ThermoLife International LLC v. Neogenis Labs Incorporated ( 2021 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 ThermoLife International LLC, No. CV-18-02980-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 Neogenis Labs Incorporated, 13 Defendant. 14 NeoGenis Labs Incorporated, 15 Counter-Claimant, 16 v. 17 ThermoLife International LLC and Ronald L. Kramer, 18 Counter-Defendants. 19 20 21 Pending before the Court is ThermoLife’s renewed motion to voluntarily dismiss 22 the Second Amended Complaint (“SAC”) without prejudice. (Doc. 202.) For the 23 following reasons, the motion is granted. 24 RELEVANT BACKGROUND 25 As discussed in earlier orders (Doc. 201), this action has been pending for almost 26 three years. The Court and the parties have plodded through (1) two motions to dismiss 27 ThermoLife’s complaint (Docs. 40, 63 [orders resolving motions]), resulting in the 28 operative SAC; (2) two motions to dismiss HumanN’s counterclaims (Docs. 113, 176 1 [orders resolving motions]); (3) several requests to stay the case pending settlement 2 discussions (Docs. 76, 78, 80, 82); (4) several requests to extend case deadlines (Docs. 116, 3 124, 184); and (5) various discovery disputes (Docs. 128, 130, 139, 142, 147, 175, 177). 4 Fact discovery is set to close on July 23, 2021. (Doc. 208.) Even more discovery disputes 5 have popped up in the last few days. (Docs. 219, 222.) 6 Meanwhile, on February 11, 2021, ThermoLife filed separate lawsuit against 7 HumanN in the Western District of Texas (the “Texas Litigation”), alleging that three of 8 HumanN’s products—SuperBeets, BeetElite, and Neo40—infringe three of its patents: 9 Patent Nos. 9,180,140 (the “’140 Patent”), 8,455,531 (the “’531 Patent”), and 10,555,968 10 (the “’968 Patent”). (Doc. 174-1.) On April 7, 2021, HumanN filed an answer and asserted 11 counterclaims against ThermoLife in the Texas Litigation. (Doc. 174-2.) HumanN’s three 12 products, and ThermoLife’s past assertions of infringement related to the ’140 and ’531 13 Patents, are also at issue in this lawsuit. 14 Recently, ThermoLife requested a stay of HumanN’s counterclaims in this action, 15 arguing (among other things) that the Texas Litigation would “resolve legal disputes 16 between the parties that [would] be dispositive to likely all of HumanN’s counterclaims.” 17 (Doc. 189 at 4, 6-8.) HumanN disagreed, arguing that it would be prejudiced by a stay and 18 questioning whether the issues in the Texas Litigation would be dispositive of the issues in 19 this action. (Doc. 199.) In this briefing, the parties also disputed whether, assuming a stay 20 was granted, voluntary dismissal of ThermoLife’s claims would be proper. (Doc. 189 at 21 8-10; Doc. 199 at 13-17; Doc. 200 at 9-11.) 22 The Court denied ThermoLife’s stay request, explaining (among other things) that 23 “even if a ruling in the Texas Litigation might simplify the issues in this case, ThermoLife 24 [had] not shown that such potential for simplification would justify an indefinite stay of 25 this action, which has been pending for almost three years and is on the cusp of the close 26 of discovery, when the alternative is forcing this Court to await a ruling in a suit filed only 27 a few months ago on issues it is fully capable of resolving itself in due course.” (Doc. 201 28 at 7.) And “because ThermoLife conditioned the voluntary dismissal of its claims on the 1 granting of a stay, the dismissal request [was] denied as moot.” (Id. at 8.) 2 Soon afterward, ThermoLife filed the pending motion. (Doc. 202.) ThermoLife 3 seeks to dismiss its claims without prejudice under Rule 41(a), with two conditions: “(1) 4 that ThermoLife not refile the claims set forth in the Second Amended Complaint unless 5 and until the Texas Patent Litigation finally resolves, including all appeals; and (2) if 6 ThermoLife refiles the claims set forth in the Second Amended Complaint, it must refile 7 them in this jurisdiction (absent an agreement by HumanN otherwise).” (Id. at 1.) 8 On June 11, 2021, HumanN filed a response. (Doc. 209.) 9 On June 23, 2021, ThermoLife filed a reply. (Doc. 218.)1 Neither side requested 10 oral argument. 11 DISCUSSION 12 I. Legal Standard 13 Rule 41(a)(2) of the Federal Rules of Civil Procedure provides: 14 Except as provided in Rule 41(a)(1), an action may be dismissed at the plaintiff’s request only by court order, on terms that the court considers 15 proper. If a defendant has pleaded a counterclaim before being served with 16 the plaintiff’s motion to dismiss, the action may be dismissed over the defendant’s objection only if the counterclaim can remain pending for 17 independent adjudication. Unless the order states otherwise, a dismissal 18 under [Rule 41(a)(2)] is without prejudice. 19 Whether to grant a motion for voluntary dismissal under Rule 41(a)(2) is a matter of “the 20 district court’s sound discretion.” Stevedoring Servs. of Am. v. Armilla Int’l B.V., 889 F.2d 21 919, 921 (9th Cir. 1989). “In exercising its discretion, the Court must make three separate 22 determinations: (1) whether to allow the dismissal at all; (2) whether the dismissal should 23 be with or without prejudice; and (3) what terms and conditions, if any, should be 24 imposed.” Burnette v. Godshall, 828 F. Supp. 1439, 1443 (N.D. Cal. 1993). 25 … 26 1 The operative reply is ThermoLife’s amended reply. ThermoLife sought to file its initial reply under seal but the Court denied the sealing request without prejudice because 27 ThermoLife gave “no reasons whatsoever to justify sealing, other than the assertion that the documents at issue were designated as confidential.” (Doc. 216 at 2.) On June 23, 28 2021, ThermoLife filed its amended reply (Doc. 218) and a notice that ThermoLife “determined that [it] could file a modified version of the Reply publicly.” (Doc. 217.) 1 II. The Parties’ Arguments 2 ThermoLife argues that dismissal is proper because HumanN would not lose any 3 “substantial right” by dismissal and would “instead benefit . . . by avoiding the expense of 4 litigating claims against it.” (Doc. 189 at 8.) ThermoLife also argues that HumanN will 5 benefit from its proposed conditions of dismissal—i.e., “(1) that ThermoLife not refile the 6 claims set forth in the Second Amended Complaint unless and until the [Texas Litigation] 7 finally resolves, including all appeals; and (2) if ThermoLife refiles the claims set forth in 8 the Second Amended Complaint, it must file them in this jurisdiction (absent an agreement 9 by HumanN otherwise).” (Doc. 202 at 1.) Last, ThermoLife argues that any dismissal 10 should be without prejudice because the case is still in the discovery stage, HumanN has 11 “not had to prepare for trial,” and the parties will likely reach a “final resolution” of their 12 disputes in the Texas Litigation. (Doc. 189 at 9.) 13 HumanN opposes ThermoLife’s request, arguing that dismissal would be improper 14 because ThermoLife “waited two-and-a-half years before bringing its serial motions to 15 voluntarily dismiss, and in both iterations, it has given no explanation for why it delayed 16 so long in requesting voluntary dismissal.” (Doc. 209 at 5, internal quotation marks 17 omitted). HumanN also argues that it will face “obvious prejudice were ThermoLife 18 allowed to walk away from this case now, right before the close of discovery, only to re- 19 file it down the road.” (Id.) Next, HumanN argues that any dismissal of ThermoLife’s 20 claims should be with prejudice because “HumanN has expended significant resources in 21 defending itself,” “ThermoLife’s lack of diligence over the last thirty-four months is 22 patent,” and ThermoLife has “offered no coherent explanation as to why it now seeks 23 dismissal of its own claims.” (Id. at 5-9.) In HumanN’s view, ThermoLife is seeking to 24 dismiss its claims now because ThermoLife knows its claims will not survive summary 25 judgment. (Id.) Finally, HumanN argues that if the Court is inclined to dismiss without 26 prejudice, ThermoLife should be required to pay HumanN’s reasonable attorneys’ fees in 27 litigating this action. (Id. at 9-10.) 28 ThermoLife replies that there is “no reason to require ThermoLife to prosecute 1 claims that, while meritorious, now appear unlikely to entirely resolve the parties’ broader 2 disputes.” (Doc. 218 at 2.) ThermoLife further argues that HumanN “does not argue that 3 it will lose a substantial right if ThermoLife’s claims are dismissed without prejudice” and 4 elaborates on why HumanN will not, in fact, lose any substantial right from dismissal. (Id. 5 at 2-7.) As for HumanN’s argument that the dismissal request is part of a plot to avoid an 6 adverse ruling at summary judgment, ThermoLife argues that “the potential for the Court 7 to grant a dispositive motion a year from now” is not a relevant factor in determining 8 whether to grant a voluntary dismissal motion, that there is “no basis for the Court to dive 9 into the merits of the case and determine whether it might be inclined to grant a summary 10 judgment motion, after substantial additional discovery takes place,” and that its claims 11 are, at any rate, meritorious. (Id. at 3, 7-12.) ThermoLife also clarifies that it is willing to 12 attach another condition to its dismissal request—that “if ThermoLife’s claims are 13 [refiled], [it] consents to allow the use of the discovery that has been taken” in any later- 14 filed action. (Id. at 3-4.) Last, ThermoLife argues that, if dismissal without prejudice is 15 granted, the parties should bear their own attorneys’ fees and costs because “HumanN’s 16 attorneys have not done any work that cannot be used in a future litigation.” (Id. at 12-13.) 17 III. Analysis 18 A. Whether To Allow Dismissal 19 Under Ninth Circuit law, “[a] district court should grant a motion for voluntary 20 dismissal under Rule 41(a)(2) unless a defendant can show that it will suffer some plain 21 legal prejudice as a result.” Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001) (footnote 22 omitted). See also Stevedoring Servs. of Am., 889 F.2d at 921 (“The purpose of [Rule 23 41(a)(2)] is to permit a plaintiff to dismiss an action without prejudice so long as the 24 defendant will not be prejudiced or unfairly affected by the dismissal.”) (citation omitted). 25 “Legal prejudice” means “prejudice to some legal interest, some legal claim, some legal 26 argument.” Westlands Water Dist. v. United States, 100 F.3d 94, 97 (9th Cir. 1996). In 27 contrast, “[u]ncertainty because a dispute remains unresolved is not legal prejudice.” Id. 28 Thus, “the threat of future litigation . . . is insufficient to establish plain legal prejudice.” 1 Id. at 96. See also Hamilton v. Firestone Tire & Rubber Co., Inc., 679 F.2d 143, 145 (9th 2 Cir. 1982) (“Plain legal prejudice . . . does not result simply when defendant faces the 3 prospect of a second lawsuit or when plaintiff merely gains some tactical advantage.”). 4 Nor does “the expense incurred in defending against a lawsuit,” because the “defendants’ 5 interests can be protected by conditioning the dismissal without prejudice upon the 6 payment of appropriate costs and attorney fees.” Westlands Water Dist., 100 F.3d at 97. 7 HumanN has not established that it will suffer “plain legal prejudice” if 8 ThermoLife’s claims are dismissed. HumanN’s primary argument is that it would “face 9 obvious prejudice were ThermoLife allowed to walk away from this case now, right before 10 the close of discovery, only to re-file it down the road” (Doc. 209 at 5), but the Ninth 11 Circuit has made clear that this sort of harm isn’t sufficient under Rule 41(a)(2)—the 12 “threat of future litigation which causes uncertainty is insufficient to establish plain legal 13 prejudice.” Westlands Water Dist., 100 F.3d at 96. Nor are the attorneys’ fees and costs 14 incurred by HumanN. Id. at 97. 15 HumanN also invokes Central Montana Rail, Inc. v. BNSF Railway Co., 422 F. 16 App’x 636 (9th Cir. 2011), in which the Ninth Circuit held that a district court did not abuse 17 its discretion in denying a request for voluntary dismissal where (1) the defendant could 18 “face litigation in state court of a claim that had reached the summary judgment stage in 19 federal court, after almost four years of litigation”; (2) the plaintiff had “given no 20 explanation for why it delayed so long in requesting voluntary dismissal”; (3) the defendant 21 would “be denied a federal forum were the motion granted”; and (4) the “Rule 41(a)(2) 22 motion was motivated by forum shopping.” Id. at 638. But the circumstances present in 23 Central Montana Rail are not present here. In that case, “[a]s a result of [the court’s] prior 24 rulings,” only one claim remained, which had been assigned to the plaintiff by the State of 25 Montana. Cent. Mont. Rail, Inc. v. BNSF Ry. Co., 2010 WL 11534149, *3 (D. Mont. 2010). 26 After “years of litigation,” several adverse rulings, and after the defendant filed a motion 27 for summary judgment on the sole remaining claim, Montana voluntarily terminated the 28 assignment and sued the defendant in state court on a “nearly identical factual basis” and 1 indicated that it would relitigate an issue that “was already litigated and decided in the 2 present case.” Id. (emphasis omitted). Accordingly, it was “not simply a second lawsuit 3 that [the defendant] face[d], but . . . the re-litigation of the same issues which [had] already 4 [been] decided in th[e] case.” Id. (emphasis omitted). See also id. at *4 (“In sum, the State 5 of Montana disagrees with this Court’s past rulings and wants to re-litigate those rulings 6 elsewhere. . . . The State of Montana has now filed suit in State court, defying this Court’s 7 rulings and the arbitrator’s decision, and once again is expressly seeking payment from 8 [the defendant] on a per-car basis.”). The court also noted that the timing was suspicious 9 given that “[o]nly after four years of litigation, several rulings against it, and the filing of 10 a final motion by [the defendant] that would dispose of the entire case on the merits, did 11 the State of Montana decide to assume the costs and burdens associated with this litigation 12 and terminate the assignment to avoid certain, final defeat.” Id. (internal quotation marks 13 omitted). Although the “filing of a summary judgment motion [did] not, per se, establish 14 legal prejudice, the attempts by [the plaintiff] to avoid judgment against it, and 15 consequently the State of Montana, support[ed] denial of its Motion to Dismiss.” Id. at *4. 16 Here, no dispositive motions have been filed, there is nothing to indicate that 17 HumanN would be deprived of a federal forum if voluntary dismissal were granted, and 18 HumanN has not argued that ThermoLife is attempting to relitigate in the Texas Litigation 19 any of the issues decided in this case. Nor has ThermoLife indicated that it intends to 20 relitigate issues already decided in this action in any refiled action—instead, it argues that 21 the parties would “restart exactly where this case left off.” (Doc. 218 at 2.) Although the 22 parties (and the Court) could have avoided expending substantial resources on this action 23 had ThermoLife pursued a different litigation strategy, the Court does not, on balance, find 24 ThermoLife’s actions to be on par with the behavior found unacceptable in Central 25 Montana Rail. The Court is not unsympathetic to HumanN’s irritation at ThermoLife’s 26 request for dismissal at this stage of the case, but such irritation does not qualify as “plain 27 legal prejudice.” And under Ninth Circuit law, voluntary dismissal should be granted in 28 the absence of such prejudice. 1 B. With Or Without Prejudice 2 “Rule 41(a)(2) provides that, unless otherwise specified in the court’s order, the 3 dismissal is without prejudice. Whether to allow dismissal with or without prejudice is 4 discretionary with the court, and it may order the dismissal to be with prejudice where it 5 would be inequitable or prejudicial to defendant to allow plaintiff to refile the action.” 6 Burnette, 828 F. Supp. at 1443. Courts consider the following factors in determining 7 whether to dismiss with or without prejudice: (1) “the defendant’s effort and expense 8 involved in preparing for trial”; (2) “excessive delay and lack of diligence on the part of 9 the plaintiff in prosecuting the action”; and (3) “insufficient explanation of the need to take 10 a dismissal.” Id. at 1443-44 (internal quotation marks omitted). 11 The first factor weighs in favor of ThermoLife. Although HumanN has undoubtedly 12 expended significant resources litigating this case, the bulk of those resources have been 13 spent on motions practice and on discovery, no dispositive motions have been filed, and 14 there is nothing to indicate that HumanN has started preparing for trial. Cf. Sacchi v. Levy, 15 2015 WL 12765637, *3 (C.D. Cal. 2015) (“[A]lthough defendants assert that they have 16 spent more than $30,000 defending this action, no dispositive motions have been filed . . . 17 . The court presumes that the bulk of the parties’ work has been discovery given that the 18 fact discovery cut-off date recently passed. Because of the pendency of this motion, it is 19 virtually certain that no dispositive motions have been drafted or trial preparation begun.”) 20 (footnotes omitted). Additionally, “[w]ere the action ever to be reinstituted . . . the work 21 that has been done would continue to be of value.” Id. This is especially true in light of 22 ThermoLife’s agreement to permit all discovery obtained in this action to be used in any 23 refiled action. Finally, and as discussed in more detail in Part III.C below, HumanN has 24 asserted an array of counterclaims in this action. The presence of those counterclaims 25 makes it difficult to pin all of the blame on ThermoLife for the resources the parties have 26 expended during the discovery and early motions processes in this case. 27 The second factor also weighs in ThermoLife’s favor. ThermoLife has not engaged 28 in excessive delay tactics or shown a lack of diligence. Although this action has progressed 1 at a regrettably slow pace, the delays were largely due to the parties’ continued efforts to 2 settle, to the several rounds of motion-to-dismiss briefing, to the many discovery disputes, 3 and to complications resulting from the COVID-19 pandemic. 4 The third factor does not weigh in ThermoLife’s favor but does not cut decisively 5 against ThermoLife, either. To be sure, ThermoLife has provided a rationale for its 6 dismissal request—it contends “there is no reason to require ThermoLife to prosecute 7 claims that, while meritorious, now appear unlikely to entirely resolve the parties’ broader 8 disputes.” (Doc. 218 at 6.) But this does not strike the Court as a particularly compelling 9 explanation. If ThermoLife truly believed its existing claims were “meritorious,” it would 10 have an incentive to continue litigating them regardless of whether they would, standing 11 alone, have the potential to resolve ThermoLife’s broader dispute with HumanN. This is 12 particularly true because this action will not go away even if ThermoLife’s dismissal 13 request is granted—HumanN has asserted counterclaims against ThermoLife that will 14 remain pending regardless of what happens with ThermoLife’s claims. Given this 15 backdrop (coupled with the unusual timing of the dismissal request, which comes on the 16 eve of the discovery cutoff and soon after ThermoLife filed a separate lawsuit against 17 HumanN in Texas), the Court suspects there may be a tactical aspect to ThermoLife’s 18 dismissal request that has not been fully explored in its motion papers. 19 Nevertheless, even if the final factor cuts slightly against ThermoLife, it does not 20 outweigh the other two factors. The Court will thus permit ThermoLife to dismiss its 21 claims without prejudice. 22 C. Conditions Of Dismissal 23 The Court agrees with all of ThermoLife’s proposed conditions of dismissal and 24 imposes them here, as follows: (1) ThermoLife may not refile the claims set forth in the 25 Second Amended Complaint unless and until the Texas Litigation finally resolves, 26 including all appeals; (2) if ThermoLife refiles the claims set forth in the Second Amended 27 Complaint, it must refile them in this jurisdiction; and (3) if ThermoLife’s claims are 28 refiled, the discovery that has been taken in this action may be used in the later-filed action. 1 (Doc. 218 at 13.) 2 A final disputed issue is whether ThermoLife should be required, as an additional 3 condition of dismissal, to pay all (or some) of HumanN’s attorneys’ fees. (Doc. 209 at 9- 4 10; Doc. 218 at 12-13.) The Court declines to impose such a condition. It is true that 5 “costs and attorney fees are often imposed upon a plaintiff who is granted a voluntary 6 dismissal . . . .” Stevedoring Servs. of Am., 889 F.2d at 921; 1 Gensler, Federal Rules of 7 Civil Procedure, Rules and Commentary, Rule 41, at 1258 (2021) (noting that the “most 8 common condition” imposed by courts on voluntary dismissals is “to require the plaintiff 9 to compensate the defendant for costs and attorney’s fees incurred in that suit”). However, 10 the imposition of such attorneys’ fees and costs is not required by Rule 41(a)(2). 11 Stevedoring Servs. of Am., 889 F.2d at 921. Here, the Court exercises its discretion to 12 decline to award fees and costs because, as discussed in Part III.B above, HumanN 13 contributed to the parties’ expenditure of fees and costs by asserting an array of 14 counterclaims, some of which will remain pending even after ThermoLife’s claims are 15 dismissed. Under these circumstances, the case for requiring ThermoLife to pay all (or 16 even some) of the fees and costs incurred to date by HumanN is less compelling. See, e.g., 17 Disantillo v. Simon Prop. Grp., 2015 WL 5834150, *2 (W.D. Mo. 2015) (concluding that 18 “the proper terms for dismissal under Rule 41(a)(2) require that the parties[] bear their own 19 costs, attorneys’ fees, and expenses” in part because “granting [plaintiff’s] motion for 20 voluntary dismissal does not resolve all claims because [defendant’s] counterclaims remain 21 pending” and defendant could obtain attorneys’ fees pursuant to its counterclaims); 22 Heartland Recreational Vehicles, LLC v. Forest River, Inc., 2010 WL 497327, *10 n.8 23 (N.D. Ind. 2010) (“[T]he Court declines the Defendant’s request for fees and costs [as a 24 condition of voluntary dismissal under Rule 41(a)(2)] because much of the legal work 25 undertaken to this point can be used in the prosecution of the Defendant’s counterclaims 26 and because the Defendant has a claim for attorney’s fees under 35 U.S.C. § 285 that 27 remains pending.”); Mid-Continent Cas. Co. v. Subterra, Inc., 2008 WL 4372352, *2 28 (W.D. Wash. 2008) (“It is not an abuse of discretion by the district court to deny attorneys’ || fees for specific and particular reasons. Here, the Court finds that Subterra will not suffer || any prejudice as a result of Mid-Continent’s voluntary dismissal. As mentioned above, || Mid-Continent has expressly indicated that its dismissal does not affect Subterra’s counterclaims. Indeed, Subterra’s counterclaims against Mid-Continent remain intact, and || Subterra remains free to pursue attorneys’ fees and costs associated with its 6 || counterclaims.”). 7 Accordingly, 8 IT IS ORDERED that ThermoLife’s motion to dismiss (Doc. 202) is granted. 9 IT IS FURTHER ORDERED that (1) ThermoLife may not refile the claims set || forth in the Second Amended Complaint (“SAC”) unless and until the Texas Litigation finally resolves, including all appeals; (2) if ThermoLife refiles the claims set forth in the 12 || SAC, it must refile them in this jurisdiction; and (3) if ThermoLife’s claims are refiled, the 13 | discovery that has been taken in this action may be used in the later-filed action. 14 Dated this 30th day of June, 2021. 15 fT-L M7 "Dominic W. Lanza 18 United States District Judge 19 20 21 22 23 24 25 26 27 28 -ll-