FOOD SCIENCES CORPORATION v. NAGLER

Filing 63

OPINION. Signed by Judge Jerome B. Simandle on 6/2/2011. (dmr)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

FOOD SCIENCES CORPORATION
d/b/a ROBARD CORPORATION,

HON. JEROME B. SIMANDLE
Civil No. 09-1798 (JBS/KMW)

Plaintiff,
v.

MEMORANDUM OPINION

WILLIAM M. NAGLER,
Defendant.

SIMANDLE, District Judge:
This matter is before the Court on three related motions:
Defendant, Dr. William M. Nagler, moves to dismiss that portion
of the Amended Complaint seeking a permanent injunction [Docket
Item 56]; Plaintiff, Food Sciences Corporation doing business as
Robard Corporation, moves for voluntary dismissal of the entire
action pursuant to Rule 41(a)(2) of the Federal Rules of Civil
Procedure, dismissing this action with prejudice and with the
parties to bear their own respective costs and attorneys' fees
[Docket Item 57];1 and Defendant cross-moves to modify the terms
of the dismissal and impose as a condition on dismissal

1

Although Plaintiff initially captioned its motion as a
motion for involuntary dismissal, both the context of the motion
and brief (as well as Plaintiff's later explicit clarification)
make clear that it was a motion for voluntary dismissal. The
Court has also considered Defendant's sur-reply in support of its
cross-motion for costs and attorneys' fees as a condition of
dismissal with prejudice [Docket Item 62] because it was
Defendant's first opportunity to address the clarification in
Plaintiff's reply brief.

Plaintiff's payment of Defendant's costs and legal fees [Docket
Item 58].
The context of these cross-motions can be summarized
succinctly.

In its original Complaint, Robard sued Dr. Nagler

based on Nagler's practice of selling Robard's Nutrimed dietary
food supplements through his website without Robard's
authorization.

Robard had previously terminated Nagler as an

authorized distributor in part because of Nagler's practice of
selling Nutrimed products over the internet, which Robard does
not permit.

Robard contended that Nagler's post-termination

online sales of Nutrimed products as "Dr. Nagler's Diet Foods"
created customer confusion regarding whether Nagler was still an
authorized distributor of the Nutrimed products.

On or about

February 9, 2009, Nagler added a disclaimer to his website
telling customers he is not sponsored by or affiliated with
Robard.
This Court's March 22, 2010 Opinion and Order dismissed the
Complaint as originally pleaded, holding that Nagler's sale of
Nutrimed products by name on Nagler's website did not, without
more, state a claim for sponsorship confusion, and the Court
dismissed all claims (trademark infringement, false designation
of origin, and unfair competition under New Jersey law) without
prejudice to Robard's right to file an Amended Complaint to add
the allegations necessary to state such claims.

2

Robard moved for leave to file an Amended Complaint, and the
Court permitted the proposed Amended Complaint to go forward in
part (with respect to the allegations of pre-disclaimer
sponsorship confusion), but determined that claims regarding
post-disclaimer confusion are futile and would not be permitted.
[Docket Item 46 "Oct. 20, 2010 Opinion" at 23-24.]

The ensuing

Amended Complaint nonetheless included a claim seeking permanent
injunctive relief as a remedy for Nagler's conduct, both predisclaimer and post-disclaimer, notwithstanding the Court's
finding that a claim directed at the post-disclaimer conduct is
futile.
Dr. Nagler now moves to dismiss the claim for a permanent
injunction, Robard moves for voluntary dismissal of the entire
action, and Nagler cross-moves to modify the terms of the
dismissal and impose as a condition on dismissal Plaintiff's
payment of Defendant's costs and legal fees.
The principal issue is whether Robard's voluntary dismissal
of its claims, with prejudice, should include a condition that
Robard also pay Nagler's attorneys' fees and costs pursuant to
Rule 41(a)(2), Fed. R. Civ. P.
1.

The Court finds as follows:

After the filing of an answer or a motion for summary

judgment, an action may be dismissed by stipulation of all
parties who have appeared or "at the plaintiff's request only by
court order, on terms that the court considers proper."

3

Rule

41(a)(2), Fed. R. Civ. P.

Since this a motion to dismiss with

prejudice, and since Defendant agrees that dismissal is proper,
dismissal will be granted.
2.

Because the action will be dismissed with prejudice, the

motion to strike the claim for a permanent injunction from the
Amended Complaint will be dismissed as moot.
3.

The only other question is whether, as a condition of

dismissal, to shift to Plaintiff the fees and costs of this suit
incurred by Defendant.

Defendant complains that Plaintiff is

just seeking to avoid Rule 11 sanctions, since the Amended
Complaint sought relief foreclosed by this Court's previous Order
of October 20, 2010, which specifically found Plaintiff's claim
for post-disclaimer relief to be futile and impermissible in any
amended pleading.

Defendant argues that dismissal without fee

shifting would unfairly reward Plaintiff since Plaintiff has
forced Defendant to defend this lawsuit that Plaintiff regards as
having been meritless from the start.
4.

Even if the Court agreed with Defendant that Plaintiff's

claims in either the Complaint or Amended Complaint were
frivolous, the Court would not award Defendant fees and cost as a
condition of voluntary dismissal absent some other extraordinary
circumstances.

Defendant relies on outdated precedent from the

1980s with respect to Rule 11 to argue that the Court should
require payment of fees and costs as a condition for permitting

4

the voluntary dismissal of putatively frivolous claims.

The

extensive 1993 amendments to Rule 11 adopted a new policy on
sanctions, including a provision for a safe harbor against
sanctions where a claim is voluntarily dismissed in response to a
Rule 11 notice from the adversary.
P.

Rule 11(c)(2), Fed. R. Civ.

Furthermore, the Rule now explicitly declares that "The Court

must not impose a monetary sanction . . . on its own, unless it
issued the show-cause order under Rule 11(c)(3) before voluntary
dismissal."

Rule 11(c)(5), Fed. R. Civ. P.

The rules were

designed so that "the timely withdrawal of a contention will
protect a party against a motion for sanctions."
1993 Amendments subdivisions (b) and (c).

Id. cmt. to

In this case,

Plaintiff moved to voluntarily dismiss the case before this Court
ordered Plaintiff to show cause, and before Defendant moved for
sanctions.
5.

The text of Rule 11 does not necessarily modify the

Court's power to condition withdrawal under Rule 41, but it does
reflect the federal courts' modern policy when balancing the
competing goals of encouraging permissive withdrawal of meritless
claims and discouraging their initial filing.

Many courts

including the Tenth Circuit Courts of Appeals have held that a
court cannot impose fee-shifting conditions on voluntary
dismissal with prejudice absent extraordinary circumstances
beyond the mere dismissal with prejudice of a claim that was

5

frivolous.

See Charles Alan Wright & Arthur R. Miller, 9 Fed.

Prac. & Proc. Civ. § 2366 n.16-18 (3d ed.) (collecting cases);
AeroTech, Inc. v. Estes, 110 F.3d 1523, 1527 (10th Cir. 1997)
("Today, we continue to adhere to the rule that a defendant may
not recover attorneys' fees when a plaintiff dismisses an action
with prejudice absent exceptional circumstances.").

Consistent

with that balancing of the relevant interests, in this case the
Court will not condition withdrawal on payment of fees and costs.
6.

Two other factors counsel against an award of costs and

fees here.

First, Plaintiff is voluntarily dismissing with

prejudice its entire Amended Complaint, including pre-disclaimer
claims that this Court previously permitted when it denied
Defendant's Rule 12(b)(6) motion on October 20, 2010.

Because

those pre-disclaimer claims had a plausible basis in factual
allegations, an award of costs and fees for defense would be
inappropriate and disproportional to the harm incurred from
defending the post-disclaimer claims.

Second, in seeking an

injunction against a resumption of infringing conduct (such as
against a cessation of Defendant's use of the court-approved
disclaimer), Plaintiff argues that Defendant cannot meet its
heavy burden of showing that future infringement is "practically
speaking, nearly impossible," Lyons Partnership, L.P. v. Morris
Costumes, Inc., 243 F.3d 789, 800 (4th Cir. 2001), which is an
application of the well-accepted doctrine of injunctive relief

6

that "[t]he court's power to grant injunctive relief survives
discontinuance of the illegal conduct" since the "purpose of an
injunction is to prevent future violations," United States. v.
W.T. Grant Co., 345 U.S. 629, 633 (1953).

While Defendant, in

response, strongly asserts its intention to continue to employ
the prominent disclaimer on its website in connection with its
sales of Robard's products, the Court does not find that
Plaintiff's arguments for future injunctive relief are so
frivolous or unfounded in law as to warrant the sanction of fee
shifting for the entire case under Rule 41(a).
7.

The most troublesome aspect of Plaintiff's litigation

strategy is that Plaintiff did not simply dismiss its claims for
post-disclaimer relief, choosing instead to file opposition to
Defendant's dismissal motion [Docket Item 59], which could have
avoided this dispute about the good faith of such claims.
Nonetheless, Plaintiff had already filed its motion for voluntary
dismissal of the entire case with prejudice three weeks earlier
[Docket Item 57], just one day after Defendant's motion to
dismiss the post-disclaimer injunction.

Greater cooperation

could have ended this case several months sooner.
8.

In summary, Plaintiff's motion to voluntarily dismiss

this case with prejudice will be granted without further
conditions, as Defendant has not shown the kind of extraordinary
circumstances necessary to condition such dismissal on payment of

7

fees and costs.

The Court will deny Defendant's cross-motion for

the same reason, and this dismissal moots the pending motion to
dismiss part of the Amended Complaint.

The accompanying Order

will be entered.

June 2, 2011
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
United States District Judge

8