Emergency Recovery, Inc. v. Bryan Hufnagle, 20-11743

Background

Emergency Recovery (owned by Bobbie Celler) employed Hufnagle and King under written contracts; later the companies executed new, more generous contracts with Solatium that added 12‑month noncompete restrictions, but the asset transfer to Solatium was never completed and Emergency Recovery continued paying under the Solatium terms.
The companies terminated the executives and filed this federal action alleging trade‑secret misappropriation, breach of contract, and tortious interference; the executives promptly filed a parallel Florida state suit seeking compensation, declaratory relief about the noncompetes, and an accounting.
In federal court the executives answered, moved to compel discovery (granted), and moved for summary judgment; Solatium moved for a preliminary injunction; discovery closed but the companies sought multiple extensions and then moved to voluntarily dismiss without prejudice instead of responding on the merits.
The companies argued (first in a reply) that dismissal should be unconditional because the defendants’ litigation work would be useful in the parallel state case; the district court granted dismissal without prejudice and imposed no fee/cost condition, citing that all work would be useful but offering no factual or record‑based explanation.
The executives moved for reconsideration; the district court denied it in a one‑sentence minute entry repeating the conclusory utility finding. The executives appealed seeking vacatur of the no‑conditions dismissal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court abused its discretion in granting a voluntary dismissal without prejudice under Rule 41(a)(2)	Companies: dismissal proper; no bright‑line bar even with pending summary judgment	Executives: dismissal inappropriate given advanced litigation and pending summary judgment	Court: Granting dismissal was within the district court’s broad discretion; not an abuse on that ground
Whether the district court abused its discretion by declining to condition dismissal on payment of defendants’ litigation expenses given a parallel state action	Companies: no fees needed because defendants’ work will be useful in the state action	Executives: incurred ~ $200,000; much work may be wasted in state case; courts should condition dismissal to reimburse wasted expense	Court: Vacated and remanded — district court provided no factual basis for its conclusion that all work would be useful and the record is undeveloped; must determine portion of work useful and then weigh equities before deciding fee condition

Key Cases Cited

McCants v. Ford Motor Co., 781 F.2d 855 (11th Cir. 1986) (framework for Rule 41(a)(2) dismissals and when to condition dismissal on payment of defendants’ litigation expenses)
Friends of the Everglades v. S. Fla. Water Mgmt. Dist., 678 F.3d 1199 (11th Cir. 2012) (district court must give explanation sufficient to permit meaningful appellate review)
Arias v. Cameron, 776 F.3d 1262 (11th Cir. 2015) (pending summary judgment does not automatically bar Rule 41(a)(2) dismissal)
Holmes v. Cont'l Can Co., 706 F.2d 1144 (11th Cir. 1983) (district court must articulate bases for discretionary dismissals to allow appellate review)
United States v. $242,484.00, 389 F.3d 1149 (11th Cir. 2004) (appellate court may infer district court’s basis from the record when the record supports such an inference)
Pontenberg v. Boston Sci. Corp., 252 F.3d 1253 (11th Cir. 2001) (abuse‑of‑discretion review recognizes district courts’ "zone of choice")