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Accurate Grading Quality Assurance, Inc. v. KGK Jewelry, LLC

United States District Court, S.D. New York

July 7, 2014

ACCURATE GRADING QUALITY ASSURANCE, INC., et al., Plaintiffs,
v.
KGK JEWELRY, LLC, Defendant.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge.

Presently before the Court is Plaintiffs' motion to voluntarily discontinue this action without prejudice, pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure. Defendant KGK Jewelry, LLC has conditioned its consent to this dismissal upon (i) Plaintiffs' payment of a sanctions award entered by United States Magistrate Judge Debra C. Freeman on June 17, 2014; and (ii) the reimbursement of the attorneys' fees and costs incurred by Defendant in defending this action over the past 14 months. For the reasons set forth in this Opinion, Plaintiffs' motion to discontinue the action without prejudice is granted, and Defendant's request to impose conditions upon that dismissal is denied.

BACKGROUND

The factual background of this action is set forth in the Court's previous decision on the motion to dismiss, as well as Magistrate Judge Freeman's various Opinions and Orders. ( See Dkt. #59, 112, 116, 117, 118, 119, 120, 121, 122, 136). Nonetheless, the Court will recount the procedural history relevant to the instant motion.

A. Initiation of the Action

Plaintiffs Accurate Grading Quality Assurance, Inc., and Electronic Sales Dealer Network, Inc. (collectively, "Plaintiffs"), initiated this action on February 22, 2012, against John R. Thorpe and KGK Jewelry, LLC ("KGK"), alleging claims of copyright infringement, misappropriation of trade secrets, unfair competition, and breach of contract arising out of a failed business venture related to the jewelry industry. (Dkt. #1). On March 26, 2013, United States District Judge Andrew L. Carter, the judge then assigned to the case, dismissed all claims against Thorpe and certain claims against KGK; Plaintiffs' claims for misappropriation of trade secrets, unfair competition, and unjust enrichment against KGK survived the motion to dismiss. (Dkt. #59). These claims related to Plaintiffs' contention that KGK had misappropriated Plaintiffs' trade secrets as embodied in their so-called "Playbook, " and that the misappropriation had occurred during a failed joint business venture named "NewCo." ( Id. ).

B. Discovery

The parties proceeded thereafter to discovery before Judge Freeman from March 2013 to May 2014. During that time, Plaintiffs sought to amend their complaint; their effort was rebuffed by Judge Freeman in January 2014. ( See Dkt. #112).

The discovery process was contentious. Between August 2013 and November 2013, Plaintiffs and their counsel failed to produce certain discovery, in direct violation of Judge Freeman's instructions. ( See Dkt. #79, 80, 81, 82, 83, 84, 85, 86). As a result, on November 5, 2013, Judge Freeman imposed sanctions on Plaintiffs related to their failure to comply with the Court's Orders. ( See Dkt. #96). Defendant sought reimbursement of the $31, 100.10 in attorneys' fees and costs it claimed it had incurred as a result of Plaintiffs' noncompliance. (Dkt. #90). Plaintiffs subsequently sought reconsideration of Judge Freeman's imposition of sanctions. (Dkt. #103).[1]

On March 28, 2014, prior to the conclusion of discovery, Plaintiffs retained new counsel. (Dkt. #129). Pursuant to this Court's May 2, 2014 Order, pre-motion letters in connection with any motions for summary judgment were to have been filed by May 27, 2014. (Dkt. #131). However, on May 22, 2014, the parties jointly notified the Court that Plaintiffs wished to voluntarily discontinue the action, and asked that the summary judgment deadlines be adjourned sine die. (Dkt. #133). The Court granted their request, and directed the parties to submit letter briefing by May 28, 2014 (Dkt. #134), and June 2, 2014 (Dkt. #135), setting forth their respective positions on Plaintiffs' motion to discontinue.

C. The Parties' Submissions Concerning the Motion to Discontinue

Plaintiffs seek to voluntarily discontinue this action because they believe their rights are adequately protected by two other actions arising from common underlying facts, KGK Jewelry LLC v. ESDNetwork et al., No. 11 Civ. 9236 (LTS) (RLE) (S.D.N.Y.), and Accurate Grading Quality Assurance Inc., et al. v. KGK Group, et al., No. 12 Civ. 9130 (LTS) (RLE) (S.D.N.Y.). (Dkt. #134 at 1 n.1). Defendant, by contrast, contends that it will only consent to the voluntary dismissal of this action if that dismissal is conditioned upon (i) Plaintiffs' payment of the sanctions awarded by Judge Freeman; and (ii) the imposition of attorneys' fees and costs to compensate Defendant for expenses incurred throughout discovery.

DISCUSSION

A. Plaintiffs' Motion to Voluntarily Discontinue the Action Without ...


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