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Northwest Osteoscreening, Inc. v. Mountain View Hosptial, LLC

United States District Court, D. Idaho

February 9, 2015

NORTHWEST OSTEOSCREENING, INC., an Idaho corporation, directly and derivatively in its capacity as a member of IDAHO HEALTH SCREENINGS AND VACCINATIONS, LLC, an Idaho limited liability company, PREVENTATIVE HEALTH, LLC, an Idaho limited liability company, and DANIELLE BENNION, Plaintiffs,
v.
MOUNTAIN VIEW HOSPTIAL, LLC, a Delaware limited liability company, BENJAMIN WOOD, JAMES ADAMSON, JOSH TOLMAN, SIASCONSET, LLC, an Oregon limited liability company, PREVENTATIVE HEALTH, LLC, a Delaware limited liability company, WELLNESS SCREENINGS, LLC, an Idaho limited liability company, and DOE ENTITIES I-X, Defendants.

MEMORANDUM DECISION AND ORDER

B. LYNN WINMILL, Chief District Judge.

I

Plaintiffs brought suit against Defendants alleging violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, and twenty-one state-law claims. Amend. Compl., dkt. 28. Defendants moved to dismiss Plaintiffs' RICO claims for failure to state a claim, and to dismiss the state-law claims without prejudice pursuant to 28 U.S.C. § 1367(c)(3). The Court granted the motion in its entirety. Oct. 2, 2014 MDO, dkt. 39.

Having prevailed on their motion to dismiss, Defendants now move for attorney fees and costs. See Dkts. 45 & 46.[1] Because RICO provides for attorney fees to prevailing plaintiffs, not defendants, and because Defendants have not established an alternative authorization for fees, the Court will deny Defendants' request for attorney fees. The Court further concludes that Defendants are not entitled to costs.

II

RICO authorizes district courts to award "a reasonable attorney[] fee" to prevailing plaintiffs, but it does not authorize an award to a party who successfully defends against a RICO claim. Chang v. Chen, 95 F.3d 27, 28 (1996); see also 18 U.S.C. § 1964(c). "Courts, however, have never construed this provision as precluding a prevailing defendant from recovering attorney[] fees when authorized elsewhere." Chang, 95 F.3d at 28. The alternative authorizations to which Defendants point are (A) Idaho Code § 12-120(3), which mandates an award of attorney fees to the prevailing party in a commercial dispute, see BECO Constr. Co. v. J-U-B Eng'rs, Inc., 184 P.3d 844, 851 (Idaho 2008), and (B) the "Professional Services Agreement" ("PSA") between Idaho Health Screenings & Vaccinations, LLC and defendant Mountain View Hospital, LLC. Neither of these authorities authorize a fee award.

A. § 12-120(3)

Defendants' argument for attorney fees under Idaho Code § 12-120(3) starts from a flawed premise. They argue that a federal district court with jurisdiction over state law claims, here pursuant to 28 U.S.C. § 1367, applies the law of the forum state to award attorney fees. Defendants invoke the Erie doctrine, but they mistake it for a jurisdictional rule.

Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), and its progeny require federal courts to apply substantive state law in certain circumstances. See Alyeska Pipeline Co v. Wilderness Soc'y, 421 U.S. 240, 260 n.31 (1975). However, "the basis of a federal court's jurisdiction over a state law claim is irrelevant for Erie purposes." In re Exxon Valdez, 484 F.3d 1098, 1100 (9th Cir. 2007).

Instead, it is a choice-of-law rule. "Where state law supplies the rule of decision, it is the duty of federal courts to ascertain and apply that law.'" Id. The rule is most often applied where a federal court adjudicates a state-law claim under its diversity or supplemental jurisdiction, but the rule is not isolated to those situations. At times, a federal court exercising its original jurisdiction over a federal question is required to apply state law as well. See 19 Wright, Miller, et al., Federal Practice & Procedure § 4520 (2d ed.).[2]

Regardless of the basis of its jurisdiction, a federal court is not required to ascertain and apply state substantive law, see id., and those state rules which "affect the enforcement of the right as given by the State, " Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99, 109 (1945), until that right is actually adjudicated. Before the right comes into play, there is no risk that the party claiming the right will be denied equal protection of the law. Absent that risk, there is no justification to invoke the Erie doctrine.[3] See Hanna v. Plumer, 380 U.S. 460, 467 (1965) ("The Erie rule is rooted in part in a realization that it would be unfair for the character of result of a litigation materially to differ because the suit had been brought in a federal court."). Just as a litigant should not be able to thwart the "substantial policy of the state" regarding attorney fees by litigating a dispute over state-created rights in federal court, Alyeska Pipeline, 421 U.S. at 260 n.31, a litigant should not be allowed to shoehorn a state's policy into a dispute over federal rights. A contrary result would deprive the opposing party of her reasonable reliance on the American rule regarding attorney fees, see id. at 247, and disregard Congress's judgment on the matter, all without any substantial justification for the departures.

Idaho Code § 12-120(3) represents Idaho's allocation of the "cost[s] of using the court system to resolve disputes in specified types of commercial transactions." Sanders v. Lankford, 1 P.3d 823, 828 (Id. Ct. App. 2000), overruled in part on other grounds by BECO Constr. Co. v. J-U-B Eng'rs, Inc., 184 P.3d 844 (Idaho 2008) (quoting DeWils Interiors, Inv. v. Dines, 678 P.2d 80, 83 (Idaho 1984)). "In effect, " §12-120(3) is a statutory "adjunct to the underlying commercial agreement between the parties." Griggs v. Nash, 775 P.2d 120, 127 (Idaho 1989). Plaintiffs' federal RICO claims, however, were not a dispute over the PSA or the commercial rights of the parties. RICO "serve[s] independent federal purposes...." United States v. Zemek, 634 F.2d 1159, 1164 n.4 (9th Cir. 1980). It exists to combat organized crime and racketeering. See Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 498 (1985); Russello v. United States, 464 U.S. 16, 26-29 (1983); see also Chang, 95 F.3d at 29 (holding that plaintiffs' "RICO action did not arise out of any one of the [underlying] contracts, " because "RICO's pattern requirement could be satisfied only because there were three land transactions"). Defendants' position as the prevailing party to the RICO claims does not implicate the judgment the Idaho legislature made when it enacted § 12-120(3). This is all the more true when one considers that Plaintiffs have refiled the majority of their state-law claims in state court, and that court can make the proper fee award once those claims have been adjudicated.

Furthermore, the Supreme Court has made clear that "whether a court has subject-matter jurisdiction over a claim is distinct from whether a court chooses to exercise that jurisdiction." Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009). "With respect to supplemental jurisdiction in particular, a federal court has subject-matter jurisdiction over specified state-law claims, which it may (or may not) choose to exercise." Id. Here, at Defendants' request, the Court chose not to exercise ...


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