Indecision Has A Price: Withdraw Lawsuit, Pay Hefty Fee Award

Nature or nurture? Some lawsuits become unwise after years of development. Some are just born that way.

It's hard to say which was which in Miller v 22 Ericsson Owner, LLC, 84 Misc3d 1258(A) [Sup Ct, NY County Oct. 9, 2025]), a special proceeding to dissolve nine New York real estate owning limited liability companies under Section 702 of the Limited Liability Company Law.

But after three years of litigation and nine rounds of motion practice, the petitioning manager-member, Larry Miller ("Miller"), had a change of heart, deciding he would be better off withdrawing the lawsuit, litigating another case in another form before another judge. Incensed, the respondents opposed withdrawal.

What resulted was a Decision and Order from New York County Commercial Division Justice Robert R. Reed illustrating the perils litigants face when changing their mind about whether to pursue a litigation once the case has begun.

A court "cannot compel a party to litigate," wrote Justice Reed. "However, there can be no question that being forced to defend an unnecessary action for three years comes with associated costs." Ominous words for one hoping to withdraw a lawsuit. What "associated costs"? Let's take a look.

In January 2022, Miller, co-manager of the LLCs with David Berley ("Berley"), started his lawsuit with a petition accusing Berley of "mismanagement, breaches of contract, and breaches of fiduciary duty," invoking the nuclear option: judicial dissolution on grounds that it was "no longer reasonably practicable to carry on the businesses of the LLCs in conformity with their respective operating agreements."

In an amended petition filed another two years and eight months into the litigation, Miller named an army of opponents – nine entities and one individual, Berley, as direct respondents; and, by my count, 37 entities, individuals, or trusts as nominal respondents because of their status as holders of interests in the entities Miller sought to dissolve. Of course, lots of litigants usually equals lots of legal fees.

In December 2024, about three months after he filed his amended dissolution petition in New York County Supreme Court, Miller, among multiple plaintiffs, represented by the same law firm, filed another lawsuit in Queens County Supreme Court suing Berley derivatively on behalf of the same LLCs he sought to dissolve in Manhattan.

About two months later, Miller decided he'd had about enough litigation in New York County, moving to withdraw his lawsuit. In an affirmation with just a single paragraph "explanation," Miller wrote: "I, together with two other nominal plaintiffs, have filed a primarily derivative action in Queens County against David Berley and another defendant. Those derivative claims are submitted on behalf of the subject limited liability companies – not myself – and at this time, I believe those claims are the best way to obtain relief."

Most of the time, when a petitioner / plaintiff chooses to cease a lawsuit, the respondent / defendant agrees without a fight, content to put the case to bed without a loss on the merits. The applicable procedural rule then is CPLR 3217 (a) (2), which provides, "Any party asserting a claim may discontinue it without an order . . . by filing with the clerk of the court . . . a stipulation in writing signed by the attorneys of record for all parties . . . ." Simple enough.

But an irked respondent / defendant may oppose withdrawal of a case for a variety of reasons. Perhaps the petitioner / plaintiff is trying to avoid a loss on the merits. Or trying to avoid a disfavorable judge. Or just trying to be vindictive. And then, of course, there is the cost factor. No defendant wants to defend a case at great legal expense, only for the plaintiff to evade a determination on the merits, with nothing for the defendant to show for it but a pile of legal bills.

When there is opposition to withdrawal of a lawsuit, the applicable procedural rule is CPLR 3217 (b), which provides, "Except as provided in subdivision (a), an action shall not be discontinued by a party asserting a claim except upon order of the court and upon terms and conditions, as the court deems proper." CPLR 3217 (c), in turn, provides, "Unless otherwise stated in the notice, stipulation or order of discontinuance, the discontinuance is without prejudice . . . ."

Under these provisions, the court has a couple of options. It can order a with-prejudice dismissal, a subject about which Peter Mahler wrote many years ago. Or it can order fee shifting.

Advocating for denial of the motion, or, alternatively, dismissal with prejudice and fee shifting, the Miller respondents argued:

• "That Miller is unhappy with this Court's rulings is no basis for him to commence a new suit in the Supreme Court, Queens County";
• "Miller is simply shopping for a new Judge";
• Miller "is deliberately attempting to circumvent this Court's order by seeking an injunction elsewhere," in Queens County, after Justice Reed denied him an injunction in New York County; and
• Under "forum-selection clauses found in nearly all the Operating Agreements for the LLCs, the plaintiffs in the Queens action are contractually bound to confine any litigation in New York County, where each of these entities operate and where they own (or have owned) Manhattan real estate."

In short, respondents argued that withdrawal was purely tactical.

Miller's half-hearted explanation in his affirmation for withdrawal surely did not help his cause. Respondents asked the Court to "reject Miller's blatant attempt at forum shopping" by either denying his motion for discontinuance outright, "or if the Court is so moved to grant Petitioner's motion, that the Court grant the motion with prejudice and order Petitioner to pay Respondents' legal fees inclusive of legal fees, costs, and disbursements related to the case."

I've been on both sides of the fee-shifting argument under CPLR 3217 (b). Objectively, orders requiring payment of legal fees as a condition to discontinuance under CPLR 3217 (b) are the exception, not the rule, fee shifting denied far more often than granted.

Instead of fee shifting, courts will more often order a with-prejudice dismissal. But Justice Reed was disinclined to grant dismissal with prejudice, hinting at the potential preclusive effect on the separate lawsuit in Queens County, writing, "Any question regarding the viability of the Queens action should be left to the Honorable Justice deciding the matter before it in that venue."

So the Court turned to fee shifting, for which the Appellate Division provides some basic rules of law.

"The later the stage of litigation, the greater should be the court's scrutiny of the plaintiff's motive" for discontinuing a lawsuit (Shapiro v Town of Ramapo, 185 AD3d 747 [2d Dept 2020]).

Where a plaintiff moves under CPLR 3217 (b), "it is within a court's discretion to condition an application for a voluntary discontinuance made pursuant to CPLR 3217 (b) upon the movant paying the adverse party's legal fees, costs, and disbursements" (New York Downtown Hosp. v Terry, 80 AD3d 493 [1st Dept 2011]).

In Carter v Howland Hook Hous. Co., Inc. (19 AD3d 146 [1st Dept 2005]), the Court affirmed an order under CPLR 3217 (b) granting discontinuance "upon condition that plaintiffs pay defendant's costs and disbursements incurred in this action up to the date of discontinuance plus defendant's attorneys' fees incurred on the motion to discontinue," ruling that discontinuance "was properly granted upon conditions that eliminated any prejudice attributable to the discontinuance."

Although considered a discretionary decision, where "prejudice" is shown, denial of fee shifting may be a reversible abuse of discretion (see e.g. Baralan Intern., S.p.A. v Vetrerie Bormioli Ing. Luigi S.p.A., 215 AD2d 338 [1st Dept 1995] [grant of discontinuance without fee shifting under CPLR 3217 [b] "unanimously reversed," and, upon reversal, "conditioning said discontinuance upon the payment by plaintiff of Avant's costs, disbursements and reasonable attorneys' fees from the inception of this action to date" because "the record amply supports Avant's contention that plaintiff . . . prejudiced Avant by its having to defend this action at considerable expense over so many years," and thus, "it was an abuse of the court's discretion in failing to condition the discontinuance upon payment of Avant's costs, disbursements and reasonable attorneys' fees."

Relying upon Carter, Justice Reed ruled:

(citations omitted).

"Accordingly," ruled the Court, "this action shall be deemed discontinued," and either "within ten (10) days of entry of this order, the parties shall submit a stipulation agreeing to a stated calculation of respondents' costs, disbursements and expenses to the court for so-ordering," or "within fifteen (15) days of the entry of this order, respondents shall submit to the court a proposed order granting costs and expenses with an accompanying bill of costs and attendant affidavit(s)."

I can think of no litigation task more joyful for the victor, or more demoralizing for the loser, than a large attorneys' fee application. Facing the likelihood of an imminent six-figure fee award, Miller immediately moved for leave to reargue, the same day filing notice of appeal. My crystal ball predicts a denied reargument motion, or, perhaps, a granted motion with more rationale, but, upon reargument, adhering to the original determination.

The lesson from Miller is that once you decide to launch a lawsuit, it may be hard to take it back without consequences, either on the merits or financially, especially if the litigation has been underway for some time. So if you bring a lawsuit, better be committed to see it through to the end.

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