Want to Avoid Paying Rule 41(d) Costs? Then Re-File in State Instead of Federal Court

We have all seen this before: a plaintiff decides to dismiss and then re-file.  But wait, you say, there’s a downside to doing that, which is subjecting the plaintiff to costs pursuant to Federal Rule of Civil Procedure 41(d).  That’s generally true, but according to the Eleventh Circuit, it’s not true if the plaintiff re-files in state court.  See Sargeant v. Hall, Case No. 18-15205 (11th Cir. March 2, 2020).

In this interesting case of first impression, the plaintiff filed his initial action in federal court during February 2018 alleging violations of the Computer Fraud and Abuse Act and making other related claims.  The defendant filed a motion to dismiss, the federal magistrate issued a report recommending that the district court judge grant the motion, and the plaintiff voluntarily dismissed its action pursuant to Rule 41(a)(1)(A)(i) before the district court judge acted on the magistrate’s report.  Based upon the plaintiff’s notice of voluntary dismissal, the district court judge entered an order dismissing the action without prejudice and providing that “each party shall bear its own fees and costs.”  Id.

Shortly after the voluntary dismissal, the plaintiff re-filed a similar action in state court and the defendant filed a motion in the closed federal case seeking costs pursuant to Rule 41(d).  The district court judge denied the motion for costs.  The defendant appealed to the Eleventh Circuit, which identified the legal question at hand: “The sole question for us is whether Rule 41(d) applies when a plaintiff refiles a previously dismissed federal action in state court.”  Id.

Although the Eleventh Circuit’s opinion on the issue is detailed and spans several pages, its conclusion is well summarized in one sentence near the beginning of its analysis: “We agree with the magistrate judge and the district court that the better reading of Rule 41(d) is that the motion for costs must be submitted in the second action, which must have been filed in federal court.”  Id.  Therefore, because the second action was filed in state court, Rule 41(d) provided no basis for the defendant to seek costs.

Finally, in case you are wondering why the defendant did not just seek its costs in the state court action, the answer is that the costs rule in Florida state court differs from Rule 41(d).  The Eleventh Circuit explained:

We recognize that there may be situations where a plaintiff dismisses a federal action and refiles it in state court in a state lacking a procedural mechanism equivalent to Rule 41(d), leaving a defendant like Mr. Hall without a remedy for obtaining the costs of the previous action. Indeed, it appears that Mr. Hall has no remedy in the Florida state-court action, based on how Florida courts have interpreted Rule 1.420(d). See Wilson, 624 So. 2d at 258 (“Rule 1.420(d) is unambiguous—costs are to be assessed in the action that is the subject of the voluntary dismissal.”). But “[w]hatever merits th[is] and other policy arguments may have,” we cannot “rewrite [Rule 41(d)] to accommodate them.” See Artuz v. Bennett, 531 U.S. 4, 10, 121 S.Ct. 361, 148 L.Ed.2d 213 (2000).

Id.

Thus, the motto of this story: regardless of whether indecision or strategic advantage drives a plaintiff’s decision to dismiss a federal action and re-file, that plaintiff can avoid Rule 41(d) costs by re-filing in state court (at least in the Eleventh Circuit and Florida state courts).

Matthew J. Meyer is a Partner in our Florida office.