Appellants James E. Elbaor, MD PA, Individually and as Trustee for the James E. Elbaor MD PA Retirement Trust dated April 24, 1997 and Edward E. Elbaor, Individually and as Trustee and General Partner of the Elbaor Family Limited Partnership # 2 dated December 21, 1988 and Elbaor Children's Trust Partnership dated March 1, 1993 (collectively the "Elbaors") filed a motion in the district court, seeking a voluntary dismissal, without prejudice, pursuant to Fed.R.Civ.P. 41(a)(2) ("Rule 41(a)(2)"). The district court granted the Elbaors' motion for voluntary dismissal pursuant to Rule 41(a)(2). However, the district court dismissed with prejudice, concluding that to do otherwise would be unjust. The Elbaors appeal, contending that the district court's order constitutes an abuse of discretion. Because the order dismissing all of the Elbaors' claims with prejudice was overbroad, we vacate the order of the district court and remand for proceedings consistent with this opinion.

On August 4, 2000 the Elbaors filed suit in the 348th Judicial District Court of Tarrant County, Texas. In summary, the Elbaors alleged that they hired appellee William Branston ("Branston") to invest money held in trust and that Branston, in violation of his duty of care, used large portions of that money to invest in NeoPath Inc. (a predecessor corporation of appellee Tripath Imaging, Inc.). The Elbaors further alleged that when they contacted Alan Nelson ("Nelson"), CEO of NeoPath, seeking assurances that the investment was sound, he made misrepresentations in an effort to induce them to maintain their investment. Based upon these allegations the Elbaors asserted claims for negligence, fraud and negligent misrepresentation and violations of the Texas Deceptive Trade Practices-Consumer Protection Act [Bus. & Com.Code § 17.41 et seq.] (the "DTPA") and Bus. & Com.Code § 27.01 against Nelson and appellees Branston, Parallax Group LP, Tandem Management Inc. and Tripath Imaging, Inc. (collectively "Tripath").

On October 27, 2000 Tripath and Nelson joined in the removal of the action to the District Court for the Northern District of Texas, Forth Worth Division. Eleven days later Nelson, a Washington resident, filed a motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) and Tripath filed a motion to dismiss for failure to state a claim and failure to plead fraud with particularity pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b). On January 3, 2001, the district court granted Nelson's motion to dismiss and ostensibly denied Tripath's motion, but nevertheless ordered the Elbaors to file an amended complaint by January 12, 2001.

On January 12, 2001, instead of filing an amended complaint, the Elbaors filed a motion to dismiss their action pursuant to Rule 41(a)(2), seeking dismissal without prejudice. In that motion, the Elbaors failed to explain the reason for seeking the dismissal or identify the jurisdiction where they intended to re-file. On January 31, 2001 Tripath filed an opposition, contending that an unconditional dismissal would prejudice it because, were the Elbaors to file the action in another jurisdiction, Tripath might lose certain defenses to the Elbaors' DTPA, negligence and negligent misrepresentation claims, including but not limited to statute of limitations defenses. Tripath did not contend, however, that it could lose defenses to the fraud or Bus. & Com.Code § 27.01 claims. In the opposition, Tripath requested that the district court deny the motion for voluntarily dismissal or condition dismissal on the payment of Tripath's attorney's fees. In addition, Tripath requested that the district court dismiss the action with prejudice because of the Elbaors' failure to comply with its order to file an amended complaint.

On February 5, 2000, before the Elbaors filed a reply (and before the period for the filing of a timely reply had elapsed), the district court entered the instant order, which provides, in pertinent part, as follows:

Came on for consideration the motion of plaintiffs ... for voluntary dismissal ... The court having considered the motion... finds that the motion should be granted but that dismissal should be with prejudice. By order signed January 3, 2001, the court ordered plaintiff to file, by 4:30 p.m. on January 12, 2001, [an] amended complaint specifically setting forth their claims against each defendant in this action. Plaintiffs failed to do so, and instead filed their motion for voluntary dismissal. Dismissing plaintiffs' claims without prejudice would be unjust. Therefore, [t]he court ORDERS that plaintiffs' motion for voluntary dismissal be, and is hereby, granted in part and plaintiff's claims against defendants... be, and are hereby, dismissed with prejudice.1

On the same day the district court entered final judgment for Tripath and closed the case.

The parties ask us to decide today whether the circumstances of this case support the district court's "conversion" of the Elbaors' Rule 41(a)(2)2 motion to voluntarily dismiss without prejudice, granting it with prejudice.

We have explained that, as a general rule, motions for voluntary dismissal should be freely granted unless the non-moving party will suffer some plain legal prejudice other than the mere prospect of a second lawsuit. See Manshack v. Southwestern Elec. Power Co., 915 F.2d 172, 174 (5th Cir.1990). The primary purpose of Rule 41(a)(2) is to "prevent voluntary dismissals which unfairly affect the other side, and to permit the imposition of curative conditions." Id. (citing 9 C. Wright & A. Miller, Federal Practice and Procedure § 2364, at 165 (1971)).

Therefore, faced with a Rule 41(a)(2) motion the district court should first ask whether an unconditional dismissal will cause the non-movant to suffer plain legal prejudice.3 If not, it should generally, absent some evidence of abuse by the movant, grant the motion. If the district court concludes that granting the motion unconditionally will cause plain legal prejudice, it has two options, it can deny the motion outright or it can craft conditions that will cure the prejudice.

A. Existence of Prejudice Necessitating Denial of the Motion or Conditional Dismissal

As noted above, the first question necessarily resolved by the district court was whether an unconditional dismissal would cause Tripath to suffer plain legal prejudice.

The district court's determination on this point, i.e. whether to grant or deny an unconditional dismissal, is reviewed for abuse of discretion. See Davis v. Huskipower Outdoor Equip. Corp., 936 F.2d 193, 199 (5th Cir.1991). We conclude that the district court did not abuse that discretion. Although the district court's order does not explain how Tripath would suffer this prejudice, Tripath argued below in its opposition to the Elbaors' motion, and on appeal, that it would be prejudiced by an unconditional dismissal because such a dismissal would potentially strip it of a viable statute of limitations defense.4 We agree.

In Phillips v. Illinois Cent. Gulf R.R., 874 F.2d 984 (5th Cir.1989), the appellant contended that the district court erred in granting summary judgment in favor of the appellees on their statute of limitations defense instead of granting his pending Rule 41(a)(2) motion to dismiss. See id. at 985-86. We disagreed. As an initial matter, we indicated that Plaintiff sought the dismissal to re-file in a jurisdiction where the statute of limitations would not be a bar. See id. In light of this fact we concluded that the district court correctly denied the motion, reasoning that the absolute loss of a statute of limitations defense constitutes the type of clear legal prejudice that precludes the granting of an unconditional dismissal. See id. at 987.

At argument the Elbaors attempted to distinguish Phillips on two bases, arguing that there is nothing in the record that indicates that they intend to file in a jurisdiction with a longer statute of limitations and that, in fact, they sought the dismissal solely in order to file in a jurisdiction where they could maintain a single suit against Tripath and Nelson. Therefore, they contend that unlike Phillips, Tripath's assertion that they will be stripped of the statute of limitations defense is purely speculative. Furthermore, the Elbaors asserted that the statute of limitations defense would not succeed because they could utilize Texas' discovery rule to plead around the statute of limitations. See generally Jackson v. West Telemarketing Corp. Outbound, 245 F.3d 518, 524 (5th Cir.2001) ("The discovery rule, however, `defers accrual of certain causes of action until the plaintiff knew, or exercising reasonable diligence, should have known of the wrongful act causing injury.'") (citing Salinas v. Gary Pools, Inc., 31 S.W.3d 333, 335 (Tex.App.2000)).

In arguing that Phillips is distinguishable, however, the Elbaors fail to discuss our opinion in Ikospentakis v. Thalassic Steamship Agency, 915 F.2d 176 (5th Cir.1990). In Ikospentakis, the appellants challenged an order granting a dismissal without prejudice, contending that the dismissal stripped them of a forum non conveniens defense. See id. at 177. In holding that the district court erred in granting the motion, we made clear that whether the defense will ultimately be successful is not the appropriate inquiry. See id. at 179 (rejecting the appellees' attempt to distinguish Phillips on the ground that the decision whether to grant a forum non conveniens dismissal is discretionary). We reasoned:

But whether appellant can sustain this defense beyond the shadow of a doubt in federal court is not the point of the inquiry concerning legal prejudice, although that circumstance made the decision in Phillips relatively easy. The point of the inquiry, rather, is that appellants' invocation of forum non conveniens is far from frivolous, and that if appellants are relegated to litigating in the Louisiana state courts, they will not even have the opportunity to pursue a forum non conveniens dismissal.

Id. In light of Ikospentakis, the Elbaors' potential ability to plead around the statute of limitations is irrelevant.

The fact that we do not know where the Elbaors intend to file this action is slightly more troublesome. Because of this, we do not know, as we did in Ikospentakis and Phillips, that a defense will be lost. Hypothetically, the Elbaors may re-file in a jurisdiction with the same two-year statute of limitations.5 However, the reason for this hole in the record is the Elbaors' failure to disclose to the district judge why they sought the dismissal. Cf. Hamm v. Rhone-Poulenc Rorer Pharm., Inc., 187 F.3d 941, 950 (8th Cir.1999) ("In exercising [its] discretion [to grant or deny a Rule 41(a)(2) dismissal], a court should consider factors such as whether the party has presented a proper explanation for its desire to dismiss ..."); Phillips USA, Inc. v. Allflex USA, Inc., 77 F.3d 354, 358 (10th Cir.1996) (same); Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir.1990) (same). Although the Elbaors did explain their motivation at argument, they still did not identify the jurisdiction in which they intend to re-file. This information is uniquely in the Elbaors' possession. We decline to adopt a rule that allows a movant to garner a dismissal by simply refusing to disclose the jurisdiction where they intend to re-file.

In summary, because dismissal without prejudice would have caused Tripath plain legal prejudice, the district court had only two options: it could deny the motion or it could craft reasonable conditions that would eliminate the prejudice.

The district court attempted to take the latter path; in fact it imposed the harshest condition available to it — dismissal with prejudice. Review of an order setting conditions to a Rule 41(a)(2) dismissal is also reviewed for abuse of discretion. See American Cyanamid Co. v. McGhee, 317 F.2d 295, 298 (5th Cir.1963).

A threshold question is whether Rule 41(a)(2) ever allows a district court to "convert" a motion for Rule 41(a)(2) dismissal without prejudice, granting it with prejudice. Although the Fifth Circuit has never answered this question, every Circuit addressing it has answered in the affirmative, reasoning either that the district is authorized to do so as a condition by the "terms and conditions" language in the statute or that the authority is implicit in the "[u]nless otherwise specified" language of the statute. See Gravatt v. Columbia University, 845 F.2d 54, 55 (2d Cir.1988); Andes v. Versant Corp., 788 F.2d 1033, 1037 (4th Cir.1986); United States v. One Tract of Real Property, 95 F.3d 422, 425 (6th Cir.1996); Marlow v. Winston & Strawn, 19 F.3d 300, 304 (7th Cir.1994); Jaramillo v. Burkhart, 59 F.3d 78, 79 (8th Cir.1995). We agree with these Circuits that Rule 41(a)(2) clearly provides authority to the district court to grant the dismissal on the condition that it be with prejudice.

However, in this instance dismissing all of the Elbaors' claims with prejudice as a condition was an abuse of discretion. Although abuse of discretion review gives the district court a great deal of leeway in crafting conditions to dismissal, the district court must be careful to craft conditions that are not overbroad. See Le Compte v. Mr. Chip, Inc., 528 F.2d 601, 604-05 (5th Cir.1976) ("It seems, therefore, that in ruling on motions for voluntary dismissals, the district court should impose only those conditions which will alleviate the harm caused to the defendant."). As noted above, Tripath did not demonstrate that it would be prejudiced by the unconditional dismissal of the fraud or Bus. & Com.Code § 27.01 claims nor could it identify any prejudicial effects at argument. Therefore, while the district court had discretion to impose conditions on dismissal that prevented the Elbaors from re-filing the negligence, negligent misrepresentation and DTPA claims in a jurisdiction with a longer statute of limitations, no reason is apparent for a condition that bars future litigation of the other two claims. Accordingly, we must vacate.

On remand, the district court will be required to either deny the Elbaors' motion to dismiss or craft well-tailored conditions that will cure the prejudice Tripath will suffer as a result of an unconditional dismissal. If the district court chooses the latter path, we note that our case law requires that the district court allow the Elbaors the opportunity to withdraw their motion to dismiss rather than accept the conditions. See Mortgage Guar. Ins. Corp. v. The Richard Carlyon Co., 904 F.2d 298, 301 (5th Cir.1990) ("Ordinarily, the plaintiff has the option to refuse a Rule 41(a)(2) voluntary dismissal and to proceed with its case if the conditions imposed by the court are too onerous.").

For the reasons stated above, we VACATE the district court's order of dismissal and REMAND for proceedings consistent with this opinion.