Opinion ID: 2515119
Heading Depth: 3
Heading Rank: 1

Heading: The Superior Court's Entry of a Dismissal Without an Award of Fees Was Proper.

Text: Alaska Civil Rule 82(a) provides that the prevailing party in a civil case shall be awarded attorney's fees. Glynwood argues that because the tenants chose to dismiss their case with prejudice, Glynwood was the prevailing party and thus entitled to attorney's fees. Glynwood relies on case law that recognizes a dismissal with prejudice as an adjudication on the merits of a lawsuit. [7] Glynwood analogizes this case to our decision in Bovee v. LaSage, where the defendant was found to be the prevailing party and awarded attorney's fees after plaintiff Bovee's suit was dismissed with prejudice. [8] But Glynwood's reliance on Bovee is misplaced. In Bovee, we recognized that a plaintiff's dismissal with prejudice makes a prevailing party determination possible. [9] We have never held that a plaintiff's dismissal with prejudice automatically makes the defendant a prevailing party. Instead, as the tenants note, we have adopted a more common sense approach to determine prevailing party status: the prevailing party is the party who has successfully prosecuted or defended against the action, the one who is successful on the main issue of the action and in whose favor the decision or verdict is rendered and the judgment entered. [10] With few exceptions, the party who obtains an affirmative recovery is considered prevailing. [11] The tenants are also correct in noting that in Bovee, the police officer was declared to be the prevailing party not simply because Bovee had dismissed his case with prejudice, but because as a result of the dismissal the officer had prevailed on every claim in the lawsuit. In this case, the tenants received $45,000 in exchange for their dismissal and were therefore successful on the main issue of the action. Glynwood further argues that the settlement agreement between its insurer and the tenants is collateral to the prevailing party issue. Glynwood relies on Municipality of Anchorage v. Baugh Construction & Engineering Co. [12] as instructive on the question whether payments by a collateral source influence a prevailing party determination. In Baugh, the Municipality of Anchorage contracted with Baugh to build a waste-shredding facility. [13] An explosion and fire severely damaged the facility, and the Municipality sued Baugh, asserting a number of claims including one for products liability. [14] The Municipality reached a settlement with the third-party defendant manufacturer of the equipment and then dismissed with prejudice its products liability claims against Baugh. [15] Because the verdict was unequivocally in Baugh's favor, Baugh was declared the prevailing party and awarded attorney's fees. [16] Glynwood contends that it is the prevailing party and entitled to attorney's fees because, as in Baugh, the tenants dismissed their case against Glynwood with prejudice after settlement with a third party. But as the superior court correctly recognized, Baugh is distinguishable because while in Baugh, the settlement was reached with a third-party defendant, the settlement agreement in this case was reached with Glynwood's own insurer. We have never endorsed such an inflexible definition of prevailing party as that advocated by Glynwood and instead have held that the prevailing party is the one who succeeds on the main issue of the case. [17] In addition, a party need not prevail on every issue to enjoy prevailing party status, nor need the party obtain formal judicial relief. [18] The tenants requested that the superior court dismiss their case with prejudice under Civil Rule 41(a)(2). Civil Rule 41(a)(2) covers situations where dismissal is requested after the answer has been filed and the defendant has not stipulated to dismissal. In deciding a voluntary dismissal motion, Alaska courts balance the interests of both the plaintiff and the defendant in the dismissal in order to obtain a result which will be fair and equitable under all the circumstances of the case. [19] But as the tenants have noted, federal courts have held that a plaintiff's motion for dismissal with prejudice must be granted. [20] Voluntary dismissal with prejudice carries a heavy price for a plaintiff: unless the court has made some other provision, a dismissal with prejudice is subject to the rules of res judicata, [21] and one who acquiesces to a dismissal with prejudice waives the right to an appeal. [22] Legal commentators Charles Wright and Arthur Miller state that [s]ince such a dismissal is a complete adjudication of the claims and a bar to a further action on them between the parties, it has been held that the [federal] district court has no discretion to refuse such a dismissal and cannot force an unwilling plaintiff to go to trial. [23] Civil Rule 41(a)(2) also provides that an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper. In Dome Laboratories v. Farrell, we determined that this rule provides an independent basis for an award of attorney's fees. [24] In this case, the tenants voluntarily moved to dismiss their case with prejudice under Civil Rule 41(a)(2), stating that their action was necessary because Glynwood's counsel had refus[ed] to sign off on any stipulation for dismissal. The superior court had the discretion to grant the dismissal on any conditions it found to be just. Its choice to not impose conditions in this case was reasonable given that a global settlement had been reached in which Glynwood's own insurer paid the tenants $45,000. As the superior court recognized, the real issue in this case is between Glynwood and its insurance carrier.
Glynwood's arguments for prevailing party status and discovery sanctions are based on its refusal to acknowledge the settlement agreement between its insurer and the tenants. The real dispute in this case is between Glynwood and its insurer as to the coverage guaranteed by its policy. The record on appeal reveals that Glynwood knew or should have known of the settlement between the tenants and its insurer at least two weeks before it moved to compel discovery: a filing by the tenants' attorney on January 17, 2007, informed the court that a global settlement had been negotiated with Glynwood's insurer on December 26, 2006. Yet a filing by Glynwood dated January 24, 2007, included an affidavit from Glynwood's counsel stating: I have not had any settlement discussions with Plaintiffs or their attorneys. My clients have not agreed to any settlement of this case. A week later Glynwood filed its order seeking a motion to compel discovery and sanctions. When asked about the settlement at the May 16, 2007 hearing, Glynwood's attorney answered, I don't know that the insurer has paid or agreed to pay anything other than what I see in the pleadings. Glynwood's attorney also twice referred to a secret agreement between its insurer and the tenants. The tenants, in turn, claimed that Glynwood's attorney was made aware of the settlement agreement, yet refused to agree to the dismissal of the case even though it would have absolved his clients from any liability. At the hearing, the tenants' attorney stated, as far as what we've heard from the insurance adjuster, they were in constant communication with Glynwood's attorney during the settlement process. We have not been provided with a copy of the settlement agreement. But the transcript of the hearing before the superior court indicates the tenants' attorney provided the court and Glynwood's attorney with copies of the settlement checks made payable to each of the tenants individually. It is thus puzzling that Glynwood continues to refer to the tenants' settlement as if it did not actually occur. [25] The real dispute in this case is between Glynwood and its insurer. Under most liability insurance policies, the insured relinquishes to the insurer its right to settle claims and its right to control the litigation during the post-injury to pre-judgment period. [26] As the superior court remarked, usually an insurance contract says that an insurance company retains the right to control the litigation and the insureds have an obligation to cooperate with the insurance company. There is no copy of Glynwood's insurance contract in the trial record. Glynwood's insurer has settled with the tenants and fully indemnified Glynwood as to all the allegations in the tenants' complaint. Yet Glynwood maintains it has been abandoned by its insurer and has been forced to bear the costs of litigation. Glynwood put forth this argument at the May 16, 2007 hearing, arguing that this abandonment constitutes a breach of the insurance contract and that, as a consequence, its insurer has no right to settle on its behalf. But as the superior court recognized, the questions whether the insurance contract gave the insurance company the right to settle without the insured's consent and whether Glynwood was abandoned by its insurer were not capable of resolution within the context of the tenants' lawsuit: I hear the argument, but it's not a fact that I'm finding or I'm able to find today. As the trial court recognized, those issues can be fully litigated in a separate case between Glynwood and its insurer.
In addition to having little plausible basis in law, awarding attorney's fees against the tenants after they had settled their case would undermine public policy. As noted by the tenants, Glynwood's proposed rule, whereby an insured defendant could be declared the prevailing party in a case where the defendant's insurer has agreed to a substantial settlement with the plaintiffs, would chill future settlements in Alaska and contravene well-settled public policy. We recently recognized: [T]here is a strong public policy in favor of the settlement of disputes. Settlements and settlement hearings facilitate communication and compromise; they encourage litigants to voluntarily resolve their disputes; and they simplify, shorten and settle litigation without taking up valuable court resources. Accordingly, private settlements and stipulations are to be favored and should not be lightly set aside. [27] But if a defendant could be considered the prevailing party simply by refusing to accept a settlement negotiated by its insurer, this would force plaintiffs either to accept the settlement and risk being liable for the defendant's attorney's fees or to continue litigating the case after an acceptable resolution has already been reached. We review a superior court's determination of prevailing party status and attorney's fees for abuse of discretion. [28] We will find an abuse of discretion only if the record as a whole leaves us with a definite and firm conviction that a mistake has been made. [29] Glynwood has not shown that the superior court abused its discretion in denying Glynwood prevailing party status. Furthermore, accepting Glynwood's arguments would lead to a decision that is contrary to the public policy in favor of settlement agreements. Accordingly, we affirm the judgment of the superior court.