Szabo Food Service, Inc. v. Canteen Corporation

823 F.2d 1073
CourtCourt of Appeals for the Seventh Circuit
DecidedAugust 25, 1987
Docket86-3093
StatusPublished
Cited by463 cases

This text of 823 F.2d 1073 (Szabo Food Service, Inc. v. Canteen Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Szabo Food Service, Inc. v. Canteen Corporation, 823 F.2d 1073 (7th Cir. 1987).

Opinions

EASTERBROOK, Circuit Judge.

Twice in recent months we have encountered cases in which district judges denied substantial motions for sanctions without giving reasons. Twice we have remanded for more complete consideration. Shrock v. Altru Nurses Registry, 810 F.2d 658 (7th Cir.1987); Dreis & Krump Manufacturing Co. v. Machinists & Aerospace Workers, 802 F.2d 247 (7th Cir.1986). We follow the same course today. See also Thomas v. Capital Security Services, Inc., 812 F.2d 984, 989 (5th Cir.1987); Jackman v. WMAC Investment Corp., 809 F.2d 377, 384 (7th Cir.1987); Lieb v. Topstone Industries, Inc., 788 F.2d 151, 157-58 (3d Cir.1986).

I

The substantive dispute concerns a contract to supply food at the Cook County Jail. Szabo Food Service, Inc., a caterer with more than $200 million in annual sales, held the contract between 1978 and November 1986. The next term was put up for bids. Cook County has an ordinance calling for 30% of all contract work to be awarded to firms owned by members of certain minority groups and women. Rather than take a chance on being in the 70%, Szabo formed a joint venture with Catfish Digby’s, Inc., a successful restaurant chain owned by black entrepreneurs. The principal competing bid came from Canteen Corp., another substantial caterer. Canteen bid on its own behalf, although it claimed that it would subcontract some work, including the recruiting of employees, to minority firms. Canteen!s bid was lower by more than $1 million, although the Szabo-Digby joint venture excelled on other specifications, such as plans for dealing with riots. An evaluation committee rated the Szabo-Digby bid superior, but on October 6, 1986, the County Board awarded the contract to Canteen.

On Tuesday, October 14, the joint venture and its venturers (collectively Szabo-Digby) filed a 30-page complaint in the district court against Canteen, the Board, all of the Board’s members, Cook County, and the County’s purchasing agent. The complaint asserted that Szabo-Digby was the victim of racial discrimination, that the procedures used to award the contract to Canteen violated the due process clause of the fourteenth amendment, and that the Board had violated state law; the complaint invoked the district court’s pendent jurisdiction to support the latter claims. Szabo-Digby obtained a hearing at 4:00; at the hearing it moved for a temporary restraining order. The district judge denied the motion on the ground that any injury appeared to be reparable by money damages; nonetheless, Szabo-Digby requested expedition, leading the judge to order Canteen to file within 72 hours its papers and supporting materials in opposition to Sza-[1076]*1076bo-Digby’s request for a preliminary injunction. As Canteen tells the tale, there followed round-the-clock preparation of the background materials and briefs necessary to oppose Szabo-Digby’s request for emergency relief.

Canteen’s papers were due by 4:30 p.m. on Friday, October 17. At 1:15 that day Szabo-Digby served a notice of voluntary dismissal under Fed.R.Civ.P. 41(a)(l)(i). The notice ended the case without intervention by the court, see Scam Instrument Corp. v. Control Data Corf., 458 F.2d 885, 888 (7th Cir.1972), and Canteen therefore did not file its papers. Szabo-Digby moved across the street to the Circuit Court of Cook County, where it filed a suit based wholly on state and local law. Discovery was had; the Circuit Court entered judgment in favor of Canteen; the case is on appeal.

Canteen says that during the discovery in the state suit it became convinced that Szabo-Digby had filed the federal suit either knowing that it could not prevail or without performing the pre-filing investigation required by Fed.R.Civ.P. 11. Canteen concluded that Szabo-Digby knew or should have discovered that Canteen, too, had a minority participant. That squelched any inference of racial discrimination, according to Canteen, even any inference that the County Board had been indifferent to its minority set-aside ordinance. On November 14 Canteen filed a motion asking the district court to award it attorneys’ fees as a sanction under Rule 11; it also sought fees as a “prevailing party” under 42 U.S.C. § 1988. The parties appeared before the district judge on November 21. Canteen offered to file a brief and supporting papers by November 24. Szabo-Digby asked for time to respond. Instead of setting a briefing schedule, however, the district court announced:

I have reviewed the motion. I am well aware of the case. I reviewed the materials that were previously filed in connection with the case.
I don’t believe, under the circumstances of the case, that a Rule 11 violation has occurred, nor do I believe that Section 1988 fees should be awarded, and so the motion, upon my review of the entire record in this case, is denied.

The “entire record in this case” was Szabo-Digby’s complaint and attachments, and Canteen’s skeletal motion for fees. Canteen had not yet filed either the papers it had prepared in response to the complaint or the materials from the state proceedings it planned to use in support of its request for sanctions.

II

Szabo-Digby dismissed its complaint under Rule 41(a)(l)(i) and maintains that the dismissal deprived the district court of “jurisdiction” to award attorneys’ fees against it. Santiago v. Victim Services Agency, 753 F.2d 219 (2d Cir.1985), offers comfort to that position. Santiago filed and then dismissed a complaint under 42 U.S.C. § 1983; after the Rule 41(a)(l)(i) dimissal, the defendants requested and received an award of fees under § 1988; the court of appeals reversed, stating that “[ojnce the plaintiff has dismissed the action under [Rule 41(a)(l)(i) ], the court loses all jurisdiction over the action.” 753 F.2d at 221. The Second Circuit reasoned that because the court lost “jurisdiction” it could not award fees. Id. at 221-23. Williams v. Ezell, 531 F.2d 1261, 1263-64 (5th Cir.1976), contains similar language and comes to the same conclusion. Corcoran v. Columbia Broadcasting System, Inc., 121 F.2d 575 (9th Cir.1941), which neither Santiago nor Williams cited, had come to the opposite conclusion on a request for fees under the copyright laws.

We agree with Santiago's holding, although as we explain below we do not endorse its reasoning. Santiago’s holding dooms Canteen’s request for fees under § 1988. That statute authorizes awards to “prevailing” parties only. A dismissal without prejudice under Rule 41(a)(l)(i) does not decide the case on the merits. The plaintiff may refile the complaint (or, as Szabo-Digby did here, file a redacted complaint in a different court). The defendant remains at risk. A dismissal under Rule 41(a) is unlike a dismissal with preju[1077]*1077dice under Rule 41(b), which enables the defendant to say that he has “prevailed”.

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Bluebook (online)
823 F.2d 1073, Counsel Stack Legal Research, https://law.counselstack.com/opinion/szabo-food-service-inc-v-canteen-corporation-ca7-1987.