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Melaleuca, Inc. v. Shan

United States District Court, D. Idaho

September 5, 2018

MELALEUCA, INC., an Idaho corporation, and MELALEUCA CHINA WELLNESS PRODUCTS CO., LTD. a wholly-owned subsidiary of Melaleuca, Inc., Plaintiff,
KOT NAM SHAN, an individual, and SHAKLEE CORP., a Delaware corporation, Defendants.


          David C. Nye, U.S. District Court Judge.


         Pending before the Court is Defendant Kot Nam Shan's (“Kot”) Motion for Attorney Fees. Dkt. 78. Having reviewed the record and briefs, the Court finds that the facts and legal arguments are adequately presented. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court will address the motion without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). For the reasons outlined below, the Court finds good cause to DENY in PART and GRANT in PART Kot's Motion for Attorney Fees.


         The factual background underlying this dispute is set forth in the Court's previous Decision. Dkt. 74. The Court incorporates that background in full by reference.

         Procedurally, on February 26, 2018, Kot filed a Motion to Dismiss Plaintiffs Melaleuca Inc. and Melaleuca (China) Wellness Products Co., Ltd.'s (hereinafter referred to collectively as “Melaleuca”) claims against him on several grounds. Dkt. 47. The Court held oral argument on this motion on March 23, 2018 and issued a Memorandum Decision and Order on April 24, 2018. While it found that it has personal jurisdiction over Kot concerning the 2010 Agreements, it ultimately dismissed all of Melaleuca's claims against Kot on forum non conveniens grounds and directed Melaleuca to refile those claims in China. Dkt. 74, at 21. Kot then filed a Motion for Attorney Fees on May 8, 2018. Dkt. 78.

         III. ANALYSIS

         As this Court's subject matter jurisdiction is based on diversity, Idaho state law applies. Clark v. Podesta, No. 1:15-CV-00008-CWD, 2017 WL 4855845, at *2 (D. Idaho Oct. 26, 2017) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 34, (1991); Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 260 n. 31 (1975)). Kot specifically requests attorney fees under section 12-120(3) of the Idaho Code, which provides as follows:

In any civil action to recover on an open account, account stated, note, bill, negotiable instrument, guaranty, or contract relating to the purchase or sale of goods, wares, merchandise, or services and in any commercial transaction unless otherwise provided by law, the prevailing party shall be allowed a reasonable attorney's fee to be set by the court, to be taxed and collected as costs.

         However, Idaho Code section 12-120(3) “is a substantive law that enlarges the rights of litigants in a commercial transaction.” Boise Tower Assocs., LLC v. Washington Capital Joint Master Trust Mortg. Income Fund, No. 03-141-S-MHW, 2007 WL 4355815, at *2 (D. Idaho Dec. 10, 2007). “[P]arties are not entitled to attorney fees under an Idaho substantive statute that enlarges the rights of litigants to a commercial dispute when the law governing the contract denies litigants that right.” Id. at *4.

         “In China, litigation costs include court costs and party expenses, but generally, attorney's fees are not included in the latter. . . . Generally, in China, attorney's fees are borne by the parties on their own accounts separately, and neither party can get reimbursements from the counterparty.” Xiao Jianguo and Tang Xin, Cost and Fee Allocation in Civil Procedure: China National Report, 4 Tsinghua China L. Rev. 43, 45 (2011). In an earlier decision, the Court determined that “it will apply Idaho law to the 2010 Agreements and Chinese law to the 2011 Agreements.” Dkt. 74, at 12. The Court also determined that Chinese law would apply to Melaleuca's claim of fraud in the inducement with regard to the 2011 Non-Competition Agreement. Consequently, Kot is not entitled to fees-as related to litigation surrounding the 2011 Agreements-under Idaho Code section 12-120(3), because the Chinese law governing the underlying contracts generally denies such awards.[1] Kot's Motion for Attorney Fees is therefore DENIED in PART, as it relates to fees stemming from litigation surrounding the 2011 Agreements.

         That leaves only Kot's request for attorney fees related to the 2010 Agreements. While the Court has not reached the merits of Melaleuca's claims regarding the 2010 Agreements, that does not automatically foreclose Kot's request for fees. The Idaho Supreme Court has held that a court may award attorney fees even when the case is dismissed without prejudice and the court never reaches the merits of the dispute. See Charney v. Charney, 356 P.3d 355, 360 (Idaho 2015). In Charney, the Idaho Supreme Court stated:

[Defendant] argues that there was no final judgment, apparently meaning that there was no decision on the merits. In the Parkside Schools case, there was also no decision on the merits. We still remanded the case so that the defendant could request an award of attorney fees. . . . Rule 54(a) . . . states: “A judgment shall state the relief to which a party is entitled on one or more claims for relief in the action. Such relief can include dismissal with or without prejudice.” Thus, a judgment includes a dismissal without prejudice. The rule also states, “A judgment is final if either it has been certified as final pursuant to subsection (b)(1) of this rule or judgment has been entered on all claims for relief, except costs and fees, asserted by or against all parties in the action.” A dismissal of all claims for relief without prejudice would be a final judgment. A final judgment in a civil action does not require a decision on the merits; it would include a dismissal of all claims for relief without prejudice.

Id. (discussing Parkside Sch., Inc. v. Bronco Elite Arts & Ath., LLC, 177 P.3d 390 (Idaho ...

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