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BKD, LLP v. Yates
Citations: 240 S.W.3d 588; 367 Ark. 391; 2006 Ark. LEXIS 487Docket: 06-276
Court: Supreme Court of Arkansas; October 5, 2006; Arkansas; State Supreme Court
BKD, LLP and its partners, William E. Fingland, Jr. and Steven D. Warren, appealed a decision from the Pulaski County Circuit Court that denied their motion for attorneys' fees following a lawsuit filed by former partner Barbara Yates. The central issue on appeal was whether BKD was the prevailing party, as defined under Arkansas law, specifically Ark.Code Ann. 16-22-308 (Repl.1999). The Supreme Court of Arkansas assumed jurisdiction due to the case presenting an issue of first impression. Yates had filed a complaint against BKD after her partnership was terminated, raising multiple causes of action including challenges to the enforceability of noncompete clauses, breaches of the partnership agreement, and fiduciary duty claims. She sought various forms of relief, including declaratory judgments and an accounting. BKD responded by invoking the partnership agreement's forum-selection clause, which directed that disputes be litigated in Greene County, Missouri. The circuit court dismissed Yates's claims with prejudice regarding the forum-selection clause but allowed other claims to potentially be refiled in Missouri. BKD sought attorneys' fees based on this dismissal, arguing they had prevailed, but the court found they did not prevail on the merits. The Supreme Court affirmed the circuit court's decision, finding no error in its ruling. BKD appeals the circuit court's denial of its application for attorneys' fees, asserting it is a prevailing party due to a dismissal with prejudice that enforced the forum-selection clause. BKD contends it deserves fees because Yates attempted to undermine the parties' contractual expectations, burdened the courts with frivolous litigation, and caused BKD to incur significant legal costs. The appeal requires examination of whether the circuit court erred in determining BKD did not prevail on the merits and whether attorneys' fees should have been granted under section 16-22-308. It is established that a circuit court has discretion in awarding fees, and such decisions are reviewed for abuse of discretion. Under Arkansas law, a prevailing party must have received relief on the merits of its claim, determined by the outcomes of individual causes of action. BKD cites previous cases, notably Burnette, where a dismissal without prejudice did not grant prevailing-party status due to the possibility of further litigation. BKD argues its case is different as it involves a dismissal with prejudice, which it claims removes the potential for future litigation. However, the court clarifies that a dismissal with prejudice does not automatically confer prevailing-party status under section 16-22-308, contradicting BKD's interpretation of Burnette. In footnote 3 of Burnette, it is noted that federal courts have denied attorney's fees under 42 U.S.C. § 1988 when the merits have not been adjudicated. The Eighth Circuit in Keene Corp. v. Cass ruled that a dismissal for lack of subject matter jurisdiction does not allow for recovery of fees, as the defendant did not prevail on any central issue. In contrast, the Seventh Circuit in Szabo Food Service, Inc. v. Canteen Corp. explained that a dismissal without prejudice does not establish a defendant as the prevailing party since the plaintiff retains the option to refile. The circuit court's ruling indicated a mixed outcome: the forum selection clause was enforced, but the dismissal was without prejudice regarding other claims, meaning the underlying merits were unresolved. Yates's claims for declaratory and injunctive relief, as well as breach of contract and fiduciary duty, remain pending. Consequently, despite BKD's single favorable ruling on the forum selection clause, it does not qualify as a "prevailing party" under section 16-22-308, as the litigation is ongoing and many issues are unresolved. The circuit court's finding that BKD was not a prevailing party was affirmed, making it unnecessary to consider BKD's claim for attorney's fees.