The opinion of the court was delivered by: J. Paul Oetken, District Judge:
On July 15, 2011, Plaintiff Securities and Exchange Commission (the "Commission" or the "SEC") initiated this action against Defendants Compania Internacional Financiera S.A. ("Compania"), Coudree Capital Gestion S.A. ("Coudree"), and Chartwell Asset Management Services ("Chartwell"), alleging that the defendants traded on the basis of material, non-public information in July 2011 relating to the acquisition of Arch Chemicals, Inc. ("Arch") by Lonza Group Ltd. ("Lonza"). On February 14, 2012, the Commission and Chartwell stipulated to the dismissal of the action against Chartwell without prejudice, and Chartwell was terminated from the action. On February 10, 2012, the Commission filed a motion pursuant to Federal Rule of Civil Procedure 41(a)(2) to dismiss its complaint against Compania and Coudree (together "Defendants") without prejudice. Defendants opposed the motion, arguing that any dismissal of this action should be with prejudice.
For the reasons set forth below, the Commission's motion to dismiss without prejudice is granted.
Familiarity with the factual and procedural background of this matter is assumed. The Commission filed this action on July 15, 2011 against Compania, Coudree, and
Chartwell. On that same day, the Commission obtained an ex parte temporary restraining order ("TRO"), freezing assets of all three defendants, pending a hearing on the Commission's motion for a preliminary injunction. (Dkt. No. 2.)
Prior to the preliminary injunction hearing, Compania, Coudree, and the Commission modified and extended the TRO. On July 26, 2011, Compania and Coudree agreed to place $14,784,006 in the Court's CRIS account to remain frozen during the pendency of the action. (Dkt. No. 24.) The agreement also set an expedited discovery schedule, with discovery concluding January 20, 2012, but provided that any party could move, for good cause, to amend the schedule. On July 26, 2011, the Court entered this order by consent. (Id.)
Chartwell did not consent to provide a bond during the pendency of this action, and on July 29, 2011, Judge Denise L. Cote, to whom this case was previously assigned, granted the Commission's motion for a preliminary injunction against Chartwell, entering an asset freeze during the pendency of the action and enjoining Chartwell from destroying any potentially discoverable materials. (Dkt. Nos. 38, 39.) On October 12, 2011, this matter was reassigned to the undersigned.
Pursuant to the revised schedule, motions for summary judgment were due on February 13, 2012. A few days prior to the deadline for moving for summary judgment, the Commission contacted all of the Defendants and requested that they stipulate to dismissal of the action without prejudice. Chartwell agreed to the proposal. The Court endorsed the stipulation between the Commission and Chartwell to dismiss the claims against Chartwell without prejudice on February 14, 2012. (Dkt. No. 117.)
Compania and Coudree objected to the Commission's proposal, taking the position that any dismissal should be with prejudice. On February 10, 2012, the Commission moved to dismiss the complaint against Compania and Coudree without prejudice. Four days later, on February 14, 2012, Compania and Coudree filed an opposition to the motion to dismiss the complaint without prejudice. (Dkt. No. 110.) On that same day, Defendants filed a motion for summary judgment. (Dkt. No. 113.) The Court subsequently stayed the briefing schedule on Defendants' motion for summary judgment pending the decision on the Commission's motion to dismiss without prejudice. (Dkt. No. 122.)
Federal Rule of Civil Procedure 41(a) provides that, except where the parties agree to a stipulation of dismissal, after the defendant has answered the complaint or moved for summary judgment, "an action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper." "However, although voluntary dismissal without prejudice is not a matter of right, the presumption in this circuit is that a court should grant dismissal pursuant to Rule 41(a)(2) absent a showing that defendants will suffer substantial prejudice as a result." A.V. by Versace, Inc. v. Gianni Versace S.p.A., 261 F.R.D. 29, 31 (S.D.N.Y. 2009); see also Sec. Exch. Comm. v. Chakrapani, Nos. 09 Civ. 325, 09 Civ. 1043, 2010 WL 2605819, at *2 (S.D.N.Y. June 29, 2010).
The Second Circuit has identified "two lines of authority" to guide district courts when considering contested motions to dismiss without prejudice. Camilli v. Grimes, 436 F.3d 120, 123 (2d Cir. 2006). "One line indicates that such a dismissal would be improper if 'the defendant would suffer some plain legal prejudice other than the mere prospect of a second lawsuit.'" Id. (citing Cone v. West Virginia Pulp & Paper Co., 330 U.S. 212, 217 (1947)). The other line requires the district court to consider a non-exhaustive list of factors, known as the Zagano factors, including (1) the plaintiff's diligence in bringing the motion, (2) any undue vexatiousness on the plaintiff's part, (3) the extent to which the suit has progressed, including the defendant's efforts and expense in preparation for trial, (4) the duplicative expense of relitigation, and (5) the adequacy of the plaintiff's explanation for the need to dismiss. Id.; Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir. 1990); see also D'Alto v. Dahon California, Inc., 100 F.3d 281, 284 (2d Cir. 1996). These factors need not be weighted equally, and no single factor is dispositive. Chakrapani, 2010 WL 2605819, at *2. The most important inquiry remains whether the defendant will suffer substantial prejudice as a result of a dismissal without prejudice. Id.
As a threshold matter, it is important to understand the history of discovery in this case, which informs a number of the factors to be considered on this motion. The parties agreed at the outset to an expedited discovery schedule, with fact discovery to be completed by January 20, 2012, and expert discovery by January 26, 2012. Yet at the close of the discovery period, ...