                                                                        F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                   UNITED STATES COURT OF APPEALS
                                                                         OCT 29 1998
                          FOR THE TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

    DON H. FREYMILLER,

             Plaintiff,

    v.                                                 No. 98-6190
                                                 (D.C. No. CIV-96-1833-T)
    CMS TRANSPORTATION                                 (W.D. Okla.)
    SERVICES, INC. and AMERITRUCK
    DISTRIBUTION CORP.,

             Third-Party-Plaintiffs
             Defendants-Appellees,

    v.

    DAVID FREYMILLER; DENISE F.
    MCARDLE; D&M CARRIERS, INC.,
    d/b/a JADE EXPRESS and JADE
    ENTERPRISES,

             Third-Party-
             Defendants-Appellants.




                          ORDER AND JUDGMENT            *




Before BALDOCK, EBEL, and MURPHY , Circuit Judges.


*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

      David Freymiller, Denise F. McArdle, and D&M Carriers, Inc. [hereinafter

“appellants”] appeal from the district court’s dismissal pursuant to Federal Rule

of Civil Procedure 41(a)(2) and (c), of CMS Transportation Service’s and

AmeriTruck Distribution Corporation’s [hereinafter “AmeriTruck”] claims against

them. This court exercises jurisdiction pursuant to 28 U.S.C. § 1291, and affirms

in part and reverses in part.


                                           I.

      AmeriTruck initially argues that this court lacks jurisdiction over this

appeal, asserting that the order of dismissal was not a final appealable order under

Federal Rule of Civil Procedure 54. Appellants were originally brought into this

suit as third-party defendants by AmeriTruck.    1
                                                     AmeriTruck and the plaintiff, Don

Freymiller, agreed to settle all of the claims and counterclaims between them on

March 4, 1998. Based on AmeriTruck’s representation that all “primary claims”



1
      On AmeriTruck’s motion, the district court realigned appellants as parties
defendant to its counterclaim against the plaintiff on November 20, 1997.

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had been settled and that plaintiff and AmeriTruck would “jointly move the Court

for an order dismissing with prejudice Plaintiff’s claims against AmeriTruck and

AmeriTruck’s counterclaims against Plaintiff,”       AmeriTruck’s Motion for Order of

Dismissal, Appellants’ App. at 116, the district court granted AmeriTruck’s

motion to voluntarily dismiss with prejudice all of AmeriTruck’s claims against

appellants on March 23, 1998.       See Order, id. at 130. On April 7, 1998, a

stipulation of dismissal with prejudice of all of AmeriTruck’s claims against

another third-party defendant, DFE Transportation, was entered, which ended all

litigation between all parties. Appellants filed their notice of appeal on April 20,

1998. The stipulation of dismissal between plaintiff and AmeriTruck was

formally entered on April 29, 1998.

       Citing Rule 54(b) of the Federal Rules of Civil Procedure,     Kelley v.

Michaels , 59 F.3d 1055 (10th Cir. 1995), and      United States v. Hardage , 982 F.2d

1491 (10th Cir. 1993), AmeriTruck argues that because the stipulation between

the plaintiff and itself had not been formally entered at the time appellants

appealed from the order dismissing AmeriTruck’s claims against appellants, that

order was not an appealable final order. In both     Kelley and Hardage , the district

courts acknowledged that their orders were not final by issuing Rule 54(b)

certifications to permit appeals.   Kelley , 59 F.3d at 1057; Hardage , 982 F.2d at

1494. Those cases are distinguishable because here, the district court relied on


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AmeriTruck’s assertion that all primary claims     were settled as a basis for its

order, and thus there was no need for the court to certify the order for appeal

pursuant to Rule 54(b). When the stipulated dismissal between plaintiff and

AmeriTruck was formally entered on April 29, no outstanding claims or

defendants were left in the case and there was nothing further for the trial court to

do. Because it was signed by all the parties left in the case at that time, the

stipulation became effective without further order of the court under Fed. R. Civ.

P. 41(a)(1). Kelley and Hardage are instructive in one regard, however, and that

is that when a notice of appeal is premature, upon an event that fulfills the finality

requirement, the notice of appeal will “ripen.”    See Kelley , 59 F.3d at 1057,

Hardage , 982 F.2d at 1494. In this case, the notice of appeal “ripened” upon

entry of the April 29 stipulated dismissal and the appeal is thus properly before

this court. See Burlington N. R.R. v. Huddleston     , 94 F.3d 1413, 1416 n.3 (10th

Cir. 1996) (“If no question exists as to the finality of the district court’s decision,

the absence of a Rule 58 judgment will not prohibit appellate review.”);        see also

Bankers Trust Co. v. Mallis , 435 U.S. 381, 385 (1978) (instructing that under

Rule 58, an appellate court should avoid the loss of an appeal due to confusion

and avoid compliance with technicalities only when the parties have assumed that

the time for appeal had begun to run and proceeded accordingly);           Baker v.

Limber , 647 F.2d 912, 916 (9th Cir. 1981) (stating that “judgments whose finality


                                            -4-
would normally depend upon a Rule 54(b) certificate may be treated as final [and

appealable under § 1291] if remaining claims subsequently have [ ] been

finalized”).


                                           II.

       On the merits, appellants argue that the district court abused its discretion

by entering an order of dismissal without requiring AmeriTruck to first respond to

appellants’ motion for summary judgment. “Federal Rule of Civil Procedure

41(a)(2) permits a district court to dismiss an action without prejudice ‘upon such

terms and conditions as the court deems proper.’ This court reviews such a

dismissal for an abuse of discretion.”   American Nat’l Bank & Trust Co. v. Bic

Corp. , 931 F.2d 1411, 1412 (10th Cir. 1991). Appellants had filed a motion for

summary judgment before AmeriTruck moved to dismiss its claims against them.

Although appellants state that the district court “summarily denied” its motion for

summary judgment, see Appellants’ Br. at 4, a review of the record indicates that

the court did not rule on the motion. AmeriTruck’s response to the motion was

still not yet due at the time the court entered its order of dismissal. In its

response to AmeriTruck’s motion to voluntarily dismiss, appellants argued that

they could prove through the anticipated summary judgment responses that

AmeriTruck had no evidence to support its claims against appellants and that its

claims were frivolous.    See Appellants’ App. at 123-24. In the order of dismissal,

                                           -5-
the district court stated that it disagreed with appellants’ conclusions after having

reviewed the record, and that it was not in the interest of justice to require

additional expenses to pursue the motion for summary judgment.         See id. at 131.

We hold that the district court did not abuse its discretion by refusing to require

AmeriTruck to respond to the motion for summary judgment before it ordered

dismissal of the case.


                                           III.

       Appellants also argue that the district court abused its discretion by

entering an order of dismissal without awarding attorneys fees to appellants.

Appellants assert that they fall within the “exceptional circumstances” exception

to the general rule in this circuit that a defendant may not recover attorneys fees

when a plaintiff voluntarily dismisses an action with prejudice under Rule

41(a)(2). See AeroTech, Inc. v. Estes , 110 F.3d 1523, 1528 (10th Cir. 1997).

Although this court has not defined what “exceptional circumstances” are under

Rule 41(a)(2), because an award of such fees is also contrary to the American

Rule, “‘the underlying rationale for fee-shifting is punitive and the ‘bad faith’ is

an essential element.’”   San Juan Prods., Inc. v. San Juan Pools of Kan., Inc.   ,

849 F.2d 468, 476 (10th Cir. 1988) (quotation omitted). The district court found

that the record did not reflect either that AmeriTruck’s claims were frivolous or

that they were brought only for the purpose of harassment, and appellants’ other

                                           -6-
alleged bases for “exceptional circumstances” are not well supported in the

record. We hold that the district court did not abuse its discretion in refusing to

award attorneys fees.


                                             IV.

       Finally, appellant argues that the district court abused its discretion by

denying costs to appellants in its dismissal order. Because “a defendant is a

prevailing party under Rule 54 when, in circumstances not involving settlement,

the plaintiff dismisses its case against the defendant,”   Cantrell v. International

Bhd. of Elec. Workers , 69 F.3d 456, 456 (10th Cir. 1995) (en banc), the district

court has discretion to award costs to the defendant, but that discretion is limited

in two ways. “First, it is well established that Rule 54 creates a presumption that

the district court will award costs to the prevailing party. . . . [S]econd . . . it

must provide a valid reason for not awarding costs to a prevailing party.”       Id. at

459. Although AmeriTruck asserts that the court gave sufficient reasons for not

awarding costs, the language quoted in its brief refers to the court’s decision not

to award attorneys fees and costs as a condition to granting the motion to dismiss.

The district court abused its discretion when, without considering the Rule 54

presumption or citing the reasons for not awarding costs to appellant, it ruled that

each party should bear its own costs.



                                             -7-
      AmeriTruck argues that appellants are not entitled to costs because they

never filed a bill of costs or supporting brief as required by Local Rule 54.1.

Because the district court ruled against appellants on this issue before they had

opportunity to follow the local rule and an immediate appeal followed, this

argument is without merit.

      We AFFIRM the district court’s refusal to require AmeriTruck to respond

to the motion for summary judgment before it ruled on the motion to dismiss;

we AFFIRM the court’s denial of attorney’s fees under Rule 41(a)(2); and we

REVERSE the district court’s order denying appellants their costs under Rule

54(d) and REMAND for a determination of whether costs are appropriate in light

of this order and judgment.



                                                     Entered for the Court



                                                     Michael R. Murphy
                                                     Circuit Judge




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