United States District Court, C.D. California,
CIVIL MINUTES -
GENERAL PROCEEDINGS: (IN CHAMBERS): DEFENDANT PROSPER, INC'S MOTION FOR
VOLUNTARY DISMISSAL WITHOUT PREJUDICE OF CROSS COMPLAINT (DKT. NO. 151, FILED
FEBRUARY 17, 2015)
CHRISTINA A. SNYDER, District Judge.
The Court finds this motion appropriate for decision without oral argument. See Fed.R.Civ.P. 78; Local Rule 7-15. Accordingly, the hearing date of March 23, 2015, is vacated, and the matter is hereby taken under submission.
This lawsuit was commenced on February 8, 2012, when plaintiff Frank DuFour ("DuFour") filed a complaint in the Los Angeles County Superior Court ("Superior Court"). DuFour filed his most recent Fourth Amended Complaint ("FAC") on December 27, 2013, also in the Superior Court. See Dkt. No. 1-2. The FAC names as defendants Robert Allen ("Allen"), Enlightened Wealth Institute International, L.C., Enlightened Wealth Institute, L.C., Prosper Inc. ("Prosper"), Green Planet Services, Opteum Financial Services, Midland Mortgage Company, Aurora Loan Services, Sherson Lehman, Millennium Home Loans, Charlie Payne, and Does 1 through 100. Id . In brief, the FAC alleges that defendants schemed to induce plaintiff to enroll in a fraudulent real estate investment course offered by Prosper, and to buy fraudulently marketed properties, from which defendants profited through undisclosed relationships with management and financing companies. See generally FAC. This case was removed to federal court on July 19, 2014, after the Federal Deposit Insurance Corporation was appointed as receiver of defendant Millennium Bank, N.A. Id.
On December 23, 2013-just prior to the filing of DuFour's FAC-Prosper filed a cross complaint for breach of contract against DuFour. Dkt. No. 153 Ex. 1. The Cross-Complaint alleges that on or about January 16, 2006, DuFour executed a written Enrollment Agreement with Prosper regarding the aforementioned real estate investment education program. Cross-Complaint ¶ 10. The Cross-Complaint alleges that DuFour electronically signed the Enrollment Agreement and paid the associated enrollment fee, and that Prosper substantially performed its duties under that agreement. Id . ¶¶ 15, 19. Prosper alleges that DuFour breached the Enrollment Agreement by (1) filing this lawsuit instead of submitting his claim to mediation and binding arbitration, (2) refusing to spend the "specified number of hours per week in furtherance of his objectives relating to the educational program, " (3) failing to "learn and apply the principles taught in the program and to complete homework assignments, " (4) not consulting "his own legal, accounting and tax advisors before making financial decisions related to... the real estate education" program, and (5) refusing to indemnify and hold Prosper harmless. Id . ¶ 21. DuFour filed a demurrer to the Cross-Complaint in the Superior Court, which was overruled. DuFour subsequently filed a "Cross-Cross-Complaint, " which this Court dismissed on September 15, 2014, on the ground that it impermissibly duplicated claims already raised in the FAC. DuFour has appealed the order dismissing the Cross-Cross-Complaint to the Court of Appeals for the Ninth Circuit. See Opp'n at 1-2; Dkt. No. 46.
In May 2014, before this case was removed to federal court, the Superior Court granted summary judgment on the FAC in favor of defendants including Prosper. See Dkt. No. 90. On November 21, 2014, the Court entered judgment in favor of these defendants. Id . DuFour has appealed this judgment to the Ninth Circuit as well. Dkt. No. 110. On January 26, 2015, the Court denied without prejudice Prosper's motion for attorneys' fees based on the FAC, finding that the best course of action was to defer ruling on that motion until the resolution of DuFour's appeal. Dkt. No. 140.
On February 17, 2015, Prosper filed a motion for voluntary dismissal without prejudice of the Cross-Complaint. Dkt. No. 141. DuFour filed an opposition on March 2, 2015, and Prosper replied on March 9, 2015. Dkt. Nos. 155, 158. After considering the parties' arguments, the Court finds and concludes as follows.
II. LEGAL STANDARD
"Federal Rule of Civil Procedure 41(a)(2) allows a plaintiff, pursuant to an order of the court, and subject to any terms and conditions the court deems proper, to dismiss an action without prejudice at any time." Westlands Water Dist. v. United States, 100 F.3d 94, 96 (9th Cir. 1996). "The purpose of the rule is to permit a plaintiff to dismiss an action without prejudice so long as the defendant will not be prejudiced... or unfairly affected by dismissal." Stevedoring Servs. of Am. v. Armilla Int'l, B.V., 889 F.2d 919, 921 (9th Cir. 1989) (citations omitted).
"When ruling on a motion to dismiss without prejudice, the district court must determine whether the defendant will suffer some plain legal prejudice as a result of the dismissal." Westlands Water Dist., 100 F.3d at 96. Legal prejudice is "prejudice to some legal interest, some legal claim, [or] some legal argument, " and focuses on "the rights and defenses available to a defendant in future litigation." Id. at 97. For example, legal prejudice may result when a dismissal without prejudice "would result in the loss of a federal forum, or the right to a jury trial, or a statute-of limitations defense, " or "when the dismissal of a party would have rendered the remaining parties unable to conduct sufficient discovery to untangle complex fraud claims." Id . A defendant may also suffer plain legal prejudice if dismissal without prejudice prevents it from bringing a motion for attorneys' fees as a prevailing party, because "dismissal without prejudice precludes prevailing party status." United States v. Ito, 472 F.Appx. 841, 842 (9th Cir. 2012). A district court may also consider such factors as the stage of litigation and the moving party's delay in requesting voluntary dismissal, as well as indications of forum shopping. See Cent. Mont. Rail v. BNSF Ry. Co., 422 F.Appx. 636, 638 (9th Cir. 2011).
Legal prejudice is not, however, established "because a dispute remains unresolved" or by the mere "threat of future litigation." Westlands Water Dist., 100 F.3d at 96-97; see also Hyde & Drath v. Baker, 24 F.3d 1162, 1169 (9th Cir. 1994) ("The inconvenience of defending another lawsuit or the fact that the defendant has already begun trial preparations does not constitute prejudice."). Neither is legal prejudice present just because the plaintiff "gains some tactical advantage." Hamilton v. Firestone Tire & Rubber Co, Inc., 679 F.2d 143, 145 (9th Cir. 1982).
Nor does "the expense incurred in defending against a lawsuit... amount to legal prejudice, " especially because dismissal without prejudice may be conditioned "upon the payment of appropriate costs and attorney fees." Westlands Water Dist., 100 F.3d at 97. Still, "[i]mposition of costs and fees as a condition for dismissing without prejudice is not mandatory." Id .; see Stevedoring Servs. of Am., 889 F.2d at 921 (holding a district court had not abused its discretion by refusing to require payment of costs and attorneys' fees).
By order, a district court may dismiss an action with prejudice on a motion for voluntary dismissal under Rule 41(a)(2). Smith v. Lenches, 263 F.3d 972, 976 (9th Cir. 2001); see Fed.R.Civ.P. 41(a)(2) ("Unless the order states otherwise, a dismissal under this paragraph (2) is without prejudice."). "Attorneys' fees and costs will not be imposed as a condition for voluntary dismissal with prejudice because there is no risk of future litigation." Larsen v. King Arthur Flour Co., No. C 11-05495 CRB, 2012 WL 2590386, at *1 (N.D. Cal. July 3, 2012) (citing Burnette v. Godshall, 828 F.Supp. 1439, 1443 (N.D. Cal. 1993)); see also Gonzalez, 2008 WL 612746, at *3 ("An award of costs and attorneys' fees should generally be denied if the voluntary dismissal is granted with prejudice."). Therefore, a "plaintiff faced with the imposition of attorneys' fees and costs as a condition of voluntary dismissal may request that the action be dismissed with prejudice to avoid payment." Gonzalez, 2008 WL 612746, at *3.
A district court's resolution of a Rule 41(a)(2) motion is reviewed for abuse of discretion. Westlands Water Dist., 100 F.3d at 96; ...