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Dzanoucakis v. Chase Manhattan Bank

March 25, 2008

CAROLYN DZANOUCAKIS, PLAINTIFF,
v.
THE CHASE MANHATTANBANK, USA, DEFENDANT.



The opinion of the court was delivered by: Joseph F. Bianco, District Judge

MEMORANDUM AND ORDER

Pro se plaintiff Carolyn Dzanoucakis (hereinafter "plaintiff" or "Dzanoucakis") brought the instant lawsuit in New York State court against defendant Chase Manhattan Bank, USA (hereinafter "defendant" or "Chase Bank"), alleging a claim pursuant to the Truth in Lending Act, 5 U.S.C. §§ 166 et seq. ("TILA"), and claims for breach of contract and violation of due process, all relating to a credit card account that plaintiff had with the defendant. In particular, plaintiff alleged, among other things, that defendant improperly obtained an arbitration award against her in the amount of $25,995.29 with respect to an alleged credit card debt owed by plaintiff to defendant, even though no agreement existed between the parties to arbitrate. Thus, plaintiff contended that the defendant had no right to obtain an arbitration award against plaintiff and the arbitrator exceeded her authority. Based upon these alleged violations, plaintiff sought, among other things, immediate injunctive relief in the form of vacating the arbitration award.

Following removal of the lawsuit by defendant to this Court, defendant moved for leave to amend Chase Bank's answer to assert a counterclaim against plaintiff, pursuant to Federal Rule of Civil Procedure 15, for confirmation of the arbitration award under the Federal Arbitration Act, 9 U.S.C. § 9 ("FAA"). Defendant also moved to dismiss plaintiff's claims on counts 2 and 3 - that is, the breach of contract and due process claims, respectively - pursuant to Rule 12 of the Federal Rules of Civil Procedure. Plaintiff subsequently indicated that she wished to discontinue her claims and withdraw the action. Defendant objected on the ground that, if the Court failed to decide the motion to amend the answer to include the counterclaim before dismissing the lawsuit, defendant would be prejudiced because its time to make such a claim has expired during the pendency of its motion to amend and, thus, it would be unable to re-file such a claim in state court.

For the reasons set forth below, the Court concludes the following: (1) defendant's motion to amend should be decided prior to plaintiff's motion to withdraw the lawsuit; (2) defendant's motion to amend the answer to add a counterclaim to confirm the arbitration award is granted; (3) defendant's motion to dismiss counts 2 and 3 is moot because plaintiff no longer wishes to pursue such claims; and (4) plaintiff's motion to voluntarily dismiss the action will be held in abeyance until the Court can ascertain from defendant as to whether there is any objection to dismissal of plaintiff's claims and remand of the counterclaim to state court.

I. BACKGROUND

On October 19, 2006, the defendant removed this action from Supreme Court, State of New York, County of Suffolk, based upon the plaintiff's assertion of a federal claim in count one of her complaint, which sought monetary damages for the defendant's alleged violations of TILA. On October 26, 2006, the defendant filed an answer. On June 29, 2007, pursuant to Rule 12 of the Federal Rules of Civil Procedure, defendant filed a motion to dismiss the second and third counts in the complaint - namely, the breach of contract and due process claims, respectively. On that same date, defendant also moved, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, to add a counterclaim for confirmation of the arbitration award.

By letter dated December 5, 2007, after the motions were fully submitted and oral argument was conducted, plaintiff indicated that she wished to voluntarily dismiss her complaint. By letter dated December 11, 2007, defendant opposed plaintiff's request to withdraw her claims. Specifically, defendant contended, among other things, that her "request to withdraw her claims is an improper attempt to avoid Chase's proposed counterclaim, which seeks to enforce her debt pursuant to an arbitration award entered in Chase's favor." (Defendant's December 11, 2007 Letter, at 2.) Moreover, defendant argued that it would be prejudiced by the Court's failure to consider its motion to amend before dismissing plaintiff's claims because "Chase will face the argument that the one-year limit under the FAA to bring the action to confirm the arbitration award has expired." (Id.) Although the Court initially indicated during a telephone conference on December 20, 2007 that it would issue an order dismissing this case with prejudice, the Court also requested supplemental briefing regarding defendant's objection. As of February 4, 2008, the issues have been fully briefed and the Court has carefully considered the submissions of both sides.

II. DISCUSSION

Plaintiff seeks to prevent defendant from amending its answer to add the counterclaim to confirm arbitration on the ground that plaintiff has already indicated a desire to dismiss her claims and, in the absence of the plaintiff's claims, there would be no independent basis for jurisdiction over the counterclaim. As set forth below, the Court disagrees and finds that, before the Court considers plaintiff's motion to dismiss the case, the defendant should be allowed to amend the answer to include the counterclaim for confirmation of the arbitration award.

A. Timing of the Motions

Plaintiff contends that, because she indicated her desire to discontinue the action before the Court had decided the pending the motion to amend, the Court should dismiss the case without granting leave to amend. However, as discussed below, the Court finds that argument unpersuasive.

Under Rule 41(a)(1) of the Federal Rules of Civil Procedure, a plaintiff may dismiss an action without order of the Court if a notice of dismissal is filed prior to the service of an answer or by filing a stipulation of dismissal signed by all parties.*fn1 Here, there is no basis for dismissal of this action without order of the Court because the plaintiff's notice of her desire to dismiss the action was filed on December 11, 2007, which is long after the defendant filed and served its answer. Moreover, there is no stipulation of dismissal. Thus, there is no basis for voluntary dismissal without an order of the Court under Rule 41(a)(1) and the Court must analyze dismissal under Rule 41(a)(2).

Rule 41(a)(2) states that "an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms an conditions as the court deems proper."*fn2 Accordingly, the Court turns to the factors that must be considered by a court in deciding whether to exercise its discretionary authority to grant a motion to dismiss pursuant to Fed. R. Civ. P. 41(a)(2). See D'Alto v. Dahon Cal., Inc., 100 F.3d 281, 283 (2d Cir. 1996) ("Rule 41(a)(2) dismissals are at the district court's discretion and only will be reviewed for an abuse of that discretion."). These factors include: "[1] the plaintiff's diligence in bringing the motion; [2] any `undue vexatiousness' on plaintiff's part; [3] the extent to which the suit has progressed, including the defendant's effort and expense in preparation for trial; [4] the duplicative expense of relitigation; and [5] the adequacy of plaintiff's explanation for the need to dismiss." Catanzano v. Wing, 277 F.3d 99, 109-10 (2d Cir. 2001) (quoting Zagano v. Fordham Univ, 900 F.2d 12, 14 (2d Cir. 1990)); accord Ibeto Petrochemical Indus. v. M/T Beffen, 475 F.3d 56, 61 (2d Cir. 2007); see also D'Alto, 100 F.3d at 283 ("A voluntary dismissal without prejudice under Rule 41(a)(2) will be allowed `if the defendant will not be prejudiced thereby.'") (quoting Wakefield, 769 F.2d at 114). As courts have noted, "[t]he primary purpose of Rule 41(a)(2) is to protect the interests of the defendants.'" Wentworth v. Hedson, No. 06-CV-3373 (RER), 2008 WL 125015, at *1 (E.D.N.Y. Jan. 15, 2008) (quoting Brown v. Brown, 343 F. Supp. 2d 195, 199 (E.D.N.Y. 2004)).

After analyzing all of the relevant factors, the Court concludes that allowing dismissal of the action before deciding the motion to amend the answer would be unfairly prejudicial to the defendant. The defendant filed that motion to amend months before plaintiff indicated her desire to discontinue the action. Moreover, if the Court were to dismiss the lawsuit before deciding the motion to amend, defendant would be unfairly prejudiced because, if it tried to institute the arbitration claim in state court at this juncture, it would face the argument that the one-year time limit under the FAA to bring the action to confirm the arbitration award has expired (even though it had not expired at the time of defendant's motion to amend). See, e.g., United States v. Brunswick, 476 F. Supp. 2d 1183, 1188 (D. Nev. 2006) ("The Ninth Circuit has interpreted [Rule 41(a)(2)] as precluding the dismissal of an action if the defendant will suffer some plain legal prejudice as a result of the dismissal.") (citing Westlands Water Dist. v. United States, 100 F.3d 94, 96 (9th Cir. 1996)). Therefore, given that defendant's motion to amend ...


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