Both Judgment And Attorney Fees Are Lost For Non-Compliance With Service Rules

In RFR Industries, Inc. v. Century Steps, Inc. . (February 16, 2007), the Federal Circuit reverses a grant of judgment on the pleadings and award of attorney fees to defendant Century Steps, due to Century's failure to properly serve its Answer on plaintiff RFR. RFR and Century were parties to a settlement agreement in 2000 in which RFR agreed to sell its patented embedded railway track components to Century. In 2004, RFR filed an action alleging Century failed to pay for some of the components, and included patent infringement counts based on Century's unauthorized sale of the components to its customers. Century filed its Answer with the district court, and faxed a copy to RFR's counsel. RFR then filed a Notice of Dismissal under Fed. R. Civ. P. 41(a)(1)(i), the rule permitting voluntary withdrawal without leave of the court before service of an Answer. In the alternative, RFR moved for the court's dismissal of the case under Fed. R. Civ. P. 41(a)(2). Century opposed, and responded with a motion for judgment on the pleadings and a request for attorney fees. The district court denied RFR's requests, and granted judgment and attorney fees to Century.

On appeal, the Federal Circuit does not reach the patent infringement issues. Instead, applying the Fifth Circuit's view that Rule 41(a)(1)(i) “means what it says,” the panel reviews the Fed. R. Civ. P. 5(b)(2) requirements for service, and determines that Century's faxing of its Answer to RFR's counsel plainly did not comply with Rule 5. In particular, the Court finds that Century failed to meet subsection D's allowance for service “by any other means, including electronic means, consented to in writing by the person served .” Here, Century had argued in the alternative that consent could be implied from a number of facts, including RFR's counsel having previously accepted fax service in another case. The panel rejects this argument, noting the Advisory Committee's comment that consent to fax service “must be express, and cannot be implied from conduct.” Finally, the panel reverses the grant of attorney fees on the ground that Century was not a prevailing party because the Rule 41 dismissal did not constitute a “judicially sanctioned change in the legal relationship of the parties,” i.e. , as there was no judicial involvement in the voluntary dismissal, and the legal relationship of the parties had not changed, i.e. , RFR was free to refile its suit.