Youseff v. Tishman Construction Corp., No. 12-4135 (2d Cir. 2014)
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Plaintiff filed a qui tam action against defendants under the federal False Claims Act, 31 U.S.C. 3729 et seq., and under the New York False Claims Act, N.Y. Fin. Law 187 et seq. Before defendants filed an answer or made a motion for summary judgment, plaintiff sought to voluntarily dismiss the action. The district court dismissed the action without prejudice as to the United States and the State of New York, but with prejudice as to plaintiff. The court disagreed with the district court that the statement by plaintiff's counsel that plaintiff would not "pursue this matter any further" constituted "the plain English equivalent of a request that the Court dismiss the claim with prejudice." The court concluded that the plain language of the letter supplied no reason to conclude that plaintiff's counsel was requesting a dismissal with prejudice. In the absence of any indication by the plaintiff, Federal Rule of Civil Procedure 41(a), which governs the voluntary dismissal of an action, presumes that a voluntary dismissal under these circumstances is without prejudice. Accordingly, the district court erred by dismissing the case with prejudice. The court also rejected defendants' alternative argument that the dismissal should be analyzed under Rule 41(a)(2). The court vacated and remanded.
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12 4135 Youssef v. Tishman Construction Corporation UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2013 (Submitted: September 25, 2013 Decided: March 10, 2014) Docket No. 12 4135 Magdy M. Youssef, Plaintiff Appellant, v Tishman Construction Corporation, Turner Construction Company, Defendants Appellees.* Before: SACK and DRONEY, Circuit Judges.** * The Clerk of the Court is respectfully directed to amend the caption as shown above. ** Judge Reena Raggi, originally assigned to the panel, recused herself before the case was received on submission. The two remaining members of the panel, who are in agreement, have determined the matter in accordance with Second Circuit Internal Operating Procedure E(b). See 28 U.S.C. § 46(d). Appeal from a judgment of the Southern District of New York (P. Kevin Castel, Judge), dismissing the plaintiffʹs claims with prejudice. The plaintiff does not contest the dismissal of the action, but argues that it should have been done without prejudice, as provided in Federal Rule of Civil Procedure 41(a)(1)(b). Because we conclude that the district court erred in dismissing the case with prejudice as to the plaintiff, we VACATE the order of the district court, and REMAND with instructions to dismiss the plaintiffʹs action without prejudice. Daniel J. Kaiser, Geoffrey R. Kaiser, Kaiser Saurborn & Mair, P.C., New York, NY, for Appellant. Noah A. Levine, Jamie S. Dycus, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, for Appellee Tishman Construction Corp. Kevin Joseph OʹConnor, Patrick J. Greene, Jr., Peckar & Abramson, P.C., River Edge, NJ, for Appellee Turner Construction Co. SACK, Circuit Judge: This case concerns the proper application of Federal Rule of Civil Procedure 41(a), which governs the voluntary dismissal of an action. Youssef, the plaintiff and appellant, filed a qui tam action under the federal and New York 2 False Claims Acts. Subsequently, before the defendants had filed an answer or had made a motion for summary judgment, the plaintiff sought to voluntarily dismiss the action. The district court (P. Kevin Castel, Judge) dismissed the action without prejudice as to the United States and the State of New York, but with prejudice as to Youssef. The sole question for appellate review is whether the district courtʹs dismissal with prejudice was proper. BACKGROUND Magdy M. Youssef, a structural engineer who was employed successively by both defendant companies, brought this action under the federal False Claims Act, 31 U.S.C. §§ 3729 et seq., and the New York False Claims Act, N.Y. Fin. Law §§ 187 et seq., alleging a ʺfraudulent billing schemeʺ by the defendants on a number of publicly financed construction projects, including the new One World Trade Center. The complaint, dated August 3, 2010, was filed under seal. The seal was repeatedly extended while the New York Attorney General and the U.S. Attorneyʹs Office were deciding whether to intervene in the matter.1 In early December 2011, both declined to intervene. 1 The False Claims Act provides that the complaint in a qui tam action ʺshall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information.ʺ 31 U.S.C. § 3730(b)(2). 3 On December 13, 2011, the plaintiffʹs counsel sent a letter to the district court which, the parties agree, expressed an intent to dismiss the action. In the letter, counsel stated, ʺI have spoke[n] to my client and in view of the governmentʹs decision not to intervene he has decided not to pursue this matter any further.ʺ Joint Appʹx at 39. The letter further acknowledged that, as required by 31 U.S.C. § 3730(b)(1), dismissal of the qui tam action required approval from both the court and the U.S. Government. At this point, the defendants in the action had not been served, nor had they filed any responsive pleading. On December 22, 2011, the U.S. Attorneyʹs office advised the district court that it consented to the dismissal of the action, so long as it was without prejudice as to the United States. The following day, in a handwritten order in the margin of the U.S. Attorneyʹs letter, the district court dismissed the action ʺwith prejudice as to claims by Mr. Youssef and without prejudice as to the United States and the State of New York.ʺ Joint Appʹx at 40. The plaintiffʹs counsel asserts that he did not receive a copy of this order until eight months later, in late August 2012. The dismissal was not entered on the docket until September 18, 2012. The United States may request extensions of the seal for good cause. Id. § 3730(b)(3). 4 On August 3, 2012, Youssef re filed his claim in the Eastern District of New York after learning that the federal government was investigating similar allegations against the defendants. Only thereafter, Youssef alleges, did he learn that his case had been dismissed with prejudice in the Southern District. On August 31, 2012, Youssefʹs counsel wrote to Judge Castel, requesting that the court modify its earlier order to reflect a dismissal without prejudice. In an order dated September 4, 2012, the court denied the request. Judge Castel wrote: The action was dismissed with prejudice as to Mr. Youssefʹs claims over 8 months ago. Prior to the dismissal with prejudice his counsel wrote to this Court that ʺ. . . he has decided not to pursue this matter any further.ʺ No appeal was taken from the dismissal with prejudice. There is no basis for the court to take any further action. Order dated Sept. 4, 2012, Joint Appʹx at 43 (citation omitted). On September 5, 2012, the plaintiff requested that the district court reconsider its decision, or, in the alternative, that it reopen the time to file a notice of appeal. On September 10, 2012, the district court denied both requests. The following week, on September 18, 2012, an order reflecting the dismissal was entered on the district courtʹs docket. The plaintiff then sought leave to appeal this dismissal order, which the district court granted on October 3, 2012. On 5 October 10, 2012, the district court ordered the seal lifted on both the complaint and the docket. The plaintiff filed a timely notice of appeal. DISCUSSION This appeal turns on the application of the Federal Rule of Civil Procedure governing voluntary dismissals.2 Subject to any applicable federal 2 The relevant portion of Rule 41 reads: (a) Voluntary Dismissal. (1) By the Plaintiff. (A) Without a Court Order. Subject to Rules 23(e), 23.1(c), 23.2, and 66 and any applicable federal statute, the plaintiff may dismiss an action without a court order by filing: (i) (ii) (B) (2) a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment; or a stipulation of dismissal signed by all parties who have appeared. Effect. Unless the notice or stipulation states otherwise, the dismissal is without prejudice. But if the plaintiff previously dismissed any federal or state court action based on or including the same claim, a notice of dismissal operates as an adjudication on the merits. By Court Order; Effect. Except as provided in Rule 41(a)(1), an action may be dismissed at the plaintiffʹs request only by court order, on terms that the court considers proper. If a defendant has pleaded a counterclaim before being served with the plaintiffʹs motion to dismiss, the action may be dismissed over the defendantʹs objection only if the counterclaim can remain pending for independent 6 statute, a plaintiff may voluntarily dismiss an action by filing a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment. Fed. R. Civ. P. 41(a)(1)(A)(i). ʺUnless the notice . . . states otherwise, the dismissal [under Rule 41(a)(1)] is without prejudice.ʺ Fed. R. Civ. P. 41(a)(1)(B). If voluntary dismissal is unavailable under the conditions set forth in Federal Rule of Civil Procedure 41(a)(1), then ʺan action may be dismissed at the plaintiffʹs request only by court order, on terms that the court considers proper.ʺ Fed. R. Civ. P. 41(a)(2). It is undisputed that the plaintiff sought voluntary dismissal of the claim before any defendant filed an answer or motion for summary judgment.3 In such a case, the plain text of the rule provides that dismissal ʺis without prejudice,ʺ and affords no discretion in this respect to the district court. Fed. R. adjudication. Unless the order states otherwise, a dismissal under this paragraph (2) is without prejudice. Fed. R. Civ. P. 41. 3 We do note that the plaintiffʹs letter regarding dismissal was not styled as a formal ʺnotice of dismissal,ʺ nor did it reference Rule 41. See Joint Appʹx, at 39, 52. Invoking Rule 41 and its specific provisions on the effects of voluntary dismissal could have spared the plaintiff a substantial degree of time, expenditure, and frustration. Nonetheless, we conclude that the format and content of the plaintiffʹs letter, while less than ideal, do not preclude us from analyzing the issue under Rule 41. See, e.g., Williams v. Ezell, 531 F.2d 1261, 1263 (5th Cir. 1976) (ʺAlthough Rule 41(a)(1) was not cited in the Motion for Dismissal, there is no question that plaintiffs were acting pursuant to it.ʺ). 7 Civ. P. 41(a)(1)(B); see also Commercial Space Mgmt. Co. v. Boeing Co., 193 F.3d 1074, 1077 (9th Cir. 1999) (ʺ[A] court has no discretion to exercise once a Rule 41(a)(1) dismissal is filed.ʺ). A dismissal with prejudice, in this circumstance, constitutes grounds for vacatur and remand with instructions to correct the error. See Pedrina v. Han Kuk Chun, 987 F.2d 608, 610 (9th Cir. 1993) (employing this remedy); Manze v. State Farm Ins. Co., 817 F.2d 1062, 1069 (3d Cir. 1987) (same). The district court decided it could nonetheless dismiss the action with prejudice, because counselʹs letter stated that the plaintiff ʺhas decided not to pursue this matter any further.ʺ Joint Appʹx at 39, 43; see also Fed. R. Civ. P. 41(a)(1)(B) (permitting a plaintiff to stipulate to a dismissal other than without prejudice). The plaintiff argues that the letter reflected ʺa decision not to pursue the matter further at that time,ʺ and that the letter contained no notice or stipulation allowing dismissal with prejudice. Appellant Br. at 9 (emphasis added). The applicability of Rule 41(a)(1)(A)(i) to the plaintiffʹs claim is ʺa legal question which we review de novo.ʺ ISC Holding AG v. Nobel Biocare Fin. AG, 688 F.3d 98, 109 (2d Cir. 2012). We also follow our sister circuits in reviewing de novo the district courtʹs interpretation of the plaintiffʹs letter, inasmuch as that interpretation was based ʺsolely on [the district courtʹs] reading of the written 8 words of the stipulation.ʺ De Leon v. Marcos, 659 F.3d 1276, 1283 (10th Cir. 2011); accord Anago Franchising, Inc. v. Shaz, LLC, 677 F.3d 1272, 1276 (11th Cir. 2012). This standard of review, while not explicitly stated in our previous cases, is consistent with well established general principles. See Bellefonte Reins. Co. v. Aetna Casualty & Surety Co., 903 F.2d 910, 912 (2d Cir. 1990) (ʺThe proper standard for appellate review of a pure textual construction by the district court, whatever the procedural posture of the case, is de novo.ʺ (emphasis added)); see also In re Enron Creditors Recovery Corp., 461 F. Appʹx 11, 14 (2d Cir. 2012) (non precedential summary order) (concluding that interpretation of a joint stipulation entered with the Bankruptcy Court is reviewed de novo). On de novo review, we disagree with the district court that the statement by plaintiffʹs counsel that Youssef would not ʺpursue this matter any furtherʺ constituted ʺthe plain English equivalent of a request that the Court dismiss the claim with prejudice.ʺ Order dated Sept. 10, 2012, Joint Appʹx, at 51, 53. The plain language of the letter supplies no reason to conclude that the plaintiffʹs counsel was requesting a dismissal with prejudice. By stating that the plaintiff would not ʺpursue this matter any further,ʺ counsel may just as well have been indicating an intention simply to stop pressing the complaint that was 9 currently before the district court for any number of reasons having nothing to do with the merits of the claim.4 Furthermore, when read in context, it is clear that the letter expressed no opinion on the merits of the action, or on the res judicata effect of any dismissal. As the letter explained, the decision to dismiss the claim arose from ʺthe governmentʹs decision not to intervene,ʺ Joint Appʹx at 39, which itself does not appear to address the governmentʹs views as to the ultimate merits of the claim. Cf. United States ex rel. Williams v. Bell Helicopter Textron Inc., 417 F.3d 450, 455 (5th Cir. 2005) (noting that the United States ʺmay opt outʺ of a qui tam action ʺfor any number of reasonsʺ other than the merits). In this context, the statement that the plaintiff ʺhas decided not to pursueʺ the issue further is most naturally read to reflect a pragmatic decision, not necessarily connected to the substance of the case, and not a request for dismissal with prejudice. See Smith v. Potter, 513 F.3d 781, 783 (7th Cir. 2008) (holding that the statement that the 4 Neither the district court nor the defendant has, moreover, pointed to any reason why the plaintiff would want his claims dismissed with res judicata effect, or why the district court would understand this to be so. There was, for instance, no settlement agreement or joint stipulation, in which case a res judicata dismissal might reasonably be expected to be part of the partiesʹ bargain. Nor did the plaintiff have any other motivation we can fathom to request a with prejudice dismissal, for example, to establish a final, appealable judgment. 10 plaintiff ʺno longer wishes to proceed with the complaintʺ was not a request for dismissal with prejudice). In the absence of any indication by the plaintiff, Rule 41(a)(1) presumes that a voluntary dismissal under these circumstances is without prejudice. Fed. R. Civ. P. 41(a)(1)(B); see also Poloron Prods., Inc. v. Lybrand Ross Bros. & Montgomery, 534 F.2d 1012, 1017 (2d Cir. 1976) (noting ʺthe general principle, contained in Rule 41(a)(1) and honored in equity prior to the adoption of the Federal Rules, that a voluntary dismissal of an action does not bar a new suit based upon the same claimʺ). The case law of other circuits confirms this view. See Yesh Music v. Lakewood Church, 727 F.3d 356, 362 (5th Cir. 2013) (stating that stipulated dismissals, like unilateral dismissals, are ʺpresumptively without prejudiceʺ); Balsley v. LFP, Inc., 691 F.3d 747, 771 72 (6th Cir. 2012) (similar), cert. denied, 133 S. Ct. 944 (2013); Anago Franchising, 677 F.3d at 1276 (ʺ[D]ismissals under Rule 41(a)(1) must explicitly state if prejudice is to attach, else the court will assume that the dismissal will be without prejudice.ʺ); Green Aviation Mgmt. Co. v. Fed. Aviation Admin., 676 F.3d 200, 204 (D.C. Cir. 2012) (noting ʺthe presumption that when a complaint is dismissed at the request of the plaintiff, it is without prejudiceʺ); Commercial Space Mgmt., 193 F.3d at 1076 (stating that dismissal under Rule 41(a)(1) ʺis presumed to be ʹwithout prejudiceʹ unless it 11 states otherwiseʺ). Accordingly, the district court erred by dismissing the case with prejudice. We also reject the defendantsʹ alternative argument that this dismissal should be analyzed instead under Federal Rule of Civil Procedure 41(a)(2), which grants a greater degree of discretion to the district court. The defendants argue that, because 31 U.S.C. § 3730(b)(1) requires the courtʹs consent for the dismissal of any False Claims Act qui tam action, the plaintiffʹs dismissal necessarily required a court order, and therefore is governed by Federal Rule of Civil Procedure 41(a)(2) (dismissal ʺBy Court Orderʺ). This argument is based on a misreading of the statute and the rules. Rule 41(a)(1), which we apply here, operates ʺ[s]ubject toʺ four specified Federal Rules Rules 23(e), 23.1(c), 23.2, and 66 and ʺany applicable federal statute,ʺ including the False Claims Act. Fed. R. Civ. P. 41(a)(1); see also Fed R. Civ. P. 41, Advisory Comm. Note, 1937 Adoption (ʺProvisions regarding dismissal . . . [in the False Claims Act] are preservedʺ). As we have previously explained in the context of one of those specified rules, ʺ[t]he ʹsubject toʹ clause of Rule 41(a)(1) . . . incorporates Rule 23(e)ʹs requirement of court approval into its stated provisions.ʺ In re PaineWebber Ltd. Pʹships Litig., 147 F.3d 132, 137 (2d Cir. 1998). Even though Fed. R. Civ. P. 23(e) requires court approval for the dismissal 12 of an action, we had no trouble ʺreading Rules 41(a)(1) and 23(e) together,ʺ without turning to Rule 42(a)(2). Id. at 139. The same analysis applies here. For the purposes of this case, Rule 41(a)(1)(A)(i) incorporates the court consent requirement contained in 31 U.S.C. § 3730(b)(1), and the two provisions must be read together. See Minotti v. Lensink, 895 F.2d 100, 103 (2d Cir. 1990) (deciding that the consent requirement applies to voluntary dismissals under Rule 41(a)); see also Bailey v. Shell W. E&P, Inc., 609 F.3d 710, 719 (5th Cir.) (concluding that the right of unilateral dismissal under Rule 41 is qualified by False Claims Act consent requirement), cert. denied, 131 S. Ct. 428 (2010). But nothing in the False Claims Act requires that a voluntary dismissal be accorded res judicata effect.5 See 31 U.S.C. §§ 3729 et seq. Therefore, the consent requirement of the False Claims Act may be incorporated into Rule 41(a)(1) without disturbing the ruleʹs usual presumption in favor of dismissal without prejudice. 5 The defendants point to no text in the False Claims Act that would support their argument, nor do they provide any principle or policy underlying the statute that would justify overriding the presumption in favor of dismissal without prejudice in these circumstances. 13 CONCLUSION For the foregoing reasons, we VACATE the judgment of the district court and REMAND the case with instructions for the court to dismiss the action without prejudice. 14
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