagavulin. But there is a point that seems to register with even our most self-righteous accusers: for every meritorious case, there are many, many more that are made-up money grabs. The chattering classes agree that plaintiff lawyers are at least as greedy as occupants of the C-suites, and are, if anything, more prone to playing fast and loose with the facts. Plaintiff lawyers overreach. Everyone knows that. Do courts?

Yes, at least some do. A recent example can be found in Carroll v. E One Inc., et al, 2018 WL 3040757 (3d Cir. June 20, 2018). Carroll is not a drug or device case, but it contains useful language about plaintiff lawyers who fail to do the minimal homework as to whether their clients actually have a case. The plaintiffs in Carroll were firefighters who sued the manufacturer of fire sirens, alleging that they suffered occupational hearing loss due to the "omni-directional design" of the sirens, which "unnecessarily exposed the firefighters to dangerous levels of sound." This lawsuit was one of several filed around the country, all involving the same plaintiff lawyers, same defendant, and same theories. Results varied in those other cases. The plaintiffs won some, lost some, and dismissed some after it became clear that the cases were flat-out losers. It became pretty clear pretty early in the Carroll case that it was in the loser category. First, early discovery revealed the firefighters' lawsuit to be time-barred. Since the 1990's, the plaintiffs' fire department conducted routine annual audiological screenings of all of its firefighters. Nearly all of the plaintiffs in this suit had been advised many years earlier that they had hearing loss that was very probably caused by the loud noises to which they were exposed on the job and that they should be wearing hearing protection. Consequently, the plaintiffs' claims were "obviously" time-barred when they filed in or around January 2015. Second, one firefighter had not even suffered hearing loss attributable to noise exposure. Oops. As the district court observed, "had Plaintiffs' counsel spoken with the individual plaintiffs or conducted any other type of investigation prior to commencing this litigation, [counsel] would have learned these facts."

How could the plaintiff lawyers miss the obvious flaws in the case? Let's now perform a cinematic flashback and look at how the plaintiff counsel collected their plaintiffs. The firefighters received a notice at their fire departments either on a physical or web-based bulletin board that free hearing screening was being offered at the union hall. Many of those notices were prepared by the plaintiff counsel's law firm. Firefighters who decide to avail themselves of the free hearing test went to the union hall, then into a certain room, sometimes two firefighters at a time, where an audiologist puts headphones on them, played tones and directed the firefighters to raise their hands or push a button when they heard the sounds. You have probably heard of such tests before. The firefighters were not informed of test results until months or sometimes years later, after they became part of a lawsuit. The firefighters were not referred to a doctor or advised to wear hearing protection. Frequently the first contact a firefighter plaintiff had with someone from the plaintiffs' counsel law firm was just before or even at their deposition. You have probably heard of this sort of thing before, too.

So maybe it's not such a surprise that the plaintiff lawyers took a while to catch on to the fact that their clients had no viable case. Call those lawyers willfully deaf. Nevertheless, even after learning the truth – and certainly well after they should have learned of the truth — the plaintiff lawyers pressed on. They did so even after the defendant patiently laid out the defects in the case and invited the plaintiffs to dismiss before undue work was done (e.g., depositions) and undue expenses were incurred. The plaintiffs said No thanks. More work was done and more money was spent. Then the plaintiff lawyers said, Never mind. They grudgingly agreed to dismiss. The defendant said Fine, but only if the plaintiffs paid appropriate attorney fees for all the waste. The plaintiffs' counsel ignored the counter-offer, and—without seeking leave from the district court—filed a "Notice of Dismissal," asking the Clerk of Court to "mark the claims of all Plaintiffs as being dismissed without prejudice to all parties in this action." Nice try. This "Notice of Dismissal" was improper under Federal Rule of Civil Procedure 41(a). By that point, discovery had closed and the complaint had been answered. The parties had not agreed to a stipulation of dismissal. Accordingly, the defendant filed a motion seeking fees and costs and contested the plaintiffs' counsel's ability to "voluntarily" dismiss the firefighters' claims without prejudice. The plaintiffs' counsel continued to back-pedal, consenting to dismissal with prejudice, but still opposing the defendant's request for fees and costs.

And now, we offer a brief primer on basic civil procedure law. Under Federal Rule of Civil Procedure 41(a)(1), unilateral, voluntary dismissal is available only before the opposing party serves either an answer or motion for summary judgment. It was clearly too late for that in the Carroll case. Thus, the plaintiffs' effort to dismiss fell under Rule 41(a)(2), which allows an action to be "dismissed at the plaintiff's request only by court order, on terms that the court considers proper." Exercising that broad grant of discretion in the Carroll case, the district court concluded that its terms would include an award of attorneys' fees and costs. The district court recognized the "general rule [that] defendants are not permitted to recover fees when a plaintiff dismisses an action with prejudice absent exceptional circumstances." The plaintiffs' counsel was banking on that general rule to shield them from attorney's fees. But as the district court put it, "this case is unusual and it therefore calls for an unusual solution."

What was unusual about the Carroll case? The district court conducted an evidentiary hearing regarding the fee request. A defense attorney testified. The plaintiffs put on no evidence. The district court ended up pointing to the complete failure on the part of plaintiffs' counsel to spot the weaknesses in their case. The district court also took into account that the selfsame plaintiffs' counsel had been similarly asleep at the wheel or indifferent to reality in other cases around the country. The plaintiff lawyers felt aggrieved by the fee award, so they appealed to the Third Circuit. They lost.

The Third Circuit acknowledged that attorneys' fees and costs are typically not awarded when a matter is voluntarily dismissed with prejudice. But such an award may be granted when "exceptional" circumstances exist. Exceptional circumstances include pushing a case forward with utter indifference as to whether there is any there there. The plaintiffs' counsel argued that they were not put on notice of the time-barred nature of their clients' claims until the deposition of a medical director of the police and fire clinic that provided annual hearing tests to the plaintiff firefighters. But that evidence turned out to be more damning than exculpatory. All it did was provide "further evidence of counsel's failure to conduct a meaningful pre-suit investigation." The plaintiff lawyer "could simply have asked his clients during a routine interview when they had first discovered that they were suffering from hearing loss attributable to their jobs as firefighters." Then came the quote that any decent defense hack might want to tack on the wall for future use:

"It highlights the importance that counsel treat each individual case in this aggregate litigation as just that, its own individual case."

Save room on the wall. There's more:

"[T]his case is an example of some of the excesses of modern mass tort litigation – when attention to an individual case is sacrificed for the sake of pursuing mass filings."

As our nerd friends would say, that sacrifice of paying attention to an individual case is not a bug in the mass tort system in this country, it is a feature.

The Third Circuit had no problem with the district court's consideration of "circumstances that extended beyond the geographic boundaries that make up the Eastern District of Pennsylvania." Last minute dismissal of frail cases was arguably part of the plaintiff counsel's modus operandi in this litigation. The plaintiff counsel complained that the district court had "appoint[ed] itself the policeman of this nationwide litigation" by "unilaterally usurp[ing] the powers of the other courts." The Third Circuit put the "overheated rhetoric," and concluded that the district court had not abused its discretion when it explicitly considered the entirety of the nationwide litigation. Rather, the district court "properly took notice of how the case before it fit within the larger network of cases brought by Plaintiffs' counsel throughout the country." This pattern and practice of failure "to perform a meaningful pre-suit investigation, and a repeated practice of bringing claims and dismissing them with prejudice after inflicting substantial costs on the opposing party and the judicial system," with such failure and infliction of costs being especially egregious and unnecessary in the Carroll case, constituted the sort of "exceptional" circumstances that called for an award of attorney fees even in the wake of a voluntary dismissal with prejudice.

Chalk it up as a nice win for the defense. Nevertheless, a question gnaws at our defense hack noggin: what if the plaintiff lawyers' failure to pre-screen the cases for merit really is not so "exceptional"?

This article is presented for informational purposes only and is not intended to constitute legal advice.

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