United States District Court, D. Connecticut
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 ...