Lassen Municipal Utility District v. Kinross Gold U.S.A., Inc.

          MEMORANDUM AND ORDER

          MORRISON C. ENGLAND UNITED STATES DISTRICT JUDGE

         Through the present action, Plaintiff Lassen Municipal Utility District ("Plaintiff") sought to nullify its December 2007 purchase of the so-called Hayden Hill 69kv power transmission line ("the Line") in Lassen County, California. According to Plaintiff, its former General Manager, Frank Cady, lacked the requisite authority to execute a sales contract for purchase of the Line from Defendants Kinross Gold, U.S.A. Inc. and Lassen Gold Mining, Inc. ("Defendants"). Plaintiff's lawsuit, which contained causes of action for declaratory relief and restitution, was removed to this Court under the auspices of its diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). Plaintiff now moves for voluntary dismissal of its lawsuit pursuant to Federal Rule of Civil Procedure 41(a)(2).^[1] For the reasons set forth below, that Motion is GRANTED.^[2]

         BACKGROUND

         Plaintiff's lawsuit was initially filed in state court on December 15, 2010, and Defendants removed the matter to this Court on January 27, 2011. On April 2, 2012, Plaintiff moved for summary judgment on grounds that Frank Cady lacked the requisite authority to bind Plaintiff to the Purchase and Sales Agreement (‘PSA") at issue. ECF No. 27. That Motion was denied by this Court's Memorandum and Order filed March 8, 2013 (ECF No. 93).^[3] Since that ruling, the trial in this matter was continued three times on the Court's own motion because of its impacted caseload. Then, on March 10, 2016, about a month before the rescheduled April 11, 2016 trial date, Plaintiff filed the Motion for Voluntary Dismissal now before the Court. (ECF No. 113). As a result of that Motion, the Court vacated the April 11, 2016 trial pending its decision on the Motion to Dismiss. Defendants proceeded to oppose Plaintiff's Motion (ECF No.116), and Plaintiff filed a Reply to that Opposition. (ECF No. 117).

         While Defendants do not ostensibly oppose Plaintiff's request that this lawsuit be dismissed, they nonetheless request that various conditions be imposed by the Court as a precondition for dismissal. Defendants argue that they are prejudiced by Plaintiff's decision to voluntarily dismiss the action on the eve of trial, and contend that permitting dismissal at this juncture would deprive them of their ability to prevail on their affirmative defense of ratification. Contrary to Plaintiff's assertion otherwise, that defense asserts that Plaintiff had in fact ratified the purchase of the Line from Defendants. Defendants accordingly seek declaratory relief to that effect should Plaintiff's request for dismissal be granted.^[4] Similarly, Defendants also ask that the Court order Plaintiff to 1) assume its reclamation obligations under the PSA; 2) to post adequate security for those obligations; and 3) to obtain its own Special Use Permit for reclamation activities.

         Additionally, according to Defendants, they should be awarded attorney's fees, both as a prevailing party both under the provisions of the PSA and in accordance with California law and the provisions of the sales agreement, and pursuant to the Court's inherent authority because Plaintiff's persistence in continuing to litigate this matter was frivolous.

         STANDARD

         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. Waller v. Fin. Corp. of Am., 828 F.2d 579, 583 (9th Cir. 1987); see also Hamilton v. Firestone Tire & Rubber Co., 679 F.2d 143, 145-46 (9th Cir. 1982). Rule 41(a)(2) provides:

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.

         The Ninth Circuit has clarified that legal prejudice means "prejudice to some legal interest, some legal claim, some legal argument." Smith v. Lenches, 263 F.3d 972, 976 (9th Cir. 2001) (quoting Westlands Water Dist. v. United States, 100 F.3d 94, 96 (9th Cir. 1996)). In so holding, the Court further explained that "uncertainty because a dispute remains unresolved" or because "the threat of future litigation . . . causes uncertainty" does not result in plain legal prejudice. Id. at 976. Moreover, plain legal prejudice does not result merely because the defendant will be inconvenienced by having to defend in another forum or where a plaintiff would gain a tactical advantage by that dismissal. Hamilton, 679 F.2d at 145.

         The decision to grant or deny a request to dismiss pursuant to Rule 41(a)(2) is a matter subject to a district court's sound discretion. Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980). In exercising that discretion, "[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).

         ANALYSIS

         As indicated above, Defendants first request that this Court condition any dismissal of Plaintiff's complaint on the provision of several forms of affirmative relief, including: (1) the enforcement of the PSA against Plaintiff as well as orders that Plaintiff assume its reclamation obligations under the sales agreement; (2) that Plaintiff post adequate security for those obligations; and (3) that Plaintiff obtain its own Special Use Permit for reclamation activities. Defendants argue that it will be prejudiced absent such conditions and that accordingly any dismissal must be predicated upon them.

         Defendants' request for affirmative relief ignores the fact that they have filed no counterclaim during the more than five years that this matter has been pending. As a matter of law, no prejudice results from a dismissal where defendants "have not counterclaimed or otherwise filed for affirmative relief." Burnett v. Godshall, 828 F.Supp. 1439, 1443 (N.D. Cal. 1993); Roberts v. MacDonald, 967 F.2d 590 at *2 (9th Cir. 1992) (no prejudice where dismissal sought before any counterclaim is pending). The Court agrees with Plaintiff's observation that imposition of the declaratory conditions advocated by Defendants would amount to Defendants "receiving a decision on the merits with respect to declaratory relief claims it has never pursued and never established." Pl.'s Reply, ECF No. 117, 9:5-7. Moreover, the Court rejects Defendants' claim that dismissal of the present matter would foreclose Defendants' future right to seek relief against Plaintiff for some potential future breach of the PSA. Those issues are different and would not be barred under res judicata principles if Plaintiff's own lawsuit, which contends that Cady lacked authority to bind Plaintiff to the subject purchase agreement, is ...