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Stipulated Dismissal Pursuant to Fed. R. Civ. P. 41(a)(1) Divests the Court of Subject Matter Jurisdiction

09-1047
June 26, 2009

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Last Month at the Federal Circuit - July 2009

Judges: Michel, Lourie (author), Prost

[Appealed from: N.D. Ill., Judge Castillo]

In Garber v. Chicago Mercantile Exchange, Nos. 09-1047, -1384 (Fed. Cir. June 26, 2009), the Federal Circuit reversed the district court’s denial of Howard Garber’s Fed. R. Civ. P. 60(b)(4)motion, holding that the stipulation for dismissal without prejudice was filed pursuant to Fed. R. Civ. P. 41(a)(1) and therefore divested the district court of subject matter jurisdiction.

Garber filed a patent infringement complaint against the Chicago Mercantile Exchange and the Chicago Board of Trade (collectively “CME”), among others. Six months after filing suit, Garber’s counsel withdrew from the case. Thereafter, Garber entered into an agreement with CME to dismiss the suit without prejudice. Garber filed the agreement, which was signed by all remaining parties, in the district court. Attached to the stipulation was a proposed order for dismissal without prejudice.

The district court entered a minute order (“First Dismissal Order”) giving Garber just over one month “to move to reinstate this case or this lawsuit may be dismissed without prejudice.” Slip op. at 3. The district court then entered a second order (“Second Dismissal Order”), stating, “There being no motion by the plaintiff to reinstate this case, as directed by the Court’s [First Dismissal Order], the case is hereby dismissed with prejudice.” Id.

Over three years later, Garber filed a motion for relief from the Second Dismissal Order. Garber brought the motion pursuant to Fed. R. Civ. P. 60(a), which permits courts to correct clerical mistakes. In the alternative, Garber raised Fed. R. Civ. P. 60(b)(6), which allows relief for any other reason that justifies relief. The district court denied the motion. Garber then filed a motion for reconsideration seeking to vacate as void the district court’s First Dismissal Order because the district court lacked subject matter jurisdiction over the case. According to Garber, the joint stipulation entered into by the parties was filed under Fed. R. Civ. P. 41(a)(1) and thus was immediately self-executing. Therefore, the district court lacked subject matter jurisdiction when it issued the First Dismissal Order. CME opposed the motion, contending that Garber’s Rule 41(a)(1) argument was improperly raised in his motion for reconsideration and that argument, even if properly raised, was ineffectual because the stipulation was filed pursuant to Fed. R. Civ. P. 41(a)(2) and therefore was not self-executing. The district court denied Garber’s motion.

On appeal, the Federal Circuit noted that the dispute in this case centers on whether the stipulation for dismissal without prejudice was filed in the district court under Rule 41(a)(1) or under Rule 41(a)(2). The Court stated that it agreed with Garber that the joint stipulation was filed pursuant to Rule 41(a)(1) and divested the district court of jurisdiction. Thus, it held that the First and Second Dismissal Orders entered by the district court were void ab initio.

The Court noted that in this case, which concerns a document entitled “Stipulation for Dismissal Without Prejudice” signed by all parties, there can be no serious dispute that there was a dismissal signed by all parties who have appeared. The Federal Circuit rejected CME’s argument that the inclusion of a proposed order transformed the stipulation into a motion or request, which the district court was within its discretion to accept, reject, or modify under Rule 41(a)(2). The Court held that Rule 41(a)(2) is properly reserved for those cases in which the parties have not formally entered into an agreement regarding dismissal.

The Court then noted that CME’s position is contradicted by decisions of the Seventh Circuit that have rejected interpreting Rule 41(a)(1) filings in the formalistic manner requested by CME. Accordingly, applying the regional circuit law, the Court found that the inclusion of a proposed order was surplusage that did not alter the fact that the requirements of the rule were met. As such, the Court held that the stipulation was properly entered under Rule 41(a)(1) and reversed the district court’s denial of Garber’s motion, thus vacating all orders entered by the district court following the joint stipulation for dismissal without prejudice.

Summary authored by Benjamin H. Huh, Esq.