ABRO Industries, Inc. v. 1 New Trade, Inc. et al

Filing 154

OPINION AND ORDER: The Court DENIES the Plaintiff's Motion 89 to DISMISS its Amended Complaint 7 with prejudice. The Court GRANTS the Plaintiff leave to renew when and if appropriate, upon resolution of the fees and cost issues between the parties. Signed by Judge Theresa L Springmann on 2/2/2017. (lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
ABRO INDUSTRIES, INC.,
Plaintiff,
v.
1 NEW TRADE, INC., et al.,
Defendants.

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CAUSE NO.: 3:14-CV-1984-TLS

OPINION AND ORDER
This matter is before the Court on the Plaintiff’s, ABRO Industries, Inc. (“ABRO”),
Motion to Dismiss Plaintiff’s Amended Complaint Pursuant to Rule 41(a)(2) [ECF No. 89],
dated April 25, 2016. The Plaintiff commenced this action on October 23, 2014. On November 4,
2014, ABRO filed its Amended Complaint [ECF No. 7] claiming that the Defendants, 1 New
Trade, Inc., Igor Zorin, Boris Babenchik, Vadim Fishkin (collectively, the “1 New Trade
Defendants”), and Quest Specialty Coatings, LLC (“Quest”), infringed on ABRO’s copyright to
a carburetor and choke cleaner packaging. On December 16, 2014, Quest filed its Answer to
ABRO’s Amended Complaint [ECF No. 19], asserting a cross-claim against 1 New Trade. On
December 31, 2014, the 1 New Trade Defendants filed their Answer to ABRO’s Amended
Complaint [ECF No. 23], asserting a series of counter claims against ABRO. Specifically, Zorin
and Babenchik each assert separate claims of breach of fiduciary duty and breach of contract.
And collectively, the 1 New Trade Defendants also assert a tortious interference claim asking for
both monetary and injunctive relief. Also, on December 31, 2014, Zorin and Babenchik filed a
Third Party Complaint [ECF No. 24] against Peter Baranay, president of ABRO, with each
asserting a tortious interference claim against him. The parties engaged in substantial discovery

until April 25, 2016, when ABRO filed the Motion to Dismiss. It states that ABRO and Quest
agreed that ABRO would dismiss the Amended Complaint with prejudice, with all parties to bear
their own attorney’s fees and costs incurred in connection with the prosecution and defense of
the claims. 1 The Motion further states that the counterclaims raised by the 1 New Trade
Defendants would remain pending for adjudication. However, these defendants had not
consented to the Rule 41(a)(2) Motion.
On April 26, 2016, Quest filed its Opposition to Plaintiff’s Motion to Dismiss [ECF
No. 91], where it asserted that it had not consented to ABRO’s Motion. Quest, however, did not
object to ABRO dismissing its claims with prejudice. On April 27, 2016, ABRO filed its Reply
[ECF No. 92]. Separately, on May 9, 2016, the 1 New Trade Defendants filed a brief in
opposition to ABRO’s Motion to Dismiss ABRO’s Amended Complaint [ECF No. 98] claiming,
in part, that ABRO never had a legitimate copyright claim and pursued this action to harass the
Defendants and put them out of business. On May 19, 2016, ABRO filed its Reply to the 1 New
Trade Defendants [ECF No. 102]. Quest filed its Sur-Reply in Opposition to Motion to Dismiss
[ECF No. 109] on June 8, 2016, which spurred ABRO to file a Motion for Leave to File SurReply to Quest’s Sur-Reply [ECF No. 112]. On June 24, 2016, the Court denied without
prejudice ABRO’s motion seeking permission to file a sur-reply.
After reviewing the record, on July 15, 2016, the Court issued an order directing “all
Defendants” and “any other parties asserting claims that would remain pending in the event that
the Court grants (in whole or in part) the pending Rule 41(a)(2) motion to dismiss to submit . . . a
jurisdictional statement and supporting brief providing the independent basis of jurisdiction for

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Although the Motion stated that ABRO had not obtained 1 New Trade Defendants’ consent,
ABRO’s voluntary dismissal also sought to release its claims against the 1 New Trade Defendants, with
these Defendants to bear their own attorney’s fees and costs.

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their claims.” (Op. & Order, ECF No. 119.) In response, the parties filed their jurisdictional
statements and related documents [ECF No. 121–23, 127]. The Court then issued a second order,
addressing the 1 New Trade Defendants’ responses and requesting an additional jurisdictional
statement and supplemental briefing from Zorin and Babenchik “identifying (1) the citizenship
of Peter Baranay; and (2) [Zorin and Babenchik’s] permanent resident alien status and domicile.”
(Op. & Order 2, ECF No. 129.) After receiving the additional jurisdictional statement and
briefing [ECF No. 130], the Court then issued a third order requesting that Zorin and Babenchik
submit “a second supplemental jurisdictional statement and supporting brief identifying the state
of the United States of which Peter Baranay is a citizen.” (Order 2, ECF No. 134.) Zorin and
Babenchik submitted their jurisdictional statement and briefing [ECF No. 136] for that Order on
August 22, 2016. With this additional briefing, the Court now reviews the Rule 41(a)(2) Motion
for Voluntary Dismissal.

ANALYSIS
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. If a defendant
has pleaded a counterclaim . . . the action may be dismissed over the defendant’s objection only
if the counterclaim can remain pending for independent adjudication.” Unlike Federal Rule of
Civil Procedure 41(a)(1)(ii), a plaintiff seeking dismissal under Rule 41(a)(2) does not require
the consent of the defendants. SmithKline Beecham Corp. v. Pentech Pharma., Inc., 261 F. Supp.
2d 1002, 1004 (N.D. Ill. 2003) (Posner, J.) (explaining dismissals under Rule 41(a) and noting
that the plaintiff moved to dismiss under Rule 41(a)(2) because one of the defendants refused to
sign a stipulation of dismissal).

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ABRO is asking for its claims against Quest and the 1 New Trade Defendants to be
dismissed with prejudice, a less common scenario than dismissal without prejudice. ABRO
alleges that it and Quest have agreed to terms of dismissal. However, the now contentious
briefing spurred by the Plaintiff’s Motion indicates that the veracity of such an agreement is
questionable. After considering the detailed timelines presented by each party, the Court finds
that ABRO and Quest did not reach an agreement. But ABRO anticipates this finding. It
maintains in its proposed sur-reply that even though “Quest consented to ABRO’s motion . . . if
the Court finds that consent was somehow revoked, it should grant ABRO’s motion,” but on the
condition that the parties bear their own attorney’s fees and costs. (ABRO Sur-Reply Mot.
Dismiss, 7, 10, ECF No. 112-1.)
Quest has not plead any counterclaims against ABRO. However, it does assert a crossclaim against 1 New Trade, Inc., alleging that “[i]f ABRO prevails on its claims . . . then [1 New
Trade, Inc.] is liable to Quest because [1 New Trade, Inc.] specified the product packaging that is
accused of infringement.” (Quest’s Answer, Cross-cl., and Jury Demand to ABRO’s Am. Compl.
10, ECF No. 19.) The 1 New Trade Defendants have plead counterclaims against ABRO too.
Zorin and Babenchik each assert separate claims of breach of fiduciary duty and breach of
contract against ABRO. The 1 New Trade Defendants also collectively assert a tortious
interference claim seeking both monetary and injunctive relief. Additionally, Zorin and
Babenchik have filed a third party complaint against Baranay, each asserting a tortious
interference claim against him as well.
Although Quest’s cross-claim would satisfy federal question jurisdiction, as the Court has
previously stated, the jurisdictional basis for the counterclaims asserted by the 1 New Trade
Defendants was unclear from the record. Despite the palpable animosity between the parties,

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none have challenged ABRO’s statement that the “counterclaims may properly remain pending
for adjudication even with the dismissal of ABRO’s complaint.” (Pl.’s Mot. Dismiss Pl.’s Am.
Compl. Pursuant to Rule 41(a)(2) 2, ECF No. 89.) More specifically, none of the parties
confirmed that the Court could maintain its jurisdiction over the counterclaims (which are based
in state law contract and tort) if the Court were to dismiss ABRO’s complaint. The Court now
reviews the independent jurisdictional basis for these claims before addressing the merits of the
Plaintiff’s Rule 41(a)(2) Motion.

A.

Independent Jurisdictional Basis for 1 New Trade Defendants’ Counterclaims
The Court has “an independent obligation to be sure that jurisdiction exists.” Andrews v.

E.I. Du Pont De Nemours & Co., 447 F.3d 510, 514 (7th Cir. 2006). The 1 New Trade
Defendants are suing the Plaintiff ABRO and Third-Party Defendant Baranay for breach of
contract and tortious interference, claims which do not invoke the Court’s federal question
jurisdiction. Thus, if the Court were to dismiss ABRO’s Complaint, to maintain the 1 New Trade
Defendants’ claims, the parties would need to invoke the Court’s diversity jurisdiction. See
Salton, Inc. v. Philips Domestic Appliances and Personal Care, 391 F.3d 871, 875 (7th Cir.
2004) (“claims in a counterclaim cannot confer federal jurisdiction over a case”). To invoke the
Court’s diversity jurisdiction, the parties must be completely diverse: “no plaintiff may be a
citizen of the same state as any defendant.” Altom Transp., Inc. v. Westchester Fire Ins. Co., 823
F.3d 416, 420 (2016). For the purposes of diversity jurisdiction, a natural person must be both a
“citizen of the United States” and “a citizen of one of the United States.” Sadat v. Mertes, 615
F.2d 1176, 1180 (7th Cir. 1980); 28 U.S.C. § 1332(a)(1). Similarly, a corporation must be a
citizen of a state of the United States. MAS Capital Inc. v. Biodelivery Scis. Int’l, Inc., 524 F.3d
831, 832–33 (7th Cir. 2008); 28 U.S.C. § 1332(a)(1). Aliens may also invoke a court’s diversity
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jurisdiction in a suit against a citizen of a state of the United States. Soc’y of Lloyd’s v.
Ashenden, 233 F.3d 473, 475 (7th Cir. 2000); 28 U.S.C. § 1332(a)(2). And under § 1332(a)(3),
“[w]hen citizens of states are on both sides of the litigation and are completely diverse, the
presence of aliens on one or both sides of the controversy” does not destroy a court’s diversity
jurisdiction over the matter. Dresser Indus., Inc. v. Underwriters at Lloyd’s of London, 106 F.3d
494, 498 (3d Cir. 1997) (quoting Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 428
(7th Cir. 1993)).
The parties do not dispute that 1 New Trade, Inc., is a Maryland corporation with its
principal place of business in Russia, that Zorin and Babenchik are Russian citizens, or that
Third-Party Defendant Baranay is a resident of Michigan. If true, the Court could maintain
jurisdiction over the 1 New Trade Defendants’ counterclaims under § 1332(a)(2)–(3) should it
dismiss ABRO’s Complaint. However, these important assumptions were not plainly evident
over the course of the proceedings. The Court, as a result, asked the parties for jurisdictional
statements and briefings until it could make a determination that the parties were in fact
domiciled where they claim.
After three rounds of briefing and clarification on this sua sponte inquiry, the Court finds
that the 1 New Trade Defendants’ counterclaims against ABRO, as well as Zorin and
Babenchik’s cross-claim against Baranay independently invoke the Court’s diversity jurisdiction.
The Court makes this determination from the additional briefing, jurisdictional statements, and
attestations it requested on the matter. For Zorin and Babenchik’s counterclaims against ABRO,
the Court can maintain its diversity jurisdiction under § 1332(a)(2) because each are non-resident
aliens domiciled in Russia seeking relief against an Indiana corporation. See Soc’y of Lloyd’s.
233 F.3d at 475. The same is the case for Zorin and Babenchick’s claim against Third-Party

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defendant Baranay, who is domiciled in Michigan. See id. And for the 1 New Trade Defendants’
collective tortious interference claim against ABRO, the Court can maintain its jurisdiction under
§ 1332(a)(2) because 1 New Trade is a Maryland corporation, with its principle place of business
in Russia. See Dresser Indus., Inc., 106 F.3d at 498. The Court therefore finds that it can
maintain jurisdiction over the remaining claims in the case should the Court dismiss ABRO’s
Amended Complaint under Rule 41(a)(2).

B.

Rule 41(a)(2) Motion for Voluntary Dismissal
Rule 41(a)(2) allows a court upon request of a plaintiff, to dismiss a case “upon such

terms and conditions as the court deems proper.” Fed. R. Civ. P. 41(a)(2). “Although the power
to set terms and conditions is vested in the court, the plaintiff may move for dismissal on
conditions stated in the plaintiff’s motion; under these circumstances, the court either must grant
the motion on the conditions offered or deny the motion.” 9 Charles A. Wright, et al., Federal
Practice and Procedure § 2366 (3d ed.). “The purpose of authorizing terms and conditions on a
voluntary dismissal is to protect the defendant from prejudice.” Cross Westchester Dev. Corp. v.
Chiulli, 887 F.2d 431, 432 (1989) (emphasis added); see also Wright et al., supra, at § 2366.
ABRO has requested that the Court dismiss its Amended Complaint with prejudice on the
condition that “all parties bear their own attorney’s fees and costs incurred in connection with the
prosecution and defense of the claims stated in ABRO’s Amended Complaint.” (Mot. to Dismiss
Am. Compl. ¶ 6.) It is the “American Rule” that “[e]ach litigant pays his own attorney’s fees,
win or lose, unless a statute or contract provides otherwise.” Baker Botts L.L.P. v. ASARCO LLC,
135 S. Ct. 2158, 2164 (2015) (quoting Hardt v. Reliance Standard Life Ins., Co., 560 U.S. 242,
252–253 (2010)). And here, ABRO seeks relief under the Copyright Act which “provides that a
district court ‘may . . . award a reasonable attorney’s fee to the prevailing party.’” Kirtsaeng v.
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John Wiley & Sons, Inc., 136 S. Ct. 1979 (2016) (quoting 17 U.S.C. § 505). ABRO’s proposed
condition that all parties bear their own attorney’s fees is prejudicial to the Defendants because
they have a statutory right to seek attorney’s fees if victorious. For this reason, the Court deems
the terms and conditions of ABRO’s Motion improper and denies the Motion.
ABRO’s Motion is an end-run around this very issue of attorney’s fees. One of Quest’s
chief reasons for opposing ABRO’s Motion is ABRO’s representation that Quest agreed to
waive its right to seek attorney’s fees and costs. (Quest’s Opp. Pla.’s Mot. Dismiss 3, ECF No.
91 (“Quest opposes the dismissal of Quest’s claim for the attorney’s fees and costs incurred
defending this lawsuit. Quest does not object to the portion of the motion that seeks dismissal of
ABRO’s claims against Quest with prejudice.”); Quest’s Sur-Reply in Opp. Mot. Dismiss 2, 9,
ECF No. 109 (“Although Quest remains willing to discuss a settlement that would not require
ABRO to pay Quest’s fees, Quest is entitled to seek attorney’s fees, and reserves the right to do
so absent an agreement . . . . [T]he Court should deny ABRO’s motion to the extent that it seeks
to extinguish Quest’s right to seek attorney’s fees and costs incurred . . . . Quest intends to bring
a motion for attorney’s fees [under] Fed. R. Civ. P. 54(d)(2).”).) Like Quest, the 1 New Trade
Defendants’ also specifically emphasize their desire to recover the attorney’s fees and costs
incurred in defending this lawsuit. (1 New Trade Def.’s Supp. Br. Opp. to ABRO’s Mot. Dismiss
ABRO’s Am. Compl. 10, 15–16, ECF No. 98 (“ABRO has prosecuted since October 2014 a
baseless claim to harass [the Defendants], caused them to incur substantial expense and
attorney’s fees and now seeks leave to withdraw its claims in a thinly disguised attempt to avoid
sanctions.”).)
Quest and the 1 New Trade Defendants may very well be entitled to recover their
attorney’s fees and costs upon an appropriate showing—as is their right under § 505. Kirtsaeng,

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136 S. Ct. at 1983. Because ABRO has proposed terms and conditions for its Rule 41(a)(2)
Motion—and the Court rejects those terms and conditions—“any attempted imposition of a term
or condition by this court would be involuntary and subject to rejection by plaintiff.” Dickie v.
Cannondale Corp., No. 01 C 6347, 2003 WL 134990, at *2 (N.D. Ill. Jan 16, 2003) (citing
Woodzicka v. Artifiex, Ltd., 25 F. Supp. 2d 930, 937 (E.D. Wisc. 1998)); see Wright et al., supra,
§ 2366. Accordingly, ABRO’s Motion for voluntary dismissal is denied.

CONCLUSION
For the reasons set forth above, the Court DENIES the Plaintiff’s Motion [ECF No. 89]
to DISMISS its Amended Complaint [ECF No. 7] with prejudice. The Court GRANTS the
Plaintiff leave to renew when and if appropriate, upon resolution of the fees and cost issues
between the parties.
SO ORDERED on February 2, 2017.
s/ Theresa L. Springmann
THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT
FORT WAYNE DIVISION

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