United States District Court, W.D. Washington, Seattle
ORDER GRANTING IN PART AND DEFERRING IN PART
DEFENDANTS' MOTION FOR FEES, COSTS, AND
RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE
matter is before the Court on Defendants' Post-Final
Judgment Rule 54 Motion for Fees, Costs, and Disbursements.
Dkt. #121. Plaintiffs filed this action after their
employment was terminated, asserting that they were entitled
to certain payments and that those payments constituted
withheld wages. Dkt. #108. The Court dismissed
Plaintiffs' claims on Defendants' motion to dismiss.
Dkt. #119. Defendants now seek attorneys' fees, costs,
and disbursements incurred by Defendant X2 Biosystems, Inc.
(“Defendant X2”) in the amount of $545, 642.48.
Dkt. #121 at 1. Plaintiffs contest Defendant X2's
entitlement to fees, costs, and disbursements in this action.
Dkt. #129. The parties have not requested oral argument and
the Court does not find oral argument necessary to its
resolution of this Motion. Having reviewed the record and for
the reasons set forth below, the Court grants in part and
defers in part Defendants' Motion.
are former employees of Defendant X2. At the time they were
hired by Defendant X2, Plaintiffs each executed employment
contracts, Inventions and Confidentiality Agreements, and
Phantom Stock Agreements. Dkt. #108 at 28-60. Plaintiffs were
subsequently terminated and initiated this action against
Defendant X2 seeking severance, annual bonuses, milestone
bonuses, and phantom stock benefits they believed they were
owed under the employment agreements. Id. at
¶¶ 8.1-8.5. Plaintiffs also brought claims against
Defendant X2 and the individual Defendants for unlawfully
withholding wages under Washington law, asserting their
severance, annual bonuses, milestone bonuses, and phantom
stock benefits constituted “wages” under the
terms of their employment agreements. Id. at
proceeded under three different complaints in this action and
throughout, Plaintiffs have pursued claims for “phantom
stock benefits” that they believed they were owed under
their employment agreements with Defendant X2. Dkt. #1 at
¶¶ 5.1-5.4; Dkt. #71 at ¶¶ 6.1-6.5; Dkt.
#108 at ¶¶ 8.1-8.5. Specifically, under the Phantom
Stock Agreements, “a ‘share' of Phantom Stock
shall mean a contractual right to receive distributions in
like amount as, and as and when distributions are made to an
owner, as of the Effective Date of one share of the common
stock of X2 (a “Common Share”) by reason of
ownership of such Common Share.” Dkt. #108 at 41, 58.
Defendants sought dismissal of Plaintiffs' final Second
Amended Complaint, prevailed, and the Court ordered dismissal
of Plaintiffs' claims. Dkts. #110 and #119. Regarding
Plaintiffs' stock benefit claims, the Court specifically
found that Plaintiffs failed to plead a necessary condition
precedent: that a distribution had been made to owners of
common stock. Dkt. #119 at 7-8.
Phantom Stock Agreements, between Plaintiffs and Defendant
X2, included a provision awarding attorneys' fees and
costs to a prevailing party. Specifically, the Agreements
If any Party hereto shall bring any suit, arbitration or
action against another for relief, declaratory or otherwise,
arising out of this Agreement, the prevailing Party shall
have and recover against the other Party, in addition to all
court costs and disbursements, such sum as the court or
arbitrator may adjudge to be a reasonable attorneys' fee.
Dkt. #108 at 43, 60. On the basis of this provision and the
outcome of this action, Defendant X2 now seeks fees and costs
in defending this action. Dkt. #121.
courts interpret and apply state law when enforcing
contractual attorneys' fee provisions pursuant to Federal
Rule of Civil Procedure 54(d). MRO Communications, Inc.
v. AT&T Co., 197 F.3d 1276, 1281 (9th Cir. 1999). In
turn, Washington courts generally “enforce attorney fee
provisions in contracts ‘if the action arose out of the
contract and if the contract is central to the
dispute.'” LaCoursiere v. Camwest Dev.,
Inc., 181 Wash.2d 734, 748, 339 P.3d 963, 970 (2014)
(quoting Seattle-First Nat'l Bank v. Wash. Ins. Guar.
Ass'n, 116 Wash.2d 398, 413, 804 P.2d 1263 (1991)).
Conversely, “[w]hen the underlying documents merely
provide the background out of which the [plaintiff] allegedly
acquires new rights and duties by operation of law . . ., it
is apparent that the action is not ‘on the
contract.'” Hemenway v. Miller, 116 Wn.2d
725, 742, 807 P.2d 863 (1991).
opposing Defendants' Motion, Plaintiffs seek to
marginalize their stock benefit claims and the involvement of
the Phantom Stock Agreements. Specifically, they argue that
the Phantom Stock Agreements were not “central to the
controversy” because Plaintiffs sought breach of
contract remedies only under their employment contracts. Dkt.
#129 at 3-5. The Court does not agree. Plaintiffs' breach
of contract claims specifically alleged breach of contract
due to a failure to pay “Phantom Stock benefits.”
Dkt. #108 at ¶¶ 8.3, 8.4. Plaintiffs were entitled
to financial gain from ownership of phantom stock only under
the Phantom Stock Agreements. Id. at 41, 58
(providing that a share of phantom stock is a
“contractual right to receive distributions” when
distributions are made to holders of common stock).
Otherwise, Plaintiffs were not entitled to “stock
benefits” under their employment contracts. This