United States Court of Appeals
For the First Circuit
No. 11-2477
MANUEL A. COLÓN CABRERA,
Plaintiff, Appellant,
v.
ESSO STANDARD OIL CO. (PUERTO RICO), INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José Antonio Fusté, U.S. District Judge]
Before
Torruella, Lipez, and Howard,
Circuit Judges.
Carlos E. Montañez Alvarado for appellant.
Tynan Buthod, with whom Baker Botts L.L.P., Carla García-
Benítez, and O'Neill & Borges, were on brief, for appellee.
July 17, 2013
LIPEZ, Circuit Judge. Appellant Manuel Colón Cabrera
filed suit against appellee Esso Standard Oil Company under the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6972,
seeking to compel Esso to remediate environmental contamination at
a gas station he owned. After lengthy proceedings in the district
court and in a concurrent action in the Puerto Rico commonwealth
courts, Colón Cabrera filed a motion for voluntary dismissal under
Federal Rule of Civil Procedure 41(a)(2), stating that the federal
lawsuit was no longer necessary in light of Esso's alleged
concession that it would clean up his gas station. The district
court held its ruling on the motion in abeyance while the parties
engaged in settlement negotiations. Although it appeared for a
time that the parties would be able to resolve the matter, the
negotiations were ultimately unsuccessful. The district court
subsequently granted Colón Cabrera's motion, but chose to dismiss
the case with prejudice pursuant to Rule 41(a)(2) and assess
attorneys' fees and costs against him.
Colón Cabrera filed this appeal, arguing that the
district court abused its discretion in dismissing the case with
prejudice. The parties offer different portrayals of the
proceedings below, but the issue that concerns us here is the
district court's emphasis on Colón Cabrera's refusal to accept
Esso's settlement offers. We conclude that dismissing the case
with prejudice based on appellant's refusal to settle was an abuse
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of discretion. We therefore vacate the dismissal order and remand
for further proceedings.1
I.
To understand the parties' positions in this case, we
must explain not only the procedural history of this litigation,
but also the path of the concurrent Commonwealth action between the
same parties that alleged similar, if not identical, claims.
A. The Concurrent Commonwealth Action
The parties' dispute arises out of Colón Cabrera's
operation of a gas station under the Esso trademark. The property
on which the gas station is located turned out to be contaminated
with various pollutants, and the responsibility for and extent of
the necessary remediation has been a subject of much contention
between the parties.
In 2005, Colón Cabrera initiated a proceeding in the
Puerto Rico commonwealth courts against Esso, asserting various
claims arising under Puerto Rico law and seeking damages. In late
2007, he filed a motion for partial summary judgment in that case,
which Esso opposed in addition to filing its own motion for summary
judgment. In March 2009, the Puerto Rico Superior Court resolved
the motions in Colón Cabrera's favor, holding that Esso had made a
1
Colón Cabrera also appealed the district court's decision to
impose fees and costs against him. At oral argument, the parties
represented that the court had decided to defer the award of fees
and costs until we resolved this appeal. The parties thus agreed
that we need not reach that issue.
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"unilateral declaration of intent" that bound the defendant to
remediate the contamination at the gas station. The Commonwealth
court's order required Esso to investigate the extent of the
contamination on appellant's property and engage in the necessary
remediation, as well as pay any related expenses. Esso appealed
the decision to the Court of Appeals of Puerto Rico.
On October 29, 2010, the appellate court upheld the court
of first instance's grant of partial summary judgment in Colón
Cabrera's favor, and remanded for further proceedings. Esso filed
a petition for certiorari with the Supreme Court of Puerto Rico
challenging this decision. On May 13, 2011, the Supreme Court of
Puerto Rico denied Esso's petition, leaving undisturbed the grant
of partial summary judgment.
B. The Federal Action and the Parties' Initial Settlement Efforts
While the litigation in the Commonwealth courts was in
its appellate stages, Colón Cabrera filed a complaint in federal
court on October 6, 2009, alleging violations of RCRA. This
complaint sought, inter alia, civil penalties and an injunction
mandating that Esso conduct environmental remediation at the site.
The company responded with a motion to dismiss, invoking Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6).
While this motion was pending, the parties engaged in
settlement negotiations. The parties' attempts to settle the
federal case broke down in late 2010, and they decided to resume
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litigation. After the district court denied Esso's long-pending
motion to dismiss on January 26, 2011, the company filed an answer
and counterclaim in February of that year. This pleading asserted
that Esso had repeatedly tried to implement a remediation plan at
the gas station, but that Colón Cabrera had denied it access to the
property.
C. Colón Cabrera's Rule 41 Motion and the Subsequent Proceedings
On March 16, 2011, Colón Cabrera filed a motion for
voluntary dismissal under Rule 41(a)(2). He stated that the
parties' dispute may have arisen from a "miscommunication" between
Esso and appellant's retained environmental expert, as well as a
misunderstanding regarding the scope of the appropriate
remediation. Contending that Esso's pleading was the first time
that it had expressed a willingness to "clean up the contamination
of the property,"2 and believing that this purported concession
would resolve the federal case, Colón Cabrera sought dismissal of
the federal action without prejudice and without the imposition of
attorneys' fees or costs.
On its own initiative, the district court immediately
issued an order holding appellant's motion in abeyance and directed
the parties to meet and confer regarding settlement terms. After
2
Esso vigorously disputes this statement, and has placed
correspondence into the record indicating that it had been
communicating its intent to conduct remediation activities on the
site since 2008.
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further negotiations, Esso sent appellant an offer on April 7,
which stated that Esso would pay $200,000 in exchange for, inter
alia, the dismissal with prejudice of both the federal action and
the concurrent Commonwealth action. At this time, the Supreme
Court of Puerto Rico had not yet ruled on Esso's petition for
certiorari in the concurrent Commonwealth action. Colón Cabrera
rejected this offer, stating that he was unwilling to dismiss the
Commonwealth action until he had a better sense of the damages he
could obtain via that lawsuit. At the least, he did not wish to
engage in negotiations regarding damages until the remediation work
had been completed at the gas station.
As the parties could not reach an accord, the district
court informed them that it would move forward with a previously
calendared scheduling conference on May 12, 2011, to discuss
pretrial proceedings and trial. Colón Cabrera requested that the
scheduling conference be converted to a settlement conference
because he believed that an agreement could be reached with respect
to the federal claims. The court granted this motion, and set the
settlement conference for the same day as the previously set
scheduling conference. The requested conference took place, but
the parties could not come to terms even with the court's
facilitation. A text entry on the district court docket states
that "[t]he Court recommended that th[e] case be settled" and
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granted additional time for the parties to continue negotiations.
The court also set a trial date for June 20, 2011.
As noted, on May 13, 2011, the day after the parties'
settlement conference, the Supreme Court of Puerto Rico denied
Esso's petition for certiorari in the concurrent Commonwealth
action, meaning that the grant of partial summary judgment in Colón
Cabrera's favor remained standing.
On May 24, 2011, appellant filed a pleading with the
court indicating that despite the settlement conference's lack of
success, the parties were on the verge of resolving the case. He
specifically stated that "the issue of monetary compensation has
been resolved" and that he "ha[d] accepted the monetary
compensation offered by defendant Esso." He asked for more time to
"fine tun[e]" the terms of the settlement and release, and stated
that he would inform the court once that process was complete.
D. The June Hearings and the District Court's Order
Colón Cabrera had spoken too soon. On June 3, 2011,
about two weeks later, he filed another pleading indicating that
settlement negotiations had stalled yet again. This pleading
stated that Esso "is refusing to grant plaintiff a complete release
under the same conditions that Esso is requesting from plaintiff"
and again requested that an upcoming scheduling conference be
converted to a settlement conference. The court denied that
request.
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The court held a pretrial conference on June 6, 2011.
Despite the court's previous denial of plaintiff's request to
convert this hearing into a settlement conference, the parties
reported the status of their negotiations to the judge and
discussed with him the wording of a clause in the proposed
settlement agreement that was a sticking point. This hearing was
continued to a "settlement conference" set for the next day, when
Colón Cabrera's counsel stated that his client was still unwilling
to settle. The court inquired whether appellant insisted on
obtaining a release "for things that are totally unrelated to this
whole situation," and counsel replied in the affirmative. The
parties agreed that the court should rule on Colón Cabrera's
pending Rule 41 motion,3 but Esso argued that the motion should be
granted with prejudice and with the imposition of fees and costs.
The court characterized the parties' inability to settle the matter
as "very unfortunate" and told plaintiff's counsel that "your
client is a very stubborn man." The court then took the matter
under submission.
3
As noted, Esso asserted counterclaims for declaratory relief
against Colón Cabrera. Rule 41(a)(2) provides that "[i]f a
defendant has pleaded a counterclaim before being served with the
plaintiff's motion to dismiss, the action may be dismissed over the
defendant's objection only if the counterclaim can remain pending
for independent adjudication." Esso stated to the district court
that its counterclaims could be severed from Colón Cabrera's
underlying claims, and that they therefore posed no barrier to
granting voluntary dismissal.
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Two days later, the district court issued an order
granting Colón Cabrera's motion for voluntary dismissal and
dismissed the case with prejudice. The court explained the essence
of its decision in a brief paragraph, observing that Colón Cabrera
had been given "numerous opportunities to settle this case" and
that "[t]he Court granted Plaintiff several extensions to negotiate
the terms of the settlement and Plaintiff has refused to do so."
The court also stated that it had considered "Defendant's efforts
and expenses in preparing this case for trial and in offering to
settle, as well as[] the costs associated with Plaintiff's repeated
delays in deciding whether to settle." Finally, the court stated
that it would award attorneys' fees and costs to Esso, but did not
set the award's amount.
Colón Cabrera filed a timely motion to alter judgment
pursuant to Federal Rule of Civil Procedure 59(e) and for relief
from judgment pursuant to Federal Rule of Civil Procedure 60, both
of which the district court summarily denied. This appeal
followed.
II.
A. Legal Standard Governing Rule 41(a)(2)
Rule 41(a)(2) permits a plaintiff to request dismissal of
an action "by court order, on terms that the court considers
proper." Fed. R. Civ. P. 41(a)(2). The rule allows a plaintiff to
voluntarily dismiss his own case as long as "no other party will be
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prejudiced." P.R. Mar. Shipping Auth. v. Leith, 668 F.2d 46, 50
(1st Cir. 1981) (quoting LeCompte v. Mr. Chip, Inc., 528 F.2d 601,
604 (5th Cir. 1976)) (internal quotation mark omitted). The court
is responsible for ensuring that such prejudice will not occur.
Doe v. Urohealth Sys., Inc., 216 F.3d 157, 160 (1st Cir. 2000).
The rule also provides that such a dismissal is without prejudice,
"[u]nless the [court's] order states otherwise." Fed. R. Civ. P.
41(a)(2). Accordingly, dismissal without prejudice is the norm,
"unless the court finds that the defendant will suffer legal
prejudice." Leith, 668 F.2d at 50. The mere prospect of a
subsequent lawsuit does not constitute such prejudice. See Doe,
216 F.3d at 160-61.
Our review of the district court's decision to grant a
Rule 41(a)(2) voluntary dismissal is for abuse of discretion. Doe,
216 F.3d at 160. Thus, "we may not reverse a determination simply
because we, if sitting as a court of first instance, would have
weighed the relevant considerations differently." Negrón-Almeda v.
Santiago, 528 F.3d 15, 21 (1st Cir. 2008). By the same token, the
standard is not a "rubber stamp, counseling affirmance of every
discretionary decision made by a trial court." Id. The court
exceeds its discretion when it "fails to consider a significant
factor in its decisional calculus, if it relies on an improper
factor in computing that calculus, or if it considers all of the
appropriate factors but makes a serious mistake in weighing such
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factors." De Jesus Nazario v. Morris Rodriguez, 554 F.3d 196, 199
(1st Cir. 2009).
B. The District Court's Analysis
The central issue before us is whether the court abused
its discretion by factoring Colón Cabrera's refusal to settle into
its decision. Resolving this issue requires us to identify the
precise relevance that the course of settlement negotiations may
have under Rule 41(a)(2).
Voluntary dismissal under Rule 41(a)(2) is conditioned on
court permission "to protect the nonmovant from unfair treatment."
Grover by Grover v. Eli Lilly & Co., 33 F.3d 716, 718 (6th Cir.
1994). Such unfairness can take numerous forms, including "the
defendant's effort and expense of preparation for trial, excessive
delay and lack of diligence on the part of the plaintiff in
prosecuting the action, insufficient explanation [of] the need to
take a dismissal, and the fact that a motion for summary judgment
has been filed by the defendant." Doe, 216 F.3d at 160 (quoting
Pace v. S. Express Co., 409 F.2d 331, 334 (7th Cir. 1969))
(internal quotation marks omitted). For example, it is appropriate
to consider whether "a party proposes to dismiss the case at a late
stage of pretrial proceedings, or seeks to avoid an imminent
adverse ruling." In re FEMA Trailer Formaldahyde Prods. Liab.
Litig., 628 F.3d 157, 162 (5th Cir. 2010); see also Brown v. Baeke,
413 F.3d 1121, 1124 (10th Cir. 2005). A plaintiff should not be
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permitted to force a defendant to incur substantial costs in
litigating an action, and then simply dismiss his own case and
compel the defendant to litigate a wholly new proceeding.
Despite the variety of circumstances that may weigh in
favor of dismissing the case with prejudice, the inclusion of a
plaintiff's handling of settlement negotiations into this analysis
requires particular care. The decision to settle is a highly
subjective one that represents a desire to waive permanently a
party's claims for the sake of finality. See Ehrheart v. Verizon
Wireless, 609 F.3d 590, 595 (3d Cir. 2010) ("The choice to settle
implicitly acknowledges calculated risks and . . . reflects the
deliberate decision of both parties to opt for certainty in
terminating their litigation."). This choice must be left to the
individual litigant's judgment. See Del Rio v. N. Blower Co., 574
F.2d 23, 26 (1st Cir. 1978) ("There is no duty . . . to settle
cases, or to reduce one's claims."). While "the law favors the
voluntary settlement of civil suits, it does not sanction efforts
by trial judges to effect settlements through coercion." Kothe v.
Smith, 771 F.2d 667, 669 (2d Cir. 1985) (citation omitted).
Accordingly, using the discretion conferred by Rule 41(a)(2) to
penalize a plaintiff for not settling a case places too much
coercive power within the hands of the district judge. See Goss
Graphics Sys., Inc. v. DEV Indus., Inc., 267 F.3d 624, 627-28 (7th
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Cir. 2001) ("If parties want to duke it out, that's their
privilege.").
As this case's procedural history shows, the district
court played an assertive role in facilitating settlement talks
between the parties. The court put substantial effort into
encouraging negotiations, including deferring a ruling on the Rule
41 motion and holding settlement conferences with the parties.
Some of these actions were taken in response to appellant's
requests, and were directed toward the laudatory goal of bringing
the case to a less acrimonious and resource-intensive conclusion.
We appreciate the district court's efforts in this regard.
Nevertheless, the record also demonstrates that the
district court permitted the information gleaned through its
involvement with the settlement talks to exert undue influence over
its disposition of appellant's Rule 41 motion. The written order
on the motion notes Colón Cabrera's "numerous opportunities to
settle this case" and his "refusal to do so" despite being given
several extensions of time. The order also notes Esso's "efforts
and expenses in preparing this case for trial and in offering to
settle, as well as[] the costs" it incurred during Colón Cabrera's
"repeated delays in deciding whether to settle." These facts are
identified as the basis for dismissing the case with prejudice.
These observations echo the disappointment the court expressed from
the bench at the June 7, 2011, hearing, where it called Colón
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Cabrera's refusal to settle "very unfortunate" and chastised him
for his obstinacy.
Given these statements, it is clear that the district
court disfavored Colón Cabrera's rejection of multiple
opportunities to settle his federal case, blamed him for the failed
settlement talks, and decided that appellant's conduct justified
dismissal with prejudice. Relying on Colón Cabrera's failure to
settle was an abuse of discretion. Even if the district court's
view of the settlement talks had a legitimate basis, dismissing the
case with prejudice based on Colón Cabrera's adherence to his
negotiating position effectively penalized appellant for not
resolving his claims in the manner that the district court viewed
as most reasonable. Using Rule 41 in this way intruded too heavily
into a decisionmaking process that should have been left to the
parties.
Notwithstanding this concern, we perceive a crucial
distinction between a party's decision as to whether to settle, and
the party's comportment during the settlement negotiations
themselves. The plaintiff's lack of diligence and the defendant's
resulting costs are appropriate factors to consider under Rule
41(a)(2). See Doe, 216 F.3d at 160-61. His handling of the
settlement negotiations may have been relevant if, for example,
Colón Cabrera had failed to participate in previously scheduled
settlement discussions or similarly dragged out the proceedings in
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a way that prejudiced Esso. Importantly, however, these procedural
factors are distinct from the choice a party ultimately makes
between settlement and continued litigation. The former may be
appropriate to consider in the disposition of a Rule 41(a)(2)
motion, but the latter is not.
Esso itself appears uneasy with the court's emphasis on
Colón Cabrera's refusal to settle, choosing to focus instead on
the court's comment on his "repeated delays in deciding whether to
settle." (emphasis added). The company argues that the court's
true concern was the costs and expenses Esso incurred because of
appellant's dilatory conduct. The record does not support that
more favorable view of the rationale for the court's decision.
Lacking sufficient information on the nature of the parties'
settlement talks before appellant sought voluntary dismissal in
March 2011, we cannot evaluate which party contributed more to the
delay in resolving the case to that point. Insofar as the court
faults Colón Cabrera for the extensions it granted from March
through June 2011, these negotiations occurred only after Colón
Cabrera filed his motion. Although the court could have ruled on
the motion when it was filed, it apparently believed that further
settlement negotiations would be beneficial. Neither the record
nor the court's order discloses why holding Colón Cabrera
responsible for that period of delay was appropriate, given that he
expressed a wish to dismiss the case before this period of
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negotiations even began. Moreover, Colón Cabrera was meeting with
success in the parallel Commonwealth litigation. Hence, it is far
from clear that appellant's supposed obstinacy during the period
from March through June arose from bad faith, rather than a genuine
belief in the strength of his bargaining position. See Leith, 668
F.2d at 50 ("[T]he record indicates ample grounds on which the
district court could conclude that the plaintiff has acted in good
faith, regardless of the eventual resolution of the controversy.")
(footnote omitted).
Esso further suggests that the district court's doubts
regarding Colón Cabrera's likelihood of success at trial supports
dismissal with prejudice. We disagree. The guiding inquiry here
is whether defendant would suffer prejudice if the motion were
granted. Prejudice does not mean having to defend against a case
that the court deems weak. Esso has identified nothing in Rule
41(a)(2) or the case law that permits the court to use a motion for
voluntary dismissal to weed out cases it deems unmeritorious.4
To be clear, we are not suggesting that the court is
always required to give a lengthy explanation of its reasons for a
4
To the extent that the district court seeks to curb
frivolous or abusive litigation, it has other means of addressing
such concerns. See 28 U.S.C. § 1927 (permitting imposition of
costs and attorneys' fees on person who "multiplies the
proceedings" in an "unreasonabl[e] and vexatious[]" manner); Fed.
R. Civ. P. 11(b)(1) & 11(c) (stating that by making representations
to court, attorney or party certifies that representations are "not
being presented for any improper purpose," and authorizing courts
to impose sanctions based on violations).
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dismissal with prejudice pursuant to Rule 41(a)(2), though some
explanation of such a consequential decision is certainly
necessary. The problem here is that the glimpse we have into the
district court's thought process indicates that it relied almost
entirely on a factor -- the failure to settle -- that should have
played no role in its analysis.
We also reiterate that we are not criticizing the trial
judge's involvement in the settlement negotiations. See Fed. R.
Civ. P. 16(a)(5) (authorizing court to order appearances at
pretrial conferences to, inter alia, "faciliat[e] settlement").
The desire to aid the settlement process was both commendable and
understandable. But this case demonstrates the potential pitfalls
of a district court's direct engagement with that process. Such
involvement could result in the judge obtaining information about
the parties' respective positions that might unduly influence the
judge's rulings in the case. That is what happened here.
Finally, we note that Colón Cabrera has requested that we
remand with instructions to grant his motion to dismiss without
prejudice. Given our present understanding of the record, we see
no justification for dismissal with prejudice. Nevertheless, we
owe deference to the district court's familiarity with the
litigation and its grasp of all the relevant facts. We therefore
remand so that the district court can reconsider the issue with the
benefit of our guidance. If on remand the district court concludes
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that dismissal with prejudice is a proper exercise of its
discretion, it should take care to evaluate the appropriate factors
fully and provide an explanation of its reasons.
III.
For the reasons stated, the district court's grant of
voluntary dismissal with prejudice is vacated, and the case is
remanded for further proceedings consistent with this opinion.
Costs to appellant.
So ordered.
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