GDS Industries, Inc. v. Great American Insurance Company et al, No. 3:2016cv01506 - Document 19 (S.D. Cal. 2016)
Court Description: ORDER granting 12 Plaintiff's Motion to Voluntarily Dismiss. the Court GRANTS Plaintiff's motion to voluntarily dismiss this action pursuant to Federal Rule of Civil Procedure 41(a)(2). (Doc. No. 12.) The Court DISMISSES this action WITH PREJUDICE. The Court exercises its discretion and declines to award fees and costs as a result of this dismissal. Signed by Judge Anthony J. Battaglia on 11/29/2016. (acc)
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 GDS INDUSTRIES, INC., A California Corporation, 15 16 17 ORDER GRANTING PLAINTIFF’S MOTION TO VOLUNTARILY DISMISS UNDER FEDERAL RULE OF CIVIL PROCEDURE 41(a)(2) Plaintiff, 13 14 Case No.: 16-CV-1506-AJB-BLM v. GREAT AMERICAN INSURANCE COMPANY, A Surety; DOES 1 through 100, (Doc. No. 12) Defendant. 18 19 20 21 Presently before the Court is Plaintiff GDS Industries, Inc.’s (“Plaintiff”) motion to 22 dismiss brought pursuant to Federal Rule of Civil Procedure 41(a). (Doc. No. 12.) 23 Defendant Great American Insurance Co. (“Defendant”) opposes the motion. (Doc. No. 24 14.) Having reviewed the parties’ moving papers and controlling legal authority, and 25 pursuant to Local Civil Rule 7.1.d.1, the Court finds the matter suitable for decision on the 26 papers and without oral argument. Accordingly, the hearing date currently set for 27 December 22, 2016, at 2:00 p.m. in Courtroom 3B is hereby VACATED. For the reasons 28 set forth below, the Court GRANTS Plaintiff’s motion. 1 16-CV-1506-AJB-BLM BACKGROUND 1 2 This dispute arises from nonpayment for materials, equipment, and services Plaintiff 3 rendered to nonparty Rodeway Engineering Works, Inc. (“Rodeway”). 1 (Doc. No. 1-2 ¶¶ 4 8–13, 18.) Defendant is a surety company that duly made, executed, and filed a payment 5 and performance bond whereby Defendant guaranteed to pay in the event Rodeway failed 6 to do so. (Id. ¶¶ 20–21.) Plaintiff asserts it submitted a formal bond claim to Defendant on 7 February 9, 2016, and Defendant ultimately denied Plaintiff’s request “in bad faith and 8 without following standard claims handling practices” on April 7, 2016. (Id. ¶ 23.) 9 Plaintiff instituted this lawsuit in San Diego Superior Court on May 10, 2016. (Doc 10 No. 1 ¶ 1; see Doc. No. 1-2.) On June 15, 2016, Defendant answered the complaint in state 11 court. (Doc. No. 1 ¶ 3; see Doc. No. 1-4.) Defendant subsequently removed the action to 12 this Court the following day. (Doc. No. 1 at 2.) Plaintiff filed the instant motion to 13 voluntarily dismiss the action pursuant to Federal Rule of Civil Procedure 41(a) 2 on 14 September 22, 2016. (Doc. No. 12.) Defendant filed an opposition to the motion, (Doc. No. 15 14), and Plaintiff filed a reply, (Doc. No. 15). This order follows. LEGAL STANDARD 16 17 Rule 41(a)(1) permits the plaintiff to voluntarily dismiss an action without court 18 order by either filing a notice of dismissal before the opposing party has served an answer 19 or motion for summary judgment, or a stipulation of dismissal by all parties who have 20 appeared. Where dismissal under Rule 41(a)(1) is unavailable, Rule 41(a)(2) permits an 21 action to be “dismissed at the plaintiff’s request” by court order on terms the court 22 considers proper. Fed. R. Civ. P. 41(a)(2). 23 The decision to grant or deny a request to dismiss pursuant to Rule 41(a)(2) is within 24 the district court’s sound discretion. Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th 25 26 27 28 1 Rodeway is not a party to this action because it has declared bankruptcy. (Doc. No. 1-2 ¶ 2; Doc. No. 12-1 at 1.) 2 All references to “Rule” are to the Federal Rules of Civil Procedure. 2 16-CV-1506-AJB-BLM 1 Cir. 1980). However, “[a] district court should grant a motion for voluntary dismissal under 2 Rule 41(a)(2) unless a defendant can show that it will suffer some plain legal prejudice as 3 a result.” Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001). 4 The Ninth Circuit has held that “legal prejudice” means “prejudice to some legal 5 interest, some legal claim, [or] some legal argument.” Westlands Water Dist. v. United 6 States, 100 F.3d 94, 97 (9th Cir. 1996). This inquiry focuses on “the rights and defenses 7 available to a defendant in future litigation.” Id. For example, legal prejudice may result 8 when a dismissal without prejudice “would result in the loss of a federal forum, or the right 9 to a jury trial, or a statute-of-limitations defense.” Id. A defendant may also suffer plain 10 legal prejudice if dismissal without prejudice prevents it from bringing a motion for 11 attorneys’ fees as a prevailing party given that “dismissal without prejudice precludes 12 prevailing party status.” United States v. Ito, 472 F. App’x 841, 842 (9th Cir. 2012) (citing 13 Cadkin v. Loose, 569 F.3d 1142, 1149 (9th Cir. 2009); Oscar v. Alaska Dep’t of Educ. & 14 Early Dev., 541 F.3d 978, 981 (9th Cir. 2008)). A district court may also consider such 15 factors as the stage of litigation, the moving party’s delay in requesting voluntary dismissal, 16 and indications of forum shopping. See Cent. Mont. Rail v. BNSF Ry. Co., 422 F. App’x 17 636, 638 (9th Cir. 2011). 18 Legal prejudice is not, however, established “because a dispute remains unresolved” 19 or by the mere “threat of future litigation.” Westlands Water Dist., 100 F.3d at 96–97; see 20 also Hyde & Drath v. Baker, 24 F.3d 1162, 1169 (9th Cir. 1994) (“The inconvenience of 21 defending another lawsuit or the fact that the defendant has already begun trial preparations 22 does not constitute prejudice.”). Neither is legal prejudice present simply because the 23 plaintiff “gains some tactical advantage.” Hamilton v. Firestone Tire & Rubber Co., 679 24 F.2d 143, 145 (9th Cir. 1982). 25 Nor does “the expense incurred in defending against a lawsuit . . . amount to legal 26 prejudice,” notably because dismissal without prejudice may be conditioned “upon the 27 payment of appropriate costs and attorney fees.” Westlands Water Dist., 100 F.3d at 97. 28 Still, “[i]mposition of costs and fees as a condition for dismissing without prejudice is not 3 16-CV-1506-AJB-BLM 1 mandatory[.]” Id.; see Stevedoring Servs. of Am. v. Armilla Int’l B.V., 889 F.2d 919, 921 2 (9th Cir. 1989) (holding district court did not abuse discretion in refusing to require 3 payment of costs and attorney’s fees). 4 By order, a district court may dismiss an action with prejudice on a motion for 5 voluntary dismissal under Rule 41(a)(2). Smith, 263 F.3d at 976; see Fed. R. Civ. P. 6 41(a)(2) (“Unless the order states otherwise, a dismissal under this paragraph (2) is without 7 prejudice.” (emphasis added)). “Attorneys’ fees and costs will not be imposed as a 8 condition for voluntary dismissal with prejudice because there is no risk of future 9 litigation.” Larsen v. King Arthur Flour Co., No. C 11-05495 CRB, 2012 WL 2590386, at 10 *1 (N.D. Cal. July 3, 2012) (citing Burnette v. Godshall, 828 F. Supp. 1439, 1443 (N.D. 11 Cal. 1993)); see also Gonzalez v. Proctor & Gamble Co., No. 06cv869 WQH (WMc), 2008 12 WL 612746, at *3 (S.D. Cal. Mar. 4, 2008) (“An award of costs and attorneys’ fees should 13 generally be denied if the voluntary dismissal is granted with prejudice[.]”). DISCUSSION 14 15 Plaintiff first states it may dismiss this action pursuant to Rule 41(a)(1)(A)(i). As 16 stated above, that section permits a plaintiff to dismiss an action without court order by 17 filing “a notice of dismissal before the opposing party serves either an answer or a motion 18 for summary judgment[.]” Fed. R. Civ. P. 41(a)(1)(A)(i). Here, Plaintiff asserts that 19 because Defendant only filed its answer in state court before removing the action to federal 20 court, Plaintiff may invoke Rule 41(a)(1)(A)(i). Not so. Rule 81(c)(2) provides that “[a]fter 21 removal, repleading is unnecessary unless the court orders it.” Fed. R. Civ. P. 81(c)(2). 22 Accordingly, Defendant’s state court answer, (Doc. No. 1-4), is sufficient to bar voluntary 23 dismissal under Rule 41(a)(1)(A)(i). 24 Alternatively, Plaintiff asks the Court to dismiss this action under Rule 41(a)(2). 25 Plaintiff asserts dismissal without prejudice and conditions is appropriate because of the 26 early stage of litigation, this action having been filed only a few months ago; Plaintiff 27 sought dismissal within weeks of reviewing Caltrans documents that weakened Plaintiff’s 28 case; and there is no risk that Defendant will incur duplicative expenses because Plaintiff 4 16-CV-1506-AJB-BLM 1 has no intention of refiling this lawsuit and has even offered to dismiss this action with 2 prejudice. (Doc. No. 12-1 at 5.) In response, Defendant asserts Plaintiff knew its lawsuit 3 was time-barred before filing the operative complaint and only filed the instant motion 4 when informed that Defendant intended to file a case-dispositive motion. (Doc. No. 14 at 5 5.) Accordingly, Defendant asks that if the Court is inclined to dismiss this action, it must 6 do so with prejudice. (Id.) 7 The Court agrees that Plaintiff’s request for dismissal should be granted. This case 8 is in the very early stages of litigation, having been filed a mere four months prior to 9 Plaintiff’s motion. Little discovery has been conducted, and while Defendant represents it 10 intended to file a case-dispositive motion, a review of the docket reflects that no such 11 motion practice has occurred. See Smith, 263 F.3d at 976 (finding “no fault with the district 12 court’s reasoning” and dismissal of claims with prejudice where the district court “stressed 13 that [defendant] could not argue high litigation costs because discovery had not begun, it 14 had not commenced trial preparations, and no motions challenging the merits of this case 15 had come before the court”). 16 However, the Court finds that dismissal without prejudice would constitute legal 17 prejudice to Defendant in that Defendant would be prevented from bringing a motion for 18 attorneys’ fees as a prevailing party under California Civil Code section 9564. See Cal. 19 Civ. Code § 9564(c) (“In an action to enforce the liability on the bond, the court shall award 20 the prevailing party a reasonable attorney’s fee.” (emphasis added)); Ito, 472 F. App’x at 21 842 (finding district court abused its discretion in dismissing action without prejudice 22 because defendants were precluded by the dismissal from bringing a motion for attorney’s 23 fees). In light of the foregoing, the Court GRANTS Plaintiff’s motion and DISMISSES 24 this action WITH PREJUDICE. The Court exercises its discretion and declines to award 25 fees and costs as a condition of dismissal. Gonzalez, 2008 WL 612746, at *3 (“An award 26 of costs and attorneys’ fees should generally be denied if the voluntary dismissal is granted 27 // 28 // 5 16-CV-1506-AJB-BLM 1 with prejudice.”). This order, however, does not preclude Defendant from bringing a 2 properly noticed and supported motion for attorney’s fees.3 4 CONCLUSION 3 4 For the reasons set forth above, the Court GRANTS Plaintiff’s motion to voluntarily 5 dismiss this action pursuant to Federal Rule of Civil Procedure 41(a)(2). (Doc. No. 12.) 6 The Court DISMISSES this action WITH PREJUDICE. The Court exercises its 7 discretion and declines to award fees and costs as a result of this dismissal. 8 9 10 IT IS SO ORDERED. Dated: November 29, 2016 11 12 13 14 15 16 17 3 18 19 20 21 22 23 24 25 26 27 28 Defendant cites to California Rule of Court 3.1702 as the rule setting forth the timeframe within which a motion for attorney’s fees may be brought. (Doc. No. 14 at 7.) The Court reminds Defendant that it removed this case to federal court, and while the Court must look to state substantive law in diversity cases, federal procedural rules govern. See Hanna v. Plumer, 380 U.S. 460, 465 (1965) (“federal courts are to apply state substantive law and federal procedural law” (citing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938))). Accordingly, Rule 54 governs any motion for attorney’s fees Defendant may wish to bring. See Fed. R. Civ. P. 54(d)(2)(B)(i) (“Unless a statute or a court order provides otherwise, the motion must . . . be filed no later than 14 days after the entry of judgment[.]”) 4 Plaintiff asks the Court to hold at this time that no prevailing party exists. (Doc. No. 15 at 3–4.) While the Court is cognizant that this case is in the early stages of litigation and Plaintiff brought its motion within weeks of reviewing newly released Caltrans documents, the Court feels it more appropriate to rule on the prevailing party issue following full briefing on the issue. The Court also reminds Plaintiff that “expenses incurred in defending the litigation . . . do not establish legal prejudice.” Real Estate Disposition Corp. v. Nat’l Home Auction Corp., No. CV 08-00435 SJO (Ex), 2009 WL 764529, at *2 (C.D. Cal. Mar. 19, 2009). This applies with equal force to Plaintiff as it does to Defendant. 6 16-CV-1506-AJB-BLM
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