Opinion
Civil No. 00-0057-AS
April 2, 2001
AMENDED FINDINGS AND RECOMMENDATION
The court enters this Amended Findings and Recommendation solely for the purpose of addressing Defendant's initial motion to dismiss Plaintiffs' claim of legal malpractice. The initial motion to dismiss is denied based on the reasons stated in this Findings and Recommendation, as it is subsumed by Defendant's supplemental motion to dismiss.
The matters before the court are: (a) Defendant Kaaren Barr's initial motion (#17) to dismiss Plaintiffs Piotr and Alla Lepesh's claim for legal malpractice; (b) Defendant's supplemental motion (#19) to dismiss Plaintiffs' claim for legal malpractice against Defendant; and (c) Plaintiffs' request (#21) for voluntary dismissal.
BACKGROUND
On January 11, 2000, Plaintiffs filed a complaint against Defendant, alleging that she had committed the crime of legal malpractice against Plaintiffs and requesting that Defendant return $2,700.00 to Plaintiff Alla Lepesh, and reimburse her for the costs of this litigation. Plaintiffs also requested "punitive relief in the amount of $50,000.00 to Plaintiffs" in the interest of justice and as necessary to prevent Defendant from "hurting others".
On August 10, 2000, Defendant filed an answer to Plaintiffs' complaint, as well as a counterclaim against Plaintiffs for filing a punitive action without legal basis. On August 30, 2000, the court granted Plaintiffs' request for leave to alter or amend the complaint. The court ordered the amended complaint to be filed by December 30, 2000.
On January 12, 2001, after Plaintiffs failed to file an amended complaint, Defendant filed a motion to dismiss for failure to satisfy the requirements of federal diversity jurisdiction or, in the alternative, for a change of venue to the Unites States District Court for the Western District of Washington.
On January 31, 2000, Defendant filed a supplemental motion to dismiss, requesting the dismissal be granted "with prejudice" and that Defendant be granted the reasonable costs of defending against Plaintiffs' suit. Plaintiffs filed a response to Defendant's motions, offering to voluntarily dismiss their suit "without prejudice" so that they may file the action in a Washington state court, and requesting that the court deny Defendant's request for costs, as the suit was legitimately filed before the court.
The matter is now before the court to decide the issue of whether the dismissal is "with" or "without" prejudice, as well as the issue of whether to order Plaintiffs to pay Defendant's costs of litigation in the current suit.
FACTS
On March 16, 1998, Plaintiff Piotr Lepesh was detained by the Immigration and Naturalization Service ("INS"). Piotr Lepesh retained Defendant to represent him in an attempt to secure Piotr Lepesh's release from the custody of the INS. Defendant is an attorney licensed to practice law in Idaho and Washington. Defendant was paid $2,500.00 for representing Piotr Lepesh by Plaintiff, Alla Lepesh, Piotr's mother. During the course of the attorney-client relationship between Defendant and Plaintiffs, Defendant was paid by Alla Lepesh and communicated with Alla Lepesh about the progress of Piotr Lepesh's case.
Plaintiff Piotr Lepesh filed a habeas corpus petition on January 11, 1999, and was appointed a federal public defender by the court to represent him in his petition. In November of 1999, United States District Court Judge Rothstein ordered that Piotr Lepesh be released from INS custody after review of the habeas corpus petition.
On December 7, 1999, Plaintiffs sent a demand letter to Defendant requesting a refund of $2,700.00 paid by Plaintiff Alla Lepesh for Defendant's services as Piotr Lepesh's attorney. On December 4, 1999, Defendant responded to the demand letter and enclosed a trust account check for $1,500.00 as an offer of "full and final settlement" of the demand by Plaintiffs. Plaintiffs were also notified on December 16, 1999, by Mr. Antonio Salazar, that Salazar was the attorney representing Defendant in any further disputes and communications between Plaintiffs and the Defendant.
There is a disagreement about the total amount paid to Defendant by Plaintiff Alla Lepesh during the attorney-client relationship. Plaintiffs plead that Defendant was paid $2,700.00 in total for her services as attorney. Defendant admits in her answer only to an amount of $2,500.00 in payment by Plaintiffs for her services. The Plaintiffs and Defendant agree that there was an evaluation of Piotr Lepesh arranged by Defendant. However, Plaintiffs allege that Alla Lepesh paid $200.00 to Defendant for the evaluation, and Defendant admits only that she arranged the evaluation, but denies the payment of the $200.00. This explains the difference in total amounts for payment reported by Plaintiffs and Defendant.
LEGAL STANDARD
Rule 41(a) of the Federal Rules of Civil Procedure specifies the circumstances in which an action may be voluntarily dismissed by a plaintiff to a suit. Once a defendant has filed an answer or a motion for summary judgment, a plaintiff cannot dismiss without leave of court. Federal Rules of Civil Procedure, Rule 41(a), 28 U.S.C.A.; Hamilton v. Shearson-Lehman Am Express, Inc., 813 F.2d 1532, 1535 (9th Cir. 1987) (emphasis added). Dismissal by a plaintiff in these circumstances must be sought under Rule 41(a)(2):
(2) By Order of Court. Except as provided in paragraph (1) of this subdivision of this rule, an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon the defendant of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court. Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice.
Federal Rules of Civil Procedure, supra at (2).(emphasis added).
Rule 41(a)(2) motions for voluntary dismissal upon order of the court should be liberally granted, provided that no party will suffer legal prejudice. Stevedoring Services of America v. Armilla Int'l, 889 F.2d 919, 921 (9th Cir. 1991). In the Ninth Circuit, the decision to grant a voluntary dismissal under Rule 41(a)(2) is addressed to the district court's sound discretion. Westlands Water Dist. v. U.S., 100 F.3d 94, 96 (9th Cir. 1996).
Legal Prejudice
When ruling upon a Rule 41(a)(2) motion to dismiss without prejudice, the district court must first determine whether the defendant will suffer "plain legal prejudice" as a result of the dismissal. Hyde Drath v. Baker, 24 F.3d 1162, 1169 (9th Cir. 1994). Legal prejudice is shown "where actual legal rights are threatened or where monetary or other burdens appear to be extreme or unreasonable. Westlands, 100 F.3d at 97. Plain legal prejudice does not, however, result simply when the defendant faces the prospect of a second lawsuit or when plaintiff merely gains some tactical advantage. Durham v. Florida East Coast Railway Co., 385 F.2d 366, 368 (5th Cir. 1967). See also 5 J. Moore, J. Lucas J. Wicker, Moore's Federal Practice P 41.05(1), at 41-72 (2d ed. 1981).
Although case law does not articulate a precise definition of "legal prejudice," courts have examined whether a dismissal would result in the loss of a federal forum, or the right to a jury trial, or a statute-of-limitations defense. See American National Bank Trust Co. of Sapulpa v. Bic Corp., 931 F.2d 1411, 1412 (19th Cir. 1991); Manshack v. Southwestern Elec. Power Co., 915 f.2d 172, 174 (5th Cir. 1990); Hyde Drath v. Baker, 24 F.3d at 1169; and Westlands, 100 F.3d at 97. If the court determines that legal prejudice to the defendant will result, dismissal is granted "with prejudice." If no legal prejudice is found, a dismissal "without prejudice" is proper.
Dismissal With or Without Prejudice
The primary meaning of "dismissal without prejudice" is a dismissal without barring the defendant from returning later, to the same court, with the same underlying claim. That will also ordinarily have the consequence of not barring the claim in other courts. "With prejudice" is an acceptable form of shorthand for `an adjudication upon the merits'." 18 Wright and Miller, § 2373, at 396, n. 4. See also Goddard, 14 Cal.2d at 54, 92 P.2d, at 808 (stating that a dismissal "with prejudice" evinces "the intention of the court to make the dismissal on the merits."). To dismiss with prejudice, it must appear to a certainty that Plaintiff would not be entitled to relief under any set of facts that could be proven. Reddy v. Litton Industries, 912 F.2d 291-93.
Conditions on the Dismissal
In addressing a voluntary dismissal under Rule 41(a)(2), the district court must further determine what conditions, if any, to place upon the dismissal. See FRCP § 41(a)(2). The terms and conditions imposed by the district court under Rule 41(a)(2) are generally for the protection of the defendant. To alleviate the prejudice resulting from dismissal, courts typically impose costs and attorney fees upon plaintiff. Costs may include all litigation-related expenses incurred by the defendant, including reasonable attorney's fees. See American Cyanamid, 317 F.2d 295, 298 (5th Cir. 1963); Bishop v. West American Insurance Co., 95 F.R.D. 494, 495 (N.D.Ga. 1982). However, the imposition of costs and fees is not a prerequisite to granting a voluntary dismissal. Stevedoring Services of America v. Armilla Int'l, 889 F.2d at 921. The plaintiff has an option not to go forward with a dismissal if the conditions specified by the court seem too onerous. Washington Bancorporation v. Said, 812 F. Supp. 1256 (D.C.D.C. 1993); Mortgage Guar. Ins. Corp. v. Richard Carylon Co., 904 F.2d 298 (5th Cir. 1990).
DISCUSSION
Dismissal of the Suit
Rule 41(a)(2) allows a plaintiff, with the approval of the court, to dismiss an action voluntarily and without prejudice to future litigation, even after a defendant has filed an answer. In the instant case, the Defendant filed an answer as well as a counterclaim before Plaintiffs made the motion to voluntarily dismiss the suit against Defendant. Therefore, Rule 41(a)(2) is applicable to this suit. In analyzing whether to grant a voluntary dismissal "with" or "without" prejudice, the court must look to the possibility of legal prejudice to the Defendant. Hyde Drath v. Baker, 24 F.3d at 1169.
Defendant contends that the dismissal should be granted "with prejudice" because Defendant and defense counsel have expended a considerable amount of time and resources in defending against Plaintiffs' suit and legal prejudice will therefore result. However, the threat of future litigation which can cause uncertainty is insufficient to establish plain legal prejudice. Hyde Drath v. Baker, 24 F.3d at 1169; American National Bank Trust Co. of Sapulpa v. Bic Corp., 931 F.2d 1411, 1412 (19th Cir. 1991); and Conafay v. Wyeth Laboratories, 841 F.2d 417, 419 (D.C. Cir. 1988). The Defendant has not established plain legal prejudice merely by asserting that the Defendant and defense counsel had already begun trial preparations. See Durham, 385 F.2d at 368-69.
Courts have also held that it is not an abuse of discretion for district courts to voluntarily dismiss a suit without prejudice even though a plaintiff intends to re-file a claim in the state courts of another state. McCants v. Ford Motor Co.781 F.2d at 859. The court does not find that prejudice exists because the Plaintiffs plan to re-file the action in a state court in Washington. Therefore, pursuant to Rule 41(a)(2), the voluntary dismissal on the motion of the Plaintiffs is GRANTED without prejudice.
Conditions on the Voluntary Dismissal
Defendant's supplemental motion for dismissal also requested that Defendant be awarded the reasonable costs in defense of this suit, alleging that there was a considerable amount of time and resources used and that this suit very likely did not satisfy jurisdictional requirements and was filed in the wrong venue. The court does not need to decide the issue of satisfying jurisdiction or choice of venue because the court has granted the voluntary dismissal by Plaintiffs. The court finds that an award of costs to Defendant as a condition of the voluntary dismissal by Plaintiff is proper in this instance. However, the Defendant should only be awarded the payment of costs and attorney's fees for work which cannot be used in any future litigation of these claims. Koch v. Hankins, 8 F.3d 650, 652 (9th Cir. 1993) (where the Ninth Circuit expressly states that they will adopt this requirement for award of costs under Rule 41(a)(2)); Davis v. USX Corp., 819 F.2d 1270, 1276 (4th Cir. 1987).
Thus, the Plaintiffs will be responsible for reimbursing Defendant only for costs used to produce work product rendered useless by the dismissal of the claims. It is evident from the record that much of the work and resources expended to date during this suit will be easily carried over to litigation of the Plaintiffs' cause of action in state court. Therefore, the court will need to determine which costs arose from the preparation of work product which might be useful in the continuing litigation between the parties, and which costs arose from the preparation of work product rendered useless by the dismissal. See Koch v. Hankins, 8 F.3d 650, 652 (9th Cir. 1993).
CONCLUSION
For the foregoing reasons, Defendant's initial motion (#17) to dismiss is DENIED; Defendant's supplemental motion (#19) to dismiss is DENIED; and Plaintiffs' request (#21) for voluntary dismissal without prejudice is GRANTED, subject to the condition that Plaintiffs pay the reasonable costs expended in defense of this suit to Defendant to be determined in due course.
SCHEDULING ORDER
Objections to these Findings and Recommendation(s), if any, are due April 16, 2001. If no objections are filed, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement on that date.
If objections are filed, the response is due no later than April 30, 2001. When the response is due or filed, whichever date is earlier, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement.