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Clerisy Corporation v. Airware Holdings, Inc.

United States District Court, Ninth Circuit

December 3, 2013

Clerisy Corporation, et al., Plaintiffs,
v.
Airware Holdings, Inc., et al., Defendants.

ORDER

PAUL G. ROSENBLATT, District Judge.

Before the Court is Plaintiffs' motion to dismiss all claims and counterclaims without prejudice. (Doc. 109.) Defendants have filed a cross-motion for attorneys' fees and costs. (Doc. 110.) For the reasons set forth herein, the Court will grant Plaintiffs' motion to dismiss and deny Defendants' cross-motion.

BACKGROUND

Plaintiff Reed Transition Technologies, LLC, owns a patent for an "Apparatus for and Methods of Administering Volatile Substances into an Inhalation Flow Path." Plaintiff Clerisy Corp. manufactures, markets, and distributes Aromahaler® Nasal SoftStrips2122 using the patented apparatus. Defendants market, sell, and distribute "AIR" branded nasal products, which, like the Nasal SoftStrips, are infused with essential oils.

Plaintiffs filed a complaint in the Western District of New York alleging that Defendants are infringing the Patent. The case was transferred to the District of Arizona on Defendant's motion. Plaintiffs filed an amended complaint, and Defendants filed an answer and counterclaims.

The Court held a claim construction hearing and, on July 23, 2013, issued an order largely adopting the constructions proposed by Plaintiffs. (Doc. 102.)

On September 27, 2013, Plaintiffs filed the pending motion to dismiss under Rule 41(a)(2). (Doc. 109.) Plaintiffs state that they do not have the financial resources to continue litigating the case. ( Id. )

DISCUSSION

"Federal Rule of Civil Procedure 41(a)(2) allows a plaintiff, pursuant to an order of the court, and subject to any terms and conditions the court deems proper, to dismiss an action without prejudice at any time." Westlands Water District v. U.S., 100 F.3d 94, 96 (9th Cir. 1996) (internal citation omitted). A court "should grant a motion for voluntary dismissal... unless a defendant can show that it will suffer some plain legal prejudice as a result." Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001).

Plaintiffs have executed a covenant not to sue Defendants. (Doc. 109, Ex. A.) They argue that the covenant extinguishes any case or controversy between the parties, so that the Court now lacks subject matter jurisdiction over any of the claims or counterclaims in this action, which therefore must be dismissed. The Court agrees. Under the broad covenant here, the adequacy of which Defendants do not dispute, Plaintiffs have met their burden of showing that they cannot reasonably be expected to sue, thereby mooting the case. See Already, LLC v. Nike, 133 S.Ct. 721, 726 (2013); Dow Jones & Co. v. Ablaise Ltd., 606 F.3d 1338, 1346 (Fed.Cir. 2010).

Defendants do not oppose dismissal or contend that they will be prejudiced. However, they ask the Court to condition dismissal on Plaintiffs' reimbursement of Defendants' attorney's fees and costs pursuant to Rule 41(a)(2) or under 28 U.S.C. § 1927, which provides for the imposition of fees and costs against any attorney who "multiplies the proceedings in any case unreasonably and vexatiously." The Court concludes that Defendants are not entitled to attorneys' fees under either Rule 41(a)(2) or § 1927.

1. Rule 41(a)(2)

Rule 41(a)(2) provides that unless a plaintiff files a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment, or the parties stipulate to the dismissal of the action, "[a]n action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper." Fed. R.Civ. P. 41(a)(2). A motion for voluntary dismissal pursuant to Rule 41(a)(2) should be granted unless a defendant can show that it will suffer some plain legal prejudice as a result of the dismissal. Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001). As noted, Defendants do not make such a showing.

A court has the discretion to condition a dismissal without prejudice upon the payment of "appropriate costs and attorney fees." Westlands Water Dist. v. United States, 100 F.3d 94, 96 (9th Cir. 1996). The payment of fees is not, however, a prerequisite to a Rule 41(a) dismissal. Stevedoring Servs. of Am. v. Armilla Intern. B. V., 889 F.2d 919, 921 (9th Cir. 1989) (explaining that "no circuit court has held that payment of the defendant's costs and attorney fees is a prerequisite to an order granting voluntary dismissal"); ...


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