Lombardo v. R.L. Young, Inc.

          RULING ON RULE 41(D) MOTION AND MOTION TO DISMISS

          Janet Bond Arterton, U.S.D.J.

         In this diversity action, Plaintiff Don Lombardo alleges that Defendants breached a joint venture agreement, or in the alternative, a partnership or independent contractor agreement, and seeks damages, an accounting, and other equitable relief, inter alia. Defendant R.L. Young, Inc. d/b/a Young & Associates (“YA”) has moved under Fed.R.Civ.P. 41(d) for costs incurred with Plaintiff's prior action against Defendant-which Plaintiff voluntarily dismissed-and to stay the proceedings until Plaintiff complies with such order. (Rule 41(d) Mot. [Doc. # 19].) Individual Defendants Raymond Young and Linda Young have moved to dismiss the causes of action asserted against them in Plaintiff's Second Amended Complaint. (Mot. Dismiss [Doc. # 35].)

         I. Rule 41(d) Motion

         Plaintiff commenced this action against YA and Defendants Raymond and Linda Young on February 1, 2018, seeking to recover damages arising out of an independent contractor consulting relationship between Plaintiff and YA. (Rule 41(d) Mot. at 1.) Prior to filing this action, Plaintiff had commenced another lawsuit in state court against YA, which YA removed to the U.S. District Court for the District of Connecticut on June 7, 2017, and which was assigned to the Honorable Alvin Thompson. (See 3:17-cv-940.) In the first lawsuit, Plaintiff amended his complaint once and sought leave to amend again. (Rule 41(d) Mot. at 1.) The parties both produced documents and took depositions within the discovery deadline of March 19, 2018. (Id. at 2.) While Defendant's second Motion to Dismiss and Plaintiff's Motion for Leave to Amend his First Amended Complaint were still pending in the first case, Plaintiff filed this action on February 1, 2018. (Id.) Four days later, Plaintiff voluntarily dismissed the first lawsuit. (Id.)

         Rule 41(d) provides that “[i]f 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.” Fed.R.Civ.P. 41(d).

         Plaintiff argues that “an award of costs pursuant to Rule 41(d) is discretionary and, based upon the particular circumstances here, no award of costs is appropriate[, ]” because “Plaintiff had a legitimate basis for withdrawing the prior action and instituting the instant action.” (Pl.'s Obj. to Rule 41(d) Mot. at 1.) In the alternative, Plaintiff argues that even if the Court awards costs, the Court should exclude any expenditures related to work in the prior action that will be useful in the instant action, and second, that the Court should not award attorney's fees as part of costs. (Id. at 2.)

         Plaintiff claims that “[b]ased on the information revealed during discovery [in the first lawsuit], Plaintiff believed it was necessary to expand and clarify his claims regarding the operation of [YA].” (Id. at 6.) Specifically, Plaintiff asserts that he learned that there was a good faith basis for a veil-piercing claim, and that “it was necessary to timely add claims related to [changes to Plaintiff's compensation in March 2012] to avoid any claims being” time-barred. (Id.) Plaintiff asserts that he could not “expeditiously” add the individual Youngs as parties or make additional claims “in the original action due to the pendency of YANV's second motion to dismiss.” (Id.)

         Plaintiff does not, however, explain why he did not attempt to amend to add additional parties and claims in the first lawsuit, or why, if the statute of limitations loomed on the claims against the Individual Defendants, he could not have simply filed a new case against those Defendants without dismissing the prior action against YA. Plaintiff does not dispute for the purposes of Rule 41(d) that the instant action is based on and includes at least some of the same claims against one of the same defendants as his first lawsuit.

         “An award of costs under Rule 41(d) is discretionary with the court.” Loubier v. Modern Acoustics, Inc., 178 F.R.D. 17, 22 (D. Conn. 1998) (citation omitted). “There is no requirement in Rule 41(d) or the relevant caselaw that a defendant must show bad faith on the part of the plaintiff in order to recover costs.” Id. “On the other hand, there is authority for plaintiffs' position that we may take into consideration plaintiffs' motive in dismissing the prior action.” Id.

         Plaintiff argues that YA failed to give any notice of its intent to file this motion and thus waived any right to seek costs pursuant to Rule 41(d). He provides no authority for this position and the text of the rule contains no notice requirement, see Fed. R. Civ. P. 41(d), so this argument is unavailing.

         Plaintiff claims that he had no vexatious purpose for dismissing the first lawsuit and filing the instant action, asserting that in fact, he sought to avoid the waste of court resources that would result if he had filed a second separate action against the Youngs individually. (Pl.'s Obj. to Rule 41(d) Mot. at 10 n.1.) Plaintiff disregards the likelihood that his second action would have been consolidated with the first lawsuit and thus his proffered reason of conservation of judicial resources does not provide a satisfying explanation for the course of litigation conduct in which he engaged.

         In briefing, Plaintiff noted that the text of Rule 41(d) references only “costs” and not “fees, ” which he took to mean that Defendant cannot recover attorney's fees. But at oral argument, he properly abandoned that position in light of the Second Circuit's recent holding that “district courts may award attorneys' fees as part of costs under Rule 41(d)[, ]” while recognizing that the question has split circuit courts. Horowitz v. 148 S. Emerson Assocs. LLC, 888 F.3d 13, 24 (2d Cir. 2018). Noting that “the entire Rule 41(d) scheme would be substantially undermined were the awarding of attorneys' fees to be precluded[, ]” the Second Circuit held that “Rule 41(d) evinces an unmistakable intent for a district court to be free, in its discretion, to award attorneys' fees as part of costs.” Id. at 25.

         Moreover, “[t]he need for attorneys' fees may be especially acute in the Rule 41(d) context[, ]” where “litigants . . . file complaints and quickly dismiss them, perhaps in reaction to initial unfavorable rulings, or hoping for a subsequent case assignment to a judge they view as more favorable.” Id. at 26. Such cases may involve “minor costs to the adversary other than attorneys' fees, which may be substantial.” Id.

         Plaintiff also argues that the amount in fees and costs sought by Defendant-originally identified by Defendant as $151, 661.36 but subsequently increased to $237, 825- is unreasonable and excessive. However, since Defendant's motion included no itemization of its costs and fees, the merits of Plaintiff's position cannot be determined at this time. At oral argument on December 11, 2018, the Court directed Defendant to file fee documentation supporting its Rule 41(d) Motion including documentation of what discovery in the first lawsuit could be utilized in this case, which currently remains in dispute. (Endorsement and Scheduling Order [Doc. # 53] ¶ 3.)

         An award of costs and the issuance of a stay are separate discretionary issues under Rule 41(d), and there is nothing in the text of the rule that requires the Court to issue a stay upon an award of costs. See Fed. R. Civ. P. 41(d) (a district court “may order the plaintiff to pay all or part of the costs of that previous action” and ...