16-3912

Montauk U.S.A., LLC v. 148 South Emerson Associates LLC

1

2 In the

3 United States Court of Appeals

4 For the Second Circuit

5 ________

6

7 AUGUST TERM, 2017

8

9 ARGUED: OCTOBER 5, 2017

10 DECIDED: APRIL 20, 2018

11

12 No. 16-3912-cv

13

14 MARK HOROWITZ,

15 Plaintiff,

16

17 MONTAUK U.S.A., LLC,

18 Plaintiff-Appellant,

19

20 v.

21

22 148 SOUTH EMERSON ASSOCIATES LLC,

23 Defendant-Appellee.

24 ________

25

26 Appeal from the United States District Court

27 for the Eastern District of New York.

28 No. 16-cv-02741 – Sandra J. Feuerstein, Judge.

29 ________

30

31 Before: WALKER, RAGGI, and HALL, Circuit Judges.

32 ________

33
2 No. 16-3912

1 Plaintiff-Appellant Montauk U.S.A., LLC (“Montauk”) appeals

2 from (i) the district court’s dismissal without prejudice of its Lanham 

3 Act claims and motion for preliminary injunction under the “first4 filed” rule, and (ii) the district court’s order, pursuant to Fed. R. Civ. 

5 P. 41(d), that Montauk pay the costs, including attorneys’ fees, that 

6 Defendant-Appellee 148 South Emerson Associates LLC 

7 (“Associates”) incurred in responding to a previous action Montauk 

8 brought against Associates in Georgia state court that Montauk 

9 voluntarily dismissed. Central to Montauk’s appeal is the contention 

10 that Associates, a limited liability company, should have been held in

11 default because Associates could not litigate through a partial owner

12 who lacked derivative litigation rights under New York law.

13 Because New York law allows for derivative representation on 

14 the facts presented, we conclude at the outset that the district court 

15 correctly rejected Montauk’s request to hold Associates in default. 

16 We nevertheless vacate the district court’s dismissal of Montauk’s 

17 complaint and preliminary injunction motion in favor of a first-filed 

18 federal Georgia action because the Georgia suit has been transferred 

19 to the Eastern District of New York, so the reasoning behind the first20 filed ruling no longer pertains. We affirm the district court’s award 

21 of costs under Rule 41(d), including attorneys’ fees, incurred by 

22 Associates in the Georgia state action. Consequently, we AFFIRM in 

23 part, VACATE in part, and REMAND for further proceedings.
3 No. 16-3912

1 ________

2

3 MICHAEL BOWE, Kasowitz Benson Torres & 

4 Friedman LLP, New York, NY, for Plaintiff5 Appellant.

6 JAMES M. CATTERSON, Arnold & Porter Kaye 

7 Scholer, LLP, New York, NY (Michael Burrows, 

8 Greenberg Traurig, LLP, New York, NY, on the 

9 brief), for Defendant-Appellee.

10 ________

11

12 JOHN M. WALKER, JR., Circuit Judge:

13 Plaintiff-Appellant Montauk U.S.A., LLC (“Montauk”) appeals 

14 from (i) the district court’s dismissal without prejudice of its Lanham 

15 Act claims and motion for preliminary injunction under the “first16 filed” rule, and (ii) the district court’s order, pursuant to Fed. R. Civ. 

17 P. 41(d), that Montauk pay the costs, including attorneys’ fees, that 

18 Defendant-Appellee 148 South Emerson Associates LLC 

19 (“Associates”) incurred in responding to a previous action Montauk 

20 brought against Associates in Georgia state court that Montauk 

21 voluntarily dismissed. Central to Montauk’s appeal is the contention 

22 that Associates, a limited liability company, should have been held in

23 default because Associates could not litigate through a partial owner 

24 who lacked derivative litigation rights under New York law.

25 Because New York law allows for derivative representation on 

26 the facts presented, we conclude at the outset that the district court 
4 No. 16-3912

1 correctly rejected Montauk’s request to hold Associates in default. 

2 We nevertheless vacate the district court’s dismissal of Montauk’s

3 complaint and preliminary injunction motion in favor of a first-filed 

4 federal Georgia action because the Georgia suit has been transferred 

5 to the Eastern District of New York, so the reasoning behind the first6 filed ruling no longer pertains. We affirm the district court’s award 

7 of costs under Rule 41(d), including attorneys’ fees, incurred by 

8 Associates in the Georgia state action. Consequently, we AFFIRM in 

9 part, VACATE in part, and REMAND for further proceedings.

BACKGROUND1 10

11 This case is one in a series of bitterly contested suits 

12 adjudicating rights associated with The Sloppy Tuna, a restaurant in 

13 Montauk, NY. See App’x 707–09. In this installment, Montauk, the 

14 holding company for intellectual property associated with The 

15 Sloppy Tuna, and Montauk’s alleged manager, Mark Horowitz, sued

16 Associates, the owner and operator of The Sloppy Tuna, claiming that

17 Associates’ use of Montauk’s trademarks violates various provisions 

18 of the Lanham Act.

 

1 These facts derive principally from the complaint and we accept them 

as true. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Further, the 

records and decisions in the various judicial proceedings involving the 

parties and their constituent members are facts of which we may take 

judicial notice. See Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 424–

25 (2d Cir. 2008).
5 No. 16-3912

1 The individual players at the heart of the suit, Drew Doscher, 

2 Michael Meyer, Stephen Smith, and Michael Meagher, are former 

3 business partners at The Seaport Group, a Wall Street investment 

4 firm. They and their respective entities share a long history, the 

5 relevant parts of which we discuss below. 

6 In 2010, Doscher pioneered the idea for The Sloppy Tuna while 

7 working at The Seaport Group and sought out as partners and 

8 investors then-colleagues Meyer, Smith, and Meagher. Doscher 

9 thereafter formed Montauk, a Georgia limited liability company of 

10 which he always has been the sole member. Doscher created 

11 Montauk as a vehicle to hold The Sloppy Tuna’s intellectual property

12 and to license that intellectual property to Associates for use at the 

13 restaurant. 

14 In March 2011, Doscher, Meyer, Smith, and Meagher together 

15 formed two New York limited liability companies: (i) Associates, to 

16 own and operate The Sloppy Tuna; and (ii) 148 South Emerson 

17 Partners, LLC (“Partners”), to purchase the property on which The 

18 Sloppy Tuna would operate. Following various ownership disputes 

19 not relevant here, the stakeholders in The Sloppy Tuna consist of: 

20 (i) Montauk, with Doscher as the sole 100% partner; (ii) Associates, 

21 with Meyer and Doscher as 50% partners; and (iii) Partners, with

22 Doscher, Meyer, Smith, and Meagher each as 25% partners. 
6 No. 16-3912

1 In May 2011, The Sloppy Tuna opened for business. At that 

2 time, Montauk, wholly owned and controlled by Doscher, began to 

3 successfully register several trademarks specifically designed for The 

4 Sloppy Tuna with the United States Patent and Trademark Office. See 

5 App’x 42, 44–49. According to the complaint, Montauk subsequently 

6 permitted Associates to use those trademarks for The Sloppy Tuna

7 subject to an oral licensing agreement. App’x 11, 36; see also App’x 

8 234. The parties operated under this arrangement for several years, 

9 during which time the restaurant enjoyed considerable success.

10 In January 2013, however, conflict erupted between the 

11 partners and The Seaport Group abruptly ended its relationship with 

12 Doscher. See generally Doscher v. Sea Port Grp. Sec., LLC, 832 F.3d 372 

13 (2d Cir. 2016). The record evinces the open and personal hostility 

14 between the parties, most especially between Doscher and Meyer. See

15 App’x 629, 631.

16 On October 18, 2013, amidst this conflict, Montauk and 

17 Associates entered into a written license agreement regarding 

18 Associates’ use of Montauk’s Sloppy Tuna marks (the “License 

19 Agreement”). App’x 35–41. The License Agreement’s stated aim was 

20 to “effectively” and “clearly memorialize” Montauk and Associates’ 

21 pre-existing oral agreement given that the parties “may be suffering 

22 from some form of internal disagreement.” App’x 36. Horowitz 

23 signed on behalf of Montauk, and Doscher, who owned 100% of 
7 No. 16-3912

1 Montauk and was a 50% partner in Associates, signed the License 

2 Agreement on behalf of Associates. Meyer, the other 50% partner in 

3 Associates, however, did not sign the License Agreement, which

4 required Associates to pay Montauk for use of the marks, and 

5 provided that, upon the termination of the agreement, the license 

6 “shall immediately cease, [and Associates] shall immediately 

7 discontinue all use of the [m]arks.” App’x 37–38. Associates and 

8 Meyer have consistently contended that the License Agreement is a 

sham and is unenforceable.2 9

10 In 2014, Doscher, Meyer, Smith, and Meagher, as individuals 

11 and through their respective entities, began litigating in various fora

12 numerous issues related to the ownership and operation of The 

13 Sloppy Tuna. Pertinent to the issues on appeal are the following four

14 lawsuits, each adjudicating the rights to the intellectual property that 

15 is the subject of the instant action.

16 First, on December 23, 2014, Montauk brought a declaratory

17 judgment action in the Northern District of Georgia against 

18 Associates seeking a ruling that Montauk owns the relevant 

19 trademarks and that Associates does not. As will be discussed, on 

 

2 Following Montauk’s filing of its opening brief on this appeal, the New 

York state court ruled that the License Agreement is “void, invalid and of 

not [sic] force or effect.” Meyer v. Montauk U.S.A., LLC, No. 600830/2015, 

Dkt. No. 239 at 10 (N.Y. Sup. Ct. May 9, 2017).
8 No. 16-3912

1 August 14, 2017, more than two and one-half years later, the Georgia

2 federal action was transferred to the Eastern District of New York. 

3 Second, on January 29, 2015, Meyer sued Montauk in New York 

4 state court alleging that the License Agreement was not a valid arms5 length agreement and is therefore void ab initio, which ultimately 

6 resulted in the Georgia federal action being stayed. On February 19, 

7 2015, because Doscher and Meyer were deadlocked as co-owners of 

8 Associates, the court appointed a temporary receiver (Receiver) for 

9 Associates. On March 16, 2016, after Doscher failed to fully comply 

10 with the Receiver, the New York state court further ordered that:

11 (i) the Receiver shall take full control of The Sloppy Tuna; (ii) Doscher

12 must surrender all of his restaurant-related property to the Receiver; 

13 and (iii) Doscher is “restrained from interfering in any way with the 

14 Court-appointed Temporary Receiver in his operation and 

15 management of the company.” App’x 134. Shortly thereafter, on 

16 March 24, 2016, Montauk terminated the License Agreement 

17 purportedly because the New York state court’s order wrested too 

18 much control of the restaurant from Doscher. 

19 Third, on March 24, 2016, Montauk sued Associates in Georgia 

20 state court for breach of contract, unjust enrichment, and quantum 

21 meruit, relating to Associates’ continued use of The Sloppy Tuna 

22 marks following Montauk’s termination of the License Agreement. 

23 Montauk simultaneously moved for a temporary restraining order 
9 No. 16-3912

1 (TRO) and preliminary injunction (PI). On April 26, 2016, that court, 

2 after a hearing, denied the TRO and at the same time suggested that 

3 Montauk’s filing of that action interfered with the state action in New 

4 York in violation of that court’s March 16, 2016 order. App’x 588. 

5 Two days later, on April 28, 2016, Montauk voluntarily dismissed the 

6 state action in Georgia.

7 Fourth and lastly, on May 31, 2016, Montauk and Horowitz 

8 brought the instant action against Associates in the Eastern District of 

9 New York. They alleged that Associates’ continued use of The Sloppy 

10 Tuna marks after termination of the License Agreement violated 

11 several provisions of the Lanham Act. Montauk and Horowitz

12 asserted four claims: (i) trademark infringement, 15 U.S.C. § 1114; (ii) 

13 false designation of origin and unfair competition, 15 U.S.C. § 1125(a); 

14 (iii) cybersquatting, 15 U.S.C. § 1125(d); and (iv) trademark dilution, 

15 15 U.S.C. § 1125(c). Montauk and Horowitz sought recovery only for 

16 Associates’ use of The Sloppy Tuna marks after March 24, 2016, the 

17 date Montauk terminated the License Agreement.

18 On July 1, 2016, Montauk and Horowitz moved for a TRO and

19 PI in the instant action. That same day, the TRO was denied, and 

20 attorneys James M. Catterson and Michael Burrows filed notices of 

21 appearance “for Michael J. Meyer, derivatively on behalf of 

22 Defendant 148 South Emerson Associates.” App’x 220–21. No other 

23 counsel appeared for Associates. Days later, Meyer, on behalf of 
10 No. 16-3912

1 Associates, filed a motion to dismiss, raising three arguments: (i) the 

2 complaint must be dismissed under the “first-filed” rule in favor of 

3 the earlier-filed and still extant federal action Montauk brought in 

4 Georgia; (ii) Montauk and Horowitz failed to state their 

5 cybersquatting claim; and (iii) Montauk should be ordered to pay the

6 costs, including attorneys’ fees, Associates incurred defending the 

7 discontinued state action in Georgia under the anti–forum shopping 

8 provision of Fed. R. Civ. P. 41(d).

9 Meyer, on behalf of Associates, also responded to Montauk and 

10 Horowitz’s PI motion, arguing that Montauk and Horowitz failed to 

11 meet the standard for such relief. In reply, Montauk and Horowitz

12 argued not only that they had met the standard, but that the district 

13 court should disregard any submissions filed by Meyer on behalf of 

14 Associates. Specifically, they argued that “[t]here is no basis for a 

15 non-party [such as Meyer] to defend this action ‘derivatively’ simply 

16 because it disagrees with the Receiver’s business judgment or seeks 

17 to litigate with plaintiffs for its own self-interested reasons.” No. 16-

18 cv-02741, Dkt. No. 18 at 4 (E.D.N.Y. July 13, 2016). Because Meyer’s 

19 “derivative” submissions were not properly before the court,

20 Montauk and Horowitz contended, and Meyer’s was the only 

21 opposition to the PI motion, the court should have granted the PI

22 motion by default. Meyer filed a sur-reply, still purportedly on behalf 

23 of Associates, attaching a declaration of the New York state court 
11 No. 16-3912

1 Receiver, Charles C. Russo, in which he stated that he eagerly 

2 consented to Meyer’s derivative defense of the case and that, in his

3 judgment, Meyer’s derivative representation was in Associates’ best 

4 interest. App’x 665–68.

5 On October 19, 2016, the district court resolved the pending 

motions substantially3 6 in Associates’ favor and dismissed the action. 

7 Special App’x (“SA”) 1–31. First, the district court rejected Montauk 

8 and Horowitz’s contention that Meyer did not have a derivative right 

9 to defend on behalf of Associates under New York law. SA 19–22. 

10 Second, the district court dismissed Montauk and Horowitz’s 

11 complaint without prejudice under the “first-filed” rule based on the 

12 action’s similarity to the earlier-filed federal action in Georgia. SA 22–

13 26. It followed that the district court denied without prejudice 

14 Montauk’s PI motion. SA 26 n.10. Third, the district court ordered 

15 Montauk to pay the costs, including attorneys’ fees, incurred by 

16 Associates in defending the Georgia state action under Rule 41(d). SA

17 26–30. Montauk, but not Horowitz, appealed.

18 DISCUSSION

19 Montauk contends on appeal that the district court erred in 

20 three ways: (i) allowing Meyer to defend the suit derivatively on 

 

3 The district court did not resolve the aspect of Associates’ motion 

seeking dismissal of Montauk and Horowitz’s cybersquatting claim (Count 

III) for failure to state a claim.
12 No. 16-3912

1 behalf of Associates; (ii) dismissing the action under the “first-filed” 

2 rule; and (iii) awarding Associates costs under Rule 41(d). Associates 

3 argues that all three rulings were correct.

4 We conclude that controlling New York law provides Meyer 

5 with derivative rights to defend this suit on behalf of Associates and 

6 we therefore find no error in the district court’s consideration of 

7 Associates’ submissions. We conclude, however, that the district 

8 court’s dismissal of the complaint under the “first-filed” rule should 

9 be vacated in light of the subsequent transfer of the Georgia federal 

10 action to the Eastern District of New York. We therefore vacate the 

11 dismissal of Montauk’s complaint, which restores the preliminary 

12 injunction motion which was never decided. We affirm in full, 

13 however, the awarding of costs under Rule 41(d), including attorneys’ 

14 fees, to Associates that relate to its defense of the previously 

15 discontinued Georgia state action. 

16 I. Meyer’s Derivative Right to Defend 

17 The district court rejected Montauk’s contention that Meyer has

18 no right to defend this suit derivatively on behalf of Associates. The 

19 district court did so by looking to state law, specifically, New York’s 

20 rules for derivative representation. The district court noted New 

21 York’s general disfavor of derivative litigation, but identified an 

22 exception: New York law will allow for derivative representation in 

23 certain contexts to avoid the “intolerable grievance” created where a 
13 No. 16-3912

1 corporate entity refuses to act and a stakeholder is left without a 

2 remedy. SA 20–21. The district court concluded that to reject Meyer’s 

3 right to defend derivatively here would be an “intolerable grievance,”

4 where one of the two 50% “owners of a[n] [LLC] cause[d] his wholly5 owned company, and the purported manager of that company, to 

6 commence a lawsuit against th[at] LLC.” SA 20. Stated differently, 

7 the district court concluded that to enter default against the LLC in 

8 this instance would be inequitable because it would effectively

9 require the LLC to pay license fees to one 50% member (Doscher) at 

10 the expense of the other 50% member (Meyer) who would be barred 

11 from appearing in the suit.

12 The district court correctly concluded that New York law 

13 governs whether Meyer may derivatively defend Associates in this 

14 matter. See Fed. R. Civ. P. 17(b)(3); see also Allright Missouri, Inc. v. 

Billeter, 829 F.2d 631, 635 (8th Cir. 1987).4 15 The district court’s 

16 assessment being an interpretation and application of state law, we 

 

4 Rule 17(b)(3) provides in relevant part that “[c]apacity to sue or be sued 

is determined . . . by the law of the state where the court is located.” At first 

glance, one could question whether this provision applies because Meyer is 

not “be[ing] sued” in this action. However, “[c]apacity has been defined 

[under Rule 17(b)] as a party’s personal right to come into court, and should 

not be confused with the question of whether a party has an enforceable 

right or interest or is the real party in interest. Generally, capacity is 

conceived of as a procedural issue dealing with the personal qualifications 

of a party to litigate and typically is determined without regard to the 

particular claim or defense being asserted.” Wright & Miller, 6A Fed. Prac. 

& Proc. Civ. § 1559 (3d ed. 2017) (footnotes omitted). 
14 No. 16-3912

1 review it de novo. See In re World Trade Ctr. Lower Manhattan Disaster 

2 Site Litig., 846 F.3d 58, 63 (2d Cir. 2017); see also Firestone v. Galbreath, 

3 976 F.2d 279, 283 (6th Cir. 1992).

4 Under New York law, a shareholder has no general right to 

5 litigate on behalf of a corporation. See N.Y. Bus. Corp. Law (“BCL”)

6 § 626. Such derivative litigation is disfavored “because [it] ask[s]

7 courts to second-guess the business judgment of the individuals 

8 charged with managing the company.” Bansbach v. Zinn, 1 N.Y.3d 1, 

9 8 (2003). Under certain conditions, however, a shareholder may 

10 litigate to vindicate corporate rights. BCL § 626(c). The principal

11 condition is that the putative derivative litigant attempt to get the 

12 corporate board to act or, alternatively, explain why such an attempt

13 should be excused. Id. The same principle applies when a receiver is 

14 in charge. O’Brien v. King, 17 N.Y.S.2d 44, 45 (1st Dep’t 1940) (where 

15 a corporation is run by a receiver, such pre-suit demand must be 

16 made on that receiver, which “stands in the place of the managing 

17 body”). The demand component stems from the requirement that a 

18 derivative litigant demonstrate “a sufficient excuse” as to why it 

19 should be allowed to overcome the board’s business judgment and

20 represent the interests of the corporation. See Tzolis v. Wolff, 10 N.Y.3d 

21 100, 108 (2008) (quoting Robinson v. Smith, 3 Paige Ch. 222, 232–33 

22 (N.Y. Ch. 1832)). This is because, at its core, the issue is whether the 

23 litigation decision of the governing board represents the interests of 
15 No. 16-3912

1 the shareholders. See Auerbach v. Bennett, 47 N.Y.2d 619, 628 (1979). 

2 The “real question is one of proper representation.” Id. The New York 

3 Court of Appeals has also made clear that these rules as to derivative 

4 rights apply with equal force to LLCs and their members. See Tzolis, 

5 10 N.Y.3d at 103.

6 The question here is whether these derivative representation

7 rules allow Meyer to represent Associates’ interests in defense against 

8 the instant suit. Montauk contends the answer is no, arguing that 

9 derivative representation is unavailable on the present facts. It rests 

10 its argument on two asserted principles of New York law: 

11 (i) derivative representation is available only where a managing 

12 body’s decision not to litigate was negligent, fraudulent, or in bad 

13 faith, a showing that Meyer has not made as to Associates; and 

14 (ii) derivative representation rights do not extend to litigation defense. 

15 Finding no support for either principle, we conclude that Meyer was 

16 free to derivatively defend this case on behalf of Associates.

17 Montauk cites no authority, and we are aware of none, 

18 intimating that derivative representation is only permissible under 

19 New York law where a managing body’s decision not to litigate was 

20 negligent, fraudulent, or in bad faith. Tomczak v. Trepel, 724 N.Y.S.2d 

21 737 (1st Dep’t 2001), cited repeatedly by Montauk for this proposition, 

22 is instructive. There, the First Department affirmed the dismissal of a 

23 derivative suit because the plaintiffs failed to allege sufficient 
16 No. 16-3912

1 wrongdoing on the part of the board. Id. at 738. Contrary to 

2 Montauk’s contention, however, the court did not imply that board

3 wrongdoing was the only avenue to derivative representation; it 

4 simply addressed the board’s wrongdoing because that was the 

5 reason the plaintiffs proffered in that case for why the board was not 

6 properly representing the interests of the shareholders. Tomczak

7 makes clear that, at bottom, the inquiry in a derivative rights question 

8 is an assessment of the managing body’s intent in adopting a litigation 

9 strategy. That the plaintiffs failed to adduce facts relevant to that 

10 inquiry is evidenced from the following statement:

11 While plaintiffs allege that unsuccessful 

12 demands were made on the Club’s Board of 

13 Directors to initiate legal action, the 

14 complaint provides no indication as to who 

15 made the demands, when they were made, 

16 which Board members they were made to, 

17 the content of the demands or why the Board 

18 refused to take action.

19 Id. (emphasis added).

20 If the board or other managing body’s intent in making its

21 litigation decision was to further the interests of the shareholders, 

22 New York courts defer to that choice. If its intent was otherwise, they

23 may not. 

24 With this basic principle in mind, it becomes clear that there is 

25 little sense in a rule that confines derivative representation to 

26 situations where a managing body’s decision not to litigate is made 
17 No. 16-3912

1 with some malfeasance. The flaw in Montauk’s contention is notably 

2 apparent in the present context, which is distinct from the usual 

3 derivative standing question in a significant way: the derivative 

4 litigant and the company here fully agree as to the best litigation 

5 strategy, specifically, that Meyer defend the action. New York’s

6 concerns behind its general reluctance to allow derivative litigation 

7 are simply not present in this case. 

8 A board’s malfeasance becomes relevant only where the board

9 and the shareholder disagree as to the path forward, i.e., where the

10 corporation affirmatively “decide[s] to terminate” litigation that the 

11 shareholder desired, Amalgamated Sugar Co. v. NL Industries, Inc., 825 

12 F.2d 634, 641 (2d Cir. 1987), or “decline[s] to institute . . . an action” 

13 “that the plaintiff [shareholder] has requested the receiver to 

14 maintain,” Koral v. Savory, Inc., 276 N.Y. 215, 219–20 (1937). This is 

15 because, as discussed, New York law looks to a board’s malfeasance 

16 only to the extent it may provide a reason to reject the board’s chosen 

17 litigation strategy in favor of a different one proposed by a 

18 shareholder. 

19 But, we have no battle here between conflicting litigation 

20 positions and therefore no need to show the Receiver’s malfeasance. 

21 The Receiver—which is obligated as a fiduciary to act in the best 

22 interest of Associates, see Insurance Co. of N. Am. v. City of New York, 

23 71 N.Y.2d 983, 985 (1988)—wholly and eagerly consents to Meyer’s 
18 No. 16-3912

1 derivative defense. The Receiver explained in the record its insistence 

2 that it was in the best interest of Associates for Meyer to defend this 

3 litigation. App’x 666, 672. This decision is properly subject to the 

4 business judgment rule, and it makes no difference that the governing 

5 corporate entity is a receiver. See Golden Pac. Bancorp v. F.D.I.C., 2002 

6 WL 31875395, at *9 (S.D.N.Y. Dec. 26, 2002) (under New York law, 

7 “receivers, just like corporate directors, are entitled to the deference 

8 of the business judgment rule”). Montauk does not contend that

9 Meyer’s derivative defense is somehow counter to the interests of 

10 Associates or that the Receiver’s decision to allow Meyer to defend 

11 this case was itself made in bad faith. In sum, Montauk’s argument 

12 that Meyer was required to demonstrate malfeasance on the part of 

13 the Receiver was properly rejected by the district court.

14 Montauk also argues that even if LLC members may bring 

15 derivative lawsuits, they may not derivatively defend lawsuits. 

16 Montauk cites no law, or reasoning, to support this contention, and 

17 the argument is not pressed in its reply brief. The argument is 

18 meritless nonetheless. As discussed, the core question in a derivative 

19 litigation inquiry is who is a proper entity to represent the company’s

20 interests. There is no reason for different rules for that question when

21 the company defends against rather than brings a suit.

22 In sum, Meyer both (i) took efforts to get Associates to defend 

23 the action, BCL § 626(c); and, once Associates elected not to defend 
19 No. 16-3912

1 the action, (ii) adequately explained why he should be allowed to 

2 derivatively defend it: Associates’ good-faith and well-reasoned 

3 consent. Meyer therefore met the obligations imposed on him by 

4 New York law to derivatively defend this lawsuit.

5 II. The “First-Filed” Rule

6 The district court dismissed Montauk’s complaint without 

7 prejudice under the “first-filed” rule, which provides that “where 

8 there are two competing lawsuits, the first suit should have priority, 

9 absent the showing of balance of convenience or special 

10 circumstances giving priority to the second.” AEP Energy Servs. Gas 

11 Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 722 (2d Cir. 2010) 

12 (internal quotation marks omitted). The rule “embodies 

13 considerations of judicial administration and conservation of 

14 resources, and recognizes that a party who first brings an issue into a 

15 court of competent jurisdiction should be free from the vexation of 

16 concurrent litigation over the same subject matter.” Id. (internal 

17 quotation marks and citation omitted).

18 The district judge, over Montauk’s objection, concluded that 

19 the instant action should give way to the Georgia federal action under 

20 the “first-filed” rule. On August 14, 2017, however, the district court 

21 judge presiding over the Georgia federal action transferred that case 

22 to the Eastern District of New York where it was assigned to the 

23 district judge in this case. No. 17-cv-4747, Dkt. Nos. 103–04 (E.D.N.Y.
20 No. 16-3912

1 Aug. 14 & 16, 2017). Consequently, none of the considerations 

2 motivating the district court’s application of the “first-filed” rule 

3 remain. The “first-filed” rule has no import where, as here, the two 

4 cases at issue reside on the docket of the same district judge. The able 

5 district judge is perfectly capable of consolidating them as necessary. 

6 We therefore vacate the district court’s dismissal of this action under 

7 the “first-filed” rule, as well as its dismissal of Montauk’s motion for 

8 a preliminary injunction. 

9 III. Associates’ Rule 41(d) Motion

10 The district court concluded that Montauk must pay Associates 

11 the costs, including attorneys’ fees, it incurred in the Georgia state 

12 action pursuant to Rule 41(d), which provides that: 

13 If a plaintiff who previously dismissed an 

14 action in any court files an action based on 

15 or including the same claim against the 

16 same defendant, the court . . . may order the 

17 plaintiff to pay all or part of the costs of that 

18 previous action. 

19 Fed. R. Civ. P. 41(d). The district court concluded that Rule 41(d) was 

20 implicated due to the similarities in the allegations and relief sought

21 as between the instant action and the Georgia state action, for which 

22 Montauk did not “demonstrat[e] that there was a good reason . . . to 

23 dismiss.” SA 28–29. We review the question of whether specific types 

24 of costs are available under a given statute de novo and the decision
21 No. 16-3912

1 whether to grant costs for abuse of discretion. See Gortat v. Capala 

2 Bros., 795 F.3d 292, 295 (2d Cir. 2015) (per curiam). 

3 Montauk asserts that there are two errors in the district court’s 

4 analysis. First, it argues that the district court abused its discretion in 

5 concluding that the instant action is “based on or includ[es] the same 

6 claim” as the Georgia state action. Second, it argues that even if 

7 Associates is entitled to costs under Rule 41(d), the district court erred 

8 in concluding that attorneys’ fees may be awarded as part of such 

9 costs. Neither argument is persuasive.

10 a. The District Court Did Not Abuse its Discretion in 

11 Concluding that the Instant Action is “[B]ased on . . . 

12 the [S]ame [C]laim[s]” as the Georgia State Action

13 It is quite clear to us that the instant action is “based on . . . the 

14 same claim[s]” as the Georgia state action. Montauk’s claims in both 

15 actions depend on the same core showing about the same trademarks: 

16 that Associates has no legal ownership of or right to use The Sloppy 

17 Tuna marks. If Associates owns the marks or otherwise has rights to 

18 their use, Associates likely neither breached the License Agreement

19 (the subject of the Georgia state action) nor violated the Lanham Act

20 (the subject of the instant action). On the other hand, if Montauk 

21 owns the marks or if Associates had no right to their use, Associates 

22 may have breached the License Agreement or violated the Lanham 

23 Act. The different assertions in these actions are certainly “based on” 

24 the same underlying claims of ownership and use rights.
22 No. 16-3912

1 Montauk’s arguments to the contrary are unpersuasive. 

2 Montauk points to the fact that the Georgia state action was contract3 based and the instant action is brought under the Lanham Act. That 

4 two actions involve different theories of recovery, however, is not 

5 dispositive for Rule 41(d), as its plain language—“based on . . . the 

6 same claim”—makes clear. This is most especially the case here, 

7 where Montauk could have asserted a Lanham Act violation in the 

8 Georgia state action by simply amending its complaint. See, e.g., Corps 

9 Grp. v. Afterburner, Inc., 779 S.E.2d 383, 386 n.3 (Ga. Ct. App. 2015). 

10 Rather, Montauk chose instead to voluntarily dismiss the Georgia 

11 state action and file its Lanham Act claims in federal court in another 

12 state. Moreover, it did so immediately after the Georgia state court

13 stated its belief that the action was meritless and that its filing likely 

14 contravened an order of another court, which was itself addressing 

15 substantially related claims. This is the precise type of litigation tactic 

16 that Rule 41(d) is meant to deter. See Andrews v. America’s Living Ctrs., 

17 LLC, 827 F.3d 306, 309 (4th Cir. 2016) (“[T]he purpose of Rule 41(d) is 

18 to serve as a deterrent to forum shopping and vexatious litigation.”

(internal quotation marks omitted)).5 19 

 

5 We are not alone in our view that Montauk’s actions in relation to the 

Georgia state action were part of a pattern of vexatious litigation. While 

this appeal was pending, the justice presiding over the New York state 

action held Montauk’s counsel in contempt in part for his filing of the 

Georgia state action. Meyer v. 148 S. Emerson Assocs. LLC, No. 068379/2014, 

Dkt. No. 1355 (N.Y. Sup. Ct. May 9, 2017). 
23 No. 16-3912

1 Montauk’s other contention that the actions are distinct for 

2 purposes of Rule 41(d) is that the instant action seeks relief only for 

3 infringements that occurred after the filing of the Georgia state action. 

4 Specifically, Montauk points out that because it filed the Georgia state 

5 action on March 24, 2016, the same day that it unilaterally terminated 

6 the License Agreement, “none of the alleged trademark infringement, 

7 dilution, or cybersquatting had taken place at the time the [Georgia 

8 state action] was filed.” Br. of Appellant at 41. This argument, 

9 although perhaps clever, fares no better. 

10 The record makes clear that Associates has utilized the at-issue 

11 marks at the restaurant and elsewhere since opening without 

12 interruption and with Montauk’s knowledge. Consequently, 

13 Montauk knew when it filed its Georgia state action that, under its 

14 theory, Associates would be in violation of the Lanham Act from 

15 March 25, 2016 onward, yet it neither sought Lanham Act relief in the 

16 Georgia state action nor sought to amend its complaint prior to its 

17 voluntary dismissal. In sum, that certain alleged acts occurred after 

18 the filing of the Georgia state action does not alter the underlying 

19 claim upon which both actions are based: that Associates did not own 

20 and had no right to use The Sloppy Tuna trademarks.

21 Finally, relying on Phunware, Inc. v. Excelmind Group Ltd., 117 F. 

22 Supp. 3d 613 (D. Del. 2015), Montauk argues that the instant action is

23 not sufficiently related to the Georgia state action for purposes of Rule 
24 No. 16-3912

1 41(d) because Montauk seeks distinct relief in each action. The 

2 argument is meritless. For one, in Phunware, the plaintiff had a good3 faith concern that the relief sought in the second-filed action, money

4 damages, would have been unavailable in the first-filed forum, a 

5 court of equity, id. at 623–24 & n.9, and Montauk makes no showing

6 that there was a form of relief available in the Eastern District of New 

7 York that was unavailable in the Georgia state court. More 

8 fundamentally, however, Montauk did not seek different relief in the 

9 two relevant actions; in both, Montauk sought injunctive relief and 

10 damages.

11 The district court did not abuse its discretion in granting 

12 Associates’ Rule 41(d) motion.

13 b. The District Court Did Not Err in Awarding 

14 Associates Attorneys’ Fees as Part of Costs

15 As discussed, Rule 41(d) allows a district court to order 

16 plaintiffs “to pay all or part of the costs of that previous action.” Fed. 

17 R. Civ. P. 41(d). Montauk challenges the district court’s conclusion

18 that “costs” in Rule 41(d) may include attorneys’ fees.

19 We have not addressed whether attorneys’ fees are available as 

20 part of “costs” under Rule 41(d). The issue has split our sister circuit 

21 courts. The Sixth Circuit has concluded in light of Rule 41(d)’s silence 

22 as to attorneys’ fees that such fees are never available under the rule. 

23 See Rogers v. Wal-Mart Stores, 230 F.3d 868, 874 (6th Cir. 2000). On the 
25 No. 16-3912

1 other hand, the Eighth and Tenth Circuits have concluded without 

2 much discussion that attorneys’ fees may be awarded under Rule 

3 41(d). See Evans v. Safeway Stores, Inc., 623 F.2d 121, 122 (8th Cir. 1980)

4 (per curiam); Meredith v. Stovall, 216 F.3d 1087 (10th Cir. 2000) 

5 (unpublished). The Fourth, Fifth, and Seventh Circuits have taken a 

6 hybrid approach and concluded that attorneys’ fees may not

7 generally be awarded as costs under the rule, but with an exception

8 for when the statute serving as the basis for the original suit itself 

9 allows for attorneys’ fees (such as 42 U.S.C. § 1983). See Andrews, 827 

10 F.3d at 309–12 (adopting rule from Esposito v. Piatrowski, 223 F.3d 497, 

11 501 (7th Cir. 2000)); Portillo v. Cunningham, 872 F.3d 728, 738–39 (5th 

12 Cir. 2017). For the reasons that follow, we agree with the outcomes 

13 arrived at by the Eighth and Tenth Circuits: district courts may award 

14 attorneys’ fees as part of costs under Rule 41(d). 

15 There is no uniformity across federal authorities as to whether 

16 the term “costs” includes attorneys’ fees. For example, the term 

17 “costs” in Rule 39 of the Federal Rules of Appellate Procedure, as well 

18 as an earlier version of 28 U.S.C. § 1927, have both been determined 

19 not to incorporate attorneys’ fees. See Hines v. City of Albany, 862 F.3d 

20 215, 220–21 (2d Cir. 2017); Roadway Express, Inc. v. Piper, 447 U.S. 752, 

21 759 (1980). But, the term “costs” in Rule 54(d) of the Federal Rules of 

22 Civil Procedure is written such that it includes attorneys’ fees. See 

23 Andrews, 827 F.3d at 311 n.2. For other rules, such as Rule 68 of the 
26 No. 16-3912

1 Federal Rules of Civil Procedure and Rule 7 of the Federal Rules of 

2 Appellate Procedure, “costs” includes attorneys’ fees in certain 

3 instances, but not in others, specifically, such fees can be awarded 

4 where the cause of action under which the suit at issue is brought so 

5 allows, but not otherwise. See Marek v. Chesny, 473 U.S. 1, 9 (1985); 

6 Adsani v. Miller, 139 F.3d 67, 79 (2d Cir. 1998). See generally Marek, 473 

7 U.S. at 43–51 (Brennan, J. dissenting) (listing over 100 statutes with 

8 varying usages of the term “attorney’s fees” relative to “costs”).

9 Two relevant lessons emerge from the case law on how to

10 assess the availability of attorneys’ fees pursuant to a provision, such 

11 as Rule 41(d), which allows for “costs” but makes no express reference 

12 to attorneys’ fees. First, “costs” do not include attorneys’ fees where

13 the rule incorporates a statutorily enumerated list of “costs” that itself 

14 omits attorneys’ fees. See Hines, 862 F.3d at 220–21. In Hines, for 

15 example, we concluded that the term “costs” in Rule 39 of the 

16 appellate procedure rules does not include attorneys’ fees because the 

17 advisory committee notes to the rule refer to the definition of “costs” 

18 in 28 U.S.C. § 1920, which does not include attorneys’ fees in its 

19 enumerated list of costs. Id. The Supreme Court took a similar tack 

20 in Roadway Express, where it held that the definition of “costs” in 28 

21 U.S.C. § 1920 should be incorporated into the then-operative version 

22 of 28 U.S.C. § 1927’s cost-shifting provision because the two 

23 provisions, given their shared history, “should be read together as 
27 No. 16-3912

1 part of [an] integrated statute.” 447 U.S. at 760. Here, Rule 41(d) 

2 incorporates no other definition of costs, either expressly or by 

3 reference, and therefore attorneys’ fees are not precluded by this 

4 principle.

5 Second, in this situation—where the term “costs” is entirely 

6 undefined, either expressly or by reference—we look to see “if the 

7 statute otherwise evinces an intent to provide for [attorneys’] fees.”

8 Key Tronic Corp. v. United States, 511 U.S. 809, 815 (1994). 

9 Consequently, we disagree with the Sixth Circuit’s conclusion that 

10 attorneys’ fees are unavailable under Rule 41(d) “simpl[y] [because] 

11 the rule does not explicitly provide for them.” Rogers, 230 F.3d at 874. 

12 In Marek, for example, “given the importance of ‘costs’ to the Rule,” 

13 the Court “infer[red]” “that the term ‘costs’ in Rule 68 was intended 

14 to refer to all costs properly awardable under the relevant substantive 

15 statute or other authority” on which the claimant brought suit. 473 

16 U.S. at 9; see infra note 6. 

17 Here, as the great weight of district court authority has 

18 concluded in this circuit, see Pelczar v. Pelczar, 2017 WL 3105855, at *2 

19 (E.D.N.Y. July 20, 2017) (collecting cases), the entire Rule 41(d) scheme 

20 would be substantially undermined were the awarding of attorneys’ 

21 fees to be precluded. We thus have no difficulty in concluding that 

22 Rule 41(d) evinces an unmistakable intent for a district court to be 

23 free, in its discretion, to award attorneys’ fees as part of costs.
28 No. 16-3912

1 Rule 41(d)’s purpose is clear and undisputed: “to serve as a 

2 deterrent to forum shopping and vexatious litigation.” Andrews, 827 

3 F.3d at 309 (quoting Simeone v. First Bank Nat’l Ass’n, 971 F.2d 103, 108 

4 (8th Cir. 1992) and citing Esposito, 223 F.3d at 501); Adams v. N.Y. State 

5 Educ. Dep’t, 630 F. Supp. 2d 333, 343 (S.D.N.Y. 2009); 8 Moore’s Fed. 

6 Prac. § 41.70[1] (3d ed. 2016). Rule 41(d) would be greatly limited as

7 an effective deterrent if district courts were precluded from assessing 

attorneys’ fees as part of costs.6 8 The need for attorneys’ fees may be

 

6 We choose not to join the Fourth, Fifth, and Seventh Circuits in 

adopting a rule based on Marek in which attorneys’ fees are available under 

Rule 41(d) only if the underlying cause of action itself allows for attorneys’ 

fees. We think such a rule makes little sense as to Rule 41(d), where there 

is no connection between the underlying cause of action and the behavior 

the rule seeks to influence. Pegging the scope of the incentive to the 

underlying cause of action might make sense in the context of Rule 68, 

which is meant to encourage settlement, see Marek, 473 U.S. at 5, because a 

parties’ incentives to settle are tied to the amount of available recovery. See 

id. (“Rule [68] prompts both parties to a suit to evaluate the risks and costs 

of litigation, and to balance them against the likelihood of success upon trial 

on the merits.”); see also Adsani, 139 F.3d at 73–75. As discussed, however, 

the purpose of Rule 41(d) is to deter litigants from forum shopping or filing

vexatious suits, acts largely untethered to the merits. The hybrid rule

therefore places an arbitrary condition on the Rule 41(d) deterrent. For 

example, attorneys’ fees are allowed to prevailing parties under federal 

anti-discrimination statutes but not under certain New York antidiscrimination statutes, which are “essentially the same” as their federal 

counterparts. See Lightfoot v. Union Carbide Corp., 110 F.3d 898, 913–14 (2d 

Cir. 1997) (disallowing attorneys’ fees to victorious plaintiff where her 

claim under the federal Age Discrimination in Employment Act, which

allows for the recovery of attorneys’ fees, was dismissed and plaintiff only 

recovered on her claim under the New York State Human Rights Law, 

which “does not provide for an award of [attorneys’] fees”). Under the 
29 No. 16-3912

1 especially acute in the Rule 41(d) context. The targets of deterrence 

2 under the rule will often be litigants, such as Montauk, that file

3 complaints and quickly dismiss them, perhaps in reaction to initial 

4 unfavorable rulings, or hoping for a subsequent case assignment to a 

5 judge they view as more favorable. These are actions with minor costs 

6 to the adversary other than attorneys’ fees, which may be substantial. 

7 Indeed, such actions will rarely incur most of the expenses routinely 

8 recoverable as costs. See 28 U.S.C. § 1920. The instant case is an apt

9 example. Apart from attorneys’ fees, the only costs paid by 

10 Associates in defense of the Georgia state action were a $15.00 charge 

11 for delivery of documents and a $60.48 charge for a transcript fee from 

12 a court reporter. See No. 16-cv-2741, Dkt. No. 36-5 at 10 (E.D.N.Y. 

13 Nov. 17, 2016). We are wholly unconvinced such small payments

14 would effectively deter litigants such as Montauk from forum

15 shopping or otherwise embarking on a course of vexatious litigation. 

16 We affirm the district court’s ruling on Associates’ Rule 41(d) motion.

17 CONCLUSION

18 We find the parties’ remaining contentions to be without merit, 

19 and, for the reasons stated above, we AFFIRM in part and VACATE 

 

hybrid approach, Rule 41(d) would therefore place a larger deterrent on 

vexatious federal discrimination suits than on vexatious New York 

discrimination suits. We see no basis for this distinction.
30 No. 16-3912

1 in part the judgment of the district court and REMAND for 

2 proceedings consistent with this opinion.