                                                                            FILED
                           NOT FOR PUBLICATION
                                                                             FEB 15 2018
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


PLATINUM LOGISTICS, INC., a                      No.   16-55119
Wyoming corporation,
                                                 D.C. No.
              Plaintiff-Appellant,               3:15-cv-00617-CAB-KSC

 v.
                                                 MEMORANDUM*
PLATINUM CARGO LOGISTICS, INC.,
a California corporation; et al.,

              Defendants-Appellees.



PLATINUM LOGISTICS, INC., a                      No.   16-55155
Wyoming corporation,
                                                 D.C. No.
              Plaintiff-Appellee,                3:15-cv-00617-CAB-KSC

 v.

PLATINUM CARGO LOGISTICS, INC.,
a California corporation; et al.,

              Defendants-Appellants,

 and

EXPO DISPLAYS CARIBBEAN, INC.,

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
DBA Platinum Cargo Logistics; et al.,

              Defendants.


                    Appeal from the United States District Court
                       for the Southern District of California
                  Cathy Ann Bencivengo, District Judge, Presiding

                       Argued and Submitted October 4, 2017
                               Pasadena, California

Before: FERNANDEZ, RAWLINSON, and N.R. SMITH, Circuit Judges.


      In this case, Platinum Logistics, Inc. brought its third suit against Platinum

Cargo Logistics, Inc.. After Platinum Logistics filed the present action, Platinum

Cargo requested and the district court awarded the costs (including attorney’s fees)

that Platinum Cargo accrued in the second action. When Platinum Logistics failed

to pay the award, the district court dismissed this third action with prejudice.

Platinum Logistics now challenges both of these decisions. We have jurisdiction

pursuant to 28 U.S.C. § 1291. We vacate and remand.

      1. The district court awarded costs and attorney’s fees (accrued in the second

action) pursuant to Federal Rule of Civil Procedure 41(d). Rule 41(d) provides that

      [i]f a plaintiff who previously dismissed an action in any court files an
      action based on or including the same claim against the same defendant,
      the court: (1) may order the plaintiff to pay all or part of the costs of that


                                            2
      previous action; and (2) may stay the proceedings until the plaintiff has
      complied.

By the plain language of the rule, a court may award costs only if the plaintiff

voluntarily dismissed the prior action. Here, the second action was involuntarily

dismissed without prejudice. Thus, the district court could not award costs accrued

in the second action pursuant to Rule 41(d).

      2. The district court failed to properly invoke its inherent power to award the

costs and attorney’s fees accrued in the second action. Under our precedent, “the

district court has the inherent authority to impose sanctions for bad faith, which

includes a broad range of willful improper conduct.” Fink v. Gomez, 239 F.3d 989,

992 (9th Cir. 2001). However, when a court invokes its inherent power to impose

sanctions, it triggers due process concerns. Roadway Exp., Inc. v. Piper, 447 U.S.

752, 767 n.14 (1980). Thus, Platinum Logistics was “entitled to notice, an

opportunity to be heard and a finding of bad faith” prior to the district court

awarding costs and attorney’s fees to Platinum Cargo under its inherent authority.

See F.J. Hanshaw Enters., Inc. v. Emerald River Dev., Inc., 244 F.3d 1128, 1143

(9th Cir. 2001).

      Platinum Logistics did not receive adequate notice that the court was

considering inherent power sanctions nor did the court conduct a hearing on the



                                           3
matter. Platinum Cargo made fleeting references in its motion to the district court’s

“inherent power,” but presented no argument on that issue. In its order, the district

court noted that, as an alternative to Rule 41(d), it found “that [Platinum

Logistic’s] conduct and tactics warrant payment of [Platinum Cargo’s] costs and

fees . . . as a sanction pursuant to the Court’s inherent power,” but also noted that

Platinum Cargo “did not make such an argument.” Thus, Platinum Logistics did

not receive adequate due process.

       3. Platinum Cargo’s argument that the “two-dismissal” rule in Federal Rule

of Civil Procedure 41(a) applies to the facts of this case lacks merit. Rule

41(a)(1)(A) provides that “the plaintiff may dismiss an action without a court order

by filing . . . a notice of dismissal . . . or a stipulation of dismissal.” In addition, “if

the plaintiff previously dismissed any federal or state-court action based on or

including the same claim, a notice of dismissal operates as an adjudication on the

merits.” Fed. R. Civ. P. 41(a)(1)(B) (emphasis added). Here, Platinum Logistics

did not file a notice of dismissal in the second action. Thus, under the plain

meaning of the rule, the dismissal of the second action was not an adjudication on

the merits and the “two-dismissal” rule does not apply.

       4. The district court dismissed the present action with prejudice when

Platinum Logistics failed to pay the costs and fees awarded to Platinum Cargo.


                                              4
Because we vacate the award of costs and fees, we also vacate the district court’s

order dismissing the present action.

VACATED and REMANDED

The parties shall bear their own costs on appeal.




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