Reynolds v. OneWest Bank, FSB
Filing
45
OPINION AND ORDER conditionally granting in part 40 Motion to Dismiss Without Prejudice . The court conditionally GRANTS Plaintiffs motion to dismiss 40 and notifies the parties that it intends to dismiss the Second Action without prejudi ce. The court ORDERS supplemental briefing on the issue of attorney's fees and costs under Rule 41(a)(2) and DENIES Defendant's request for fees under Rule 41(d). Defendant's supplemental briefing due within twenty days of this Order, Plaintiff response due twenty days thereafter. Signed by Chief Judge Christina Reiss on 11/7/2011. (pam)
UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
2011 NOV -7 PM 12: 25
CLERK
BY
QK
D£PUT Y CLERK
CATHERINE M. REYNOLDS,
Plaintiff,
v.
)
)
)
)
)
ONEWEST BANK, FSB,
Defendant.
Case No. 5:11-cv-81
)
)
)
)
OPINION AND ORDER CONDITIONALLY GRANTING IN PART
PLAINTIFF'S MOTION FOR DISMISSAL AND ORDERING
SUPPLEMENTAL BRIEFING ON THE ISSUE OF
ATTORNEY'S FEES AND COSTS
(Doc. 40)
This matter comes before the court on the motion by Plaintiff Catherine Reynolds
to dismiss her complaint without prejudice under Federal Rule of Civil Procedure 41.
(Doc. 40.) Defendant OneWest Bank, FSB, opposes the motion and asks the court either
to refuse to dismiss the action or to require Plaintiff to pay fees and costs incurred by
Defendant. The parties waived oral argument. Plaintiff is represented by Lisa Chalidze,
Esq., and Defendant is represented by Kristina Roomet, Esq. and John T. Sartore, Esq.
I.
Factual and Procedural Background.
This case involves a mortgage executed by Plaintiff in July 2006 in favor of
IndyMac Bank, FSB, and later transferred to Defendant. Plaintiff fell behind in her
payments and ultimately declared bankruptcy. Plaintiff alleges that Defendant
wrongfully failed to convert a temporary loan modification into a permanent
modification. She further alleges that she has continued to tender monthly payments
pursuant to the modification agreement but Defendant has rejected those payments as
insufficient under the original loan.
In February or March 2010, Plaintiff, who was self-represented at the time, served
a summons and complaint on Defendant in an action in Windsor Superior Court (the
"First Action"). The complaint alleged violations of the federal Fair Debt Collection
Practices Act and the Vermont Consumer Fraud Act. In March 2010, Defendant
removed the First Action to federal court (2: 10-cv-0070-wks). Defendant then moved to
dismiss the First Action. Thereafter, in May 2010, Plaintiff and Defendant stipulated to
dismissal of the First Action without prejudice under Fed. R. Civ. P. 41(a)(l)(A)(ii).
On February 3, 2011, Plaintiff filed a new complaint against Defendant in
Windsor Superior Court (the "Second Action"), but Plaintiff did not serve the Second
Action for several weeks. On February 8, 2011, before Defendant had been served with
the Second Action, Defendant filed a foreclosure complaint against Plaintiff in Windsor
Superior Court ("the Foreclosure Action"). In March 2011, Defendant removed the
Second Action to federal court, which is now this case. Plaintiff objected to removal and
sought to have the court abstain from hearing this case and remand the Second Action to
state court.
In August 2011, the state court denied Plaintiff s motion to dismiss the
Foreclosure Action. Thereafter, Plaintiff filed a counterclaim in the Foreclosure Action
which raises similar claims to the six claims Plaintiff has raised in the Second Action.'
At a June 27, 2011 hearing in the Second Action, the court denied Plaintiff s
motions for remand and abstention. Plaintiff then advised the court that she sought to
voluntarily dismiss the Second Action. However, Plaintiff withdrew her voluntary
dismissal when Defendant argued that such dismissal should be treated as an adjudication
on the merits. See Fed. R. Civ. P. 41(a)(I)(B) ("[l]fthe plaintiff previously dismissed
any federal- or state-court action based on or including the same claim, a notice of
dismissal operates as an adjudication on the merits."). The court advised the parties that
the Second Action would remain in federal court and they should proceed accordingly.
Plaintiff s Amended Complaint in the SecondAction alleges: (l) fraud; (2) breach of contract;
(3) breach of the contractual duty of good faith and fair dealing; (4) defamation; (5) punitive
damages; and (6) declaratory relief.
I
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On September 7, 2011, Plaintiff moved to dismiss the Second Action without
prejudice. Plaintiff argues that "the most expedient and efficient vehicle for resolving all
issues between the parties" is through the pending Foreclosure Action. (Doc. 40-1 at 4.)
Plaintiff further argues that "[i]t has been held that where the rationale for dismissal is
plaintiffs preference for adjudicating the matter in a state court as that court was the only
court with jurisdiction to adjudicate the controversy in its entirety, dismissal [is] proper."
(Doc. 40-1 at 4) (citation omitted).
Defendant opposes dismissal, contending that it has answered and served
discovery, prepared for ENE, and drafted a motion for summary judgment. Defendant
further argues that Plaintiff s alleged pattern of filing claims against Defendant only to
dismiss them as they approach a disposition is vexatious and should not be rewarded.
II.
Conclusions of Law and Analysis.
There are three issues before the court. First, the court must decide whether to
grant Plaintiffs request for voluntary dismissal under Rule 41(a)(2). Second, the court
must consider whether to impose conditions or fees under Rule 41(a)(2). Third, the court
must determine whether to impose fees under Rule 41(d).
A.
Voluntary Dismissal.
Generally, a district court may exercise its discretion to permit a plaintiff to
dismiss an action pursuant to Rule 41(a)(2) "if the defendant will not be prejudiced
thereby." Correspondent Services Corp. v. First Equities Corp. ofFla., 338 FJd 119,
126 (2d Cir. 2003). "Although voluntary dismissal without prejudice is not a matter of
right, the presumption in this circuit is that a court should grant a dismissal pursuant to
Rule 41(a)(2) absent a showing that defendants will suffer substantial prejudice as a
result." Gap, Inc. v. Stone Int'l Trading, Inc., 169 F.R.D. 584, 588 (S.D.N.Y. 1997)
(citations omitted).
The Second Circuit has identified five non-exhaustive factors that a court should
consider in determining whether a defendant will suffer prejudice: "[1] the plaintiffs
diligence in bringing the motion; [2] any 'undue vexatiousness' on plaintiffs part; [3] the
extent to which the suit has progressed, including the defendant's effort and expense in
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preparation for trial; [4] the duplicative expense of relitigation; and [5] the adequacy of
plaintiffs explanation for the need to dismiss." Catanzano v. Wing, 277 F.3d 99, 109-10
(2d Cir. 2001) (citing Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir. 1990)).
The first factor is diligence. Defendant argues that Plaintiff has not been diligent
because she first sought voluntary dismissal at a hearing on June 27,2011, and waited to
file this motion until September 2011. Defendant further asserts that "Plaintiff has
repeatedly failed to comply with Federal and Local Rules of Civil Procedure, and has
failed to prosecute the case." (Doc. 41 at 3.) In particular, Defendant points out that
Plaintiff has failed respond to Defendant's discovery despite repeated requests to do so
and has failed to prepare for and complete the ENE process. Plaintiff does not address
diligence in her motion.
"When analyzing whether a party was diligent or not in bringing a motion, courts
have focused on whether or not the moving party encouraged the non-moving party to
continue discovery without any intention of pursuing its claims." Shaw Family Archives,
Ltd. v. CMG Worldwide, Inc., No. 05 CV 3939 (CM), 2008 WL 4127549, at *5
(S.D.N.Y. Sept. 2, 2008). Here, the court cannot find that Plaintiff induced Defendant to
continue with discovery without any intention of pursuing her claims. On the other hand,
Plaintiff has not established that she has acted with diligence in either pursuing dismissal
or in pursuing her claims. The court thus finds this Zagano factor is neutral.
The second factor is any undue vexatiousness by Plaintiff. Defendant contends
that Plaintiff, on four separate occasions, filed claims against Defendant based upon the
same facts and that Plaintiffs pursuit of these claims has been vexatious. See Doc. 41 at
3 ("Plaintiffs counterclaims in state court apparently constitute the fourth time that she
has brought claims against Defendant based on the same underlying facts. She should
not be given the ability to repeatedly make claims against Defendant and then dismiss
them as soon as or just before the merits are before the Court."). Plaintiff, in tum, blames
Defendant for the procedural posture of the Second Action, arguing that Defendant, over
her objection, "forced the written discovery to take place in a federal forum." (Doc. 40-1
at 5.)
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In cases where "the plaintiff could have pursued the action with more vigor, [but]
there is no evidence to suggest that the case was brought to harass the defendant," the
second Zagano factor weighs in favor of granting dismissal. Hinfin Realty Corp. v.
Pittston Co., 206 F.R.D. 350, 356 (E.D.N.Y. 2002). Here, although Plaintiff likely could
have handled the litigation more efficiently, there is no evidence of "ill motive."
Jewelers Vigilance Comm., Inc. v. Vitale Inc., No. 90 Civ. 1476 (MJL), 1997 WL
582823, at *3 (S.D.N.Y. Sept. 19, 1997) ("absent concrete evidence of any ill-motive on
Plaintiff s part, the Court declines to label Plaintiff s conduct 'vexatious. "').
Accordingly, this factor favors dismissal.
The third factor is the extent to which the suit progressed. Defendant contends
that it "is nearly ready to file a dispositive motion ... [and] has expended substantial
effort and expense on the case." (Doc. 4 at 6.) Generally, however, this factor weighs
against dismissal only if the case has progressed to an advanced stage, such as the eve of
trial, see Zagano, 900 F.2d at 14-15, or when discovery is complete and partial
dispositive motions have been adjudicated, see Jewelers Vigilance, 1997 WL 582823, at
*3. "Dismissal without prejudice has been permitted in cases that have been pending
much longer than seven months." Shah v. RBC Capital Mkts. Corp., No. 10 Civ. 7672
(PGG), 2011 WL 2638139, at *2 (S.D.N.Y. July 5, 2011); See also, Catanzano, 277 F.3d
at 110 (finding abuse of discretion in refusing to grant motion to dismiss where "although
the litigation has gone on for years, this claim has thus far not been litigated and only
halting discovery has taken place"). In this case, discovery is not complete and the case
has not progressed to the point where dismissal would be inappropriate. As a result, this
factor also weighs in favor of dismissal.
The fourth factor is the duplicative expense of relitigation. Defendant contends
that the cost ofrelitigating these claims in state court could "very well be duplicative."
(Doc. 41 at 6.) However, Plaintiff points out that the discovery conducted by Defendant
in this court could be "set forth [in state court] ... with little or no duplication," thus
minimizing the cost ofrelitigating. (Doc. 40-1 at 5.) Where discovery can be used in a
subsequent action, dismissal is generally granted. See Banco Central de Paraguay v.
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Paraguay Humanitarian Found., Inc., No. 01 Civ. 9649 (JFK), 2006 WL 3456521, at *7
(S.D.N.Y. Nov. 30, 2006) (granting motion for voluntary dismissal where "work that
defendants have done in preparing for trial can easily be used in a subsequent, similar
action"); see also Hinfin, 206 F.R.D. at 356 (finding no prejudice where defendant "can
use some of the material discovered and the legal work already done, if the case is
renewed in the future").
The fifth factor is the adequacy of the moving party's explanation for the grounds
for dismissal. Plaintiff states that she would prefer to litigate both her claims and the
foreclosure counterclaims in the same forum. Defendant contends this explanation is
inadequate because this court is "perfectly capable of addressing [Plaintiffs] claims."
(Doc. 41 at 6.) In weighing this factor, courts consider whether a plaintiff "offers a
reasonable explanation for why it wishes to have its remaining claims voluntarily
dismissed without prejudice." Banco Central, 2006 WL 3456521, at *7. Courts may
consider both stated and unstated explanations. For example, a court may consider
whether a plaintiff is actually moving to dismiss to "avoid the prospect of an adverse
decision on a dispositive motion by dismissing a claim without prejudice." Galasso v.
Eisman, Zucker, Klein & Ruttenberg, 310 F. Supp. 2d 569, 572, 574 (S.D.N.Y. 2004)
(rejecting motion for voluntary dismissal in part due to conclusion that plaintiff hoped to
obtain "a 'no harm-no foul' dismissal ... [and] a second bite of the apple in the State
Supreme Court.").
Here, although Plaintiffs explanation is facially reasonable, there is some
suggestion of forum shopping as Plaintiff has twice asserted separate lawsuits against
Defendant only to dismiss them when they have been removed to federal court. See
Iragorri v. United Tech. Corp., 274 F.3d 65, 72 (2d Cir. 2001) (en bane) (noting that a
plaintiff s choice of forum is entitled to less deference when motivated by forum
shopping); Banga v. First USA, NA, No. CIV S-09-2268 FCD GGH PS, 2010 WL
727749, at *2 (E.D. Cal. Mar. 2, 2010) (plaintiff cannot voluntarily dismiss a defendant
without prejudice in order to bring the action in another forum where the sole reason for
dismissal is forum shopping).
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At this juncture, the court finds Plaintiff s asserted ground for dismissal is not
patently unreasonable. The potential that dismissal is also motivated by Plaintiffs forum
shopping does not alter that conclusion. Any prejudice caused by forum shopping may
be addressed through the imposition of conditions to dismissal rather than by forcing
Plaintiff to proceed with a lawsuit she wishes to dismiss.
On balance, the Zagano factors support dismissal of this action. Under Rule 41(a),
the court must next consider the "terms that the court considers proper." Fed. R. Civ. P.
41(a)(2).
B.
Conditions of Dismissal Pursuant to Fed. R. Civ. P. 41(a)(2).
The first consideration is whether dismissal should be with or without prejudice.
Pursuant to Rule 41(a)(2), dismissal is generally without prejudice, but the rule authorizes
a court to convert a motion for dismissal without prejudice to one with prejudice. See
Gravatt v. Columbia Univ., 845 F.2d 54, 56 (2d Cir. 1988). Before doing so, the court
must grant the moving party an opportunity to withdraw the motion. Plaintiff moves to
dismiss without prejudice, and Defendant does not request dismissal with prejudice.
Thus, the court finds that dismissal with prejudice is not warranted.
The next issue is the imposition of other conditions, such as attorney's fees and
costs. Defendant requests the imposition of attorney's fees of$42,130 and costs of
$514.16 as a condition of dismissal pursuant to the court's discretion under Rule 41(a)(2).
Plaintiff contends Defendant should not be granted fees or costs because any discovery
conducted can be applied in state court. In addition, Plaintiff argues that Defendant's
expenses are in effect self-inflicted because absent Defendant's removal of the Second
Action it would have remained pending in state court, Plaintiffwould have litigated in
that forum, and Plaintiff would not now be moving to dismiss.
"[U]sually the district judge at least should require that the plaintiff pay the costs
of the litigation and that practice has become commonplace." 9 Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure § 2366, at 526 (3d ed. 2008). While fee
awards "are often made when a plaintiff dismisses a suit without prejudice," Colombrito
v. Kelly, 764 F.2d 122, 133 (2d Cir. 1985), this practice "does not amount to a bright-line
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rule." Global One Commc 'ns World Holding B. V. v. Gaul, No. 01-cv-254 (GLS/DRH),
2008 WL 2783429, at *3 (N.D.N.Y. July 16,2008). Any fee award has limitations
including that these "court ordered costs cannot include those expenses for items that will
be useful in another action or that were incurred by the defendant unnecessarily." Wright
& Miller § 2366, at 527.
Because dismissal of the Second Action will be granted without prejudice,
Plaintiff should arguably be obligated to pay some or all of Defendant's fees and costs.
However, on the present record, the court cannot find that all of Defendant's fees and
costs were incurred in the Second Action. The court also cannot determine which fees
and costs are likely to obviate the need for duplication of those expenses in the
Foreclosure Action. Defendant, as the party seeking this award, has the obligation to
provide support for its request. See Universal Marine Med. Supply, Inc. v. Lovecchio,
No. 98-CV-3495 (ILG), 1999 WL 441680, at *7 (E.D.N.Y. May 7,1999) (ordering
supplemental briefing on the issue of attorney's fees after voluntary dismissal and noting
that the court cannot award fees until defendant has submitted evidence of costs); see also
Hinfin, 206 F.R.D. at 357 (inviting supplemental briefing on the issue of attorney's fees
and noting that the court could not award attorney's fees without billing sheets or
affidavits from defendant). Plaintiff, in tum, must have an opportunity to challenge those
fees and costs and demonstrate why some or all of them should not be awarded.
For the foregoing reasons, the court hereby ORDERS supplemental briefing by the
parties on the issue of attorney's fees and costs under Fed. R. Civ. P. 41(a)(2).
Defendant's response to this request is due within twenty days of this Order. Plaintiffs
response is due twenty days thereafter. However, in the event Plaintiff submits a notice
to the court within ten days of this Order that dismissal of the action should be with
prejudice, the court will deny Defendant's request for attorney's fees and costs and no
further briefing shall be required. See Colombrito, 764 F.2d at 134 (when dismissal is
granted with prejudice under Rule 41(a)(2), "attorney's fees have almost never been
awarded.").
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C.
Costs under Fed. R. Civ. P. 41(d).
Defendant also raises the issue of attorney's fees and costs under Rule 4l(d),
which states:
If a plaintiff who previously dismissed an action in any court files an action
based on or including the same claim against the same defendant, the court:
(1) may order the plaintiff to pay all or part of the costs of that
previous action; and
(2) may stay the proceedings until the plaintiff has complied.
Although Rule 41(d) by its terms permits only an award of costs, "courts have
generally allowed the recovery of attorney's fees as part of the [Rule 41(d)] costs."
Loubier v. Modern Acoustics, Inc., 178 F.R.D. 17,22 (D. Conn. 1998) (citing cases); New
Phone Co. v. NY. City Dep 't ofInfo. Tech. & Telecomm., Nos. 06-CV-3529, 07-CV
2474,2007 WL 2908110, at *16-17 (E.D.N.Y. Oct. 5,2007) ("Although Rule 41(d) does
not explicitly provide that attorneys' fees may be awarded, the weight of authority in this
Circuit supports such an award.").
An award under Rule 41(d) is within the court's discretion. See Zucker v. Katz,
708 F. Supp. 525, 539 (S.D.N.Y. 1989). Even though a defendant need not show that a
plaintiff acted in bad faith in order to recover, a "district court may refuse to impose
[Rule 41(d) costs] on the plaintiff if it appears that there was a good reason for the
dismissal of the prior action or that the plaintiff financially is unable to pay the costs."
Wright & Miller § 2375 (citations omitted); see also Loubier, 178 F.R.D. at 22 ("There
is no requirement in Rule 41(d) or the relevant case law that a defendant must show bad
faith on the part of the plaintiff in order to recover costs. On the other hand, there is
authority for plaintiffs' position that we may take into consideration plaintiffs' motive in
dismissing the prior action.") (citations omitted).
Here, Defendant has not demonstrated that the First and Second Actions "are
based on or include[e] the same claim." Fed. R. Civ. P. 41(d). Further, Defendant has
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not submitted evidence regarding its expenditures in the First Action. The court therefore
DENIES Defendant's request for fees and costs under Rule 41(d).
III.
Conclusion.
The court conditionally GRANTS Plaintiffs motion to dismiss (Doc. 40) and
notifies the parties that it intends to dismiss the Second Action without prejudice. The
court ORDERS supplemental briefing on the issue of attorney's fees and costs under
Rule 41(a)(2) and DENIES Defendant's request for fees under Rule 41(d).
SO ORDERED.
Dated at Rutland, in the District of Vermont, this
1~day of November, 2011.
United States District Court
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