Dew Wealth Management LLC v. Wesley Leftwich, et al.

• Court: District Court, D. Arizona
• Decided: October 20, 2025
• Docket: 2:25-cv-01416
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Dew Wealth Management LLC, No. CV-25-01416-PHX-DWL

10 Plaintiff, ORDER

11 v.

12 Wesley Leftwich, et al.,

13 Defendants. 14 15 Pending before the Court is Plaintiff’s Rule 41(a)(2) motion for voluntary dismissal 16 without prejudice. (Doc. 21.) Plaintiff filed this motion only after Defendant moved for 17 summary judgment (Doc. 13) and after Plaintiff then filed, but did not file a reply in support 18 of, a motion for Rule 56(d) relief (Doc. 14). Defendants partially oppose Plaintiff’s 19 dismissal request, arguing that (1) the dismissal should be with prejudice and (2) Plaintiff 20 should be required to pay Defendants’ reasonable attorneys’ fees. (Doc. 22.) 21 For the reasons that follow, the Court agrees with Defendants that any voluntary 22 dismissal should be subject to both of the conditions identified by Defendants. 23 Accordingly, through this order, the Court will give Plaintiff a 14-day deadline to either 24 accept dismissal on those conditions or withdraw its motion. Lau v. Glendora Unified 25 School Dist., 792 F.2d 929, 930-31 (9th Cir. 1986) (“Under [Rule 41(a)(2)], a plaintiff has 26 the choice between accepting the conditions and obtaining dismissal and, if he feels that 27 the conditions are too burdensome, withdrawing his dismissal motion and proceeding with 28 the case on the merits.”) (citation omitted). 1 BACKGROUND 2 On March 31, 2025, Dew Wealth Management LLC (“Plaintiff” or “Dew”) sued 3 Defendants in Maricopa County Superior Court. (Doc. 1-1.) 4 On April 28, 2025, Defendants removed the action. (Doc. 1.) 5 On May 23, 2025, Dew filed the First Amended Complaint (“FAC”). (Doc. 11.) 6 The FAC alleges as follows. Dew, “an advisory firm providing private wealth management 7 and financial planning services, education, and training to high-income individuals and 8 entrepreneurs,” previously employed Defendant Wesley Leftwich (“Leftwich”), first as an 9 “Advisor” and then as a “Senior Advisor.” (Id. ¶¶ 6-7.) As part of his promotion, Leftwich 10 signed a non-solicitation agreement (“the Agreement”), in which he agreed not to “recruit, 11 solicit, hire, employ, engage or retain the services of any Company Employee” or 12 “encourage, induce or convince any Company Employee or Business Associate . . . to end, 13 reduce, or change his/her/its relationship with the Company” during Leftwich’s 14 employment and for 12 months thereafter. (Doc. 11-1 at 23 § 2.5.)1 In May 2024, Leftwich 15 resigned and began working for non-party Socha Capital Wealth Strategies (“Socha”), “a 16 competitor of Dew.” (Doc. 11 ¶¶ 34, 35.) During the year following his resignation, 17 Leftwich allegedly “engaged and assisted others at Socha to engage in the recruitment, 18 solicitation, hiring, employment, engagement, or retention and/or the encouragement, 19 inducement, or convincing of at least one Dew Company Employee,” non-party Stephen 20 Mandracchia (“Mandracchia”), “to end, reduce, or change his relationship with Dew.” (Id. 21 ¶ 37.) The FAC names Leftwich and his wife (together, “Defendants”) as defendants and 22 asserts claims for breach of contract, breach of the implied covenant of good faith and fair 23 dealing, and tortious interference with contract or business relations. (Id. at 10-13.) 24 On June 6, 2025, Defendants filed an answer to the FAC. (Doc. 12.) 25 On June 16, 2025, Defendants filed a motion for summary judgment. (Doc. 13.) 26 The motion asserts that “Leftwich has carefully adhered to all purported requirements in 27

28 1 “Company Employee” and “Business Associate” are defined in the Agreement. (Doc. 11-1 at 23 § 2.5.) 1 the Agreement with Dew and has not directly or indirectly engaged or assisted anyone in 2 recruiting, soliciting, hiring, employing, engaging, or retaining the services of any Dew 3 employee.” (Id. at 3.) The motion requests attorneys’ fees, both under the Agreement’s 4 provision that “[t]he prevailing party in any legal action relating or touching upon this 5 Agreement is entitled to recover reasonable attorneys’ fees and costs” (Doc. 11-1 at 26 6 § 3.7) and under A.R.S. § 12-341.01. (Doc. 13 at 16.) 7 The motion is supported by several attachments. One attachment is a LinkedIn 8 message thread from January 8-10, 2025 in which Mandracchia asked Leftwich how his 9 “new gig” at Socha was going, asked what Socha advisors are paid, and noted 10 dissatisfaction with feeling “underpaid” at Dew—to which Leftwich responded, “I should 11 probably not share anything that could be construed as ‘recruiting’ employees due to my 12 non-solicit through end of May; I’ve made it 8 months doing it the right way, need to wait 13 another 4 . . . hopefully you respect that! I’m sure it really isn’t a bid [sic] deal, just want 14 to dot my Is and cross my Ts lol.” (Doc. 13-2.) Mandracchia replied, “No sweat man, was 15 just curious,” and later added, “If it’s cool with you, let’s chat after May,” to which 16 Leftwich said, “Yeah that’d be great! It’ll be here before we know it.” (Id.) 17 Another attachment is a declaration from Jeff Socha (“Mr. Socha”), the CEO and 18 founder of Socha, who declares that after Mandracchia reached out to Leftwich via 19 LinkedIn in early January 2025, Mandracchia reached out “directly” to Mr. Socha “to 20 inquire about employment at Socha,” interviewed with Mr. Socha and another lead planner, 21 and was offered a position at Socha, but “Leftwich was not involved in the interview 22 process for Mandracchia whatsoever.” (Doc. 13-3 ¶¶ 3-5.) Socha’s declaration also 23 specifies that Mandracchia “accepted employment with Socha on January 23, 2025.” (Id. 24 ¶ 6.) 25 Another attachment is Leftwich’s own declaration, which affirms that he abided by 26 the terms of the Agreement at all times. (Doc. 13-1 ¶¶ 7-19.) More specifically, Leftwich 27 avows that “[t]he first time [he] spoke to Mandracchia after exchanging the LinkedIn 28 messages . . . was after Mandracchia provided his two-weeks’ notice to Dew,” which notice 1 was provided “on or about January 31, 2025.” (Id. ¶¶ 16-17.) Leftwich clarifies that he 2 exchanged text messages with Mandracchia beginning on February 5, 2025 and “spoke 3 with Mandracchia at an in-person event held by Socha in Austin, Texas on February 7, 4 2025.” (Id. ¶¶ 18-19.) 5 Finally, yet another attachment is a February 5, 2025 text message thread between 6 Mr. Socha and Dew senior advisor Nate Birkholz, in which Mr. Socha stated, “[J]ust 7 thought I should let you know [Mandracchia] reached out to me and pursued this 8 opportunity,” adding that Mr. Socha “didn’t go after him” and “if anything tried to talk him 9 out of coming,” to which Birkholz replied, “[Mandracchia] mentioned that and I believe 10 him. Thanks for adding your confirmation.” (Doc. 13-6.)2 11 On July 16, 2025, Dew filed a Rule 56(d) motion requesting an order denying 12 Defendants’ motion for summary judgment without prejudice or deferring consideration 13 “until such time that [Plaintiff] has had a fair opportunity to take discovery and gather 14 evidence necessary to oppose the Motion.” (Doc. 14 at 2.) The premise of this motion is 15 that although Defendants’ “self-serving” declarations and other evidence may appear to 16 show that Leftwich did not engage in any solicitation-related communications with 17 Mandracchia before January 31, 2025, “Dew’s own preliminary information suggests there 18 was additional communication between Leftwich and Mandracchia prior to Mandracchia’s 19 resignation, and that Leftwich’s role in assisting Socha in the recruitment and solicitation 20 of Mandracchia was more active than he now claims.” (Id. at 5.) 21 The sole piece of evidence provided by Dew to support this suspicion is a 22 declaration from Bryce Keffeler (“Keffeler”), Dew’s managing partner. (Doc. 14-1.) The 23 declaration states that Keffeler conducted an exit interview with Mandracchia on 24 Mandracchia’s last day of work at Dew (i.e., February 13, 2025); that during this exit 25 interview, Keffeler expressed his “concerns about Mandracchia’s work/life balance upon 26 joining Socha” and his “hope that Mandracchia was going in to his new job with full

27 2 Defendants also argue that, at any rate, Mandracchia did not fall within the scope of employees Leftwich could not solicit, as he “was not on Leftwich’s pod or team” (Doc. 13 28 at 10-11), and that the Agreement is unenforceable to the extent it punishes innocent conduct and contains an unlimited geographic scope (id. at 11-14). 1 information”; and that Mandracchia replied that Leftwich and Mr. Socha had both told him 2 that Socha wanted “hard core” people. (Id. ¶¶ 5-8.) Keffeler avows that he “understood 3 Mandracchia’s statements to mean that Mandracchia had engaged in conversations with 4 both Leftwich and Socha regarding the prospect of joining Socha prior to providing his 5 notice of resignation to Dew.” (Id. ¶ 9.) 6 On July 22, 2025, Defendants responded to Dew’s Rule 56(d) motion. (Doc. 15.) 7 Defendants emphasize that Keffeler states in his declaration “that he spoke with 8 Mandracchia on February 13, 2025—over three weeks after Mandracchia signed his offer 9 letter with Socha (January 23), two weeks after Mandracchia resigned from Dew (January 10 31), and one week after Mandracchia attended the in-person event for Socha with Leftwich 11 in Austin, Texas (February 7).” (Id. at 7.) Defendants thus argue that Keffeler’s conclusion 12 “that Mandracchia had engaged in conversations with both Leftwich and Socha regarding 13 the prospect of joining Socha prior to providing his notice of resignation to Dew on January 14 31, 2025” lacks “any stated basis.” (Id.) Defendants also attached a declaration from 15 Mandracchia (who worked for Socha for one month and now works elsewhere) stating that 16 Leftwich never attempted to solicit him to join Socha or to encourage him to leave Dew; 17 that the LinkedIn messages accurately show that Leftwich would not discuss Leftwich’s 18 new job due to the Agreement; that he “independently reached out” to Socha; that Leftwich 19 was not involved in his hiring process at Socha; that after resigning from Dew and 20 accepting an employment offer from Socha, he “attended an in-person event hosted by 21 Socha in Austin, Texas,” which “began on February 7, 2025”; and that during his exit 22 interview with Keffeler on February 13, 2025, any references he made to conversations 23 with Leftwich related to conversations that took place after he resigned from Dew and 24 accepted an offer of employment with Socha. (Doc. 15-1 ¶¶ 1-13.) Defendants argue that 25 the “undisputed record affirmatively negates any solicitation occurred and precludes Rule 26 56(d) relief.” (Doc. 15 at 9.) 27 On July 29, 2025, the parties stipulated to extend Dew’s deadline to file a reply in 28 support of its Rule 56(d) motion to August 4, 2025. (Doc. 16.) 1 On August 4, 2025, Dew did not file a reply. Instead, Dew filed a motion to “(1) 2 refer this matter to a magistrate judge for a court-ordered settlement conference, and (2) 3 extend [its] deadline to file its reply in support of its Motion for Rule 56(d) Relief until 14 4 days after the settlement conference is completed.” (Doc. 18.) 5 On August 5, 2025, Defendants filed a response opposing a deadline extension and 6 asserting that settlement efforts “have already run their course.” (Doc. 19.) 7 That same day, the Court denied Dew’s request to refer the matter to a magistrate 8 judge for a settlement conference, due to the parties’ lack of agreement, and extended the 9 deadline for Dew to file a reply in support of its Rule 56(d) motion to August 11, 2025. 10 (Doc. 20.) 11 On August 11, 2025, Dew did not file a reply. Instead, Dew filed the pending Rule 12 41(a)(2) motion to voluntarily dismiss this case without prejudice. (Doc. 21.) 13 On August 14, 2025, Defendants filed a partial opposition to the motion for 14 voluntary dismissal without prejudice, asserting that the dismissal should be with prejudice 15 and that “[r]egardless of whether dismissal is with or without prejudice, Defendants remain 16 entitled to seek attorneys’ fees and costs.” (Doc. 22 at 3-8.) 17 On August 21, 2025, Dew filed a reply in support of its Rule 41(a)(2) motion. (Doc. 18 23.) Neither side requested oral argument with regard to that motion. 19 DISCUSSION 20 I. Dismissal With Or Without Prejudice 21 A. Legal Standard 22 Rule 41(a)(2) allows a plaintiff to request dismissal “by court order, on terms that 23 the court considers proper,” and specifies that “[u]nless the order states otherwise,” the 24 dismissal “is without prejudice.” Id. Motions for voluntary dismissal under Rule 41(a)(2) 25 are “addressed to the district court’s sound discretion.” Westlands Water Dist. v. United 26 States, 100 F.3d 94, 96 (9th Cir. 1996). 27 “When ruling on a motion to dismiss without prejudice, the district court must 28 determine whether the defendant will suffer some plain legal prejudice as a result of the 1 dismissal.” Id. “‘Legal prejudice’ is a term of art: it means prejudice to some legal interest, 2 some legal claim, some legal argument.” Kamal v. Eden Creamery, LLC, 88 F.4th 1268, 3 1280 (9th Cir. 2023) (cleaned up). “[T]he threat of future litigation which causes 4 uncertainty is insufficient to establish plain legal prejudice.” Westlands, 100 F.3d at 96. 5 “[T]he expense incurred in defending against a lawsuit does not amount to legal prejudice.” 6 Id. at 97. “[T]he mere inconvenience of defending another lawsuit does not constitute plain 7 legal prejudice, and plain legal prejudice does not result merely because the defendant will 8 be inconvenienced by having to defend in another forum or where a plaintiff would gain a 9 tactical advantage by that dismissal.” Kamal, 88 F.4th at 1280 (cleaned up). “[L]os[ing] 10 a res judicata defense . . . does not amount to legal prejudice.” Id. at 1285. “Legal prejudice 11 requires something more,” such as “the loss of a federal forum, or the right to a jury trial, 12 or a statute-of-limitations defense.” Id. at 1282-83. “Although case law does not articulate 13 a precise definition of ‘legal prejudice,’ the cases focus on the rights and defenses available 14 to a defendant in future litigation.” Westlands, 100 F.3d at 97. “[T]he district court must 15 determine whether granting a motion for dismissal without prejudice would result in legal 16 prejudice to the defendant and, if not, the motion should be granted.” Kamal, 88 F.4th at 17 1282. 18 B. Analysis 19 Defendants identify four reasons why Dew’s dismissal-without-prejudice request 20 should be denied: (1) “the ability to evade a response to a motion for summary judgment 21 that would render judgment in favor of the defendants constitutes legal prejudice”; (2) 22 “Dew has apparently abandoned its claims”; (3) “Dew’s failure to explain why it requests 23 dismissal without prejudice is a basis to dismiss this action with prejudice”; and (4) “Dew’s 24 request for dismissal underscores that this lawsuit was filed without verifying its central 25 allegation, without performing even the most basic pre-suit diligence that would have 26 revealed its claims to be unfounded, and as part of a broader effort to target a non-party 27 competitor (Socha Capital),” such that the “combination of unverified allegations, 28 demonstrably false factual assertions, and an improper competitive motive strongly 1 supports dismissal with prejudice.” (Doc. 22 at 3-6.) 2 Beginning with Defendants’ first argument, the Ninth Circuit has repeatedly stated 3 that “a district court should consider whether to dismiss a party’s claims under Rule 41 4 with, rather than without, prejudice when the moving party seeks to dismiss its claims to 5 avoid a near-certain adverse ruling.” Kurin, Inc. v. Magnolia Med. Techs., Inc., 2021 WL 6 5823707, *2 (9th Cir. 2021). See also Maxum Indem. Ins. Co. v. A-1 All Am. Roofing Co., 7 299 F. App’x 664, 666 (9th Cir. 2008) (“A district court may consider whether the plaintiff 8 is requesting a voluntary dismissal only to avoid a near-certain adverse ruling.”); 9 Terrovona v. Kincheloe, 852 F.2d 424, 429 (9th Cir. 1988) (“[S]ince the magistrate had 10 already issued his report and recommendation when the motion was filed, the district 11 court’s refusal to use its discretion to dismiss the petition under Fed.R.Civ.P. 41(a)(2) is 12 reasonable.”). In Biden v. Ziegler, 2025 WL 1720182 (C.D. Cal. 2025), the court 13 elaborated upon why a voluntary dismissal to avoid a probable adverse ruling could 14 constitute legal prejudice to the defendant: “Defendants have already prepared a motion 15 for summary judgment and exchanged this document with Plaintiff’s counsel . . . . This 16 motion effectively gives Plaintiff a roadmap to Defendants’ most important legal 17 arguments, and provides a prejudicial advantage given that Plaintiff has not yet had to file 18 an opposition. If allowed to refile this same case in the future, Plaintiff could develop new 19 facts, contact new witnesses, explore and include additional claims, and thereby gain a 20 strategic advantage in opposing the factual and legal defenses presented in Defendants’ 21 motion. That is more than inconvenience or additional expense—it represents real legal 22 prejudice to Defendants in defending refiled litigation.” Id. at *2. 23 It is apparent to the Court that the purpose of Dew’s dismissal request is to avoid a 24 near-certain adverse ruling. At the time Dew filed its dismissal request, there were two 25 pending motions: (1) Defendants’ summary judgment motion; and (2) Dew’s motion for 26 Rule 56(d) relief. To have any hope of prevailing on either motion, Dew needed to identify 27 a reason to suspect that the discovery process might be useful in uncovering evidence that 28 would somehow contradict the sworn statements of Leftwich, Mandracchia, and Mr. 1 Socha—which appear to be corroborated by the LinkedIn exchange and other documentary 2 evidence—that no solicitation by Leftwich occurred. 3 Dew identified the Keffeler declaration as its sole basis for believing that the 4 discovery process would be useful for that purpose. But as Defendants persuasively 5 explain in their response to the Rule 56(d) motion, the Keffeler declaration does not provide 6 any reasonable basis for doubting the veracity of the declarations from Leftwich, 7 Mandracchia, and Mr. Socha. It merely shows that Leftwich and Mandracchia engaged in 8 conversations about the “hard core” nature of the work at Socha at some unspecified point 9 before the date of Mandracchia’s exit interview on February 13, 2025. (Doc. 14-1 ¶ 8.) 10 But unless those conversations took place before January 31, 2025, when Mandracchia 11 provided his notice of resignation, they would not qualify as solicitation even under Dew’s 12 theory of the case. (Id. ¶ 9.) And Leftwich already acknowledged, in the declaration he 13 filed in support of the summary judgment motion, that he engaged in various conversations 14 with Mandracchia after Mandracchia provided two weeks’ notice to Dew on January 31, 15 2025, including conversations on February 5 and 7, 2025. (Doc. 13-1 ¶¶ 17-19.) 16 Under these circumstances, there was a near certainty that Dew would have lost on 17 its Rule 56(d) motion had it not short-circuited the briefing process by filing a motion for 18 voluntary dismissal in lieu of a reply. State of Cal., on Behalf of Cal. Dep’t of Toxic 19 Substances Control v. Campbell, 138 F.3d 772, 779-80 (9th Cir. 1998) (“[D]enial of a Rule 20 [56(d)] application is proper where it is clear that the evidence sought is almost certainly 21 nonexistent or is the object of pure speculation.”) (cleaned up); Volk v. D.A. Davidson & 22 Co., 816 F.2d 1406, 1416 (9th Cir. 1987) (“Courts will deny Rule [56(d)] discovery 23 applications where the moving party’s evidence affirmatively negates the factual issues 24 which the opposing party claims remain controverted. . . . The burden is on the party 25 seeking to conduct additional discovery to put forth sufficient facts to show that the 26 evidence sought exists.”). Furthermore, even if the Court had granted the Rule 56(d) 27 motion and authorized further discovery, there was a near certainty that Dew would have 28 eventually lost at summary judgment—on this record, it is speculative to the extreme that 1 further discovery would have uncovered evidence sufficient to create a jury issue on the 2 solicitation issue. 3 The unpersuasive nature of Dew’s explanation for its decision to move for dismissal, 4 rather than continue litigating, underscores the conclusion that the dismissal request was 5 motivated by a desire to avoid a near-certain adverse ruling. Compare Creative Labs, Inc. 6 v. Orchid Tech., 1997 WL 588923, *2 (N.D. Cal. 1997) (acknowledging that “voluntary 7 dismissal without prejudice may not be appropriate where the sole reason for plaintiff’s 8 request for dismissal is apprehension regarding a possible adverse ruling on a pending 9 motion” but declining to apply this rule because “plaintiff has identified a substantial 10 reason, apart from wanting to avoid a possible adverse ruling, for not proceeding with this 11 case”). Dew’s motion states that “[b]efore filing this action, Dew contacted Mandracchia 12 to gather additional information” and although “Mandracchia was required to cooperate 13 with Dew in providing this information under the cooperation clause of his own 14 employment contract,” he did not respond. (Doc. 21 at 2.) Dew asserts that “continuing 15 the litigation would require expansion—including amending the Complaint to bring claims 16 against Mandracchia for breach of his own contractual obligations to Dew,” but rather than 17 filing a motion for leave to amend, Dew tried to settle “to avoid the burden of continued 18 litigation” and then sought voluntary dismissal. (Id. at 3.) This explanation is unpersuasive 19 because a plaintiff’s asserted discovery of new, related claims against a third party would 20 ordinarily create a further incentive to litigate, not an incentive to dismiss. 21 Dew’s reply brief attempts to supply the missing rationale by asserting that Dew’s 22 claims against Mandracchia “are subject to arbitration under Mandracchia’s contract” and 23 that “Dew should not be required to litigate these integrally related issues on two fronts— 24 in arbitration separately from the litigation here.” (Doc. 23 at 2.) But this explanation 25 remains unpersuasive. No one is forcing Dew to pursue claims against Mandracchia, and 26 if Dew chose to pursue those claims in an arbitration proceeding, that would not have any 27 bearing on whether Dew could continue this action against Defendants. Dew, “an advisory 28 firm” that employs “a team of executives and advisors located in Arizona and around the 1 country to manage its client base nationwide” (Doc. 11 ¶ 6), can likely manage the burden 2 of two simultaneous litigations. At any rate, the possibility of pursuing separate claims 3 against a separate party for breach of a separate contract does not impair the current action 4 or make its continued litigation less desirable. 5 Because the purpose of Dew’s dismissal request was to avoid a near-certain adverse 6 ruling, the Court concludes that any voluntary dismissal should be with prejudice. 7 Authorizing a without-prejudice dismissal under this specific circumstance would create 8 the sort of cognizable legal prejudice, above and beyond the mere expenditure of legal fees 9 or threat of future litigation, that Rule 41(a)(2) is meant to avoid. Terrovona, 852 F.2d at 10 429; Kurin, Inc., 2021 WL 5823707 at *2; Maxum Indem. Ins. Co., 299 F. App’x 664 at 11 666; Ziegler, 2025 WL 1720182 at *2. 12 Although the analysis could end there, the Court will proceed to analyze 13 Defendants’ remaining arguments in an abundance of caution and in an effort to make a 14 complete record in the event of appeal. Defendants’ second argument (“Dew has 15 apparently abandoned its claims”) alone sheds little light on whether Defendants would 16 suffer plain legal prejudice if Dew’s claims were dismissed without prejudice. Voluntary 17 dismissal, by definition, works as an abandonment of the claims, at least within the context 18 of the present action. If Defendants mean to assert that Dew does not appear to intend to 19 bring the claims again in a future action, that appears to be to Defendants’ benefit—it is 20 difficult to understand how such a state of affairs could amount to legal prejudice to 21 Defendants. If, on the other hand, Defendants’ abandonment argument is that Dew failed 22 to respond to Defendants’ pending motion for summary judgment and failed to submit a 23 reply in support of its Rule 56(d) motion, this appears to merely be a corollary of 24 Defendants’ first argument (that Dew is attempting to evade an unfavorable ruling), which 25 is addressed above. 26 As for Defendants’ third argument (“Dew’s failure to explain why it requests 27 dismissal without prejudice is a basis to dismiss this action with prejudice”), the Court 28 agrees that Dew did not set forth a persuasive rationale for its dismissal request. As 1 discussed above, this omission helps inform whether the dismissal request was intended to 2 avoid a near-certain adverse ruling, which is a recognized basis in the Ninth Circuit for 3 denying a request to dismiss without prejudice. 4 With that said, to the extent the parties have identified certain district-court 5 decisions identifying factors such as “the defendant’s effort and expense involved in 6 preparing for trial,” “excessive delay and lack of diligence on the part of the plaintiff in 7 prosecuting the action,” and “insufficient explanation of the need to take a dismissal” as 8 bases for denying a request to dismiss without prejudice, those factors derive from an 9 Eighth Circuit case, Paulucci v. City of Duluth, 826 F.2d 780, 783 (8th Cir. 1987). Notably, 10 the Ninth Circuit has never endorsed those bases in a published decision and has expressly 11 “decline[d] to adopt the Eighth Circuit’s analysis in Paulucci.” Westlands, 100 F.3d at 97. 12 The Ninth Circuit has also held that at least one of the enumerated factors in Paulucci is 13 not a proxy for legal prejudice. Id. (“We have explicitly stated that the expense incurred in 14 defending against a lawsuit does not amount to legal prejudice.”). Another Ninth Circuit 15 opinion suggests a wholesale rejection of these factors, Kamal, 88 F.4th at 1282 16 (“Defendants argue that when deciding whether dismissal should be with or without 17 prejudice, the district court may consider other factors ‘not rising to the level of legal 18 prejudice,’ such as ‘the defendant’s effort and expense involved in preparing for trial’ and 19 ‘excessive delay and lack of diligence on the part of the plaintiff in prosecuting the action,’ 20 and may dismiss with prejudice if warranted by these considerations. But we have already 21 rejected similar arguments.”), although Westlands seems to contemplate that delay could 22 be a factor, albeit not one that was at play in that case. Westlands, 100 F.3d at 97. 23 At any rate, to the extent a particular factor has not been expressly embraced or 24 rejected by the Ninth Circuit, the guiding principle is set forth in Westlands: “Although 25 case law does not articulate a precise definition of ‘legal prejudice,’ the cases focus on the 26 rights and defenses available to a defendant in future litigation.” Id. For that reason, 27 Defendants’ fourth argument (“this lawsuit was filed without verifying its central 28 allegation, without performing even the most basic pre-suit diligence that would have 1 revealed its claims to be unfounded, and as part of a broader effort to target a non-party 2 competitor”) is also, alone, unavailing. The Federal Rules provide other mechanisms for 3 dealing with cases improvidently brought, but the propriety of bringing (or continuing) a 4 frivolous or harassing lawsuit does not appear to be a consideration in the Rule 41(a)(2) 5 analysis. Defendants cite no authority for the proposition that a plaintiff’s failure to 6 conduct an adequate pre-suit investigation could establish that a dismissal without 7 prejudice would cause the defendant to suffer “plain legal prejudice.” In the case 8 Defendants cite, the district court concluded that there was no legal prejudice even though 9 the claim was “frivolous” and “added without diligent research.” Burnette, 828 F. Supp. 10 at 1443-44. 11 II. Attorneys’ Fees 12 A. The Parties’ Arguments 13 The Agreement provides that “[t]he prevailing party in any action arising from or 14 relating to this Agreement shall be entitled to its/his/her reasonable attorney fees and court 15 costs.” (Doc. 11-1 at 26 § 3.7.) Defendants seek attorneys’ fees under that provision and/or 16 pursuant to A.R.S. § 12-341.01. (Doc. 13 at 16; Doc. 22 at 7-8.) Defendants argue that 17 “this Court is bound to follow Arizona law in determining Defendants’ contractual rights 18 to attorneys’ fees and costs” and that “Arizona law recognizes that a voluntary dismissal 19 (with or without prejudice) entitles Defendants to attorneys’ fees and costs” and “further 20 provides that Defendants’ contractual right to reasonable attorneys’ fees and costs is not 21 subject to discretion.” (Doc. 22 at 8.) 22 Dew argues that “[w]hile there is no technical requirement to confer before a motion 23 for summary judgment is filed, judges and parties in this District are generally expected to 24 confer with one another on litigation issues to avoid expense,” and because Defendants did 25 not take that approach, Dew should not “be saddled” with attorneys’ fees. (Doc. 23 at 2- 26 3.) In the alternative, Dew argues that “[c]ourts in the Ninth Circuit have consistently 27 denied fee awards where dismissal without prejudice leaves the question of prevailing party 28 unresolved.” (Id. at 5.) 1 B. Analysis 2 “The trial court has discretion whether to award attorneys’ fees under A.R.S. § 12- 3 341.01; but, unlike fees awarded under A.R.S. § 12-341.01(A), the court lacks discretion 4 to refuse to award fees under a contractual provision.” Risas Holdings LLC v. Tackett, 2020 5 WL 7038300, *2 (Ariz. Ct. App. 2020). “But whether pursuant to A.R.S. § 12-341.01 or 6 an attorneys’ fees clause in a contract, the determination of which party is the ‘successful’ 7 or ‘prevailing’ party for the purposes of awarding attorneys’ fees remains within the 8 discretion of the trial court and will not be disturbed on appeal if any reasonable basis for 9 it exists.” Id. The Court may consider “the totality of the litigation” when determining 10 which party, if any, is the “successful” or “prevailing” party in a particular lawsuit. Nataros 11 v. Fine Arts Gallery of Scottsdale, Inc., 612 P.2d 500, 505 (Ariz. Ct. App. 1980). 12 Because A.R.S. § 12-341.01, which provides that “[i]n any contested action arising 13 out of a contract, express or implied, the court may award the successful party reasonable 14 attorney fees,” is permissive, whereas the fees clause of the Agreement, which provides 15 that “[t]he prevailing party in any action arising from or relating to this Agreement shall be 16 entitled to its/his/her reasonable attorney fees and court costs” (Doc. 11-1 at 26 § 3.7), is 17 mandatory, the Court will limit its analysis to the fees clause of the Agreement.3 Thus, the 18 various factors that courts may consider when evaluating whether to grant fees pursuant to 19 § 12-341.01—e.g., the merits of the unsuccessful party’s position, whether the litigation 20 could have been settled, whether the unsuccessful party would suffer hardship, whether the 21 successful party prevailed with respect to all relief sought, the novelty of the legal question 22 presented, and whether a fees award would discourage future tenable suits, Associated 23 Indem. Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985)—are not relevant here. 24 Most of Dew’s arguments in opposition to an award of attorneys’ fees are premised 25 on the notion that the dismissal here will be without prejudice. (Doc. 23 at 5-6 [arguing 26 that Defendants cannot be considered the prevailing parties because “[t]hey did not secure 27

28 3 The Agreement specifies that it “shall be governed and construed in accordance with the laws of the State of Arizona.” (Doc. 11-1 at 26 § 3.7.) 1 dismissal of any claim on the merits”].) But as discussed in Part I above, the Court 2 concludes that any voluntary dismissal must be based on the condition that it is with 3 prejudice. Defendants will clearly qualify as the prevailing parties if they obtain a with- 4 prejudice dismissal of all of Dew’s claims. Also, because a fee award under the Agreement 5 is mandatory, Defendants’ asserted failure to engage in meet-and-confer efforts before 6 moving for summary judgment does not provide a basis for rejecting their fee request. 7 Furthermore, even if the Court were in agreement with Dew on the with-versus- 8 without-prejudice issue, it would still conclude that Defendants are the prevailing parties 9 and thus entitled to an award of reasonable attorneys’ fees. “When interpreting state law, 10 [federal courts] are bound to follow the decisions of the state’s highest court, and when the 11 state supreme court has not spoken on an issue, we must determine what result the court 12 would reach based on state appellate court opinions, statutes and treatises.” Tabares v. 13 City of Huntington Beach, 988 F.3d 1119, 1124 (9th Cir. 2021). Federal courts should 14 “ordinarily accept the decision of an intermediate [state] appellate court as the controlling 15 interpretation of state law, unless the federal court finds convincing evidence that the 16 state’s supreme court likely would not follow it.” Id. (cleaned up). 17 The Arizona Supreme Court has not decided whether a defendant can be (or 18 necessarily is) a “successful” or “prevailing” party when the plaintiff voluntarily dismisses 19 the lawsuit and the dismissal is without prejudice.4 However, the Arizona Court of Appeals 20 has considered the issue and held that “where a plaintiff timely and voluntarily dismissed 21 without prejudice his complaint . . . his action does not preclude the court from 22 subsequently awarding attorneys’ fees to a defendant.” Vicari v. Lake Havasu City, 213 23 P.3d 367, 374 (Ariz. Ct. App. 2009) (emphasis added). See also State v. Mauceli, 2018 24 WL 6684216, *3 (Ariz. Ct. App. 2018) (citing Vicari for the proposition that “voluntary 25

26 4 Arizona cases use the terms “successful party” and “prevailing party” interchangeably. State ex rel. Arizona Dep’t of Revenue v. Tunberg, 464 P.3d 688, 694 27 (Ariz. Ct. App. 2020); see also Martin v. Weed Inc., 2021 WL 8013764, *3 (D. Ariz. 2021) (“Arizona courts apply the same standards for determining who is the ‘prevailing party’ 28 under a contractual attorneys’ fees provision as for determining which party is the ‘successful party’ entitled to fees under A.R.S. 12-341.01(A).”). 1 dismissal of the State action, even without prejudice, does not preclude the superior court 2 from awarding attorney fees to Mauceli”); Southwest Fertility Ctr., Ltd. v. Medscan 3 Diagnostic Sys., Inc., 2013 WL 440640, *4 (Ariz. Ct. App. 2013) (“[A] party obtaining 4 dismissal without prejudice may be a successful party eligible for an attorneys’ fee award 5 under A.R.S. § 12–341.01(A).”).5 Particularly given Dew’s sparse briefing on the issue, 6 the Court does not find “convincing evidence” that the Arizona Supreme Court would 7 depart from the holding of Vicari. See generally Medical Protective Co. v. Pang, 740 F.3d 8 1279, 1283 (9th Cir. 2013) (“Arizona appellate courts have repeatedly held that an 9 adjudication on the merits is not a prerequisite to recovering attorney’s fees under Section 10 12–341.01.”) (cleaned up). Thus, even if the dismissal here was without prejudice, the 11 Court would conclude that Defendants are the prevailing parties under the circumstances 12 of this case. 13 Finally, to the extent the parties’ motion papers raise disputes concerning the 14 amount of fees that may be awarded and/or whether all of the fees that Defendants incurred 15 in defending this action are reasonable (Doc. 23 at 6), those disputes are premature and not 16 fully developed on the current record. With that said, the Court will require Defendants to 17 provide notice to Dew of the amount of fees that Defendants intend to seek, which may aid 18 Dew in making an informed choice as to whether to proceed with the dismissal request. 19 … 20 … 21 5 Other decisions by the Arizona Court of Appeals suggest that a dismissal without 22 prejudice necessarily transforms the defendant into the successful party, at least in a contract action where the dismissal was not voluntary. Britt v. Steffen, 205 P.3d 357, 360 23 (Ariz. Ct. App. 2008) (“To summarize, a defendant against whom a contract action is dismissed without prejudice for lack of prosecution is the ‘successful party’ in that action 24 and qualifies for a possible award of attorneys’ fees pursuant to A.R.S. § 12–341.01(A).”); HTA-SC Boswell Med. LLC v. Sun Health Servs., 2019 WL 439294, *3 (Ariz. Ct. App. 25 2019) (stating that “[a] defendant in a breach of contract claim is considered a prevailing party when the action is dismissed without prejudice, even if the dismissal does not operate 26 as a dismissal on the merits,” in an action where the plaintiff’s contract claims were dismissed without prejudice on ripeness grounds). See also Sandstone Marketing, Inc. v. 27 Precision Converters, Inc., 2012 WL 6217539, *1 (D. Ariz. 2012) (stating that “[a] defendant against whom a contract action is dismissed without prejudice is considered a 28 successful party” in an action where the plaintiff’s contract claims were dismissed without prejudice because they were subject to mandatory arbitration) (cleaned up). lI. Conclusion 2 As noted at the outset of this order, under Rule 41(a)(2), “a plaintiff has the choice || between accepting the conditions and obtaining dismissal and, if he feels that the conditions 4|| are too burdensome, withdrawing his dismissal motion and proceeding with the case on the 5|| merits.” Lau, 792 F.2d at 930-31 (citation omitted). See generally 1 Gensler, Federal Rules 6|| of Civil Procedure, Rules and Commentary, Rule 41 (2024) (“Courts sometimes refer to || the terms and conditions imposed as the ‘quid pro quo’ of allowing the plaintiff to dismiss 8 || his suit. The court must give the plaintiff notice of what the conditions will be and an || opportunity to withdraw the motion. In other words, the plaintiff is not required to accept 10 || the conditions proposed by the district court but may instead choose to proceed to trial on || the merits by withdrawing the motion to dismiss within a reasonable time.”). For the 12 || reasons discussed above, the Court concludes that any voluntary dismissal must be (1) with 13 || prejudice and (2) result in an award of reasonable attorneys’ fees to Defendants as the prevailing parties. 15 Accordingly, 16 IT IS ORDERED that: 17 1. Within 7 days of the issuance of this order, Defendants must provide Dew 18 || with an itemized list of the attorneys’ fees that Defendants intend to seek. 19 2. Within 14 days of the issuance of this order, Dew must file a notice that either 20 || accepts the two conditions set forth above or withdraws the dismissal motion. 21 3. If Dew withdraws its dismissal motion, it must file a reply in support of its 22 || pending Rule 56(d) motion in tandem with filing its withdrawal of its dismissal motion. 23 Dated this 20th day of October, 2025. 24

26 } t _ Dominic W. Lanza a7 United States District Judge 28

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