Coates Reprographics, Inc., Plaintiff-counterdefendant-appellant, v. Subligraphics, S.a., Defendant-counterplaintiff-appellee, v. Coates Brothers, Plc., Counterdefendant, 845 F.2d 1034 (Fed. Cir. 1988)

DECISION

Coates Reprographics, Inc. appeals from a final order of the United States District Court for the District of Columbia, No. 86-2997 (June 19, 1987), dismissing this case without prejudice. We vacate and remand.

OPINION

We note that both Coates and Subligraphics jointly proposed that the case before the district judge be stayed pending final resolution of the appeal to this court in Spectra Corp. v. Lutz, No. C 86-4447 EFL (N.D. Cal. June 19, 1987).^*  Instead of granting a stay the district court, sua sponte, dismissed the entire action without prejudice. The court gave no explanation for the dismissal in its one sentence order.

Coates argues that the dismissal of the suit was unauthorized by any court rule and was outside the inherent power of the district court. Subligraphics is indifferent to whether the suit is stayed or dismissed.

It is well settled that it is within the sound discretion of a court to refuse jurisdiction over a declaratory judgment action and to dismiss such a suit. See Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942); Wilderness Soc'y v. Morton, 179 F.2d 842, 886 (D.C. Cir.) (en banc), cert. denied, 411 U.S. 917 (1973); E. Borchard, Declaratory Judgments 313 (2d ed. 1941). However, in order for this court to properly review the district court's exercise of that discretion in this case it is necessary that the district court enunciate the reasons underlying its decision to dismiss Coates' claim. See, e.g., Public Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962) (district court cannot decline to entertain a declaratory judgment action as a matter of whim or personal disinclination); Aetna Casualty & Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th Cir. 1937) ("discretion to grant or refuse the declaratory relief 'is a judicial discretion, and must find its basis in good reason"). Here the district court gave no reason for its action.

Further, the district court stated no basis for its dismissal of Spectra's counterclaim for infringement. We recognize that under certain conditions a court can exercise its inherent powers and dismiss a litigant's claim sua sponte with prejudice. See, e.g., Link v. Wabash R.R. Co., 370 U.S. 626, 630-31 (1962) (court has the "inherent power" to dismiss sua sponte with prejudice for lack of prosecution). However, we find no authority for a sua sponte dismissal without prejudice over a defendant's or counter-defendant's objection after issue is joined. Cf. Fed. R. Civ. P. 41(b). Again, however, the difficulty is that we cannot review the court's decision to dismiss Spectra's counterclaim absent some justification for that decision. In addition, having acted sua sponte, the court gave Coates no opportunity, prior to entry of the order, to present its arguments with respect to its being prejudiced by the dismissal. Finally, it may be significant to the trial court that this court has now affirmed the judgment in Spectra.

In order to return jurisdiction to the district court either to supplement its order with a statement of reasons for dismissal of each claim or to modify its order upon further consideration of all of the circumstances, we vacate the appealed order and remand.