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Constructure Management, Inc. v. Majmudar

United States District Court, D. Maryland

March 28, 2018



          Richard D. Bennett, United States District Judge

         Plaintiff Constructure Management, Inc. ("CMI") brings this lawsuit against defendants Mukesh Majmudar ("Majmudar"), Hopkins Hospitality Investors, LLC, Hopkins Investors, LLC, and Star Development Group, LLC ("Star") seeking damages for alleged fraud relating to a construction project. Now pending is plaintiff CMLs motion for voluntary dismissal without prejudice (ECF No. 60). For the reasons set forth below, CMLs motion is granted.


         This dispute concerns alleged fraud by Majmudar, the Hopkins defendants, and Star in connection with the funding of a construction project. CMI entered into a contract ("Contract") with Star on April 8, 2013 to serve as the general contractor for the construction of a hotel in Laurel, Maryland (the "Project").[1] (ECF No. 1, ¶ 9). Hopkins Hospitality Investors, LLC and Hopkins Investors, LLC (collectively "Hopkins") owned the Project, and Star is an affiliate of Hopkins. Id. at ¶¶ 12, 16. Majmudar was the managing member of Flopkins and Star during the relevant times, and he served as the primary point of contact in communicating with CMI about the Project on behalf of Star and Hopkins. Id. at ¶ 23.

         Hopkins and Star obtained funding for the Project through a loan in the amount of $11, 556, 000 to cover construction costs and contingency for change orders (the "Loan"). Id. at ¶ 24. To obtain payment for its work, CMI submitted payment applications to Star each month. Id. at ¶ 29. Upon approval of the payment applications, Star and/or Hopkins would request the lender release funding from the Loan to pay CMI and its subcontractors. Id. at ¶ 32. After the lender released the funds, Hopkins issued checks to CMI and its subcontractors. Id. at ¶ 33. CMI submitted 26 payment applications in total for payment for its work. Id. at ¶ 34.

         In connection with payment applications Nos. 22 and 23, defendants required CMI include certain additional costs, totaling $62, 838.86, incurred by Hopkins and Star so that Hopkins and Star could receive reimbursement for these costs. Id. at ¶¶ 35, 42, 53. When defendants asked CMI to include the additional costs, defendants did not inform CMI they had made additional withdrawals from the Loan. Id. at ¶¶ 39, 47. CMI believed Hopkins and Star had only withdrawn $62, 838.86 in total from the Loan and therefore expected the balance of the Loan would equal the contract balance at the end of the Project. Id. at ¶ 51.

         In October 2015, however, CMI learned from Majmudar that Hopkins and Star had withdrawn approximately $550, 000 from the Loan to pay other expenses, including interest on the financing obtained for the Project. Id. at ¶ 54. These additional withdrawals left the balance of the Loan significantly lower than the remaining contract balance. Id. Based on these facts, CMI alleges Majmudar, Star, and Hopkins committed fraud, claiming Majmudar knew, but failed to disclose to CMI, that at the time of the preparation of payment applications Nos. 22 and 23, Hopkins and Star had already withdrawn $550, 000 from the Loan. Id. at ¶ 57. According to CMI, Majmudar intentionally concealed the additional withdrawals from CMI, misleading CMI into believing sufficient funds would remain to fulfill the Contract balance. Id. at ¶¶ 60-61.

         CMI filed a complaint against defendants in the District of Maryland on June 22, 2016 alleging two counts: (1) fraudulent misrepresentation and (2) fraudulent concealment. (ECF No. 1). A few months prior to that filing, Star and Hopkins filed a complaint, which was removed to the District of Maryland, against CMI and its surety, alleging breach of contract arising from the same Project and Contract as this current case. (Civil No. 16-1246, ECF Nos. I, 2). The breach of contract case was stayed pending the parties' voluntary participation in arbitration. (Civil No. 16-1246, ECF No. 12).[2] On August 1, 2016, Majmudar, Hopkins, and Star moved to consolidate the current fraud case, Civil No. 16-2309, with the breach of contract case, Civil No. 16-1246. (ECF No. 16). This court denied that motion in September of 2016, finding there was "at best a limited overlap of the issues presented" in the two cases. (ECF No. 22).

         In October and November of 2016, defendants filed two motions, one by Star and one by Hopkins and Majmudar, to compel arbitration and stay this case, seeking to have the fraud claims joined in the parties' breach of contract arbitration. (ECF Nos. 25, 32). This court denied both motions, finding again "a limited overlap between the issues presented in the arbitration proceedings and the issues presented in this case." (ECF Nos. 36, 41). In February 2017, defendants appealed that ruling to the Fourth Circuit Court of Appeals, but voluntarily dismissed the appeal in July of 2017. (ECF Nos. 42, 46). Following the dismissal, the parties continued with discovery. On December 5, 2017, CMI filed a motion for voluntary dismissal without prejudice, which is currently pending. (ECF No. 60).


         Under Federal Rule of Civil of Procedure 41(a)(2), a plaintiff may voluntarily dismiss an action without prejudice at any time with the court's approval. This rule's purpose is to freely "allow voluntary dismissals unless the parties will be unfairly prejudiced." Davis v. USX Corp., 819 F.2d 1270, 1273 (4th Cir. 1987). The district court's primary focus in considering a Rule 41(a)(2) motion must be "protecting the interests of the defendant." Id. A plaintiffs motion for voluntary dismissal should be granted unless there is "plain legal prejudice to the defendant." Elleti Bros. v. U.S. Fid. & Guar. Co., 275 F.3d 384, 388 (4th Cir. 2001). The prospect of a second lawsuit does not constitute prejudice to the defendant. Davis, 819 F.2d at 1274.

         In the presence of plain legal prejudice to the defendant, a court may dismiss an action with prejudice, but doing so is considered "the most extreme sanction" and must be reserved for "the most egregious cases." See United States v. Shaffer Equip. Co., 11 F.3d 450, 462 (4th Cir. 1993) ("Mindful of the strong policy that cases be decided on the merits, and that dismissal without deciding the merits is the most extreme sanction, a court must...exercise its inherent power to dismiss with restraint....); Sadler v. Dimensions Health Corp., 178 F.R.D. 56, 59 (D. Md. 1998) (citing Dove v. Codesco, 569 F.2d 807, 810 (4th Cir. 1978)) ("Dismissal with prejudice is ordinarily reserved for the most egregious cases.").

         In assessing a Rule 41(a)(2) motion, district courts apply a non-exclusive, four-factor test. These factors include: "(1) the opposing party's effort and expense in preparing for trial; (2) excessive delay or lack of diligence on the part of the movant; (3) insufficient explanation of the need for a dismissal; and (4) the present stage of litigation, i.e., whether a motion for summary judgment is pending." Wilson ...

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