Recovering the $1,000+ fee for designating a case to the Business Court seems like the unattainable Holy Grail for successful parties in the Court. That’s so even though the NC General Assembly amended the statute listing items recoverable as a "cost" (G.S§ 7A-305) to add the $1,100 designation fee as a recoverable item (in G.S. §7A-305(d)(12)).
Last week in an (unpublished) Order in Sopko v. Stancill, Judge McGuire denied recovery of that fee to a Plaintiff who had obtained a voluntary dismissal from the Defendant of the counterclaims which she had brought. That would seem to warrant a recovery of the designation fee.
That’s because Rule 41(d) of the NC Rules of Civil Procedure says that "[a] plaintiff who dismisses an action or claim under section (a) of this rule shall be taxed with the costs of the action." And that rule also applies expressly to the dismissal of a counterclaim. NC R. Civ. Pro. 41(c).
One thing that is clear about awarding costs is that a trial judge has no authority to award expenses incurred in the course of litigation that are not expressly allowed by statute. City of Charlotte v. McNeely, 281 N.C. 684, 691, 190 S.E.2d 179, 185 (1972). That’s pretty plain from Section 7A-305(d), which says that "The expenses set forth in this subsection are complete and exclusive and constitute a limit on the trial court’s discretion to tax costs. . . ."
But no appellate court has decided whether a trial judge has the authority to refuse to award costs that are expressly provided for by statute, like, for example, the fee for designating a case to the Business Court.
Judge McGuire ruled that he was required to determine whether the costs sought by the Plaintiff had been "reasonably incurred." Order ¶10. I’m not sure if that is correct. Some of the items recoverable as costs are prefaced with the words "reasonable and necessary", like deposition costs and expert witness fees. The designation fee allowed in section 7A-305(d)(12) doesn’t contain that qualifier.
Judge McGuire ruled in the Sopko Order that the designation fee was not "reasonably incurred," and he refused to award the designation fee as a cost. He said:
the Court is convinced that Plaintiff is not entitled to recover the filing fee here. First, the lawsuit was not designated to the Business Court based on Defendant’s counterclaims. Instead, Plaintiff voluntarily incurred the filing fee, apparently believing that the claims she raised in the Verified Complaint were best served by designation to the Business Court. Second, no part of this fee can conceivably be characterized as ‘reasonably incurred’ by Plaintiff in defense of the counterclaims alleged by Defendant.
It may be that this case means that a Business Court plaintiff who obtains a dismissal of counterclaims filed against him after the designation of the case to Business Court can’t recover the designation fee as a cost. Even though Rule 41 says that a Court shall award such a cost.
Well, the word "shall" doesn’t mean what it used to. It’s a surprisingly slippery and confusing word. It was deleted almost wholesale in revisions of the Federal Rules of Civil Procedure, Appellate Procedure and Criminal Procedure. (It seems to me that I wrote something about that word a few years ago on this blog, but I couldn’t find it.)
I don’t think that I have seen a single Order from the Business Court allowing recovery of the designation fee since the statute was amended to allow it. That legislation became effective in October 2014.
The Plaintiff in Sopko didn’t come up empty handed on his application for costs. He was awarded about $3500 for costs incurred for a mediation and some of his deposition expenses. Both those types of costs are specifically listed in the statute allowing costs, in G.S. §7A-305(d)(7) and (d)(10). But the Defendant, who had also obtained her own voluntary dismissal (of some of Plaintiff’s claims), was awarded more for her costs — $4,274.80 — so she washed out Plaintiff”s recovery of costs entirely.