Byker et al v. Smith
Filing
201
MEMORANDUM OPINION. Signed by Magistrate Judge Gray M Borden on 1/26/21. (MRR, )
FILED
2021 Jan-26 AM 11:50
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
DAVID G. BYKER, et al.,
Plaintiffs,
v.
NANNETTE SMITH,
Defendant.
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Case No. 2:16-cv-2034-GMB
MEMORANDUM OPINION
More than four years ago, Plaintiffs David Byker and Global Asset
Management-Holdings, LLC (“GAM”) filed this lawsuit against Defendant
Nannette Smith.1 Doc. 1. In its simplest form, the case involves the alleged breach
of a settlement agreement resolving a state-court lawsuit between Byker, GAM, and
Smith. Doc. 1. Specifically, Byker and GAM contend that software Smith provided
to them as one component of the settlement was not “functional and operational” or
“in a usable form” as required by the settlement agreement. Doc. 198 at 2. As
straightforward as that sounds, the litigation that followed has been anything but
simple or routine. The docket sheet reflects a hotly contested battle with numerous
motions, hearings, court-led conferences, memorandum opinions, and orders, all of
which are a logical extension of the tumultuous history among these parties before
1 David
Przybysz also was a plaintiff but the court dismissed him pursuant to an unopposed motion
to dismiss on January 3, 2019. Docs. 72 & 80.
the filing of the instant complaint. See Doc. 120 at 2–10.
However, before the filing of any dispositive motions, Byker and GAM filed
a Motion to Dismiss With Prejudice pursuant to Rule 41(a)(2). Doc. 191. The
motion states that “Plaintiffs and Defendant have discussed but have been unable to
agree on the issue of costs, and, respectfully, Plaintiffs therefore ask that the Court
leave open the issue of taxation of costs.” Doc. 191. Within 20 minutes of the filing
of that motion, Smith responded with a request for oral argument and a briefing
schedule. Doc. 192. The court granted Smith’s request, held a telephone hearing on
the motion, and instructed the parties to brief the issues discussed during the hearing,
including Smith’s requested conditions on the dismissal. Doc. 197. The motion has
been briefed (Docs. 198, 199 & 200) and is ripe for decision. For the following
reasons, the court concludes that the motion to dismiss is due to be granted and that
no conditions will be attached to the dismissal.
I. RELEVANT BACKGROUND
In March 2014, Smith filed a complaint in the Circuit Court of Jefferson
County, Alabama essentially alleging that Byker, GAM, and former plaintiff Robert
Przybysz fraudulently conspired since at least 2013 to cheat her out of her interest
in the business she founded, B2K Systems, Inc. (“B2K Inc.”), including its most
valuable asset: computer source code and software called “B2K,” which was used
to process credit cards and other payment systems at gas stations and convenience
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stores (the “B2K Software”). Doc. 1312 at 3–4. On November 15, 2016, as the trial
in that case was set to begin, the parties reached a settlement. Doc. 131 at 4. The
parties’ counsel memorialized the terms of the agreement by reading them into the
record in open court. Doc. 131 at 4.
Under the settlement agreement, Smith was to receive $500,000 from Byker
and GAM, to be paid in installments. Doc. 131 at 4. In exchange, Smith would
release her claims and deliver a copy of the B2K Software to Byker and GAM, which
all parties would be allowed to market and use. Doc. 131 at 4. The settlement
agreement also outlined certain intermediate steps in connection with Smith’s
delivery of the B2K Software. Doc. 131 at 4. In the weeks before trial, Smith sent a
disc containing the B2K Software to an independent software auditor, Yusuf Musaji,
whose firm had examined it and issued a letter opining that it met the certification
requirements of version 3.2 of the Data Security Standard promulgated by the
Payment Card Industry Security Standards Council. Doc. 131 at 4–5. As part of the
settlement, the parties agreed that Smith would send that disc back to Musaji, who
would be asked to “certify” that it was “the same” disc as the one he had examined
previously and that the software it contained was “functional and operational.” Doc.
131 at 5. Musaji also was to advise the parties on what “programs or other
2
The court recites much of this background from an earlier memorandum opinion granting Byker
and GAM’s motion to dismiss Smith’s counterclaims. Doc. 131.
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information is needed to open and access the disc in a way that doesn’t damage or
corrupt it.” Doc. 131 at 5. Musaji was to complete that work within thirty days of
the settlement, the same date on which Byker and GAM were to make their first
installment payment of $100,000 to Smith. Doc. 131 at 5. If Musaji provided the
necessary certifications and access information, and Byker and GAM made the first
installment payment to Smith, Musaji would then forward the disc with the B2K
Software to Byker and GAM. Doc. 131 at 5.
About a month after the parties settled, the agreement began to break down.
Byker and GAM made their monthly payments toward the $500,000 settlement, but
objected that Smith had not complied with the settlement agreement as to her
promised delivery of the B2K Software to Musaji and, in turn, to them. Doc. 131 at
6. Although Smith furnished Musaji with a disc containing a version of what
appeared to be the B2K Software, Byker and GAM claimed that it was not
“functional and operational” because it was in a “read only” format, which,
according to Byker and GAM, rendered it “useless . . . because it cannot be opened,
accessed, developed or deployed for business purposes, or otherwise.” Doc. 131 at
7 (quoting Doc. 1 at 7–8); see also Doc. 198 at 8–9. Smith disagreed and maintained
that she had provided the B2K Software disk to Musaji as agreed and that he had
provided the necessary certifications and access information specified by the
settlement. Doc. 131 at 7. This disagreement led to the instant lawsuit. Doc. 1.
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Throughout the lengthy discovery process, this difference of opinion on the
software’s functionality continued. In fact, both parties hired experts who offered
conflicting opinions on functionality. According to Byker and GAM, “[o]ne of the
major impediments was that the [B2K] [S]oftware operated in an outdated
‘development environment’ that was no longer commercially available,
PowerBuilder 12.0.” Doc. 198 at 8. Their expert attempted to migrate the B2K
Software to the current version of PowerBuilder but encountered a “fatal error” in
the migration process. Doc. 198 at 8–9; Doc. 198-2. From Smith’s perspective, she
upheld her end of the bargain from the beginning, and “[t]he entire lawsuit was based
on an egregious misunderstanding of software development and what they were
supposed to receive in the settlement.” Doc. 199 at 1–2. She contends that she
provided Byker and GAM with “everything that they bargained for in the settlement”
and that the settlement “did not require Smith to provide the development
environment or explain to them how to obtain it.” Doc. 199 at 2 (emphasis omitted)
& 18.
Near the end of the discovery process, one of Smith’s experts testified in his
deposition that he had, in fact, been able to migrate the B2K Software from
PowerBuilder 12.0 to the current version. Doc. 198 at 12. And during Smith’s
deposition as a non-retained expert, she also testified that she could migrate the B2K
Software. Doc. 198 at 12. After this testimony armed them with enough information
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to operate the B2K Software, Byker and GAM determined that they should seek a
dismissal of their claims against Smith. Doc. 198 at 12.
II. DISCUSSION
Under Federal Rule of Civil Procedure 41(a)(2), “an action may be dismissed
at the plaintiff’s request only by court order, on terms that the court considers proper.
. . . Unless the order states otherwise, a dismissal under this paragraph (2) is without
prejudice.” The Eleventh Circuit has made clear that district courts enjoy broad
discretion in determining whether to allow a voluntary dismissal under this rule.
McCants v. Ford Motor Co., Inc., 781 F.2d 855, 857 (11th Cir. 1986). “Generally
speaking, a motion for voluntary dismissal should be granted unless the defendant
will suffer clear legal prejudice other than the mere prospect of a second lawsuit.”
Arias v. Cameron, 776 F.3d 1262, 1268 (11th Cir. 2015). The crux of the inquiry is
whether “‘the defendant would lose any substantial right by the dismissal.’” Id.
(quoting Pontenberg v. Boston Scientific Corp., 252 F.3d 1253, 1255 (11th Cir.
2001)) (alterations omitted). On the other hand, “the court should also weigh the
relevant equities and do justice between the parties in each case, imposing such costs
and attaching such conditions to the dismissal as are deemed appropriate.” Arias,
776 F.3d at 1269.
There is no dispute in this case as far as the dismissal is concerned—the parties
agree that the court should dismiss all claims with prejudice. Where the parties
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disagree is the question of whether the court should attach conditions to this
dismissal. Byker and GAM argue against any conditions because they had a
reasonable and well-grounded factual basis for their claims when they filed the
lawsuit and throughout the pendency of the litigation. Smith, on the other hand,
contends that she should be deemed the prevailing party and that the court should
award her fees and costs as a condition of dismissal.3
First and foremost, the court agrees that Byker and GAM had a good faith,
reasonable basis to file this lawsuit. The years of discovery without one substantive
motion to dismiss4 or motion for summary judgment filed by Smith is a testament to
this fact. Most recently, the parties filled multiple pages in their briefs and submitted
hundreds of pages of evidence explaining their respective positions on the facts and
the merits of the claims. Doc. 198 at 8–13; Doc. 199 at 3–13 & 17–26. The briefs
highlight conflicting evidence and differing opinions on the impact of the evidence
on each of the claims. These arguments, however, only underscore the nonfrivolous
nature of the complaint when viewed at the time of filing and up to the point when
Byker and GAM filed their motion to dismiss. See Christiansburg Garment Co. v.
Equal Emp. Opp. Comm., 434 U.S. 412, 421 (1978) (stating that “the term
3 There
is no stand-alone motion before the court for fees and costs. Instead, Smith asks for fees
and costs as a condition of dismissal under Rule 41(a)(2).
4 Smith moved to dismiss the claims for an alleged lack of an indispensable party (Doc. 21), but
did not file a motion under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.
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‘meritless’ is to be understood as meaning groundless or without foundation, rather
than simply that the plaintiff has ultimately lost his case”).
The court disagrees with Smith’s contention that she should be recognized as
the prevailing party in this litigation. Doc. 199 at 15. A prevailing party ordinarily
is one who has been awarded some relief by a court resulting in a meaningful change
in the legal relationship between the plaintiff and the defendant. See Buckhannon
Bd. & Care Home, Inc., v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598,
603–05 (2001). The mere fact that the dismissal here is with prejudice does not give
Smith any relief, nor would the dismissal change the legal relationship among Byker,
GAM, and Smith. It simply means that the claims in the complaint cannot be refiled.
Moreover, the only claims litigated to their completion in this case were Smith’s
counterclaims, which were twice dismissed by the court. Docs. 120 & 131. In the
final calculus, all of the parties asserted claims but none of the claims succeeded.
There is no prevailing party in this case.
Finally, the court finds an award of fees and costs as a condition of dismissal
to be inappropriate. Under the American Rule, each party in litigation bears its own
attorneys’ fees and costs unless a statute or contract provides otherwise. Hardt v.
Reliance Standard Life Ins. Co., 560 U.S. 242, 252 (2010). While the district courts
enjoy the discretion to award fees and costs in dismissing claims under Rule
41(a)(2), this court has not found a case, and the parties have not identified one,
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where fees and costs accompanied a dismissal with prejudice except in the most
exceptional circumstances. See, e.g., Carroll v. E One Inc., 893 F.3d 139, 146 (3d
Cir. 2018) (stating that an award of fees and costs with a Rule 41(a)(2) dismissal is
warranted only in “extraordinary circumstances”).
For example, in Martin v. City of Daytona Beach, 2008 WL 4938347, at *1
(M.D. Fla. Nov. 18, 2008), the plaintiff initially filed a lawsuit in state court, but
amended his complaint to add three federal claims after litigating in state court for
nearly two years. When the defendant removed the case to federal court, the plaintiff
moved to voluntarily dismiss the federal claims under Rule 41(a)(2) and to have the
case remanded to state court. Id. The district court found that the plaintiff added the
federal claims as a tactic to delay a scheduled summary judgment hearing in state
court, and that he never had any intention of pursuing the claims. Id. The court
conditioned the dismissal on the payment of the defendants’ attorney’s fees to
compensate for the cost of removal because the plaintiff “unnecessarily wasted both
the Defendants’ resources and the judicial labor” of the court. Id.
The litigation here was hard-fought and complex, but there is no basis for
concluding that either party intentionally wasted the others’ resources, and there are
no other circumstances that warrant an award of attorney’s fees or costs as a
condition of dismissal under Rule 41(a)(2).
The requested dismissal is with
prejudice, so there is no threat of further litigation relating to these claims. There is
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no evidence of forum shopping or delay. And while Smith vehemently argues that
she did not breach the settlement agreement and that the claims were meritless at the
time the complaint was filed, Byker and GAM have advanced an argument to the
contrary and put forth ample evidence in support. When the discovery process
established that the B2K Software could be rendered functional and operational,
Byker and GAM moved to dismiss. They should not be penalized for this decision.
All parties expended substantial resources in this litigation and they will have to
absorb these costs. The motion to dismiss is due to be granted without any
conditions.
III. CONCLUSION
For these reasons, the Motion to Dismiss With Prejudice (Doc. 191) is due to
be GRANTED. No conditions will be attached to the dismissal under Federal Rule
of Civil Procedure 41(a)(2). A separate final judgment will be entered.
DONE and ORDERED on January 26, 2021.
_________________________________
GRAY M. BORDEN
UNITED STATES MAGISTRATE JUDGE
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