Corfunding, LLC v. ElhagCorfunding, LLC v. Elhag
I. BACKGROUND
On October 23, 2019, Plaintiff filed this Complaint for misappropriation of trade secrets, claiming that its ex-employee Adam Elhag had stolen confidential business leads and client relationships and sent them to competitors, including the other listed Defendants. (ECF No. 1.) Plaintiff has settled with the other Defendants and only Adam Elhag remains in the case. (ECF No. 30.) Mr. Elhag filed his answer on April 13, 2020. (ECF No. 18.)
On October 12, 2020, Plaintiff‘s counsel moved to withdraw as counsel. (ECF No. 33.) The Court denied the motion on October 13, 2020, pointing out that corporations, partnerships, and legal entities may appear in court only through an attorney. (ECF No. 34.) The Court suggested Plaintiff look for new counsel and warned that if new counsel was not located, the case was likely to be dismissed. (Id.) Two days later, Plaintiff filed this Motion to Voluntarily Dismiss Case without prejudice. (ECF No. 35.)
In the Motion, Plaintiff claims that because of the “devastation of the pandemic on the business of the Plaintiff and the personal life of its founder, Plaintiff has ceased operations and is wrapping up its business affairs.” (Id.) Plaintiff‘s counsel details the attempts she has made to locate replacement counsel. (See Supp. Decl. of Rebecca Torrey in supp. of Mot., ECF No. 38.)
Apparently, the parties are also embroiled in litigation in state court. According to Defendant‘s counsel, Mr. Elhag was sued by National Funding, Inc. in San Diego Superior Court in February 2019, also for trade secret misappropriation relating to the theft of leads. (Decl. of Micah L. Bailey in supp. of Opp‘n (“Bailey Decl.“) ¶ 3, ECF No. 36-1.) Initially, because Mr. Elhag was employed by Plaintiff at the time, Plaintiff paid for Mr. Elhag‘s defense. (Bailey Decl. ¶ 4.) However, in July 2019, after Plaintiff terminated Mr. Elhag‘s employment, Plaintiff ceased paying for this defense. (Bailey Decl. ¶ 5.) When Plaintiff refused to respond to Mr. Elhag‘s demand that the costs of the state court defense be indemnified, on October 25, 2019 (three days after Plaintiff filed the Complaint in this federal case), Mr. Elhag filed a cross-complaint in the state court litigation to recover attorney‘s fees and costs, plus damages for unpaid overtime meals breaks, rest breaks and unreimbursed expenses. (Bailey Decl. ¶ 7.) That state court case is still pending, and Ms. Torrey claims she was allowed to withdraw as counsel in the state court case. (Decl. of Rebecca Torrey in supp. of Mot. ¶ 2, ECF No. 37.) Ms. Torrey expresses concern that
II. ANALYSIS
Under the
“In ruling on a motion for voluntary dismissal, the District Court must consider whether the defendant will suffer some plain legal prejudice as a result of the dismissal.” Id. “Plain legal prejudice, however, does not result simply when defendant faces the prospect of a second lawsuit or when plaintiff merely gains some tactical advantage.” Id.; see also Brown v. Baeke, 413 F.3d 1121, 1124 (10th Cir. 2005) (“Prejudice does not arise simply because a second action has been or may be filed against the defendant.“) “Typical examples of such prejudice occur when a party proposes to dismiss the case at a late stage of the pretrial proceedings, or seeks to avoid an imminent adverse ruling, or may on refiling deprive the defendant of a limitations defense.” In re FEMA Trailer Formaldehyde Products Liab. Litig., 628 F.3d 157, 162 (5th Cir. 2010). Other practical factors include: “the opposing party‘s effort and expense in preparing for trial; excessive delay and lack of diligence on the part of the movant; insufficient explanation of the need for a dismissal; and the present stage of the litigation.” Brown, 413 F.3d at 1124. “These factors are neither exhaustive nor conclusive.” Id. The court must consider the equities, not only facing the Defendant, but those facing the Plaintiff. Id.
Defendant has failed to demonstrate plain legal prejudice if this case was dismissed without prejudice. This case is still in the early stages of litigation. By Defendant‘s own admission, Plaintiff has not served any discovery nor required any action on its part. No motions are pending. The only motions filed of any consequence that have been ruled on
Defendant requests that the dismissal be conditioned on various discovery conditions. However, the Court notes that there is ongoing litigation in Superior Court. If Defendant wishes to pursue this discovery, he can do so in state court. The Court declines to impose the requested conditions on Plaintiff‘s motion.
III. CONCLUSION AND ORDER
For the reasons stated above, the Court GRANTS Plaintiff‘s Motion to Voluntarily Dismiss the Case Without Prejudice (ECF No. 35). The clerk is directed to close this case.
IT IS SO ORDERED.
DATED: February 1, 2021
Hon. Cynthia Bashant
United States District Judge