Opinion
Case No. 01-2236-JWL
May 31, 2002
MEMORANDUM ORDER
This action arises out of a Facility Use Agreement ("FUA") entered into between plaintiff Kansas Waste Water, Inc. ("KWWI") and defendant Alliant on March 20, 1996. Plaintiff charges defendant with breach of the FUA and with fraud and negligent representation in the inducement of the agreement. In response, defendant brought a counterclaim against plaintiff for over $200,000 in past due rent. The matter is currently before the court on plaintiff's motion to dismiss without prejudice (Doc. 80). Defendant opposes the motion. Plaintiff's motion is granted subject to several conditions the court believes will alleviate any potential legal prejudice defendant may suffer.
I. Procedural Background
On April 19, 2001, plaintiff filed suit in the District Court of Johnson County, Kansas. On May 16, 2001, defendant removed the case to federal court, alleging that this court had jurisdiction under 42 U.S.C. § 1442 and U.S. Const. Art. I, § 8, cl. 7. On October 3, 2001, plaintiff filed a first amended complaint. On October 17, 2001, defendant filed an answer to the first amended complaint and a counterclaim. Defendant's counterclaim has an independent basis for jurisdiction under 42 U.S.C. § 1442 and U.S. Const. Art. I, § 8, cl. 7. On November 7, 2001, plaintiff requested to amend its complaint out of time to add Wastewater Treatment, Inc. ("WTI"), a sister corporation, as an additional party plaintiff. Magistrate Judge Waxse issued a memorandum and order dated February 14, 2002, denying plaintiff's request to add WTI as an additional party plaintiff out of time because Judge Waxse concluded that plaintiff's attorneys should have investigated who the real party in interest was in the lawsuit before the claims were filed. Plaintiff filed a motion for review of the magistrate judge's decision with this court, which was denied on April 18, 2002. In response, plaintiff filed the instant motion, seeking to dismiss the lawsuit without prejudice so that it can re-file the lawsuit with both KWWI and WTI as plaintiffs. Defendant's counsel would not consent to permit plaintiff to dismiss the case without prejudice.
II. Discussion
Plaintiff moves to dismiss this action without prejudice in light of Magistrate Judge Waxse's order declining to permit plaintiff to amend its complaint to add WTI as an additional party plaintiff. Dismissal is appropriate, according to plaintiff, for the following reasons: (1) it cannot obtain complete relief without WTI as a party to the lawsuit; (2) to avoid confusion; and (3) to avoid the need for duplicative lawsuits. Defendant argues that granting plaintiff's motion would subject it to legal prejudice. Specifically, defendant alleges that plaintiff should not be permitted to circumvent the magistrate judge's ruling that plaintiff could not amend its complaint to add WTI as an additional party plaintiff by dismissing the case and re-filing it with WTI as a party.
Federal Rule of Civil Procedure 41(a)(2) governs voluntary dismissals after the opposing party has filed an answer or motion for summary judgment. Once a defendant has filed an answer, as is the case here, a plaintiff may voluntarily dismiss an action only upon order of the court. See Fed.R.Civ.P. 41(a)(2). Rule 41(a)(2) "is designed `primarily to prevent voluntary dismissals which unfairly affect the other side, and to permit the imposition of curative conditions.'" Clark v. Tansy, 13 F.3d 1407, 1411 (10th Cir. 1993) (quoting Alamance Indus., Inc. v. Filene's, 291 F.2d 142, 146 (1st Cir. 1961)). Absent "legal prejudice" to the defendant, the district court normally should grant such a dismissal. Ohlander v. Larson, 114 F.3d 1531, 1537 (10th Cir. 1997). "The parameters of what constitutes `legal prejudice' are not entirely clear," but factors the Tenth Circuit has held the district court should consider include: "the opposing party's effort and expense in preparing for trial; excessive delay and lack of diligence on the part of the movant; insufficient explanation of the need for a dismissal; and the present stage of the litigation." Id. (citing Phillips U.S.A., Inc. v. Allflex U.S.A., Inc., 77 F.3d 354, 358 (10th Cir. 1996)). Each factor does not have to favor the moving party for dismissal to be appropriate, nor does each factor need to favor the opposing party for denial of the motion to be proper. See id. (citing Phillips U.S.A., Inc., 77 F.3d at 358).
It is also important to note that the above list of factors is not exclusive and the court is free to, and should, also consider any other relevant factors. See id. (citing Phillips U.S.A., Inc., 77 F.3d at 358). The court should "endeavor to insure substantial justice is accorded to both parties." Id. (citing 9 Charles Alan Wright and Arthur R. Miller, Federal Practice and Procedure § 2364 at 278 (2d ed. 1994)). Therefore, the court should consider the equities facing not only the defendant but also the plaintiff. See id. (citing Wright and Miller, Federal Practice and Procedure § 2364 at 278). Finally, when considering a motion to dismiss, the important factors in determining legal prejudice are those involving the parties, not the court's time or effort spent on the case. See id. (citing Clark v. Tansey, 13 F.3d 1407, 1411 (10th Cir. 1993)).
Applying the above factors and taking into account the court's ability to impose curative conditions on the parties, the court finds that the defendant will not suffer legal prejudice if this case is dismissed without prejudice. Significantly, defendant's counterclaim has an independent jurisdictional basis and, therefore, may go forward. See Amoco Prod. Co. v. United States, 852 F.2d 1574, 1579 (10th Cir. 1988) (citing National Research Bureau, Inc. v. Bartholomew, 482 F.2d 386, 388-89 (3d Cir. 1973) (where jurisdiction of the counterclaim is independent, "the counterclaim must be allowed to proceed without regard to the fate of the original claim")). In fact, a condition of the dismissal is that this order has no effect on defendant's ability to proceed with its counterclaim. Thus, it is not as if defendant's ability to obtain justice is in some way hindered by dismissal of the complaint.
The court does not find persuasive defendant's argument that plaintiff is circumventing the magistrate judge's ruling. Instead, the court believes that the motion to dismiss should be granted, while the motion to amend was denied, because a different standard is applied. Although the magistrate judge found that the motion to amend was untimely, the court does not believe that plaintiff has shown that it will be subjected to "legal prejudice" if the case is dismissed without prejudice.
With regard to the first factor, the opposing party's effort and expense in preparing for trial, the court finds that any potential prejudice can be alleviated by curative conditions. While it is true that defendant has produced thousands of documents and it appears that all of the depositions will be completed by the time this order is issued, plaintiff has agreed that all of that discovery can be used in a subsequent action. See, e.g., Jenkins v. Unified School District No. 501, 175 F.R.D. 582, 584 (D.Kan. 1997) (permitting the use of materials from any discovery already conducted if the case is re-filed). Thus, the court will incorporate that condition in the dismissal. Moreover, the court believes that any further prejudice can be cured by requiring plaintiff to pay defendant's duplicative expenses. Typically, a court imposes as a condition of dismissal without prejudice that the plaintiff pay the defendant's expenses incurred in defending the lawsuit, which usually include a reasonable attorney's fee. United States v. Rockwell Int'l Corp., 282 F.3d 787, 810 (10th Cir. 2002) (citing Marlow v. Winston Strawn, 19 F.3d 300, 303 (7th Cir. 1994)); see also Cauley v. Wilson, 754 F.2d 769, 771-72 (7th Cir. 1985) (holding that "a district court may seek to reimburse the defendant for his attorneys' fees because he [or she] faces a risk that the plaintiff will re-file the suit and impose duplicative expenses upon him."). Plaintiff has indicated it will re-file this action; therefore, requiring plaintiff to pay that part of defendant's expenses that are duplicative, including a reasonable attorney's fee, is a particularly appropriate condition in this case. In sum, the court believes that the combination of permitting defendant to use discovery in a subsequent case and reimbursing defendant for duplicative expenses will alleviate any legal prejudice to defendant.
The second factor to be considered, excessive delay and lack of diligence on the part of the movant, also does not result in legal prejudice to defendant. Defendant's argument rests on the assertion that plaintiff should have investigated who the real party in interest was before the lawsuit was filed. The court agrees that plaintiff should have done more investigating, but the court finds that plaintiff has not caused an excessive delay because it moved to dismiss this action within a reasonable time after its motion to amend was denied.
Even if the court accepts defendant's argument that plaintiff is dismissing the case because, in finding that WTI, not KWWI, ran the water treatment plant, it discovered that KWWI has no damages, the court still believes that defendant acted in a timely fashion. Upon making the discovery, plaintiff first attempted to amend the complaint. When defendant opposed the motion and, ultimately, plaintiff was unsuccessful in showing that the magistrate judge's denial of its motion to amend was clearly erroneous, defendant promptly moved to dismiss the case without prejudice.
The third factor, whether the plaintiff has an insufficient explanation for the need for a dismissal, requires the court to assess the plaintiff's explanation for seeking to dismiss this case without prejudice. Plaintiff alleges that it needs to add WTI as an additional party plaintiff to avoid confusion and duplicative lawsuits. The court finds that this is a sufficient justification for seeking dismissal without prejudice. To decide otherwise would result in an injustice to plaintiff because it would not be permitted to add a party that is potentially one of the real parties in interest. While the court does find significant defendant's contention that plaintiff's current version of the facts is inconsistent with its pleadings in this case and three prior lawsuits, defendant does not explain how this results in legal prejudice to it. Moreover, any argument regarding inconsistency with prior litigation can still be made if the case is re-filed with WTI as a party.
The last factor, the present stage of the litigation, also favors plaintiff. While a substantial amount of discovery is complete, all of the discovery may be used in a subsequent case. In short, the court does not believe this case has progressed to a point that would weigh against dismissal. Significantly, this is not a situation where either the pretrial conference has been held and the case is on the verge of trial, or where the plaintiff is seeking to dismiss the case because the defendant has filed a summary judgment motion. See, e.g., Phillips U.S.A., Inc., 77 F.3d at 358 (affirming the district court's denial of the plaintiff's motion to dismiss because a party should not be able to avoid an adverse ruling on a dispositive motion by dismissing the case).
The court does not find compelling defendant's argument that the case should not be dismissed because all of its witness at trial will be former employees. As plaintiff points out, most of the depositions should have already been taken and may be used in a subsequent case, and the witnesses would have been former employees at the time of trial anyway.
Taken as a whole, the factors, as applied to this case, do not lead the court to the conclusion that the defendant will suffer legal prejudice if this case is dismissed without prejudice subject to a number of curative conditions. For example, in Jenkins v. United School District No. 501, 175 F.R.D. 582 (D.Kan. 1997), the court held that although the factors favored denying the plaintiff's motion to dismiss, it would grant the motion because curative conditions would negate any prejudice to the defendant. Id. at 583. In Jenkins, the defendant had filed several motions to dismiss and several memoranda in opposition to plaintiff's motions to amend. Id. Defendant's counsel had appeared at two Rule 26 conferences, three scheduling conferences and the court had issued three show cause orders to the plaintiff requiring him to explain why the case should not be dismissed. Id. In fact, the court rejected the plaintiff's reason for dismissal and stated that the only thing left for the parties to do prior to trial was file a summary judgment motion. Id. at 583-84. Despite all of these factors favoring the defendant, the court granted the plaintiff's motion to dismiss because imposing conditions on the plaintiff's dismissal could alleviate any prejudice to the defendant. Id. at 584. Jenkins presents a far more compelling set of circumstances for denial of the motion than does this case.
The court believes that similar to Jenkins, here curative conditions can protect defendant from legal prejudice.
One of the curative conditions plaintiff recommends is that dismissing plaintiff's claim without prejudice have no preclusive effect on KWWI's subsequent lawsuit even if defendant chooses to proceed with its counterclaim. The court declines to do so. The preclusive effect of the dismissal without prejudice speaks for itself. Moreover, the court is not in a position to grant a condition that alleviates the preclusive effects of the counterclaim; that is one of the potential risks of dismissing the case.
Accordingly, the court grants plaintiff's motion to dismiss without prejudice subject to the following terms and conditions:
(1) This order has no effect on defendant's ability to proceed with its counterclaim.
(2) Plaintiff shall consent to the use, in any re-filed action, of any material resulting from any discovery already conducted in this case.
(3) Defendant has until June 14, 2002, to make a detailed showing to this court of the expenses, including reasonable attorney's fees, that it believes would be duplicative if a subsequent action is filed; plaintiff shall have until June 28, 2002, to respond to that showing; and the court will determine the amount as promptly as possible thereafter.
(4) Upon re-filing this action against defendant, plaintiff shall be required to pay to defendant the expenses this court finds would be duplicative.
(5) Failure to pay the amount set forth by the court within twenty days after re-filing this action will convert this dismissal into a dismissal with prejudice. The court will retain jurisdiction over this matter to entertain a motion by defendant to so convert such a dismissal.
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff's motion to dismiss without prejudice (Doc. 80) is granted subject to the following conditions: (1) This order has no effect on defendant's ability to proceed with its counterclaim; (2) Plaintiff shall consent to the use, in any re-filed action, of any material resulting from any discovery already conducted in this case; (3) Defendant has until June 14, 2002, to make a detailed showing to this court of the expenses, including reasonable attorneys' fees, that it believes would be duplicative if a subsequent action is filed; plaintiff shall have until June 28, 2002, to respond to that showing; and the court will determine the amount as promptly as possible thereafter; (4) Upon re-filing this action against defendant, plaintiff shall be required to pay to defendant the expenses this court finds would be duplicative; and (5) Failure to pay the amount set forth by the court within twenty days after re-filing this action will convert this dismissal into a dismissal with prejudice. The court will retain jurisdiction over this matter to entertain a motion by defendant to so convert such a dismissal.