UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

PCPA, LLC, et al.

v. Civil No. 16-cv-112-PB Opinion No.

The Flying Butcher, LLC, et al.

MEMORANDUM AND ORDER

In March 2016, PCPA, LLC and Prime Choice Brands, LLC sued

The Flying Butcher, LLC and Allan Bald in this court. The

plaintiffs and the defendants here are also parties to

arbitration proceedings in which, plaintiffs claim, the

arbitrator improperly decided that the parties’ dispute was not

“arbitrable.” Plaintiffs therefore brought this action, seeking

declaratory relief, and to stay the arbitration proceedings

until the court, rather than the arbitrator, can decide whether

their claims are arbitrable.

Plaintiffs have since moved to dismiss their complaint

without prejudice, pursuant to Federal Rule of Civil Procedure

41(a)(2). The defendants oppose plaintiffs’ motion, arguing

that a dismissal without prejudice will injure them. Having

considered both sides’ arguments, I grant plaintiffs’ motion. I. BACKGROUND

According to plaintiffs’ complaint, defendants Flying

Butcher and Allan Bald are former franchisees of Meat House

Franchising (“MHF”), the franchisor of The Meat House chain of

specialty butcher and grocery shops. In 2012, one or both of

the defendants entered into a “Franchise Agreement” to operate a

The Meat House store in Amherst, New Hampshire, and also an

“Area Development Agreement,” agreeing to develop and run six

The Meat House franchises in a designated area. Doc. No. 1 at

3. The Franchise Agreement included an arbitration clause,

requiring the parties to the agreement to resolve disputes

“arising out of or relating to [the] operation of the Franchised

Business or this Agreement” by “arbitration [with] the American

Arbitration Association in New Hampshire.” Doc. No. 1-1 at 35.

In April 2014, MHF’s secured creditors entered into an

Asset Purchase Agreement with PCPA, one of the plaintiffs in

this case. Doc. No. 1 at 3. As a result of that Asset Purchase

Agreement, PCPA claims that it acquired the right to enforce

MHF’s Franchise Agreements and Area Development Agreements,

including the agreements with the defendants here.

Soon thereafter, the parties to this lawsuit had a falling

out. According to the plaintiffs, the defendants improperly

terminated the Franchise Agreement, and then failed to comply 2 with that agreement’s post-termination non-competition

provisions. Id. at 4. Plaintiffs further claim that the

defendants violated plaintiffs’ Lanham Act rights by continuing

to use The Meat House’s mark without legal authority. Id. The

defendants dispute these allegations. Doc. No. 9 at 2.

On March 16, 2015, plaintiffs filed a statement of claim

with the American Arbitration Association (“AAA”) against both

Flying Butcher and Bald, asserting claims for breach of

contract, trademark infringement, unfair competition and false

designation of origin. Doc. No. 1 at 4-5. Plaintiffs asserted

that it was appropriate to arbitrate this dispute, because they

had validly acquired the right to enforce the Franchise

Agreement, including the agreement’s mandatory arbitration

provision, against the defendants.1 Id.

Approximately ten months later, in January 2016, defendants

filed a “Motion for Pre-Hearing Dispositive Ruling that

1 Bald objected to arbitrating plaintiffs’ claims, and filed an action in state court seeking a declaration that he, in his individual capacity, was not contractually bound by the arbitration provision. That action was removed to this court, and Bald subsequently moved for summary judgment. By order dated April 19, 2016, Judge McAuliffe granted Bald’s motion, concluding that “Bald is entitled to judgment as a matter of law given the undisputed facts, as it is clear that he is neither a party to, nor personally bound by, the terms of the Franchise Agreement.” Bald v. PCPA, LLC,

. That matter, 15-cv-219-SM, is now closed. 3 Claimants Lack Standing” with the arbitrator. Id. at 5. In

their motion, defendants argued that the Franchise Agreement was

not validly transferred to the plaintiffs, that plaintiffs

therefore had no right to enforce the agreement’s mandatory

arbitration clause, and that the arbitrator thus lacked

jurisdiction. Id. The arbitrator apparently agreed. In a

March 15, 2016 Interim Order, the arbitrator found that the

Franchise Agreement had not been lawfully transferred to the

plaintiffs, and, therefore, that the plaintiffs “have no claim

to arbitration.” See Doc. Nos. 1 at 7-8; 13 at 1.

Ten days later, on March 25, plaintiffs commenced this

action. Doc. No. 1. Plaintiffs assert that, “[i]n entering the

Interim Order the Arbitrator made determinations regarding the

‘arbitrability’ of the disputes between the parties that

exceeded the Arbitrator’s mandate and which Plaintiffs contend

are issues that are solely within the province of the Court.”

Doc. No. 13 at 1-2. Plaintiffs therefore sought a declaration

from the court that the Franchise Agreement was validly

transferred to plaintiffs, and that plaintiffs could enforce the

terms of the Franchise Agreement, including the arbitration

provision. Doc. No. 1 at 8. Plaintiffs also sought an order

staying the arbitration proceedings until the court decided

whether the dispute should be resolved by arbitration. Id. at 4 9.

Contemporaneous with filing their complaint, plaintiffs

submitted a motion to the arbitrator. Doc. No. 13 at 2. In

their motion, plaintiffs advised the arbitrator of their

complaint, and argued that (1) the arbitrability questions

should be decided by a court, not the arbitrator, (2) the

arbitrator’s Interim Order divested her of jurisdiction to take

further action in the arbitration, and (3) the arbitrator should

therefore take no further action until the court could decide

whether the dispute was arbitrable. Id.

Undeterred, the arbitrator issued another order on April

15, 2016, stating that she had the authority to decide whether

the plaintiffs’ claims were arbitrable, but giving plaintiffs

more time to file supplemental briefs. Id. at 2-3. Pursuant to

that invitation, plaintiffs submitted additional materials to

the arbitrator on April 22. Id. at 3. On May 23, however, the

arbitrator issued an order in which she again rejected the

plaintiffs’ arguments, and then closed the case. Id.

That same day, plaintiffs’ attorney contacted defense

counsel to explain that plaintiffs planned to dismiss their

complaint in this case without prejudice. Id. Defendants

nonetheless filed their answer later that afternoon. Doc. No.

9. Then, two days later, defendants submitted a motion for 5 summary judgment. Doc. No. 11. Plaintiffs moved to dismiss

their complaint without prejudice on June 2. Doc. No. 13. On

June 20, defendants requested leave to amend their answer to add

counterclaims. Doc. No. 19.

II. ANALYSIS

Plaintiffs have moved, pursuant to Federal Rule of Civil

Procedure 41(a)(2), to dismiss their suit without prejudice. In

cases, like this one, where (1) the defendants have filed either

their answer or a motion for summary judgment, and (2) not all

parties stipulate to the dismissal, Rule 41(a)(2) provides that

“an action may be dismissed at the plaintiff's request only by

court order, on terms that the court considers proper.” “Unless

the order states otherwise, a dismissal under [Rule 41(a)(2)] is

without prejudice.” Fed. R. Civ. P. 41(a)(2).

Rule 41(a)(2) allows plaintiffs to dismiss an action

voluntarily, “as long as no other party will be prejudiced.”

Doe v. Urohealth Sys., Inc.,

(1st Cir. 2000)

(quoting Puerto Rico Maritime Shipping Auth. v. Leith,

, 50 (1st Cir. 1981) (internal quotation marks omitted)); see

Grover by Grover v. Eli Lilly & Co.,

(6th Cir.

1994) (“The primary purpose of the rule in interposing the

requirement of court approval is to protect the nonmovant from

6 unfair treatment.”). “[D]ismissal without prejudice is the

norm, unless the court finds that the defendant will suffer

legal prejudice.” Colon Cabrera v. Esso Standard Oil Co.

(Puerto Rico),

(1st Cir. 2013) (citation and

internal punctuation omitted). “The mere prospect of a

subsequent lawsuit does not constitute [legal] prejudice.”

“The district court is responsible . . . for exercising its

discretion to ensure that such prejudice will not occur.” Doe,

. In deciding whether to grant a plaintiff’s

Rule 41(a)(2) motion, courts typically consider the “defendant's

effort and expense of preparation for trial, excessive delay and

lack of diligence on the part of the plaintiff in prosecuting

the action, insufficient explanation for the need to take a

dismissal, and the fact that a motion for summary judgment has

been filed by the defendant.”

Courts need not analyze each

of these factors, however, “or limit their consideration to

these factors.”

A. Defendants’ Efforts and Summary Judgment Motion

The plaintiffs’ motion to dismiss comes early in the

litigation, which counts in their favor. 9 Charles Alan Wright

et al., Fed. Prac. & Proc. Civ. § 2364 (3d ed.) (“Quite

naturally, if the motion is made at an early stage of the case,

before much has happened and only limited human and financial 7 resources have been invested in the matter by the defense, a

Rule 41(a)(2) dismissal is more likely to be granted by the

district court.”). Plaintiffs brought their motion about two

months after filing their complaint. Cf. MBRO Capital, LLC v.

Stolzar, No. 3:09-cv-1688(CSH),

, *3 (D. Conn.

2011) (granting motion where “only eight months had elapsed

since the filing of the complaint” and “[t]he case had not

progressed far”). The pre-trial conference has not yet been

scheduled, the parties have not submitted a discovery plan, and

it appears that no meaningful discovery has occurred. See Doc.

No. 17 at 1.

The defendants have, however, submitted a motion for

summary judgment, a fact that “may incline [courts] to deny

[plaintiffs’] voluntary dismissal motion.” Wright et al.,

supra, § 2364; see, e.g., Phillips USA, Inc. v. Afflex USA,

Inc.,

(10th Cir. 1996) (affirming denial of

plaintiff’s voluntary dismissal motion, relying largely on fact

that summary judgment motion was pending). Yet, a summary

judgment motion “is only a single factor within the Court's

analysis and does not, in and of itself, preclude dismissal.”

Glascock v. Prime Care Seven, L.L.C., No. SA-08-CA-334-FB,

, *2 (W.D. Tex. 2008); see Pontenberg v. Boston

Scientific Corp.,

, PIN (11th Cir. 2001) (rejecting 8 per se rule that a pending motion for summary judgment motion

bars courts from granting Rule 41(a)(2) motion without

prejudice); Doe,

(describing pendency of summary

judgment motion as one of several factors that courts may

consider). Moreover, the timing of defendants’ motion here

makes this case unusual -- defendants filed their motion only

two months after plaintiffs brought their complaint, two days

after defendants filed their answer, after learning that

plaintiffs planned to dismiss the case, and before the pretrial

conference or any meaningful discovery. As such, I do not lend

this factor much significance.

In sum, this is not a case in which the plaintiffs propose

“to dismiss the case at a late stage of pretrial proceedings, or

seek[] to avoid an imminent adverse ruling.” Colon Cabrera,

(1st Cir. 2013). Although defendants claim that they

have already invested “significant time and effort” in the

litigation, Doc. No. 18 at 2, 4, those efforts do not appear

extraordinary, and are largely a product of the defendants’ own

aggressive litigation strategy. These factors therefore weigh

in favor of granting plaintiffs’ motion.

B. Plaintiffs’ Diligence or Delay

There is no evidence that the plaintiffs dawdled in

pursuing their case. Plaintiffs filed their complaint here ten 9 days after the arbitrator entered her Interim Order, which forms

the basis of plaintiffs’ claims. See Doc. No. 13 at 1. Less

than two months later, on May 23, the arbitrator issued an order

reaffirming her belief that she had the authority to determine

whether the dispute was arbitrable, and closed the arbitration.

Id. at 3. That same day, plaintiffs’ counsel contacted counsel

for the defendants, and explained their intention to dismiss the

suit. Id. Plaintiffs then filed their motion to dismiss about

a week later, on June 2. Id.

These facts demonstrate that the plaintiffs did not

excessively delay or lack diligence in prosecuting this action.

This factor therefore counts in plaintiffs’ favor.

C. Explanation for Dismissal

Finally, plaintiffs have supplied a plausible explanation

for moving to dismiss at this time. Plaintiffs claim that they

have moved to dismiss because the arbitrator’s orders render

many of plaintiffs’ claims moot. Doc. No. 21 at 4. Under these

circumstances, plaintiffs argue, the appropriate way to

challenge the arbitrator’s decision -- if plaintiffs choose to

do so at all -- is to petition to vacate the arbitrator’s award.

Id. at 4 n.2. According to the plaintiffs, this approach will

promote efficiency and avoid piecemeal litigation, without

prejudicing the defendants. Id. at 8; cf. Canadian Nat. Ry. Co. 10 v. Montreal, Maine & Atl. Ry., Inc.,

(D. Me.

2011) (“From the Court's perspective, its resources are better

directed to controversies that all parties, particularly the

plaintiff, wish to litigate, rather than to controversies that

the parties, who initially sought relief, wish to dismiss.”).

Defendants dispute this explanation, accuse the plaintiffs

of improper “gamesmanship,” Doc. No. 18 at 6, and argue that

plaintiffs are moving to dismiss for “entirely strategic”

reasons, id. at 4-5.2 Not to be outdone, plaintiffs complain

that the defendants are guilty of “procedural maneuvering,” Doc.

No. 21 at 1, and have their own unsavory “ulterior motives,” id.

at 6. See id. at 7 (“[T]here is reason to believe that

2 Plaintiffs here have filed a petition in the District of Massachusetts to confirm an arbitration award in their favor against another former The Meat House franchisee. See Doc. No. 11-15. In that matter, the arbitrator determined that PCPA and Prime Choice Brands had validly acquired the rights under the franchise agreement, and therefore had standing to enforce the franchise agreement’s arbitration clause against the franchisee. Id. at 13-14. In response, the franchisees in the Massachusetts action have apparently raised the same argument that PCPA and Prime Choice Brands are pressing here -- that arbitrability is a question for the court, not the arbitrator. See Doc. No. 18 at 5. As the defendants here see it, PCPA and Prime Choice Brands seek to dismiss their complaint in this case in order to avoid the awkward position of arguing “in this action that the Arbitrator exceeded her authority to resolve the question of Plaintiffs’ standing while at the same time seek[ing] to confirm an award in the Massachusetts action by arguing that the arbitrator acted within his authority to decide the question of Plaintiffs’ standing.” Id. 11 Defendants are being influenced by third parties also engaged in

arbitrations with Plaintiffs concerning similar issues and

claims.”). Neither side’s argument on this point is compelling.

The defendants’ additional arguments do not fare any

better. Defendants suggest that it would be unfair to allow the

plaintiffs to refile their suit “at some later date chosen by

Plaintiffs when it suits their needs.” Doc. No. 18 at 6. The

First Circuit has explained, however, that “[n]either the

prospect of a second suit nor a technical advantage to the

plaintiff should bar the dismissal.” Leith, 668 F.2d at 50.

Defendants also assert that they want a “final and full

resolution of the arbitration proceeding, which has endured more

than a year,” and claim that their summary judgment motion here

might provide that resolution. Doc. No. 18 at 3. Although this

desire for finality is commendable, it appears that defendants

can achieve this same result in the arbitration proceedings.

Accordingly, in light of the factors identified by the

First Circuit in Doe,

, and given the totality of

the circumstances of this case, it is appropriate to grant

plaintiffs’ motion to dismiss without prejudice here.

III. CONCLUSION

For the foregoing reason, plaintiffs’ motion to dismiss 12 without prejudice (Doc. No. 13) is granted. Defendants’ motions

for summary judgment (Doc. No. 11) and motion for leave to amend

their answer (Doc. No. 19) are denied as moot.

SO ORDERED.

/s/ Paul Barbadoro Paul Barbadoro United States District Judge

July 18, 2016

cc: James Goniea, Esq. Steven Reingold, Eq. Jonathan Shirley, Esq. Matthew Johnson, Esq.

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