Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-00369/USCOURTS-casd-3_10-cv-00369-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Petition for Removal

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DCI SOLUTIONS INC., a California

corporation, 

Plaintiff,

CASE NO. 10cv0369 - IEG (BGS)

ORDER GRANTING

DEFENDANT AND

COUNTERCLAIMANT URBAN’S

MOTION TO DISMISS ITS

REMAINING COUNTERCLAIMS

[Doc. No. 125]

vs.

URBAN OUTFITTERS, INC., a

Pennsylvania corporation, and Does 1-20,

Defendants.

AND RELATED COUNTER CLAIMS.

Presently before the Court is Defendant and Counterclaimant Urban Outfitters, Inc.

(“Urban”)’s motion to dismiss its remaining equitable counterclaims without prejudice pursuant to

Federal Rule of Civil Procedure 41(a). [Doc. No. 125.] For the reasons below, the Court

GRANTS Urban’s motion.

BACKGROUND

This case arises out of a contract dispute between Plaintiff and Counterdefendant DCI

Solutions Inc. (“DCI”) and Urban. The factual background of this action is forth in detail in this

Court’s prior order granting in part and denying in part Urban’s motion for summary judgment and

need not be repeated herein. [See Doc. No. 60.]

On January 25, 2010, DCI filed this action in San Diego County superior court. [Doc. No.

- 1 - 10cv0369

Case 3:10-cv-00369-IEG-BGS Document 129 Filed 12/01/11 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1, Compl.] On February 16, 2010, Urban removed the action to this Court on the basis of diversity

jurisdiction. [Doc. No. 1, Notice of Removal.] In its complaint, DCI asserted four causes of

action against Urban for (1) fraud in the inducement, (2) breach of contract, (3) breach of the

implied covenant of good faith and fair dealing, and (4) quantum meruit. [Compl.] On May 25,

2010, Urban filed an amended answer and counterclaims against DCI for (1) fraud in the

inducement; (2) fraud; (3) breach of contract; (4) violation of California Business and Professions

Code §§ 17200 et. seq.; (5) declaratory relief; and (6) rescission. [Doc. No. 25.]

Beginning on September 6, 2011, the Court held a jury trial on all of DCI’s claims and on

Urban’s fraud and breach of contract counterclaims. On September 16, 2011, the jury returned a

verdict in favor of Urban on all of DCI’s claims and in favor of DCI on Urban’s fraud and breach

of contract counterclaims. [Doc. No. 116.] Following the verdict, the Court ordered Urban to file

any motions related to its three remaining equitable counterclaims for violation of California

Business and Professions Code §§ 17200 et. seq., declaratory relief, and rescission by September

26, 2011. [Doc. No. 115.] By the present motion, Urban seeks to dismiss these three remaining

counterclaims without prejudice pursuant to Federal Rule of Civil Procedure 41(a). [Doc. No.

125.]

DISCUSSION

Urban requests that the Court dismiss its fourth, fifth and sixth counterclaims without

prejudice. [Doc. No. 125.] DCI opposes this dismissal on two grounds. [Doc. No. 126.] First,

DCI argues that the Court should dismiss these counterclaims with prejudice, so DCI does not

have to face the possibility of having to defend against these counterclaims in subsequent

litigation. [Id. at 2-3.] Second, DCI argues that if the Court dismisses the counterclaims without

prejudice, the Court should order Urban to pay DCI’s attorneys’ fees and costs in any subsequent

litigation involving those counterclaims. [Id. at 3-4.]

Rule 41(a) of the Federal Rules of Civil Procedure governs the voluntary dismissal of an

action in federal court. Rule 41(a)(2) provides that unless a plaintiff files a notice of dismissal

before the opposing party serves either an answer or a motion for summary judgment, or the

parties stipulate to the dismissal of the action, “an action may be dismissed at the plaintiff [or

- 2 - 10cv0369

Case 3:10-cv-00369-IEG-BGS Document 129 Filed 12/01/11 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

counterclaimaint]’s request only by court order, on terms that the court considers proper.” FED. R.

CIV. P. 41(a)(2). The decision to grant or deny a motion pursuant to Rule 41(a)(2) is within the

sound discretion of the district court and may be reviewed only for abuse of that discretion. Sams

v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980). A court should grant a Rule 41(a)(2)

motion for voluntary dismissal unless the defendant/counterdefendant will “suffer clear legal

prejudice, other than the prospect of a subsequent suit on the same facts.” Phillips v. Illinois

Central Gulf Railroad, 874 F.2d 984, 986 (9th Cir. 1989). The Ninth Circuit interprets “legal

prejudice” to mean “prejudice to some legal interest, some legal claim, some legal argument.”

Westlands Water Dist. v. United States, 100 F.3d 94, 96 (9th Cir. 1996).

To protect the defendant’s interests when a dismissal is without prejudice, a court can

condition a dismissal upon the payment of “appropriate costs and attorney fees.” Westlands

Water, 100 F.3d at 97. However, the “[i]mposition of costs and fees as a condition for dismissing

without prejudice is not mandatory.” Id.; accord. Stevedoring Servs. of Am. v. Armilla Intern.

B.V., 889 F.2d 919, 921 (9th Cir. 1989). Further, the Ninth Circuit has held that “Fed. R. Civ. P.

41(a)(2) in itself is not ‘specific statutory authority’ for the imposition of sanctions against an

attorney.” Heckethorn v. Sunan Corp., 992 F.2d 240, 242 (9th Cir. 1993). “Given the

presumption that an attorney is generally not liable for fees unless that prospect is spelled out, it

would be incongruous to conclude from the broad language of Fed. R. Civ. P. 41(a)(2) that an

attorney could be sanctioned by authority of this rule alone.” Id. at 242; see also Int’l Union of

Petroleum & Indus. Workers v. Western Indus. Maintenance, Inc., 707 F.2d 425, 428 (9th Cir.

1983) (“[A]bsent contractual or statutory authorization, a prevailing litigant ordinarily may not

collect attorneys’ fees.”). “Thus, the district court must have an independent basis to impose fees

and costs as a condition of voluntary dismissal.” Chavez v. Northland Group, 2011 U.S. Dist.

LEXIS 10113, at *10 (D. Ariz. Feb 1, 2011); accord. Chang v. Pomeroy, 2011 U.S. Dist. LEXIS

13806, at *2 (E.D. Cal. Feb. 10, 2011) (“[A] court cannot impose fees and costs as a condition of

voluntary dismissal absent some basis other than the mere fact of the plaintiff’s request for Rule

41(a)(2).”).

DCI argues that the Court should exercise its discretion and dismiss the remaining

- 3 - 10cv0369

Case 3:10-cv-00369-IEG-BGS Document 129 Filed 12/01/11 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

counterclaims with prejudice. [Doc. No. 126 at 2-3.] In support of this argument, DCI fails to

point to any prejudice it would suffer by a dismissal without prejudice other than the prospect of

facing a future lawsuit. [See id. at 2. (“DCI will suffer prejudice if Urban’s remaining claims are

dismissed without prejudice. Namely, DCI faces the possibility of having to defend claims it has

already defeated.”).] The Ninth Circuit has stated that “the prospect of a subsequent suit on the

same facts” is insufficient to establish “legal prejudice.” Phillips, 874 F.2d at 986; see also

Westland Waters, 100 F.3d at 96 (“[T]he threat of future litigation which causes uncertainty is

insufficient to establish plain legal prejudice.”). Therefore, DCI has not shown that it will suffer

clear legal prejudice. See id.

DCI also argues that the Court should dismiss these counterclaims with prejudice because

Urban has failed to explain why the counterclaims should be dismissed without prejudice. [Doc.

No. 126 at 3.] Urban has provided a sufficient explanation of its reason for seeking dismissal

without prejudice. It explains that DCI contends that the contract at issue has a three-year window

for compensation that is still ongoing. [Doc. No. 127 at 2.] Therefore, DCI might attempt to

assert claims against Urban for compensation based on the contract in the future. [Id.] 

Accordingly, because DCI has not shown that it will suffer clear legal prejudice, and Urban has

provided an explanation for its request, the Court DISMISSES WITHOUT PREJUDICE

Urban’s remaining equitable counterclaims. See Phillips, 874 F.2d at 986

In addition, the Court declines to condition the dismissal on the payment of attorney’s fees

and costs in any subsequent litigation. First, DCI has provided no basis for the award of attorney’s

fees other than Rule 41(a)(2). Rule 41(a)(2) is not itself authority for the imposition of attorney’s

fees, and the Court must have an independent basis to condition the dismissal of the counterclaims

on the award of attorney’s fees. See Heckelthorn, 992 F.2d at 242; Chavez, 2011 U.S. Dist.

LEXIS 10113, at *10; Chang, 2011 U.S. Dist. LEXIS 13806, at *2. DCI has provided no statutory

authority or contractual provision providing for the award of attorney’s fees, and DCI has

presented no evidence showing that Urban has “‘acted in bad faith, vexatiously, wantonly, or for

oppressive reasons.’” Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 258-59

(1975). Further, all the cases that the Court has reviewed have only conditioned dismissal on an

- 4 - 10cv0369

Case 3:10-cv-00369-IEG-BGS Document 129 Filed 12/01/11 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

award of attorney’s fees for the present action not subsequent litigation. See Koch v. Hankins, 8

F.3d 650, 652 (9th Cir. 1993) (explaining that a defendant is only entitled to recover, as a

condition of dismissal, costs for work in the present action that will not be useful in subsequent

litigation). DCI has not presented the Court with any case where a court conditioned dismissal on

an award of attorney’s fees in future litigation. If Urban does eventually bring DCI back to court

on these counterclaims and DCI believes that the subsequent litigation is frivolous or in bad faith,

DCI can seek an award of attorney’s fees in that action. See Alyeska Pipeline, 421 U.S. at 258-59;

see also FED. R. CIV. P. 41(d).

CONCLUSION

For the reasons above, the Court GRANTS Urban’s motion and DISMISSES WITHOUT

PREJUDICE Urban’s fourth, fifth and sixth counterclaims for violation of California Business

and Professions Code §§ 17200 et seq., declaratory relief, and rescission.

IT IS SO ORDERED.

DATED: December 1, 2011 ________________________________

IRMA E. GONZALEZ, Chief Judge

United States District Court

- 5 - 10cv0369

Case 3:10-cv-00369-IEG-BGS Document 129 Filed 12/01/11 Page 5 of 5