Coupa Software Incorporated v. DCR Workforce, Inc.

Background

DCR previously sued Coupa in an earlier federal case referred to in the opinion as DCR I. That case involved an Asset Purchase Agreement and claims that Coupa failed to provide additional compensation allegedly owed under the agreement. The district court dismissed the case without allowing amendment. The Ninth Circuit affirmed some dismissals but reversed others, concluding that DCR should have been allowed to amend certain claims. After the appellate mandate issued, DCR voluntarily dismissed DCR I without prejudice.

DCR later filed another suit in state court, referred to as DCR II, pursuing at least some claims that it had dismissed in DCR I. Coupa then filed this federal action seeking to stop DCR II. Coupa relied on the federal All Writs Act and the relitigation exception to the Anti-Injunction Act, arguing that claim preclusion—also called res judicata—barred DCR II because of the earlier litigation.

The court held a hearing on Coupa’s motion for a preliminary injunction. It indicated that Coupa had not shown clearly enough that claim preclusion barred DCR II and that the state court should decide the issue. DCR also filed a motion for judgment on the pleadings, making essentially the same argument that the federal court should not enjoin DCR II. Coupa then moved under Federal Rule of Civil Procedure 41(a)(2) to voluntarily dismiss this federal case without prejudice.

Court’s Analysis

Rule 41(a)(2) allows a plaintiff to dismiss an action by court order on terms the court considers proper. A dismissal without prejudice ordinarily should be allowed unless the defendant would suffer “plain legal prejudice,” meaning harm to a legal interest, claim, or argument. The court may impose conditions to prevent that prejudice.

DCR argued that dismissal without prejudice would cause plain legal prejudice because Coupa was attempting to avoid an almost certain adverse ruling on the preliminary-injunction and judgment-on-the-pleadings issues. The court agreed with that argument. Because the court had already indicated that it would deny Coupa’s request for an injunction, and DCR’s pending motion made essentially the same argument, the court concluded that Coupa was trying to avoid an expected ruling against it.

The court did not need to decide DCR’s separate argument that dismissal without prejudice would prevent DCR from claiming prevailing-party status and seeking attorneys’ fees. The court also stated that it was not deciding, or expressing an opinion on, whether claim preclusion applied to DCR II. That question was left to the state court.

Disposition

The court conditionally granted Coupa’s motion for voluntary dismissal, conditioning it on Coupa agreeing to dismiss this federal case with prejudice. Coupa was ordered to file a statement within one week saying whether it agreed. If Coupa did not agree, the motion would be withdrawn, and the court would issue its ruling on the preliminary-injunction motion and proceed with DCR’s motion for judgment on the pleadings. The order disposed of Docket No. 43.