United States District Court, D. Kansas
STANTON E. ROSS, Plaintiff/Counterclaim Defendant,
ADAM ROTHSTEIN, Defendant/Counterclaimant.
MEMORANDUM AND ORDER
DANIEL D. CRABTREE, District Judge.
This matter comes before the Court on defendant's Motion for Voluntary Dismissal of his Remaining Counterclaims IV-VII, Determinations as to His Deficiency Award, Interest, and Costs, and for Entry of Final Judgment (Doc. 298). For the following reasons, the Court grants defendant's motion but imposes certain conditions.
I. Factual and Procedural Background
The facts and procedural history of this case are well known to the parties, so the Court will not recite them in great detail. See Doc. 297 at 2-4 (describing relevant facts). Broadly, this dispute began after plaintiff defaulted on a $210, 000 loan defendant had made to plaintiff. The Court has entered two summary judgment orders in this case: one on September 9, 2013 (Doc. 55-1) and second on March 12, 2015 (Doc. 297). The upshot of these two orders is that defendant has prevailed on all of plaintiff's claims and on three of the seven counterclaims he asserted. Defendant's four other counterclaims are the only claims remaining in this lawsuit: Count IV (Breach of Unconditional Guarantee); Count V (Breach of Covenant of Good Faith and Fair Dealing); Count VI (Unjust Enrichment); and Count VII (Fraud [In the Inducement], Including Punitive Damages).
In this motion, defendant seeks an order under Federal Rule of Civil Procedure 41(a)(2) dismissing these four unresolved counterclaims without prejudice. Because a Rule 41(a)(2) dismissal would dispose of all of the remaining claims, defendant seeks additional relief related to final judgment. Specifically, defendant asks the Court to: (1) direct the Clerk of the Court to enter final judgment on all proceedings in this case, including defendant's right to recover his attorney's fees, costs, and expenses; (2) determine the amount of the deficiency judgment defendant is entitled to receive; (3) declare that defendant is entitled to post-judgment interest on the deficiency judgment amount at a rate of 18%, compounded monthly; and (4) declare defendant as the prevailing party for purposes of recovering costs under Rule 54(d). The Court addresses these issues below.
II. Motion to Dismiss Defendant's Remaining Counterclaims Without Prejudice
Defendant seeks an order under Rule 41(a)(2) dismissing without prejudice his four remaining counterclaims, Counts IV-VII.
A. Legal Standard
Fed. R. Civ. P. 41(a)(2) permits a party to dismiss an action voluntarily "only by court order, on terms that the court considers proper." "The rule is designed primarily to prevent voluntary dismissals which unfairly affect the other side, and to permit the imposition of curative conditions." Brown v. Baeke, 413 F.3d 1121, 1123 (10th Cir. 2005) (internal citation omitted). District courts normally should grant a Rule 41(a)(2) dismissal without prejudice "[a]bsent legal prejudice' to the defendant." Ohlander v. Larson, 114 F.3d 1531, 1537 (10th Cir. 1997).
"Prejudice does not arise simply because a second action has been or may be filed against the defendant...." Brown, 413 F.3d at 1124. Rather, prejudice is a function of other, practical factors including: 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. "These factors are neither exhaustive nor conclusive; the court should be sensitive to other considerations unique to the circumstances of each case." Id. "Each factor need not be resolved in favor of the moving party for dismissal to be appropriate, nor need each factor be resolved in favor of the opposing party for denial of the motion to be proper." Ohlander, 114 F.3d at 1537.
When deciding whether to grant defendant's motion to dismiss without prejudice, "the district court should endeavor to insure substantial justice is accorded to both parties, and therefore the court must consider the equities not only facing" plaintiff, but also those facing defendant. Cnty. of Santa Fe, N.M. v. Pub. Serv. Co. of N.M., 311 F.3d 1031, 1048 (10th Cir. 2002) (internal quotation marks omitted). The "convenience of the court" is not an appropriate consideration. Clark v. Tansy, 13 F.3d 1407, 1411 (10th Cir. 1993) (quotation omitted).
Rule 41(a)(2) permits a court to impose "terms and conditions as the court deems proper." Brown, 413 F.3d at 1123 (internal citation omitted). The conditions should keep the parties in the same position in a subsequent lawsuit that they occupied before defendant filed his motion to dismiss. Pyles v. Boeing Co., 109 F.Appx. 291, 294 (10th Cir. 2004) ("Because the magistrate judge carefully crafted the conditions of her order to maintain the position that the parties had held before [the motion to dismiss], we hold that there has been no abuse of discretion."). When a court decides to impose conditions, it must give the party who filed the motion to dismiss an opportunity to withdraw his request for dismissal. Hall v. Great S. Bank, No. 09-2600-CM, 2010 WL 4366110, at *1 (D. Kan. Oct. 28, 2010); 9 Charles Alan Wright et al., Federal Practice and Procedure § 2366 (3d ed. 2013) ("If the conditions are too onerous, the [defendant] need not accept the dismissal on those terms.").
Defendant asks the Court to dismiss his four remaining counterclaims without prejudice. In response, plaintiff argues that the Court should dismiss the counterclaims without prejudice only if the Court imposes certain conditions to cure any legal prejudice plaintiff might suffer should defendant later revive the counterclaims. The Court first determines whether dismissal of the counterclaims without prejudice is appropriate and then evaluates what conditions to impose.
1. Legal Prejudice Analysis
The Court should grant defendant's motion to dismiss if it determines that plaintiff will not suffer legal prejudice as a result. Ohlander, 114 F.3d at 1537. The Tenth Circuit has identified four general factors to guide a district court's decision when evaluating legal prejudice: (1) insufficient explanation of the need for dismissal; (2) the opposing party's effort and expense in preparing for trial; (3) excessive delay and lack of diligence on the part of the movant; and (4) the present state of the litigation. Brown, 413 F.3d at 1124. After considering these factors, the Court has little trouble concluding that plaintiff will sustain no legal prejudice from an order dismissing defendant's remaining counterclaims without prejudice.
First, the Court considers defendant's reason for seeking dismissal. Defendant asserts that he has little to gain from continuing to pursue his remaining counterclaims because they provide largely the same remedies as the counterclaims on which he has prevailed already. The Court granted summary judgment for defendant on Counterclaim Counts I-III, which assert contract-related claims for breach of promissory note, breach of forbearance agreement, and foreclosure of security interest. The remaining counterclaims, Counts IV-VII, also assert contract-related claims for breach of guarantee, breach of covenant of good faith and fair dealing, unjust enrichment, and fraud in the inducement. All four of these claims provide for compensatory damages that duplicate those in Counts I-III. Indeed, defendant indicated in the Pretrial Order that he did not intend to pursue Counterclaim Counts IV-VI for this very reason. See Doc. 247 at 18-19. Only Count VII, a claim for fraud in the inducement, provides relief unavailable under Counts I-III because it allows for punitive damages. Still, having prevailed on Counts I-III, defendant has obtained most of the possible available relief on his counterclaims.
According to defendant, he "seeks a dismissal of his counterclaim Counts IV-VII without prejudice only because of a desire to preserve the opportunity to refile and pursue one or more of said counterclaims, if possible, in the event any [of plaintiff's] affirmative claim[s] is somehow reinstated in any subsequent proceedings, including a likely appeal initiated by [plaintiff]." Doc. 299 at 14. "In other words, [defendant] will not refile any such counterclaim(s) in the event the dispositive rulings entered by this Court remain in place following any further proceedings in this Court and/or any appeal." Id. Thus, defendant has received the bulk of the relief to which he is entitled and will revive his remaining counterclaims only if later proceedings disturb the Court's previous dispositive rulings. The Court concludes that this reason for seeking to dismiss his four remaining counterclaims is reasonable, rational, and weighs in favor of granting defendant's motion to dismiss without prejudice.
Second, the Court considers the opposing party's-here, plaintiff's-effort and expense in preparing for trial. Plaintiff argues that he has expended significant resources preparing for trial, which weighs against granting defendant's motion. Plaintiff notes that the parties have finished discovery, he has filed a motion in limine (Doc. 261), and he has filed a motion for summary judgment on defendant's fraud in the inducement counterclaim (Doc. 255). None of these actions favor plaintiff's position. The parties have completed discovery in this case, but one can attribute almost none of that work to defendant's four remaining counterclaims specifically or exclusively. Plaintiff's motion in limine sought to exclude all testimony of defendant's expert Brian Underwood. But Mr. Underwood sought to testify only on the question whether defendant's sale of the collateral in this case, 77, 310 shares of Infinity Energy Resources, Inc. ("Infinity") common stock, was reasonable. It had nothing to do with Rothstein's remaining counterclaims. And while plaintiff's motion for summary judgment attacked one of defendant's remaining counterclaims (the one asserting fraud in the inducement), he filed it seven months after the Scheduling Order's deadline for dispositive motions, and plaintiff did not respond to defendant's Statement of Additional Material ...