Opinion
Case No. 14-cv-05438-JST
02-11-2016
INTERNMATCH, INC., Plaintiff, v. NXTBIGTHING, LLC, et al., Defendants.
ORDER GRANTING MOTION FOR VOLUNTARY DISMISSAL OF COUNTERCLAIMS
Re: ECF No. 83
Before the Court is Defendant Nxtbigthing, LLC's motion to voluntarily dismiss its counterclaims with prejudice. ECF No. 83. The Court will grant the motion.
I. BACKGROUND
On December 12, 2014, Plaintiff InternMatch, Inc. filed this complaint against defendants Nxtbigthing, LLC and Chad Batterman. ECF No. 1. InternMatch alleges five causes of action: (1) false designation of origin; (2) cancellation for fraud on the USPTO; (3) cancellation for lack of use in commerce; (4) declaratory judgment that InternMatch has superior rights to Nxtbigthing and Chad Batterman in the INTERNMATCH trademark; and (5) unfair competition under California's Business and Professions Code section 17200. Id. InternMatch alleges that "Nxtbigthing and Mr. Batterman currently hold or control various trademark registrations and/or trademark applications that have been or are being prosecuted through the use of false specimens of use at the USPTO." Id. ¶ 39.
Defendants Nxtbigthing and Chad Batterman answered the Complaint on February 25, 2015. See ECF Nos. 31, 32. Nxtbigthing also filed counterclaims alleging (1) trademark infringement; (2) unfair competition under the Lanham Act; and (3) unfair competition under California's Business and Professions Code section 17200. See ECF No. 32. Defendants' assert that "[f]rom 2007 through current day, Mr. Batterman and Nxtbigthing have continuously and extensively used the mark INTERNMATCH® in interstate commerce." Id. ¶ 14.
On October 12, 2015, InternMatch's counsel sent a letter to Nxtbigthing's counsel that described "the frivolous nature" of the counterclaims. See ECF No. 67-3. On October 30, 2015, InternMatch served expert reports on Defendants, including a report that opined that no damages could be recovered from Nxtbigthing's infringement counterclaim. See ECF No. 87 at 4; ECF No. 89, Lewis Decl., Ex. 1. On November 4, 2015, Nxtbigthing informed InternMatch via email that it wanted to drop its counterclaims. ECF No. 67-5.
Nxtbigthing now seeks to dismiss its counterclaims with prejudice. ECF No. 83. InternMatch does not oppose the dismissal of Nxtbigthing's counterclaims but requests that the Court condition the dismissal upon an award of attorneys' fees and costs. ECF No. 87.
II. LEGAL STANDARD
Under Rule 41(a)(2) of the Federal Rules of Civil Procedure, after an opposing party has served an answer or motion for summary judgment, "an action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper." FED. R. CIV. P. 41(a)(2). "This rule applies to dismissal of any counterclaim, crossclaim, or third-party claim." FED. R. CIV. P. 41(c). The decision to grant or deny a request to dismiss pursuant to Rule 41(a)(2) is within the district court's sound discretion. Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980) (internal citation omitted). However, "[a] district court should grant a motion for voluntary dismissal under Rule 41(a)(2) unless a defendant can show that it will suffer some plain legal prejudice as a result." Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001) (citing Waller v. Fin. Corp. of Am., 828 F.2d 579, 583 (9th Cir. 1987)). Legal prejudice means "prejudice to some legal interest, some legal claim, [or] some legal argument." Westlands Water Dist. v. United States, 100 F.3d 94, 97 (9th Cir. 1996).
In resolving a motion under Rule 41(a)(2), a court must determine whether to allow dismissal, whether the dismissal should be with or without prejudice, and what terms and conditions, if any, should be imposed. See Williams v. Peralta Cnty. Coll. Dist., 227 F.R.D. 538, 539 (N.D. Cal. 2005).
III. DISCUSSION
Nxtbigthing requests that the Court dismiss its counterclaims with prejudice because it cannot meet its burden of proving damages and can "defend its rights equally well in its capacity merely as a defendant to the case in chief." ECF No. 83 at 3. Nxtbigthing argues that InternMatch should not be awarded attorneys' fees because, even without the counterclaims, Plaintiff would have expended the same efforts in this advancing its claims. Id. at 7. InternMatch does not oppose the dismissal with prejudice, but contends that this is an exceptional case that warrants the award of costs and attorneys' fees incurred in defending against the counterclaims. ECF No. 87 at 7. InternMatch asserts Nxtbigthing knew that its counterclaims were meritless from the outset and only belatedly filed the instant motion. Id. at 8.
The Court will dismiss the counterclaims with prejudice. The Court finds that no legal prejudice will result from the dismissal because Nxtbigthing cannot bring its claims in another federal suit. See Smith, 263 F.3d at 975. The Court must next determine whether to impose fees and costs as a condition of dismissal. InternMatch argues that the award of attorneys' fees is appropriate under either Rule 41(a)(2) or 15 U.S.C. § 1117(a).
Although the issue has not been resolved in the Ninth Circuit, district courts have concluded that payment of fees and costs should not ordinarily be imposed as a condition for voluntary dismissal with prejudice. See Rodriguez v. Serv. Employees Int'l, No. C-10-01377 JCS, 2011 WL 4831201, at *3 (N.D. Cal. Oct. 12, 2011); Burnette v. Godshall, 828 F. Supp. 1439, 1443 (N.D. Cal. 1993). Costs and fees may be imposed under "exceptional circumstances" or pursuant to Federal Rule of Civil Procedure 11. See Rodriguez, 2011 WL 4831201, at *3 (discussing Chavez v. Northland Grp., No. CV-09-2521-PHX-LOA, 2011 WL 317482, at *4 (D. Ariz. Feb. 1, 2011)). Courts should only award attorneys' fees for work "which is not useful in continuing litigation between the parties." Koch v. Hankins, 8 F.3d 650, 652 (9th Cir. 1993). Under the Lanham Act, "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). "This requirement is met when the case is either groundless, unreasonable, vexatious, or pursued in bad faith." Cairns v. Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002) (internal quotations and citations omitted).
The Court finds that this case is not "exceptional" to warrant the imposition of attorneys' fees under Rule 41(a)(2) or 15 U.S.C. § 1117(a). While Nxtbigthing elected to dismiss its counterclaims after the close of fact discovery and filed the motion after the parties briefed InternMatch's spoliation motion, ECF No. 63, the Court cannot attribute the timing of this motion to any apparent gamesmanship.
InternMatch argues that this case is like Skydive Arizona, Inc. v. Quattrochi, where the district court awarded plaintiff attorneys' fees incurred in preparing to defend against counterclaims belatedly dismissed by the defendant. 704 F. Supp. 2d 841, 857 (D. Ariz. 2010) rev'd in part sub nom. Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105 (9th Cir. 2012). In Skydive, however, the defendant informed the plaintiff for the first time that it contemplated dropping its counterclaims on the first day of trial. Id. The defendant then dropped the counterclaims after both parties made opening statements. Id. The court determined that by delaying until the very last second, the defendant tried to treat the counterclaims "as a bargaining chip or tool to leverage a better outcome." Id.
In this case, however, the Nxtbigthing did not wait until the eleventh hour to dismiss its counterclaims, and the Court has not decided in favor of InternMatch on any case dispositive motions. Nxtbigthing sought to dismiss its counterclaims after determining that it can obtain most of the relief sought "simply by defending its rights in its capacity as a defendant" and because it cannot sufficiently prove lost profits. ECF No. 83 at 5.
This is unlike the cases cited by InternMatch to support the award of attorneys' fees under the Lanham Act. ECF No. 87 at 7. In Cairns v. Franklin Mint Co., the Ninth Circuit affirmed the district court's award of fees and costs after the court granted summary judgment to the defendant. 292 F.3d at 1145, 1156. In Albrecht v. Tkachenko, the district court awarded fees and costs after dismissing the case with prejudice, No. 14-cv-05442-VC, 2015 WL 2227607, at *1. Finally, in Vital Pharmaceuticals, Inc. v. Am. Body Bldg. Products, LCC, the district court awarded fees under the Lanham Act after finding in favor of the defendants on all claims upon the conclusion of a bench trial. 510 F. Supp. 2d 1043, 1044. --------
The Court also declines to award attorneys' fees because it does not have sufficient information to distinguish the work InternMatch did to defend against the counterclaims from the work necessary to advance its affirmative claims. See Koch, 8 F.3d at 652 (holding that a party is only entitled to recover, as a condition of dismissal under Rule 41(a)(2), attorneys' fees and costs for work that is not useful in continuing litigation between the two parties). InternMatch has not described the separate work undertaken in defending against Nxtbigthing's counterclaims that would justify an award of fees and costs.
CONCLUSION
For the foregoing reasons, the Court dismisses Defendant Nxtbigthing's counterclaims with prejudice, and denies InternMatch's request that the Court order the payment of its attorneys' fees and costs as a condition of dismissal.
IT IS SO ORDERED. Dated: February 11, 2016
/s/_________
JON S. TIGAR
United States District Judge