16-3912
     Montauk U.S.A., LLC v. 148 South Emerson Associates LLC

 1

 2                                 In the
 3            United States Court of Appeals
 4                      For the Second Circuit
 5                                ________
 6
 7                           AUGUST TERM, 2017
 8
 9                        ARGUED: OCTOBER 5, 2017
10                        DECIDED: APRIL 20, 2018
11
12                             No. 16-3912-cv
13
14                            MARK HOROWITZ,
15                               Plaintiff,
16
17                         MONTAUK U.S.A., LLC,
18                          Plaintiff-Appellant,
19
20                                    v.
21
22                  148 SOUTH EMERSON ASSOCIATES LLC,
23                          Defendant-Appellee.
24                               ________
25
26              Appeal from the United States District Court
27                  for the Eastern District of New York.
28              No. 16-cv-02741 – Sandra J. Feuerstein, Judge.
29                                ________
30
31   Before: WALKER, RAGGI, and HALL, Circuit Judges.
32                               ________
33
     2                                                            No. 16-3912

 1         Plaintiff-Appellant Montauk U.S.A., LLC (“Montauk”) appeals

 2   from (i) the district court’s dismissal without prejudice of its Lanham

 3   Act claims and motion for preliminary injunction under the “first-

 4   filed” rule, and (ii) the district court’s order, pursuant to Fed. R. Civ.

 5   P. 41(d), that Montauk pay the costs, including attorneys’ fees, that

 6   Defendant-Appellee       148    South    Emerson      Associates     LLC

 7   (“Associates”) incurred in responding to a previous action Montauk

 8   brought against Associates in Georgia state court that Montauk

 9   voluntarily dismissed. Central to Montauk’s appeal is the contention

10   that Associates, a limited liability company, should have been held in

11   default because Associates could not litigate through a partial owner

12   who lacked derivative litigation rights under New York law.

13         Because New York law allows for derivative representation on

14   the facts presented, we conclude at the outset that the district court

15   correctly rejected Montauk’s request to hold Associates in default.

16   We nevertheless vacate the district court’s dismissal of Montauk’s

17   complaint and preliminary injunction motion in favor of a first-filed

18   federal Georgia action because the Georgia suit has been transferred

19   to the Eastern District of New York, so the reasoning behind the first-

20   filed ruling no longer pertains. We affirm the district court’s award

21   of costs under Rule 41(d), including attorneys’ fees, incurred by

22   Associates in the Georgia state action. Consequently, we AFFIRM in

23   part, VACATE in part, and REMAND for further proceedings.
     3                                                            No. 16-3912

 1                                   ________
 2
 3                       MICHAEL BOWE, Kasowitz Benson Torres &
 4                       Friedman LLP, New York, NY, for Plaintiff-
 5                       Appellant.

 6                       JAMES M. CATTERSON, Arnold & Porter Kaye
 7                       Scholer, LLP, New York, NY (Michael Burrows,
 8                       Greenberg Traurig, LLP, New York, NY, on the
 9                       brief), for Defendant-Appellee.

10                                   ________
11
12   JOHN M. WALKER, JR., Circuit Judge:

13         Plaintiff-Appellant Montauk U.S.A., LLC (“Montauk”) appeals

14   from (i) the district court’s dismissal without prejudice of its Lanham

15   Act claims and motion for preliminary injunction under the “first-

16   filed” rule, and (ii) the district court’s order, pursuant to Fed. R. Civ.

17   P. 41(d), that Montauk pay the costs, including attorneys’ fees, that

18   Defendant-Appellee       148    South      Emerson    Associates     LLC

19   (“Associates”) incurred in responding to a previous action Montauk

20   brought against Associates in Georgia state court that Montauk

21   voluntarily dismissed. Central to Montauk’s appeal is the contention

22   that Associates, a limited liability company, should have been held in

23   default because Associates could not litigate through a partial owner

24   who lacked derivative litigation rights under New York law.

25         Because New York law allows for derivative representation on

26   the facts presented, we conclude at the outset that the district court
     4                                                                  No. 16-3912

 1   correctly rejected Montauk’s request to hold Associates in default.

 2   We nevertheless vacate the district court’s dismissal of Montauk’s

 3   complaint and preliminary injunction motion in favor of a first-filed

 4   federal Georgia action because the Georgia suit has been transferred

 5   to the Eastern District of New York, so the reasoning behind the first-

 6   filed ruling no longer pertains. We affirm the district court’s award

 7   of costs under Rule 41(d), including attorneys’ fees, incurred by

 8   Associates in the Georgia state action. Consequently, we AFFIRM in

 9   part, VACATE in part, and REMAND for further proceedings.


10                                 BACKGROUND 1

11           This case is one in a series of bitterly contested suits

12   adjudicating rights associated with The Sloppy Tuna, a restaurant in

13   Montauk, NY. See App’x 707–09. In this installment, Montauk, the

14   holding company for intellectual property associated with The

15   Sloppy Tuna, and Montauk’s alleged manager, Mark Horowitz, sued

16   Associates, the owner and operator of The Sloppy Tuna, claiming that

17   Associates’ use of Montauk’s trademarks violates various provisions

18   of the Lanham Act.



         1
          These facts derive principally from the complaint and we accept them
     as true. See Bell Atl. Corp. v. Twombly, 

, 555 (2007). Further, the
     records and decisions in the various judicial proceedings involving the
     parties and their constituent members are facts of which we may take
     judicial notice. See Staehr v. Hartford Fin. Servs. Grp., Inc., 

, 424–
     25 (2d Cir. 2008).
     5                                                         No. 16-3912

 1         The individual players at the heart of the suit, Drew Doscher,

 2   Michael Meyer, Stephen Smith, and Michael Meagher, are former

 3   business partners at The Seaport Group, a Wall Street investment

 4   firm. They and their respective entities share a long history, the

 5   relevant parts of which we discuss below.

 6         In 2010, Doscher pioneered the idea for The Sloppy Tuna while

 7   working at The Seaport Group and sought out as partners and

 8   investors then-colleagues Meyer, Smith, and Meagher.         Doscher

 9   thereafter formed Montauk, a Georgia limited liability company of

10   which he always has been the sole member.           Doscher created

11   Montauk as a vehicle to hold The Sloppy Tuna’s intellectual property

12   and to license that intellectual property to Associates for use at the

13   restaurant.

14         In March 2011, Doscher, Meyer, Smith, and Meagher together

15   formed two New York limited liability companies: (i) Associates, to

16   own and operate The Sloppy Tuna; and (ii) 148 South Emerson

17   Partners, LLC (“Partners”), to purchase the property on which The

18   Sloppy Tuna would operate. Following various ownership disputes

19   not relevant here, the stakeholders in The Sloppy Tuna consist of:

20   (i) Montauk, with Doscher as the sole 100% partner; (ii) Associates,

21   with Meyer and Doscher as 50% partners; and (iii) Partners, with

22   Doscher, Meyer, Smith, and Meagher each as 25% partners.
     6                                                         No. 16-3912

 1         In May 2011, The Sloppy Tuna opened for business. At that

 2   time, Montauk, wholly owned and controlled by Doscher, began to

 3   successfully register several trademarks specifically designed for The

 4   Sloppy Tuna with the United States Patent and Trademark Office. See

 5   App’x 42, 44–49. According to the complaint, Montauk subsequently

 6   permitted Associates to use those trademarks for The Sloppy Tuna

 7   subject to an oral licensing agreement. App’x 11, 36; see also App’x

 8   234. The parties operated under this arrangement for several years,

 9   during which time the restaurant enjoyed considerable success.

10         In January 2013, however, conflict erupted between the

11   partners and The Seaport Group abruptly ended its relationship with

12   Doscher. See generally Doscher v. Sea Port Grp. Sec., LLC, 

13   (2d Cir. 2016). The record evinces the open and personal hostility

14   between the parties, most especially between Doscher and Meyer. See

15   App’x 629, 631.

16         On October 18, 2013, amidst this conflict, Montauk and

17   Associates entered into a written license agreement regarding

18   Associates’ use of Montauk’s Sloppy Tuna marks (the “License

19   Agreement”). App’x 35–41. The License Agreement’s stated aim was

20   to “effectively” and “clearly memorialize” Montauk and Associates’

21   pre-existing oral agreement given that the parties “may be suffering

22   from some form of internal disagreement.” App’x 36. Horowitz

23   signed on behalf of Montauk, and Doscher, who owned 100% of
     7                                                              No. 16-3912

 1   Montauk and was a 50% partner in Associates, signed the License

 2   Agreement on behalf of Associates. Meyer, the other 50% partner in

 3   Associates, however, did not sign the License Agreement, which

 4   required Associates to pay Montauk for use of the marks, and

 5   provided that, upon the termination of the agreement, the license

 6   “shall immediately cease, [and Associates] shall immediately

 7   discontinue all use of the [m]arks.” App’x 37–38. Associates and

 8   Meyer have consistently contended that the License Agreement is a

 9   sham and is unenforceable. 2

10           In 2014, Doscher, Meyer, Smith, and Meagher, as individuals

11   and through their respective entities, began litigating in various fora

12   numerous issues related to the ownership and operation of The

13   Sloppy Tuna. Pertinent to the issues on appeal are the following four

14   lawsuits, each adjudicating the rights to the intellectual property that

15   is the subject of the instant action.

16           First, on December 23, 2014, Montauk brought a declaratory

17   judgment action in the Northern District of Georgia against

18   Associates seeking a ruling that Montauk owns the relevant

19   trademarks and that Associates does not. As will be discussed, on




         2Following Montauk’s filing of its opening brief on this appeal, the New
     York state court ruled that the License Agreement is “void, invalid and of
     not [sic] force or effect.” Meyer v. Montauk U.S.A., LLC, No. 600830/2015,
     Dkt. No. 239 at 10 (N.Y. Sup. Ct. May 9, 2017).
     8                                                           No. 16-3912

 1   August 14, 2017, more than two and one-half years later, the Georgia

 2   federal action was transferred to the Eastern District of New York.

 3         Second, on January 29, 2015, Meyer sued Montauk in New York

 4   state court alleging that the License Agreement was not a valid arms-

 5   length agreement and is therefore void ab initio, which ultimately

 6   resulted in the Georgia federal action being stayed. On February 19,

 7   2015, because Doscher and Meyer were deadlocked as co-owners of

 8   Associates, the court appointed a temporary receiver (Receiver) for

 9   Associates. On March 16, 2016, after Doscher failed to fully comply

10   with the Receiver, the New York state court further ordered that:

11   (i) the Receiver shall take full control of The Sloppy Tuna; (ii) Doscher

12   must surrender all of his restaurant-related property to the Receiver;

13   and (iii) Doscher is “restrained from interfering in any way with the

14   Court-appointed     Temporary     Receiver    in   his   operation   and

15   management of the company.” App’x 134. Shortly thereafter, on

16   March 24, 2016, Montauk terminated the License Agreement

17   purportedly because the New York state court’s order wrested too

18   much control of the restaurant from Doscher.

19         Third, on March 24, 2016, Montauk sued Associates in Georgia

20   state court for breach of contract, unjust enrichment, and quantum

21   meruit, relating to Associates’ continued use of The Sloppy Tuna

22   marks following Montauk’s termination of the License Agreement.

23   Montauk simultaneously moved for a temporary restraining order
     9                                                          No. 16-3912

 1   (TRO) and preliminary injunction (PI). On April 26, 2016, that court,

 2   after a hearing, denied the TRO and at the same time suggested that

 3   Montauk’s filing of that action interfered with the state action in New

 4   York in violation of that court’s March 16, 2016 order. App’x 588.

 5   Two days later, on April 28, 2016, Montauk voluntarily dismissed the

 6   state action in Georgia.

 7         Fourth and lastly, on May 31, 2016, Montauk and Horowitz

 8   brought the instant action against Associates in the Eastern District of

 9   New York. They alleged that Associates’ continued use of The Sloppy

10   Tuna marks after termination of the License Agreement violated

11   several provisions of the Lanham Act.        Montauk and Horowitz

12   asserted four claims: (i) trademark infringement, 15 U.S.C. § 1114; (ii)

13   false designation of origin and unfair competition, 15 U.S.C. § 1125(a);

14   (iii) cybersquatting, 15 U.S.C. § 1125(d); and (iv) trademark dilution,

15   15 U.S.C. § 1125(c). Montauk and Horowitz sought recovery only for

16   Associates’ use of The Sloppy Tuna marks after March 24, 2016, the

17   date Montauk terminated the License Agreement.

18         On July 1, 2016, Montauk and Horowitz moved for a TRO and

19   PI in the instant action. That same day, the TRO was denied, and

20   attorneys James M. Catterson and Michael Burrows filed notices of

21   appearance “for Michael J. Meyer, derivatively on behalf of

22   Defendant 148 South Emerson Associates.” App’x 220–21. No other

23   counsel appeared for Associates. Days later, Meyer, on behalf of
     10                                                           No. 16-3912

 1   Associates, filed a motion to dismiss, raising three arguments: (i) the

 2   complaint must be dismissed under the “first-filed” rule in favor of

 3   the earlier-filed and still extant federal action Montauk brought in

 4   Georgia;   (ii) Montauk    and    Horowitz     failed   to   state   their

 5   cybersquatting claim; and (iii) Montauk should be ordered to pay the

 6   costs, including attorneys’ fees, Associates incurred defending the

 7   discontinued state action in Georgia under the anti–forum shopping

 8   provision of Fed. R. Civ. P. 41(d).

 9         Meyer, on behalf of Associates, also responded to Montauk and

10   Horowitz’s PI motion, arguing that Montauk and Horowitz failed to

11   meet the standard for such relief. In reply, Montauk and Horowitz

12   argued not only that they had met the standard, but that the district

13   court should disregard any submissions filed by Meyer on behalf of

14   Associates. Specifically, they argued that “[t]here is no basis for a

15   non-party [such as Meyer] to defend this action ‘derivatively’ simply

16   because it disagrees with the Receiver’s business judgment or seeks

17   to litigate with plaintiffs for its own self-interested reasons.” No. 16-

18   cv-02741, Dkt. No. 18 at 4 (E.D.N.Y. July 13, 2016). Because Meyer’s

19   “derivative” submissions were not properly before the court,

20   Montauk and Horowitz contended, and Meyer’s was the only

21   opposition to the PI motion, the court should have granted the PI

22   motion by default. Meyer filed a sur-reply, still purportedly on behalf

23   of Associates, attaching a declaration of the New York state court
     11                                                           No. 16-3912

 1   Receiver, Charles C. Russo, in which he stated that he eagerly

 2   consented to Meyer’s derivative defense of the case and that, in his

 3   judgment, Meyer’s derivative representation was in Associates’ best

 4   interest. App’x 665–68.

 5             On October 19, 2016, the district court resolved the pending

 6   motions substantially 3 in Associates’ favor and dismissed the action.

 7   Special App’x (“SA”) 1–31. First, the district court rejected Montauk

 8   and Horowitz’s contention that Meyer did not have a derivative right

 9   to defend on behalf of Associates under New York law. SA 19–22.

10   Second, the district court dismissed Montauk and Horowitz’s

11   complaint without prejudice under the “first-filed” rule based on the

12   action’s similarity to the earlier-filed federal action in Georgia. SA 22–

13   26.       It followed that the district court denied without prejudice

14   Montauk’s PI motion. SA 26 n.10. Third, the district court ordered

15   Montauk to pay the costs, including attorneys’ fees, incurred by

16   Associates in defending the Georgia state action under Rule 41(d). SA

17   26–30. Montauk, but not Horowitz, appealed.


18                                 DISCUSSION

19             Montauk contends on appeal that the district court erred in

20   three ways: (i) allowing Meyer to defend the suit derivatively on


           3
            The district court did not resolve the aspect of Associates’ motion
     seeking dismissal of Montauk and Horowitz’s cybersquatting claim (Count
     III) for failure to state a claim.
     12                                                         No. 16-3912

 1   behalf of Associates; (ii) dismissing the action under the “first-filed”

 2   rule; and (iii) awarding Associates costs under Rule 41(d). Associates

 3   argues that all three rulings were correct.

 4         We conclude that controlling New York law provides Meyer

 5   with derivative rights to defend this suit on behalf of Associates and

 6   we therefore find no error in the district court’s consideration of

 7   Associates’ submissions. We conclude, however, that the district

 8   court’s dismissal of the complaint under the “first-filed” rule should

 9   be vacated in light of the subsequent transfer of the Georgia federal

10   action to the Eastern District of New York. We therefore vacate the

11   dismissal of Montauk’s complaint, which restores the preliminary

12   injunction motion which was never decided.          We affirm in full,

13   however, the awarding of costs under Rule 41(d), including attorneys’

14   fees, to Associates that relate to its defense of the previously

15   discontinued Georgia state action.

16         I.     Meyer’s Derivative Right to Defend

17         The district court rejected Montauk’s contention that Meyer has

18   no right to defend this suit derivatively on behalf of Associates. The

19   district court did so by looking to state law, specifically, New York’s

20   rules for derivative representation. The district court noted New

21   York’s general disfavor of derivative litigation, but identified an

22   exception: New York law will allow for derivative representation in

23   certain contexts to avoid the “intolerable grievance” created where a
     13                                                                 No. 16-3912

 1   corporate entity refuses to act and a stakeholder is left without a

 2   remedy. SA 20–21. The district court concluded that to reject Meyer’s

 3   right to defend derivatively here would be an “intolerable grievance,”

 4   where one of the two 50% “owners of a[n] [LLC] cause[d] his wholly-

 5   owned company, and the purported manager of that company, to

 6   commence a lawsuit against th[at] LLC.” SA 20. Stated differently,

 7   the district court concluded that to enter default against the LLC in

 8   this instance would be inequitable because it would effectively

 9   require the LLC to pay license fees to one 50% member (Doscher) at

10   the expense of the other 50% member (Meyer) who would be barred

11   from appearing in the suit.

12            The district court correctly concluded that New York law

13   governs whether Meyer may derivatively defend Associates in this

14   matter. See Fed. R. Civ. P. 17(b)(3); see also Allright Missouri, Inc. v.

15   Billeter, 

, 635 (8th Cir. 1987). 4           The district court’s

16   assessment being an interpretation and application of state law, we


          Rule 17(b)(3) provides in relevant part that “[c]apacity to sue or be sued
          4

     is determined . . . by the law of the state where the court is located.” At first
     glance, one could question whether this provision applies because Meyer is
     not “be[ing] sued” in this action. However, “[c]apacity has been defined
     [under Rule 17(b)] as a party’s personal right to come into court, and should
     not be confused with the question of whether a party has an enforceable
     right or interest or is the real party in interest. Generally, capacity is
     conceived of as a procedural issue dealing with the personal qualifications
     of a party to litigate and typically is determined without regard to the
     particular claim or defense being asserted.” Wright & Miller, 6A Fed. Prac.
     & Proc. Civ. § 1559 (3d ed. 2017) (footnotes omitted).
     14                                                             No. 16-3912

 1   review it de novo. See In re World Trade Ctr. Lower Manhattan Disaster

 2   Site Litig., 

, 63 (2d Cir. 2017); see also Firestone v. Galbreath,

 3   

, 283 (6th Cir. 1992).

 4          Under New York law, a shareholder has no general right to

 5   litigate on behalf of a corporation. See N.Y. Bus. Corp. Law (“BCL”)

 6   § 626. Such derivative litigation is disfavored “because [it] ask[s]

 7   courts to second-guess the business judgment of the individuals

 8   charged with managing the company.” Bansbach v. Zinn, 

,

 9   8 (2003). Under certain conditions, however, a shareholder may

10   litigate to vindicate corporate rights. BCL § 626(c). The principal

11   condition is that the putative derivative litigant attempt to get the

12   corporate board to act or, alternatively, explain why such an attempt

13   should be excused. 

principle applies when a receiver is

14   in charge. O’Brien v. King, 

, 45 (1st Dep’t 1940) (where

15   a corporation is run by a receiver, such pre-suit demand must be

16   made on that receiver, which “stands in the place of the managing

17   body”). The demand component stems from the requirement that a

18   derivative litigant demonstrate “a sufficient excuse” as to why it

19   should be allowed to overcome the board’s business judgment and

20   represent the interests of the corporation. See Tzolis v. Wolff, 

  100, 108 (2008) (quoting Robinson v. Smith, 

, 232–33

22   (N.Y. Ch. 1832)). This is because, at its core, the issue is whether the

23   litigation decision of the governing board represents the interests of
     15                                                           No. 16-3912

 1   the shareholders. See Auerbach v. Bennett, 

, 628 (1979).

 2   The “real question is one of proper representation.” 

York

 3   Court of Appeals has also made clear that these rules as to derivative

 4   rights apply with equal force to LLCs and their members. See Tzolis,

 

.

 6         The question here is whether these derivative representation

 7   rules allow Meyer to represent Associates’ interests in defense against

 8   the instant suit. Montauk contends the answer is no, arguing that

 9   derivative representation is unavailable on the present facts. It rests

10   its argument on two asserted principles of New York law:

11   (i) derivative representation is available only where a managing

12   body’s decision not to litigate was negligent, fraudulent, or in bad

13   faith, a showing that Meyer has not made as to Associates; and

14   (ii) derivative representation rights do not extend to litigation defense.

15   Finding no support for either principle, we conclude that Meyer was

16   free to derivatively defend this case on behalf of Associates.

17         Montauk cites no authority, and we are aware of none,

18   intimating that derivative representation is only permissible under

19   New York law where a managing body’s decision not to litigate was

20   negligent, fraudulent, or in bad faith. Tomczak v. Trepel, 

  737 (1st Dep’t 2001), cited repeatedly by Montauk for this proposition,

22   is instructive. There, the First Department affirmed the dismissal of a

23   derivative suit because the plaintiffs failed to allege sufficient
     16                                                         No. 16-3912

 1   wrongdoing on the part of the board.         

  Contrary to

 2   Montauk’s contention, however, the court did not imply that board

 3   wrongdoing was the only avenue to derivative representation; it

 4   simply addressed the board’s wrongdoing because that was the

 5   reason the plaintiffs proffered in that case for why the board was not

 6   properly representing the interests of the shareholders.       Tomczak

 7   makes clear that, at bottom, the inquiry in a derivative rights question

 8   is an assessment of the managing body’s intent in adopting a litigation

 9   strategy. That the plaintiffs failed to adduce facts relevant to that

10   inquiry is evidenced from the following statement:

11                While plaintiffs allege that unsuccessful
12                demands were made on the Club’s Board of
13                Directors to initiate legal action, the
14                complaint provides no indication as to who
15                made the demands, when they were made,
16                which Board members they were made to,
17                the content of the demands or why the Board
18                refused to take action.

19   

20         If the board or other managing body’s intent in making its

21   litigation decision was to further the interests of the shareholders,

22   New York courts defer to that choice. If its intent was otherwise, they

23   may not.

24         With this basic principle in mind, it becomes clear that there is

25   little sense in a rule that confines derivative representation to

26   situations where a managing body’s decision not to litigate is made
     17                                                           No. 16-3912

 1   with some malfeasance. The flaw in Montauk’s contention is notably

 2   apparent in the present context, which is distinct from the usual

 3   derivative standing question in a significant way: the derivative

 4   litigant and the company here fully agree as to the best litigation

 5   strategy, specifically, that Meyer defend the action. New York’s

 6   concerns behind its general reluctance to allow derivative litigation

 7   are simply not present in this case.

 8         A board’s malfeasance becomes relevant only where the board

 9   and the shareholder disagree as to the path forward, i.e., where the

10   corporation affirmatively “decide[s] to terminate” litigation that the

11   shareholder desired, Amalgamated Sugar Co. v. NL Industries, Inc., 825

, 641 (2d Cir. 1987), or “decline[s] to institute . . . an action”

13   “that the plaintiff [shareholder] has requested the receiver to

14   maintain,” Koral v. Savory, Inc., 

, 219–20 (1937). This is

15   because, as discussed, New York law looks to a board’s malfeasance

16   only to the extent it may provide a reason to reject the board’s chosen

17   litigation strategy in favor of a different one proposed by a

18   shareholder.

19         But, we have no battle here between conflicting litigation

20   positions and therefore no need to show the Receiver’s malfeasance.

21   The Receiver—which is obligated as a fiduciary to act in the best

22   interest of Associates, see Insurance Co. of N. Am. v. City of New York,

23   

, 985 (1988)—wholly and eagerly consents to Meyer’s
     18                                                          No. 16-3912

 1   derivative defense. The Receiver explained in the record its insistence

 2   that it was in the best interest of Associates for Meyer to defend this

 3   litigation. App’x 666, 672. This decision is properly subject to the

 4   business judgment rule, and it makes no difference that the governing

 5   corporate entity is a receiver. See Golden Pac. Bancorp v. F.D.I.C., 2002

 

, at *9 (S.D.N.Y. Dec. 26, 2002) (under New York law,

 7   “receivers, just like corporate directors, are entitled to the deference

 8   of the business judgment rule”). Montauk does not contend that

 9   Meyer’s derivative defense is somehow counter to the interests of

10   Associates or that the Receiver’s decision to allow Meyer to defend

11   this case was itself made in bad faith. In sum, Montauk’s argument

12   that Meyer was required to demonstrate malfeasance on the part of

13   the Receiver was properly rejected by the district court.

14         Montauk also argues that even if LLC members may bring

15   derivative lawsuits, they may not derivatively defend lawsuits.

16   Montauk cites no law, or reasoning, to support this contention, and

17   the argument is not pressed in its reply brief. The argument is

18   meritless nonetheless. As discussed, the core question in a derivative

19   litigation inquiry is who is a proper entity to represent the company’s

20   interests. There is no reason for different rules for that question when

21   the company defends against rather than brings a suit.

22         In sum, Meyer both (i) took efforts to get Associates to defend

23   the action, BCL § 626(c); and, once Associates elected not to defend
     19                                                          No. 16-3912

 1   the action, (ii) adequately explained why he should be allowed to

 2   derivatively defend it: Associates’ good-faith and well-reasoned

 3   consent. Meyer therefore met the obligations imposed on him by

 4   New York law to derivatively defend this lawsuit.

 5         II.    The “First-Filed” Rule

 6         The district court dismissed Montauk’s complaint without

 7   prejudice under the “first-filed” rule, which provides that “where

 8   there are two competing lawsuits, the first suit should have priority,

 9   absent the showing of balance of convenience or special

10   circumstances giving priority to the second.” AEP Energy Servs. Gas

11   Holding Co. v. Bank of Am., N.A., 

, 722 (2d Cir. 2010)

12   (internal   quotation   marks   omitted).     The    rule   “embodies

13   considerations of judicial administration and conservation of

14   resources, and recognizes that a party who first brings an issue into a

15   court of competent jurisdiction should be free from the vexation of

16   concurrent litigation over the same subject matter.” 

  quotation marks and citation omitted).

18         The district judge, over Montauk’s objection, concluded that

19   the instant action should give way to the Georgia federal action under

20   the “first-filed” rule. On August 14, 2017, however, the district court

21   judge presiding over the Georgia federal action transferred that case

22   to the Eastern District of New York where it was assigned to the

23   district judge in this case. No. 17-cv-4747, Dkt. Nos. 103–04 (E.D.N.Y.
     20                                                               No. 16-3912

 1   Aug. 14 & 16, 2017).        Consequently, none of the considerations

 2   motivating the district court’s application of the “first-filed” rule

 3   remain. The “first-filed” rule has no import where, as here, the two

 4   cases at issue reside on the docket of the same district judge. The able

 5   district judge is perfectly capable of consolidating them as necessary.

 6   We therefore vacate the district court’s dismissal of this action under

 7   the “first-filed” rule, as well as its dismissal of Montauk’s motion for

 8   a preliminary injunction.

 9         III.   Associates’ Rule 41(d) Motion

10         The district court concluded that Montauk must pay Associates

11   the costs, including attorneys’ fees, it incurred in the Georgia state

12   action pursuant to Rule 41(d), which provides that:

13                If a plaintiff who previously dismissed an
14                action in any court files an action based on
15                or including the same claim against the
16                same defendant, the court . . . may order the
17                plaintiff to pay all or part of the costs of that
18                previous action.

19   Fed. R. Civ. P. 41(d). The district court concluded that Rule 41(d) was

20   implicated due to the similarities in the allegations and relief sought

21   as between the instant action and the Georgia state action, for which

22   Montauk did not “demonstrat[e] that there was a good reason . . . to

23   dismiss.” SA 28–29. We review the question of whether specific types

24   of costs are available under a given statute de novo and the decision
     21                                                            No. 16-3912

 1   whether to grant costs for abuse of discretion. See Gortat v. Capala

 2   Bros., 

, 295 (2d Cir. 2015) (per curiam).

 3         Montauk asserts that there are two errors in the district court’s

 4   analysis. First, it argues that the district court abused its discretion in

 5   concluding that the instant action is “based on or includ[es] the same

 6   claim” as the Georgia state action. Second, it argues that even if

 7   Associates is entitled to costs under Rule 41(d), the district court erred

 8   in concluding that attorneys’ fees may be awarded as part of such

 9   costs. Neither argument is persuasive.

10                a. The District Court Did Not Abuse its Discretion in
11                   Concluding that the Instant Action is “[B]ased on . . .
12                   the [S]ame [C]laim[s]” as the Georgia State Action

13         It is quite clear to us that the instant action is “based on . . . the

14   same claim[s]” as the Georgia state action. Montauk’s claims in both

15   actions depend on the same core showing about the same trademarks:

16   that Associates has no legal ownership of or right to use The Sloppy

17   Tuna marks. If Associates owns the marks or otherwise has rights to

18   their use, Associates likely neither breached the License Agreement

19   (the subject of the Georgia state action) nor violated the Lanham Act

20   (the subject of the instant action). On the other hand, if Montauk

21   owns the marks or if Associates had no right to their use, Associates

22   may have breached the License Agreement or violated the Lanham

23   Act. The different assertions in these actions are certainly “based on”

24   the same underlying claims of ownership and use rights.
     22                                                            No. 16-3912

 1            Montauk’s arguments to the contrary are unpersuasive.

 2   Montauk points to the fact that the Georgia state action was contract-

 3   based and the instant action is brought under the Lanham Act. That

 4   two actions involve different theories of recovery, however, is not

 5   dispositive for Rule 41(d), as its plain language—“based on . . . the

 6   same claim”—makes clear. This is most especially the case here,

 7   where Montauk could have asserted a Lanham Act violation in the

 8   Georgia state action by simply amending its complaint. See, e.g., Corps

 9   Grp. v. Afterburner, Inc., 

, 386 n.3 (Ga. Ct. App. 2015).

10   Rather, Montauk chose instead to voluntarily dismiss the Georgia

11   state action and file its Lanham Act claims in federal court in another

12   state. Moreover, it did so immediately after the Georgia state court

13   stated its belief that the action was meritless and that its filing likely

14   contravened an order of another court, which was itself addressing

15   substantially related claims. This is the precise type of litigation tactic

16   that Rule 41(d) is meant to deter. See Andrews v. America’s Living Ctrs.,

17   LLC, 

, 309 (4th Cir. 2016) (“[T]he purpose of Rule 41(d) is

18   to serve as a deterrent to forum shopping and vexatious litigation.”

19   (internal quotation marks omitted)). 5


          We are not alone in our view that Montauk’s actions in relation to the
          5

     Georgia state action were part of a pattern of vexatious litigation. While
     this appeal was pending, the justice presiding over the New York state
     action held Montauk’s counsel in contempt in part for his filing of the
     Georgia state action. Meyer v. 148 S. Emerson Assocs. LLC, No. 068379/2014,
     Dkt. No. 1355 (N.Y. Sup. Ct. May 9, 2017).
     23                                                          No. 16-3912

 1         Montauk’s other contention that the actions are distinct for

 2   purposes of Rule 41(d) is that the instant action seeks relief only for

 3   infringements that occurred after the filing of the Georgia state action.

 4   Specifically, Montauk points out that because it filed the Georgia state

 5   action on March 24, 2016, the same day that it unilaterally terminated

 6   the License Agreement, “none of the alleged trademark infringement,

 7   dilution, or cybersquatting had taken place at the time the [Georgia

 8   state action] was filed.” Br. of Appellant at 41.       This argument,

 9   although perhaps clever, fares no better.

10         The record makes clear that Associates has utilized the at-issue

11   marks at the restaurant and elsewhere since opening without

12   interruption and with Montauk’s knowledge.               Consequently,

13   Montauk knew when it filed its Georgia state action that, under its

14   theory, Associates would be in violation of the Lanham Act from

15   March 25, 2016 onward, yet it neither sought Lanham Act relief in the

16   Georgia state action nor sought to amend its complaint prior to its

17   voluntary dismissal. In sum, that certain alleged acts occurred after

18   the filing of the Georgia state action does not alter the underlying

19   claim upon which both actions are based: that Associates did not own

20   and had no right to use The Sloppy Tuna trademarks.

21         Finally, relying on Phunware, Inc. v. Excelmind Group Ltd., 

  Supp. 3d 613 (D. Del. 2015), Montauk argues that the instant action is

23   not sufficiently related to the Georgia state action for purposes of Rule
     24                                                           No. 16-3912

 1   41(d) because Montauk seeks distinct relief in each action.          The

 2   argument is meritless. For one, in Phunware, the plaintiff had a good-

 3   faith concern that the relief sought in the second-filed action, money

 4   damages, would have been unavailable in the first-filed forum, a

 5   court of equity, 

& n.9, and Montauk makes no showing

 6   that there was a form of relief available in the Eastern District of New

 7   York that was unavailable in the Georgia state court.               More

 8   fundamentally, however, Montauk did not seek different relief in the

 9   two relevant actions; in both, Montauk sought injunctive relief and

10   damages.

11         The district court did not abuse its discretion in granting

12   Associates’ Rule 41(d) motion.

13                b. The District Court Did Not Err in Awarding
14                   Associates Attorneys’ Fees as Part of Costs

15         As discussed, Rule 41(d) allows a district court to order

16   plaintiffs “to pay all or part of the costs of that previous action.” Fed.

. P. 41(d). Montauk challenges the district court’s conclusion

18   that “costs” in Rule 41(d) may include attorneys’ fees.

19         We have not addressed whether attorneys’ fees are available as

20   part of “costs” under Rule 41(d). The issue has split our sister circuit

21   courts. The Sixth Circuit has concluded in light of Rule 41(d)’s silence

22   as to attorneys’ fees that such fees are never available under the rule.

23   See Rogers v. Wal-Mart Stores, 

, 874 (6th Cir. 2000). On the
     25                                                            No. 16-3912

 1   other hand, the Eighth and Tenth Circuits have concluded without

 2   much discussion that attorneys’ fees may be awarded under Rule

 3   41(d). See Evans v. Safeway Stores, Inc., 

, 122 (8th Cir. 1980)

 4   (per curiam); Meredith v. Stovall, 

(10th Cir. 2000)

 5   (unpublished). The Fourth, Fifth, and Seventh Circuits have taken a

 6   hybrid approach and concluded that attorneys’ fees may not

 7   generally be awarded as costs under the rule, but with an exception

 8   for when the statute serving as the basis for the original suit itself

 9   allows for attorneys’ fees (such as 42 U.S.C. § 1983). See Andrews, 

–12 (adopting rule from Esposito v. Piatrowski, 

,

11   501 (7th Cir. 2000)); Portillo v. Cunningham, 

, 738–39 (5th

12   Cir. 2017). For the reasons that follow, we agree with the outcomes

13   arrived at by the Eighth and Tenth Circuits: district courts may award

14   attorneys’ fees as part of costs under Rule 41(d).

15         There is no uniformity across federal authorities as to whether

16   the term “costs” includes attorneys’ fees. For example, the term

17   “costs” in Rule 39 of the Federal Rules of Appellate Procedure, as well

18   as an earlier version of 28 U.S.C. § 1927, have both been determined

19   not to incorporate attorneys’ fees. See Hines v. City of Albany, 

  215, 220–21 (2d Cir. 2017); Roadway Express, Inc. v. Piper, 

,

21   759 (1980). But, the term “costs” in Rule 54(d) of the Federal Rules of

22   Civil Procedure is written such that it includes attorneys’ fees. See

23   

n.2. For other rules, such as Rule 68 of the
     26                                                           No. 16-3912

 1   Federal Rules of Civil Procedure and Rule 7 of the Federal Rules of

 2   Appellate Procedure, “costs” includes attorneys’ fees in certain

 3   instances, but not in others, specifically, such fees can be awarded

 4   where the cause of action under which the suit at issue is brought so

 5   allows, but not otherwise. See Marek v. Chesny, 

, 9 (1985);

 6   Adsani v. Miller, 

, 79 (2d Cir. 1998). See generally Marek, 

–51 (Brennan, J. dissenting) (listing over 100 statutes with

 8   varying usages of the term “attorney’s fees” relative to “costs”).

 9         Two relevant lessons emerge from the case law on how to

10   assess the availability of attorneys’ fees pursuant to a provision, such

11   as Rule 41(d), which allows for “costs” but makes no express reference

12   to attorneys’ fees. First, “costs” do not include attorneys’ fees where

13   the rule incorporates a statutorily enumerated list of “costs” that itself

14   omits attorneys’ fees. See 

–21. In Hines, for

15   example, we concluded that the term “costs” in Rule 39 of the

16   appellate procedure rules does not include attorneys’ fees because the

17   advisory committee notes to the rule refer to the definition of “costs”

18   in 28 U.S.C. § 1920, which does not include attorneys’ fees in its

19   enumerated list of costs. 

Court took a similar tack

20   in Roadway Express, where it held that the definition of “costs” in 28

21   U.S.C. § 1920 should be incorporated into the then-operative version

22   of 28 U.S.C. § 1927’s cost-shifting provision because the two

23   provisions, given their shared history, “should be read together as
     27                                                            No. 16-3912

 1   part of [an] integrated 

. Here, Rule 41(d)

 2   incorporates no other definition of costs, either expressly or by

 3   reference, and therefore attorneys’ fees are not precluded by this

 4   principle.

 5          Second, in this situation—where the term “costs” is entirely

 6   undefined, either expressly or by reference—we look to see “if the

 7   statute otherwise evinces an intent to provide for [attorneys’] fees.”

 8   Key Tronic Corp. v. United States, 

, 815 (1994).

 9   Consequently, we disagree with the Sixth Circuit’s conclusion that

10   attorneys’ fees are unavailable under Rule 41(d) “simpl[y] [because]

11   the rule does not explicitly provide for them.” 

.

12   In Marek, for example, “given the importance of ‘costs’ to the Rule,”

13   the Court “infer[red]” “that the term ‘costs’ in Rule 68 was intended

14   to refer to all costs properly awardable under the relevant substantive

15   statute or other authority” on which the claimant brought suit. 

; see infra note 6.

17          Here, as the great weight of district court authority has

18   concluded in this circuit, see Pelczar v. Pelczar, 

, at *2

19   (E.D.N.Y. July 20, 2017) (collecting cases), the entire Rule 41(d) scheme

20   would be substantially undermined were the awarding of attorneys’

21   fees to be precluded. We thus have no difficulty in concluding that

22   Rule 41(d) evinces an unmistakable intent for a district court to be

23   free, in its discretion, to award attorneys’ fees as part of costs.
    28                                                               No. 16-3912

1            Rule 41(d)’s purpose is clear and undisputed: “to serve as a

2   deterrent to forum shopping and vexatious litigation.” Andrews, 

(quoting Simeone v. First Bank Nat’l Ass’n, 

, 108

4   (8th Cir. 1992) and citing 

); Adams v. N.Y. State

5   Educ. Dep’t, 

, 343 (S.D.N.Y. 2009); 8 Moore’s Fed.

6   Prac. § 41.70[1] (3d ed. 2016). Rule 41(d) would be greatly limited as

7   an effective deterrent if district courts were precluded from assessing

8   attorneys’ fees as part of costs. 6 The need for attorneys’ fees may be


         6
           We choose not to join the Fourth, Fifth, and Seventh Circuits in
    adopting a rule based on Marek in which attorneys’ fees are available under
    Rule 41(d) only if the underlying cause of action itself allows for attorneys’
    fees. We think such a rule makes little sense as to Rule 41(d), where there
    is no connection between the underlying cause of action and the behavior
    the rule seeks to influence. Pegging the scope of the incentive to the
    underlying cause of action might make sense in the context of Rule 68,
    which is meant to encourage settlement, see 

, because a
    parties’ incentives to settle are tied to the amount of available recovery. See
    

prompts both parties to a suit to evaluate the risks and costs
    of litigation, and to balance them against the likelihood of success upon trial
    on the merits.”); see also 

–75. As discussed, however,
    the purpose of Rule 41(d) is to deter litigants from forum shopping or filing
    vexatious suits, acts largely untethered to the merits. The hybrid rule
    therefore places an arbitrary condition on the Rule 41(d) deterrent. For
    example, attorneys’ fees are allowed to prevailing parties under federal
    anti-discrimination statutes but not under certain New York anti-
    discrimination statutes, which are “essentially the same” as their federal
    counterparts. See Lightfoot v. Union Carbide Corp., 

, 913–14 (2d
    Cir. 1997) (disallowing attorneys’ fees to victorious plaintiff where her
    claim under the federal Age Discrimination in Employment Act, which
    allows for the recovery of attorneys’ fees, was dismissed and plaintiff only
    recovered on her claim under the New York State Human Rights Law,
    which “does not provide for an award of [attorneys’] fees”). Under the
     29                                                        No. 16-3912

 1   especially acute in the Rule 41(d) context. The targets of deterrence

 2   under the rule will often be litigants, such as Montauk, that file

 3   complaints and quickly dismiss them, perhaps in reaction to initial

 4   unfavorable rulings, or hoping for a subsequent case assignment to a

 5   judge they view as more favorable. These are actions with minor costs

 6   to the adversary other than attorneys’ fees, which may be substantial.

 7   Indeed, such actions will rarely incur most of the expenses routinely

 8   recoverable as costs. See 28 U.S.C. § 1920. The instant case is an apt

 9   example.    Apart from attorneys’ fees, the only costs paid by

10   Associates in defense of the Georgia state action were a $15.00 charge

11   for delivery of documents and a $60.48 charge for a transcript fee from

12   a court reporter. See No. 16-cv-2741, Dkt. No. 36-5 at 10 (E.D.N.Y.

13   Nov. 17, 2016). We are wholly unconvinced such small payments

14   would effectively deter litigants such as Montauk from forum

15   shopping or otherwise embarking on a course of vexatious litigation.

16   We affirm the district court’s ruling on Associates’ Rule 41(d) motion.


17                              CONCLUSION

18         We find the parties’ remaining contentions to be without merit,

19   and, for the reasons stated above, we AFFIRM in part and VACATE




     hybrid approach, Rule 41(d) would therefore place a larger deterrent on
     vexatious federal discrimination suits than on vexatious New York
     discrimination suits. We see no basis for this distinction.
    30                                             No. 16-3912

1   in part the judgment of the district court and REMAND for

2   proceedings consistent with this opinion.