United States of America, ex rel. v. Association of Behavior Consultants

Background

Relator Deborah Cullen brought a federal False Claims Act case against Association of Behavior Consultants (ABC) and William J. Palyo. She also brought related claims in California state court. The parties entered two settlement agreements resolving the state-court disputes. The second agreement included releases and an indemnification provision, but it expressly excluded claims brought by the United States or California under false-claims laws.

After the federal complaint was served, ABC and Palyo asserted a counterclaim—a claim brought by defendants against the opposing party—based on the settlement agreement. The counterclaim alleged breach of contract, express indemnity, implied indemnity, contribution, and sought declaratory relief. The court later granted defendants’ summary-judgment motion on the federal complaint but denied summary judgment on the counterclaim because the parties disputed the meaning of the settlement agreement’s release and indemnification provisions. The counterclaim became the only remaining claim after the court denied Cullen’s motion for a partial new trial or to change the judgment.

Voluntary dismissal

Defendants moved under Federal Rule of Civil Procedure 41(a)(2) to voluntarily dismiss their counterclaim without prejudice. Cullen agreed that the counterclaim should be dismissed but argued that the dismissal should have consequences, including revisiting her withdrawn summary-judgment motion and awarding her fees and costs. She also argued in her fee motion that the dismissal should be with prejudice.

The court declined to revisit its earlier rulings or Cullen’s withdrawn summary-judgment motion. Applying the factors relevant to voluntary dismissal, the court considered the effort and expense incurred, any delay by defendants, and defendants’ explanation for seeking dismissal. The court noted that discovery was closed and that summary-judgment motions had been decided, but the parties had not jointly prepared trial materials or engaged in pretrial preparation. It also found no excessive delay or lack of diligence by defendants and found their explanation reasonable because the federal complaint had already been resolved.

The court therefore granted defendants’ motion for voluntary dismissal without prejudice. The counterclaim was dismissed without prejudice.

Attorneys’ fees and costs

Cullen sought more than $150,000 in attorneys’ fees and also requested fees under Federal Rule of Civil Procedure 11, California’s anti-SLAPP statute, and the court’s inherent authority. The court rejected those arguments, noting that it had previously denied related motions and that defendants had not acted in bad faith, vexatiously, wantonly, or for oppressive reasons.

The court also found that Cullen’s amended fee motion did not comply with the local rule requiring supporting information about the services performed, time spent, timekeeping methods, qualifications, and hourly rates. She had not provided enough information to evaluate the request or shown that the requested fees were for work made useless by the dismissal. The court denied Cullen’s amended motion for attorneys’ fees and costs.

Disposition

Judge Joseph C. Spero ordered that each side bear its own fees and costs, vacated the scheduled motion hearing, and directed the clerk to close the file.