Ocinomled Ltd. v. Five "M" Corp.

Background

The court had recently denied defendants’ motion to dismiss the federal case. Plaintiffs then moved to voluntarily dismiss the case under Federal Rule of Civil Procedure 41(a)(2), which allows a court to dismiss an action at a plaintiff’s request by court order and on conditions the court considers proper.

The federal case involved issues also being addressed in a state-court proceeding. Defendants had previously argued in both courts that the federal case should be dismissed so the dispute could proceed in state court. After the federal court denied their motion to dismiss, defendants opposed plaintiffs’ request for voluntary dismissal and argued that dismissal would legally prejudice them.

Parties’ Arguments

Defendants identified four claimed forms of prejudice: the state court had dismissed their counterclaims, the remaining counterclaims were pending in federal court, dismissal could deprive them of a speedy trial, relitigation could be expensive because discovery in the state case had only begun, and the COVID-19 pandemic and the age of the case created uncertainty.

The court applied the factors used in the Second Circuit for Rule 41(a)(2) motions. Those factors include the plaintiff’s diligence, possible improper conduct, how far the case has progressed, the expense of repeating litigation, and the adequacy of the plaintiff’s explanation for seeking dismissal. The court found that the factors strongly favored dismissal. It also concluded that discovery from the federal case could be used in the state case, reducing concerns about duplicated costs.

Legal Prejudice and Conditions

The court determined that any prejudice could be addressed through conditions on dismissal. It stated that plaintiffs could be required to stipulate that defendants’ counterclaims could be litigated in state court. The court also noted that the nominal defendants did not oppose the motion and had shown no basis for finding that dismissal would prejudice them.

The court imposed two conditions: plaintiffs must stipulate that defendants may litigate their counterclaims in state court, and plaintiffs must write to the court within four weeks providing support for the conclusion that Justice Cohen is willing and able to hear those counterclaims in the pending state action.

Ruling

Judge Gregory H. Woods granted plaintiffs’ motion to dismiss under Rule 41(a)(2), subject to those two conditions. The Clerk of Court was directed to terminate the motion at docket entry 416. The opinion does not state a separate disposition using the phrases “with prejudice” or “without prejudice” for the federal action.