UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ALFRED W. GROSS, Commissioner of

Insurance, Bureau of Insurance, State

Corporation Commission of the

Commonwealth of Virginia, as Deputy

Receiver of Home Warranty

Corporation, Home Owners Warranty

Corporation and HOW Insurance

Company, a Risk Retention Group in

Receivership and successor to Steven

T. Foster (formerly Commissioner of

Insurance),

Plaintiff-Appellee,

v.

ROBERT F. SPIES; JOSEPH CHUDNOW;

DALE C. DEHARPPORT; JOHN J.

KOELEMIJ; AARON H. KOKLEY; E. RAY No. 96-2146

KOTHE; JACK LAGESCHULTE; SANFORD B.

MIOT; STANLEY WARANCH,

Defendants-Appellants,

and

WILLIAM F. KENNY; ROBERT W.

CRANDALL; J. ROGER GLUNT; MARY E.

POWERS; JOE N. VAN VALER; RICHARD

OPRENCHAK; H. KENNETH SEEBER;

JAMES I. BARNETT; GLENN M. BURNS;

TERENCE S. COOKE; NATIONAL ACADEMY

OF CONCILIATORS; NATIONAL

ASSOCIATION OF HOME BUILDERS OF THE

UNITED STATES; COLTON & BOYKIN,

P.C.; BOYKIN & CASANO, P.C.;

HAMILTON H. BOYKIN; HOME OWNERS
WARRANTY CORPORATION (COUNCIL)OF

HOUSTON, INCORPORATED; HOME OWNERS

WARRANTY COUNCIL OF METROPOLITAN

DALLAS, INCORPORATED; HOME OWNERS

WARRANTY COUNCIL OFTHE BUILDERS

ASSOCIATION, INCORPORATED, the Fort

Worth Council; ERNST & YOUNG, LLP;

DELOITTE & TOUCHE, LLP,

Defendants,

CIGNA INSURANCE COMPANY, d/b/a INA,

Underwriters Insurance Company;

STATE CORPORATION COMMISSION OF THE

COMMONWEALTH OF VIRGINIA,

Parties in Interest.

ALFRED W. GROSS, Commissioner of

Insurance, Bureau of Insurance, State

Corporation Commission of the

Commonwealth of Virginia, as Deputy

Receiver of Home Warranty

Corporation, Home Owners Warranty

Corporation and HOW Insurance

Company, a Risk Retention Group in

Receivership and successor to Steven

No. 96-2147

T. Foster (formerly Commissioner of

Insurance),

Plaintiff-Appellee,

v.

COLTON & BOYKIN, P.C.; BOYKIN &

CASANO, P.C.; HAMILTON H. BOYKIN,

Defendants-Appellants,

and

 2
ROBERT F. SPIES; WILLIAM F. KENNY;

JOSEPH CHUDNOW; ROBERT W.

CRANDALL; DALE C. DEHARPPORT;

J. ROGER GLUNT; JOHN J. KOELEMIJ;

AARON H. KOKLEY; E. RAY KOTHE;

JACK LAGESCHULTE; SANFORD B. MIOT;

MARY E. POWERS; JOE N. VAN VALER;

STANLEY WARANCH; RICHARD

OPRENCHAK; H. KENNETH SEEBER; JAMES

I. BARNETT; GLENN M. BURNS; TERENCE

S. COOKE; NATIONAL ACADEMY OF

CONCILIATORS; NATIONAL ASSOCIATION OF

HOME BUILDERS OF THE UNITED STATES;

HOME OWNERS WARRANTY CORPORATION

(COUNCIL)OF HOUSTON, INCORPORATED;

HOME OWNERS WARRANTY COUNCIL OF

METROPOLITAN DALLAS, INCORPORATED;

HOME OWNERS WARRANTY COUNCIL OF

THE BUILDERS ASSOCIATION,

INCORPORATED, the Fort Worth Council;

ERNST & YOUNG, LLP; DELOITTE &

TOUCHE, LLP,

Defendants,

CIGNA INSURANCE COMPANY, d/b/a INA,

Underwriters Insurance Company;

STATE CORPORATION COMMISSION OF THE

COMMONWEALTH OF VIRGINIA,

Parties in Interest.

 3
ALFRED W. GROSS, Commissioner of

Insurance, Bureau of Insurance, State

Corporation Commission of the

Commonwealth of Virginia, as Deputy

Receiver of Home Warranty

Corporation, Home Owners Warranty

Corporation and HOW Insurance

Company, a Risk Retention Group in

Receivership and successor to Steven

T. Foster (formerly Commissioner of

Insurance),

Plaintiff-Appellee,

v.

NATIONAL ASSOCIATION OF HOME

BUILDERS OF THE UNITED STATES,

Defendant-Appellant,

No. 96-2149

and

ROBERT F. SPIES; WILLIAM F. KENNY;

JOSEPH CHUDNOW; ROBERT W.

CRANDALL; DALE C. DEHARPPORT; J.

ROGER GLUNT; JOHN J. KOELEMIJ;

AARON H. KOKLEY; E. RAY KOTHE;

JACK LAGESCHULTE; SANFORD B. MIOT;

MARY E. POWERS; JOE N. VAN VALER;

STANLEY WARANCH; RICHARD

OPRENCHAK; H. KENNETH SEEBER;

JAMES I. BARNETT; GLENN M. BURNS;

TERENCE S. COOKE; NATIONAL ACADEMY

OF CONCILIATORS; COLTON & BOYKIN,

P.C.; BOYKIN & CASANO, P.C.;

HAMILTON H. BOYKIN; HOME OWNERS

WARRANTY CORPORATION (COUNCIL)OF

HOUSTON, INCORPORATED; HOME OWNERS

 4
WARRANTY COUNCIL OF METROPOLITAN

DALLAS, INCORPORATED; HOME OWNERS

WARRANTY COUNCIL OF THE BUILDERS

ASSOCIATION, INCORPORATED, the Fort

Worth Council; ERNST & YOUNG, LLP;

DELOITTE & TOUCHE, LLP,

Defendants,

CIGNA INSURANCE COMPANY, d/b/a INA,

Underwriters Insurance Company;

STATE CORPORATION COMMISSION OF THE

COMMONWEALTH OF VIRGINIA,

Parties in Interest.

ALFRED W. GROSS, Commissioner of

Insurance, Bureau of Insurance, State

Corporation Commission of the

Commonwealth of Virginia, as Deputy

Receiver of Home Warranty

Corporation, Home Owners Warranty

Corporation and HOW Insurance

Company, a Risk Retention Group in

Receivership and successor to Steven

T. Foster (formerly Commissioner of

No. 96-2150

Insurance),

Plaintiff-Appellee,

v.

WILLIAM F. KENNY; H. KENNETH

SEEBER; JAMES I. BARNETT; GLENN M.

BURNS; TERENCE S. COOKE,

Defendants-Appellants,

and

 5
ROBERT F. SPIES; JOSEPH CHUDNOW;

ROBERT W. CRANDALL; DALE C.

DEHARPPORT; J. ROGER GLUNT; JOHN J.

KOELEMIJ; AARON H. KOKLEY; E. RAY

KOTHE; JACK LAGESCHULTE; SANFORD B.

MIOT; MARY E. POWERS; JOE N. VAN

VALER; STANLEY WARANCH; RICHARD

OPRENCHAK; NATIONAL ACADEMY OF

CONCILIATORS; NATIONAL ASSOCIATION OF

HOME BUILDERS OF THE UNITED STATES;

COLTON & BOYKIN, P.C.; BOYKIN &

CASANO, P.C.; HAMILTON H. BOYKIN;

HOME OWNERS WARRANTY CORPORATION

(COUNCIL)OF HOUSTON, INCORPORATED;

HOME OWNERS WARRANTY COUNCIL OF

METROPOLITAN DALLAS, INCORPORATED;

HOME OWNERS WARRANTY COUNCIL OF

THE BUILDERS ASSOCIATION,

INCORPORATED, the Fort Worth Council;

ERNST & YOUNG, LLP; DELOITTE &

TOUCHE, LLP,

Defendants,

CIGNA INSURANCE COMPANY, d/b/a INA,

Underwriters Insurance Company;

STATE CORPORATION COMMISSION OF THE

COMMONWEALTH OF VIRGINIA,

Parties in Interest.

 6
ALFRED W. GROSS, Commissioner of

Insurance, Bureau of Insurance, State

Corporation Commission of the

Commonwealth of Virginia, as Deputy

Receiver of Home Warranty

Corporation, Home Owners Warranty

Corporation and HOW Insurance

Company, a Risk Retention Group in

Receivership and successor to Steven

T. Foster (formerly Commissioner of

Insurance),

Plaintiff-Appellee,

v.

HOME OWNERS WARRANTY CORPORATION

(COUNCIL)OF HOUSTON, INCORPORATED;

No. 96-2203

HOME OWNERS WARRANTY COUNCIL OF

METROPOLITAN DALLAS, INCORPORATED,

Defendants-Appellants,

and

ROBERT F. SPIES; WILLIAM F. KENNY;

JOSEPH CHUDNOW; ROBERT W.

CRANDALL; DALE C. DEHARPPORT;

J. ROGER GLUNT; JOHN J. KOELEMIJ;

AARON H. KOKLEY; E. RAY KOTHE;

JACK LAGESCHULTE; SANFORD B. MIOT;

MARY E. POWERS; JOE N. VAN VALER;

STANLEY WARANCH; RICHARD

OPRENCHAK; H. KENNETH SEEBER;

JAMES I. BARNETT; GLENN M. BURNS;

TERENCE S. COOKE; NATIONAL ACADEMY

 7
OF CONCILIATORS; NATIONAL

ASSOCIATION OF HOME BUILDERS OF THE

UNITED STATES; COLTON & BOYKIN,

P.C.; BOYKIN & CASANO, P.C.;

HAMILTON H. BOYKIN; HOME OWNERS

WARRANTY COUNCIL OFTHE BUILDERS

ASSOCIATION, INCORPORATED, the Fort

Worth Council; ERNST & YOUNG, LLP;

DELOITTE & TOUCHE, LLP,

Defendants,

CIGNA INSURANCE COMPANY, d/b/a INA,

Underwriters Insurance Company;

STATE CORPORATION COMMISSION OF THE

COMMONWEALTH OF VIRGINIA,

Parties in Interest.

ALFRED W. GROSS, Commissioner of

Insurance, Bureau of Insurance, State

Corporation Commission of the

Commonwealth of Virginia, as Deputy

Receiver of Home Warranty

Corporation, Home Owners Warranty

Corporation and HOW Insurance

No. 96-2204

Company, a Risk Retention Group in

Receivership and successor to Steven

T. Foster (formerly Commissioner of

Insurance),

Plaintiff-Appellant,

v.

 8
NATIONAL ASSOCIATION OF HOME

BUILDERS OF THE UNITED STATES;

COLTON & BOYKIN, P.C.; BOYKIN &

CASANO, P.C.; HAMILTON H. BOYKIN;

HOME OWNERS WARRANTY CORPORATION

(COUNCIL)OF HOUSTON, INCORPORATED;

HOME OWNERS WARRANTY COUNCIL OF

METROPOLITAN DALLAS, INCORPORATED;

HOME OWNERS WARRANTY COUNCIL OF

THE BUILDERS ASSOCIATION,

INCORPORATED, the Fort Worth Council;

ERNST & YOUNG, LLP; DELOITTE &

TOUCHE, LLP,

Defendants-Appellees,

and

ROBERT F. SPIES; WILLIAM F. KENNY;

JOSEPH CHUDNOW; ROBERT W.

CRANDALL; DALE C. DEHARPPORT; J.

ROGER GLUNT; JOHN J. KOELEMIJ;

AARON H. KOKLEY; E. RAY KOTHE;

JACK LAGESCHULTE; SANFORD B. MIOT;

MARY E. POWERS; JOE N. VAN VALER;

STANLEY WARANCH; RICHARD

OPRENCHAK; H. KENNETH SEEBER;

JAMES I. BARNETT; GLENN M. BURNS;

TERENCE S. COOKE; NATIONAL ACADEMY

OF CONCILIATORS,

Defendants,

CIGNA INSURANCE COMPANY, d/b/a INA,

Underwriters Insurance Company;

STATE CORPORATION COMMISSION OF THE

COMMONWEALTH OF VIRGINIA,

Parties in Interest.

 9
Appeals from the United States District Court

for the Eastern District of Virginia, at Richmond.

Robert R. Merhige, Jr., Senior District Judge.

(CA-95-832-3)

Argued: December 4, 1997

Decided: January 13, 1998

Before WILKINS and HAMILTON, Circuit Judges, and

MICHAEL, Senior United States District Judge for the

Western District of Virginia, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Charles Frederick Witthoefft, HIRSCHLER, FLEISCHER, WEINBERG, COX & ALLEN, Richmond, Virginia, for

Appellants. Robert Dean Perrow, WILLIAMS, MULLEN, CHRISTIAN & DOBBINS, Richmond, Virginia, for Appellees. ON BRIEF:

Michael P. Falzone, David W. Robinson, HIRSCHLER, FLEISCHER, WEINBERG, COX & ALLEN, Richmond, Virginia;

Michael S. Sundermeyer, WILLIAMS & CONNOLLY, Washington,

D.C.; Jack B. McClard, Edward J. Fuhr, Mark E. Merrmann, Kathleen

B. Murphy, HUNTON & WILLIAMS, Richmond, Virginia; Craig T.

Merritt, John Tracy Walker, IV, CHRISTIAN & BARTON, L.L.P.,

Richmond, Virginia; William A. Musgrove, MEZZULLO &

MCCANDLISH, Richmond, Virginia, for Appellants. Howard W.

Dobbins, Robert E. Eicher, John L. Walker, III, Elizabeth P. Mason,

WILLIAMS, MULLEN, CHRISTIAN & DOBBINS, Richmond, Virginia, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

 10
OPINION

PER CURIAM:

The issue in this case is whether the district court abused its discretion when it granted a Federal Rule of Civil Procedure 41(a)(2)

motion for voluntary dismissal in a suit filed by the Commissioner of

Insurance of the State Corporation Commission of the Commonwealth of Virginia (the Commission), acting as Deputy Receiver of

a group of insurance companies under an order of receivership,

against numerous individuals and entities who allegedly engaged in

illegal and improper conduct that resulted in the insolvency and hazardous financial condition of the companies. Concluding that the district court did not abuse its discretion, we affirm.

I.

Prior to receivership, the Homeowners Warranty Corp. (HOW)

administered one of the largest new home warranty programs in the

nation. HOW was formed in 1973 by the National Association of

Homebuilders (NAHB), a trade association of homebuilders and affiliated entities. HOW administered a homebuilder warranty protection

plan, known as the Homeowners Warranty Program (HOW Program).

NAHB owned both HOW and the HOW Program until approximately

1981. Thereafter, NAHB transferred its stock in HOW to the Home

Warranty Corporation (HWC), a non-stock membership corporation.

In 1981, the How Insurance Company (HOWIC) was incorporated as

a risk retention group, and in 1982, HOWIC began underwriting the

HOW Program. HWC, a Delaware corporation, wholly owned both

HOW, a District of Columbia corporation, and HOWIC, a Virginia

corporation. All three companies (collectively, the HOW Companies)

were operated as a single business enterprise.

In 1991, the Virginia Bureau of Insurance (Bureau) began an investigation into HOWIC's financial status. This investigation ultimately

led to receivership proceedings. On October 14, 1994, pursuant to

Chapter 15, Article 38.2 of the Virginia Code, the Circuit Court of the

City of Richmond, Virginia (the Circuit Court) entered a final order

(the Receivership Order) appointing the Commission as Receiver for

the HOW Companies. Three days later, the United States District

 11
Court for the Eastern District of Virginia entered a permanent injunction enjoining the HOW Companies from engaging in the business of

insurance and enjoining certain parties from interfering with the Commission's receivership. Both orders were entered with the consent of

the HOW Companies.

Under the terms of the Receivership Order, the Receiver was

authorized to take all actions it deemed advisable in connection with

the rehabilitation or liquidation of the HOW Companies. Steven T.

Foster, the Commissioner of Insurance of Virginia's State Corporation Commission, was appointed as the Deputy Receiver (D.R.).1 In

addition to setting forth the terms of the receivership, the Receivership Order included a provision requiring all claims against the Deputy Receiver to be filed with the Commission and permanently

enjoined any claimant from filing a claim against the Deputy Receiver

in another jurisdiction, except with leave of the Commission.

While exercising his duties under the Receivership Order, the D.R.

identified certain persons who, by their allegedly improper and illegal

conduct, were most responsible for the financial condition of the

HOW Companies. On October 10, 1995, the D.R. filed a complaint

in the United States District Court for the Eastern District of Virginia

against fifteen former officers, directors, and an employee of the

HOW Companies (collectively, the Original Defendants), alleging

one federal securities fraud claim and eleven claims under Virginia

law, including breach of fiduciary duty and fraud. The D.R. sought

compensatory damages in excess of $100 million, as well as "substantial" punitive damages and other relief. Essentially, the D.R. alleged

that the defendants' illegal and improper conduct had resulted in the

insolvency and hazardous financial condition of the HOW Companies.

In the complaint, the D.R. also alleged misconduct by certain other

individuals and entities he did not name as defendants. For example,

the D.R. alleged that the HOW Companies' arrangement with NAHB

was so extensive as to "effectively make the HOW Program an exten-

_________________________________________________________________

1 Alfred W. Gross has succeeded Steven T. Foster as Commissioner of

Insurance and, therefore, he has been substituted for Steven Foster in

these proceedings.

 12
sion of the NAHB." (J.A. 48). Similarly, in several places in the complaint, the D.R. alleged the defendants acted with substantial

assistance from their consultants, such as auditors and actuaries.

Additionally, the complaint stated that the D.R. was engaging in a

continuing investigation of "the causes of, and circumstances surrounding, the receivership of the [HOW] Companies" and that in connection with this investigation, certain tolling agreements had been

entered into by the D.R. and other persons or entities. (J.A. 33). The

complaint stated further that "[b]ut for the existence of these Tolling

Agreements, these other persons or entities would be named as defendants in this Complaint and may ultimately be so named." Id. On

December 15, 1995, the Original Defendants moved to dismiss the

state law claims on statute of limitations and other grounds.

On January 15, 1996, the D.R. and twelve individuals residing in

Texas and representing a putative class of homeowners, filed suit in

state court in Dallas County, Texas, against a number of defendants,

including NAHB, several local "HOW Councils," regional affiliates

that performed agency functions for the HOW Companies, accountants, actuaries, lawyers and law firms, and individual officers and

directors of the HOW Companies, alleging a variety of violations of

state law. None of the defendants named in the Texas class action suit

was named as a defendant in the federal suit in Virginia. According

to the D.R., he filed suit in Texas because at the time he took over

the affairs of the HOW Companies, their executive offices were

located in Arlington, Virginia, but their operations center and most

company employees were located in Dallas, Texas. In addition, all

claims and underwriting functions for the HOW Companies were

handled from the Dallas, Texas location, and the largest percentage

of insured homeowners and the largest percentage of claims against

the HOW Companies were located in Texas.

On February 7 and 8, 1996, fourteen of the defendants in the Texas

class action suit (the Intervenors) filed motions to intervene in this

federal suit. At the time they filed their motions, the Intervenors also

filed proposed answers to the D.R.'s complaint, and two of them,

NAHB and Deloitte & Touche, LLP, filed proposed counterclaims.

The Intervenors argued that the disposition of the federal suit might,

as a practical matter, impair or impede their ability to protect their

interests and that the claims of the D.R. and the defenses of the Origi-

 13
nal Defendants had questions of law and fact in common with the

claims and defenses of the Intervenors. In addition, the Intervenors

argued that some of the allegations contained in the D.R.'s complaint

in the federal suit in Virginia alleged wrongdoing by parties named

as defendants in the Texas action.

The D.R. opposed the Intervenors' motions, arguing that because

he represented a putative class in the Texas action, regardless of the

district court's decision on the motions to intervene, there would still

be an action in Texas against the Intervenors and, therefore, duplicative litigation. In addition, the D.R. argued that the addition of fourteen defendants would add a significant amount of time and expense

to the federal litigation because of different issues and additional parties involved.

On March 6, 1996, the district court entered an order granting the

Intervenors' motions to intervene under Federal Rule of Civil Procedure 24(b), allowing permissive intervention. In its order, the district

court also granted the D.R. thirty days to amend his complaint if he

wished. That same day, the answers and counterclaims of two Intervenors, NAHB and Deloitte & Touche, LLP, were filed. In its counterclaim, NAHB sought indemnity, based on an alleged indemnity

agreement between NAHB and HOW, for any losses that NAHB

might incur as a result of claims pending against it in the Texas action

and the Virginia action.

On March 15, 1996, the district court entered a memorandum opinion and order in which it denied the Original Defendants' motions to

dismiss the D.R.'s complaint on all bases argued by the defendants,

with the exception of the statue of limitations defense. With respect

to the Original Defendants' statute of limitations defense, the district

court took this argument under advisement and simply denied the

motions to dismiss in all other respects.

On April 5, 1996, the D.R. filed a First Amended Complaint

against all defendants, including the Original Defendants and the

Intervenors, in which he eliminated the federal securities claim and

asserted additional state law claims, including numerous violations of

Texas law. At the same time, the D.R. moved to dismiss his own case

for lack of jurisdiction or, alternatively, for voluntary dismissal under

 14
Federal Rule of Civil Procedure 41(a)(2), or for a stay, or for a continuance of the July 1, 1996 trial date. The D.R. asked, in particular, that

the district court enter an order declining to exercise supplemental

jurisdiction over the remaining state law claims, since there were no

federal causes of action remaining in the suit, and dismissing the

action without prejudice or, in the alternative, that the district court

enter an order voluntarily dismissing the action without prejudice

under Rule 41(a)(2). If the district court declined to dismiss the

action, the D.R. moved for the entry of an order staying the action

pending resolution of the Texas action or for the entry of an order rescheduling the trial date until March 1997.

Also in early April 1996, the Intervenors filed a motion in the Circuit Court, seeking clarification of the Receivership Order. Specifically, the Intervenors sought permission to assert counterclaims

against the D.R. in the Virginia and Texas actions. On April 9, 1996,

the Circuit Court released a letter opinion in which it agreed to modify the Receivership Order to permit the Intervenors to file counterclaims against the D.R. in the Virginia action and the Texas action,

despite the fact that the D.R. had not consented to suit against him in

either forum. The opinion stated that the Circuit Court would modify

the Receivership Order to permit the Intervenors' counterclaims and

that counsel for the Intervenors could "draft a suitable order allowing

the change." (J.A. 1970). On April 22, 1996, several of the Intervenors, Colton & Boykin, P.C.; Boykin & Casano, P.C.; and Hamilton

H. Boykin (collectively, the Boykin Intervenors) filed an answer and

counterclaims to the D.R.'s First Amended Complaint. The Boykin

Intervenors' counterclaims consisted of three indemnity claims

against HOW, HWC, and HOWIC, respectively.

On April 23 and April 29, 1996, the district court held hearings on

the D.R.'s voluntary motion to dismiss the action under Federal Rule

of Civil Procedure 41(a)(2). On May 9, 1996, the district court

entered an order granting the D.R.'s motion for voluntary dismissal

on the condition that the D.R. would not be able to assert in the Texas

action any claims against the defendants barred by the laws of the

Commonwealth of Virginia and that the D.R. pay to each of the

defendants a reasonable sum for the reimbursement of expenses

incurred in opposing the D.R.'s motion for dismissal without prejudice.

 15
Various of the defendants subsequently moved the district court

under Federal Rule of Civil Procedure 59(e) and 60 to reconsider

and/or to clarify its order of dismissal. On July 17, 1996, the district

court verbally clarified its order by indicating that the condition precluding the assertion of any claims against the defendants barred

under Virginia state law referred only to claims that may be asserted

against the Original Defendants, not to claims that may be asserted

against the Intervenors in the Texas action. On July 18, 1996, the district court entered its final order, declaring the clarification issue to

be moot and denying all remaining motions.

Eighteen of the twenty-nine defendants affected by the May 9 order

noted a timely appeal, including ten of the fourteen Intervenors. One

of the Intervenors that asserted a counterclaim against the D.R.,

Deloitte & Touche, LLP did not appeal. The other Intervenors with

counterclaims, NAHB and the Boykin Intervenors, have joined in this

appeal.2

On October 8, 1996, the Circuit Court issued a second letter opinion, in which it reconsidered, pursuant to a motion for reconsideration

filed by the D.R. and the Commission, its previous letter opinion permitting the modification of the Receivership Order to permit claims

against the D.R. in the Virginia and Texas suits. In this second letter

opinion, the Circuit Court reversed and declined to modify its October

1994 Receivership Order precluding any claims against the D.R.

unless filed with the Commission. Approximately one month later, on

November 15, 1996, the Circuit Court entered two orders: in one

order, the court officially ordered, in accordance with its first letter

opinion of April 9, 1996, that the Receivership Order be modified to

permit the Intervenors to assert counterclaims against the D.R. in the

Virginia and Texas suits; in the second order, the court officially

reversed its position as set forth in the April 9, 1996 letter opinion and

ordered that all claims, including counterclaims, of any type asserted

_________________________________________________________________

2 The D.R. noted a timely cross-appeal and argues that the district court

abused its discretion when it permitted the intervention of fourteen additional defendants by granting the Intervenors' motions to intervene.

Because we are affirming the district court's dismissal of this action, we

need not address the merits of the D.R.'s cross-appeal.

 16
against the receivership must be submitted in accordance with the

original provisions of the Receivership Order.

Subsequently, NAHB and the HOW Council of Houston, Texas

filed petitions with the Commission, seeking, inter alia, permission to

file counterclaims against the D.R. in any forum in which the D.R.

files suit. On November 4, 1997, the Commission entered a final

order dismissing these petitions.

II.

We review a district court's decision to grant a plaintiff's motion

to dismiss the complaint without prejudice under Federal Rule of

Civil Procedure 41(a)(2) for abuse of discretion. See Davis v. USX

Corp., 819 F.2d 1270, 1273 (4th Cir. 1987); see also Marex Titanic,

Inc. v. Wrecked & Abandoned Vessel, 2 F.3d 544, 546 (4th Cir. 1993)

(district court's decision to grant motion to dismiss under Rule

41(a)(2) is "within the court's discretion"). Rule 41(a)(2) provides, in

pertinent part:

Except as provided in paragraph (1) of this subdivision of

this rule . . ., an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such

terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service

upon the defendant of the plaintiff's motion to dismiss, the

action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court.

FED. R. CIV. P. 41(a)(2). This rule, then, permits a plaintiff to dismiss

its case without prejudice but requires that the plaintiff get court

approval. See Marex Titanic, 2 F.3d at 546. In addition, if a counterclaim is pending at the time the plaintiff files its motion, the district

court may not grant the plaintiff's motion unless the counterclaim can

remain pending for independent adjudication. The primary purpose of

the rule is to freely permit voluntary dismissals while protecting the

nonmovant from unfair treatment. See Grover v. Eli Lilly & Co., 33

F.3d 716, 718 (6th Cir. 1994); Davis, 819 F.2d at 1273; see also 9

 17
Charles Alan Wright & Arthur R. Miller, Federal Practice and

Procedure § 2364 (1995).

In this case, appellants argue both that the D.R.'s motion was

improperly granted because it unduly prejudiced them and that the

D.R.'s motion was improperly granted because counterclaims of two

Intervenors were pending at the time the action was dismissed and the

district court failed to retain them for independent adjudication. We

will consider each argument in turn.

A.

As a general rule, a plaintiff's motion for voluntary dismissal without prejudice under Rule 41(a)(2) should not be denied absent plain

legal prejudice to the defendant. See Ohlander v. Larson, 114 F.3d

1531, 1537 (10th Cir. 1997); Phillips v. Illinois Cent. Gulf R.R., 874

F.2d 984, 986 (5th Cir. 1989); Andes v. Versant Corp., 788 F.2d 1033,

1036 (4th Cir. 1986); McCants v. Ford Motor Co., Inc., 781 F.2d 855,

856-57 (11th Cir. 1986); 9 Wright & Miller, supra, § 2364. Factors

a district court should consider in ruling on such motions are: (1) the

opposing party's effort and expense in preparing for trial; (2) excessive delay or lack of diligence on the part of the movant; (3) insufficient explanation of the need for a dismissal; and (4) the present stage

of the litigation, i.e., whether a motion for summary judgment is

pending. See Phillips USA, Inc. v. Allflex USA, Inc., 77 F.3d 354, 358

(10th Cir. 1996); Grover, 33 F.3d at 718; Paulucci v. City of Duluth,

826 F.2d 780, 783 (8th Cir. 1987). These factors are not exclusive,

however, and any other relevant factors should be considered by the

district court depending on the circumstances of the case. See

Ohlander, 114 F.3d at 1537. Courts generally agree, however, that the

mere prospect of a second lawsuit is not sufficient prejudice to justify

denying a motion for voluntary dismissal. See Grover, 33 F.3d at 718;

Paulucci, 826 F.2d at 782; Davis, 819 F.2d at 1275. Similarly, "the

possibility that the plaintiff will gain a tactical advantage over the

defendant in future litigation will not serve to bar a second suit."

Davis, 819 F.2d at 1275; see also American Nat'l Bank & Trust Co.

v. BIC Corp., 931 F.2d 1411, 1412 (10th Cir. 1991) ("The possibility

that plaintiffs may gain a tactical advantage by refiling in state court

is insufficient to deny a voluntary motion to dismiss without prejudice, especially when state law is involved.").

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In this case, appellants argue the district court's order granting the

D.R.'s motion has caused them to suffer clear legal prejudice. The

first basis alleged by appellants is the loss of their statute of limitations defense that, according to appellants, bars the D.R.'s Virginia

state law claims. At the time the district court granted the D.R.'s

motion for voluntary dismissal, the district court had taken the Original Defendants' motions to dismiss based on the applicable Virginia

statutes of limitations under advisement.

As noted above, the fact that a plaintiff may gain a tactical advantage by dismissing its suit without prejudice and refiling in another

forum is not sufficient legal prejudice to justify denying a motion for

voluntary dismissal. See BIC Corp., 931 F.2d at 1412; Davis, 819

F.2d at 1275. Courts are divided, however, on the precise issue of

whether a valid statute of limitations defense precludes granting a

plaintiff's motion for voluntary dismissal under Rule 41(a)(2).

Compare McCants, 781 F.2d at 857-59 (holding that valid statute of

limitations defense does not preclude voluntary dismissal without

prejudice), with Metropolitan Fed. Bank v. W.R. Grace & Co., 999

F.2d 1257, 1262 (8th Cir. 1993) (holding there is clear legal prejudice

where a Rule 41(a)(2) dismissal is granted in the face of a valid statute of limitations defense), and Phillips, 874 F.2d at 987 (same). Nevertheless, the appellants did not suffer clear legal prejudice in this

case, even if the forfeiture of a valid statute of limitations defense

constitutes clear legal prejudice and generally bars voluntary dismissal under Rule 41(a)(2), because those defendants who had filed

a motion to dismiss based on Virginia statutes of limitations did not

lose their defense.

As set forth above, the district court dismissed this action on the

condition that the D.R. could not assert in the Texas action any claims

against the Original Defendants barred by the laws of Virginia. To the

extent that the appellants had asserted a legal defense under Virginia

law to the Virginia state claims, such that the loss of that defense

would constitute legal prejudice, then, they still have the same

defense to the same claims to the extent they are raised in the Texas

action. In other words, if the D.R. asserts claims against the Original

Defendants under Virginia law, those defendants will be able to assert

the same Virginia statute of limitations defense in Texas that they

asserted in this action in the district court.

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The appellants argue, however, that the D.R. has stated his intention to restyle the claims in the Texas action as Texas state law

claims, such that the Virginia statute of limitations defense would be

useless. However, this argument assumes that the D.R. has valid

Texas claims against the appellants. If he does, he could have properly asserted those claims in the Virginia action and a Virginia statute

of limitations defense would have been similarly useless. A Virginia

statute of limitations defense pertains only to claims under Virginia

law, regardless of the forum in which they are raised. By preserving

the appellants' right to raise that defense to any claims asserted under

Virginia law, the district court ensured that the appellants did not suffer clear legal prejudice because of forfeiture of the defense when it

dismissed the D.R.'s Virginia federal suit without prejudice.

In addition to the loss of their statute of limitations defense, the

appellants also argue that the district court's order dismissing the

complaint legally prejudices them because: (1) the appellants made an

extraordinary effort and incurred significant expense in obtaining discovery and preparing the case for trial; (2) the D.R.'s purpose in seeking voluntary dismissal was to avoid the consequences of his lack of

due diligence and trial preparation; (3) the effect of the dismissal is

to reverse the district court's ruling in favor of intervention; (4) the

appellants are insured under "wasting" liability insurance policies; (5)

key witnesses were within the subpoena power of the district court

but are not subject to subpoena in Texas; and (6) Virginia's business

judgment rule is more favorable to appellants than Texas'. It is certainly true, as appellants argue, that they incurred significant expense

in obtaining discovery and preparing for trial in this case, particularly

since much of the discovery they sought was located in Texas. However, there is no evidence suggesting that the D.R. was not diligent

in pursuing his claims or that the D.R.'s explanation of needing additional time to prepare to try claims against fourteen additional defendants (following intervention) was disingenuous. With respect to the

appellants' insurance policies, some of the appellants are apparently

insured under a policy in which the policy coverage is reduced by

defense costs and, thus, is "wasting." Although the D.R. contests this

interpretation of the policies at issue, even if the appellants' interpretation is correct, this consequence can hardly constitute legal prejudice. Finally, with respect to the subpoena power and business

judgment rule, appellants assert these arguments without providing

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any support for the proposition that these concerns constitute legal

prejudice. Witnesses are often outside the reach of a court's subpoena

power; their testimony is still available by deposition. With respect to

the business judgment rule, as set forth above, a motion for voluntary

dismissal should not be denied simply because the plaintiff gains a

tactical advantage in a different forum. Thus, while each of the appellants' reasons disfavoring dismissal is valid, none rises to the level of

legal prejudice required to deny the D.R.'s motion.

In addition, as the D.R. argues, there were valid grounds for dismissal: (1) as a result of the intervention order, there was duplicative

litigation in Virginia and Texas; (2) Texas was the only forum where

all claims against all defendants could be resolved; and (3) only state

law claims remained in this federal suit after the D.R. filed his First

Amended Complaint in April 1996. Ultimately, it was the role of the

district court to consider all relevant circumstances in this case and

decide whether, in its discretion, the D.R.'s motion should be granted.

Here, there were reasons favoring dismissal, and the conditions on

dismissal imposed by the district court ensured that the appellants

would suffer no legal prejudice as a result of the dismissal.

B.

The appellants next assert that the district court abused its discretion when it granted the D.R.'s Rule 41(a)(2) motion for voluntary

dismissal because there were counterclaims pending at the time the

action was dismissed and the district court failed to retain jurisdiction

over them. As set forth above, Rule 41(a)(2) provides that "[i]f a

counterclaim has been pleaded by a defendant prior to the service

upon the defendant of the plaintiff's motion to dismiss, the action

shall not be dismissed against the defendant's objection unless the

counterclaim can remain pending for independent adjudication." FED.

R. CIV. P. 41(a)(2). In order for this provision to apply, however, the

counterclaim must have been properly filed--that is, the district court

must have properly had subject matter jurisdiction over the claim. See

Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980);

Armstrong v. Armstrong, 132 F.R.D. 69, 71 (D. Colo. 1990); 9 Wright

& Miller, supra, § 2365.

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In this case, two of the Intervenors, NAHB and Deloitte & Touche,

filed proposed answers and counterclaims against the D.R. at the time

they intervened, and these counterclaims and answers were officially

filed on March 6, 1996, the day the district court permitted intervention and before the D.R. filed its motion to dismiss on April 5, 1996.3

As noted above, Deloitte & Touche did not appeal the district court's

order of voluntary dismissal and, as a result, the propriety of the district court's failure to retain jurisdiction over its counterclaim against

the D.R. is not before us. However, NAHB does appeal the district

court's dismissal of the Virginia action. Therefore, we must address

whether the district court erred in doing so in light of NAHB's pending counterclaim.

It is undisputed that the district court did not retain jurisdiction

over NAHB's counterclaim against the D.R. Therefore, if the counterclaim was properly filed, the district court's dismissal of the counterclaim was error. The D.R. argues, however, that NAHB's

counterclaim was not properly filed because under the terms of the

Receivership Order, claims against the D.R. could not be asserted in

the Virginia action. We agree.

The straightforward terms of the Receivership Order provided that

all claims against the D.R. had to be filed with the Commission,

unless the D.R. agreed that a claim could be filed against him in

another jurisdiction. On April 9, 1996, the Circuit Court issued a letter

opinion, stating its intention to modify its Receivership Order to permit the Intervenors to file counterclaims against the D.R. in the Virginia action and the Texas action, despite the fact that the D.R. had

not consented to suit against it in either forum. However, the Circuit

_________________________________________________________________

3 As noted earlier, a third set of Intervenors, the Boykin Intervenors,

also filed an answer and counterclaim after the D.R. amended his complaint. Unlike NAHB and Deloitte & Touche, however, the Boykin Intervenors failed to file their counterclaim prior to the D.R.'s motion to

dismiss and, therefore, by its terms, Rule 41(a)(2) does not act to require

the district court to retain jurisdiction over this counterclaim prior to permitting dismissal. See FED. R. CIV. P. 41(a)(2) (precluding voluntary dismissal unless counterclaim can remain pending in the district court "if a

counterclaim has been pleaded by a defendant prior to the service upon

the defendant of the plaintiff's motion to dismiss") (emphasis added).

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Court did not enter an order to that effect, and on October 8, 1996,

the court reconsidered its previous letter opinion and reversed itself,

declining to modify the Receivership Order precluding any claims

against the D.R. unless filed with the Commission. Then, on November 15, 1996, the Circuit Court entered two orders: one officially

modifying the Receivership Order in accordance with its April 1996

letter opinion and a second one reversing that decision and ordering

all claims, including counterclaims, asserted against the D.R. as representative of the HOW Companies to be submitted in accordance with

the Receivership Order. The second November 15, 1996 order, then,

effectively nullified any legal effect the April 1996 letter opinion may

have had and reinstated the full terms of the October 1994 Receivership Order. The Commission has recently ruled likewise, dismissing

NAHB's petition seeking permission to file counterclaims in any

forum in which the D.R. sues.

These decisions make clear that NAHB's counterclaim against the

D.R. was improperly filed because under the terms of the Receivership Order, such claims must be filed with the Commission. While

NAHB successfully challenged this provision in the Circuit Court,

that court subsequently reconsidered its decision and reinstated the

terms of the Receivership Order in full. Because the district court

lacked subject matter jurisdiction over NAHB's counterclaim, it was

not properly filed and its pendency did not preclude the voluntary dismissal of the Virginia action.

III.

In conclusion, we hold that the district court did not abuse its discretion when it granted the D.R.'s motion to voluntarily dismiss the

Virginia action pursuant to Rule 41(a)(2). Accordingly, the judgment

of the district court is affirmed.

AFFIRMED

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