Opinion ID: 150340
Heading Depth: 2
Heading Rank: 2

Heading: Attorney's Fee Award Under the Lanham Act

Text: The portion of the Lanham Act at issue in this appeal reads as follows: The court in exceptional cases may award reasonable attorney fees to the prevailing party. 15 U.S.C. § 1117(a). Therefore, in order to uphold the district court's award under the Lanham Act, we must conclude that the district court properly determined that Mr. Engida was a prevailing party and properly found this to be an exceptional case. Because we conclude that Mr. Engida was not a prevailing party, the district court's fee award under the Lanham Act must be reversed. [6] The district court's conclusion that Mr. Engida was a prevailing party is a legal question that this court reviews de novo. Cf. Al-Maleki v. Holder, 558 F.3d 1200, 1204 (10th Cir.2009) (holding prevailing-party status is a legal question reviewed de novo under the Equal Access to Justice Act); cf. also Bailey v. Mississippi, 407 F.3d 684, 687 (5th Cir.2005) (in the context of fee awards under § 1988, holding that every Circuit to address the issue has determined that the characterization of prevailing-party status for awards under fee-shifting statutes ... is a legal question subject to de novo review). Lorillard argues that Mr. Engida was not a prevailing party because Lorillard voluntarily dismissed the case without prejudice and without a court order under Federal Rule of Civil Procedure 41(a)(1)(A)(i). Under the facts of this case, we agree. Under Rule 41(a)(1)(A)(i)[,] a plaintiff may dismiss an action voluntarily before the defendant files an answer or a motion for summary judgment. Schmier v. McDonald's LLC, 569 F.3d 1240, 1242 (10th Cir.2009). Voluntary dismissal of an action ordinarily does not create a prevailing party because in order to create a prevailing party there must be a judicially sanctioned change in the legal relationship of the parties. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 605, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001); see also RFR Indus., Inc. v. Century Steps, Inc., 477 F.3d 1348, 1353 (Fed.Cir.2007) (holding voluntary dismissal under Rule 41(a)(1)(A)(i) does not bestow prevailing party status because the action may be re-filed and it is not judicially sanctioned). Under the plain language of Rule 41(a)(1)(A)(i), a plaintiff may dismiss the action without a court order; no judicial sanction is required. See Fed.R.Civ.P. 41(a)(1)(A)(i). In determining that Mr. Engida was a prevailing party, the district court pointed to Mr. Engida's defeat of the preliminary injunction before the district court, the Tenth Circuit Court of Appeals, and the United States Supreme Court, and also to what the district court perceived to be the preclusive effect of this defeat in future proceedings. However, the district court's denial of injunctive relief was based on Lorillard's failure to carry the burden of proof on the likelihood of irreparable harm and the balance of harms, not on Lorillard's failure to establish that it was likely to prevail on the merits. See Aplt.App. at 399 (At th[e preliminary injunction] hearing, I reviewed the evidence obtained pursuant to the February 14, 2006, search and held that Plaintiff had failed to meet its burden of showing it would suffer irreparable harm if an injunction did not issue.); see also Engida, 213 Fed.Appx. at 656-57 (discussing Lorillard's failure to show it would suffer irreparable harm in the absence of an injunction and its failure to show that the threatened injury to it outweighed any harm that would be caused to Mr. Engida as a result of the injunction). We have previously made clear that [a] preliminary injunction that does not provide a plaintiff with relief on the merits of [his] claim cannot serve as the basis for prevailing party status. Biodiversity Conservation Alliance v. Stem, 519 F.3d 1226, 1232 (10th Cir.2008). If a plaintiff who is granted a non-merits-based injunction cannot be a prevailing party, see id., it logically and ineluctably follows that a defendant who defeats an injunction cannot be a prevailing party if the denial similarly is based on non-merits grounds. Mr. Engida argues, however, that he in fact did materially alter the legal relationship between the parties and achieved success because the district court rejected some portion of the plaintiff's claim, and consequently, he was allowed to proceed as before the suit was filed. However, this argument does not address Lorillard's contention that the denial of the preliminary injunction was not a merits-based decision. Because the district court granted him no merits-based relief, Mr. Engida cannot demonstrate that he was a prevailing party. Mr. Engida cites Maine School Administrative District No. 35 v. Mr. & Mrs. R., 321 F.3d 9 (1st Cir.2003), in support of his argument that a defendant who defeats the imposition of a preliminary injunction can be a prevailing party. In Maine School Administrative District, a school district filed suit against the parents of a disabled child and sought a TRO and preliminary injunction prohibiting the parents from using the stay put provisions of the Individuals with Disabilities Education Act, 20 U.S.C. § 1415(j), to keep their child in a mainstream school while an administrative review of his placement was being conducted. Id. at 12-13. When the district court denied the TRO, the school district voluntarily dismissed its complaint and the parents asserted that they were entitled to attorney's fees and costs. Id. at 13. The district court denied the parents' requested fees on the basis that they were not prevailing parties. Id. On appeal, the First Circuit reversed the district court and concluded that the parents' attorney's-fees request should be granted because they were in fact prevailing parties who had defeated the school district's suit on the merits. Id. at 16-17. Mr. Engida argues that his claim for prevailing-party status is as solid as that of the [parents] in Maine School Administrative District.  Aplee. Br. at 32. In making this argument, Mr. Engida overlooks the many material distinctions between his case and Maine School Administrative District. For example, in that case, the quest for injunctive relief was the sole object of the plaintiff's suit, 321 F.3d at 16 (noting that injunctive relief was the raison d'être of the school district's suit); and the parties' legal relationship was materially altered by the denial of the preliminary injunction because the injunction was denied on the ground that the plaintiff had failed to show that it would prevail on the merits, see id. at 17 (Because the district court denied injunctive relief on the basis that the School District had not adduced sufficient proof..., it is readily evident that the appellants successfully defended the [suit] on the merits. ); see id. (By defending, the appellants not only deprived the School District of the benefit that it sought in bringing suit but also blocked it from implementing a course of action inimical to [the disabled student's] interests. The appellants' victory was, therefore, material.). In contrast, the district court's denial of Lorillard's request for a preliminary injunction was not merits-based. The district court itself explained in its order granting Mr. Engida's fee request that it denied the injunction on the basis that Lorillard had failed to show irreparable harm. In addition, Lorillard's request for injunctive relief was not the sole object of its suit; for example, it also sought damages. Although we need not definitively opine on the subject here, Mr. Engida may well be correct that a defendant who defeats the imposition of a preliminary injunction is not categorically excluded as a matter of law from prevailing-party status. However, we conclude in this case that Mr. Engida is not a prevailing party because he cannot show that the district court granted him any merits-based relief. Specifically, the district court's order did not afford Mr. Engida relief from the merits of the claims against him and did not provide a judicially-sanctioned alteration in the parties' relationship. Consequently, Mr. Engida was not a prevailing party with respect to the district court's order. The appellate rulings of our court and the Supreme Court that, respectively, affirmed and left in place this non-merits-based denial also did not make Mr. Engida a prevailing party because these rulings did not judicially alter the parties' legal relationship or provide merits-based relief. Finally, the district court determined that Mr. Engida was the prevailing party due to what it perceived to be the preclusive effect of the denial of the preliminary injunction in any subsequent litigation. However, [t]he injunction standard of probable success on the merits is not equivalent to actual success on the merits. N. Arapahoe Tribe v. Hodel, 808 F.2d 741, 753 (10th Cir.1987). Consequently, a party's claim to have succeeded at the preliminary injunction stage does not necessarily transform a party into a prevailing party. It is of course literally true that every preliminary injunction effects some judicially sanctioned change in the parties' legal relationship. If that were all [the Supreme Court's decision in] Buckhannon requires, then every recipient of a preliminary injunction becomes a prevailing party eligible for an attorneys' fee award. N. Cheyenne Tribe v. Jackson, 433 F.3d 1083, 1085 (8th Cir.2006). Following the district court's collateral-estoppel rationale, every denial of a preliminary injunction would similarly make each defendant a prevailing party. That rationale ignores the fact that a preliminary injunction that grants only temporary relief pendente lite is not, without more, a judicially sanctioned material alteration of the parties' legal relationship. Id. at 1086. As previously discussed, to be a prevailing party on the basis of a preliminary injunction requires relief on the merits, Biodiversity, 519 F.3d at 1232, and because this is not the case with Mr. Engida, he is not a prevailing party and therefore is not entitled to fees under the Lanham Act.