Honig v. Cohen

Background

Barry Honig and GRQ Consultants, Inc. sued Gregory D. Cohen and Bulldog Boxing Promotions LLC. Plaintiffs alleged that defendants repeatedly solicited money to support Cohen’s boxing business by making claims about exclusive fighter contracts and large purse earnings that were mostly false. Plaintiffs asserted claims for breach of contract, fraud, unjust enrichment, and an accounting.

Plaintiffs had previously brought a related case in the District of New Jersey involving many of the same allegations and causes of action. That case was dismissed in its entirety without prejudice. Plaintiffs then filed this case in the Southern District of New York. Before any defendant served an answer or a motion for summary judgment, plaintiffs filed a notice under Federal Rule of Civil Procedure 41(a)(1)(A)(i) voluntarily dismissing this case without prejudice.

Defendants asked the court to rule that the notice instead constituted a dismissal on the merits and with prejudice. They argued that the earlier New Jersey dismissal was the first qualifying dismissal under Rule 41(a)(1)(B), commonly called the two-dismissal rule, and that the dismissal in this case was the second. Plaintiffs disagreed and argued, among other things, that the New Jersey dismissal was made under a different part of Rule 41 and that the court lacked jurisdiction to change the effect of the notice filed in this case.

Court’s Analysis

The court held that it lacked subject-matter jurisdiction, meaning the statutory power to decide the issue presented. Under Rule 41(a)(1)(A)(i), a plaintiff may dismiss an action without a court order by filing a notice before the opposing party serves an answer or a motion for summary judgment. Unless the notice says otherwise, the dismissal is without prejudice.

The court explained that a qualifying Rule 41(a)(1)(A) notice takes effect automatically. It closes the case without requiring a court order and generally ends the court’s jurisdiction over the merits. The court relied on Second Circuit decisions stating that a proper notice of voluntary dismissal cannot ordinarily be vacated or changed by the district court. The court also distinguished a narrow earlier case involving extensive proceedings on a preliminary-injunction motion, finding that this case did not present similar facts.

Because plaintiffs filed their notice before any answer or motion for summary judgment, the court concluded that ordering a dismissal with prejudice would be error. The court emphasized that it was not deciding whether this dismissal should be treated as the second qualifying dismissal under Rule 41(a)(1)(B). It stated that a future court could decide whether the notice operated as an adjudication on the merits.

Disposition

The court denied defendants’ motions. The Clerk of Court was directed to terminate the pending motions at ECF Nos. 16, 20, and 22.