United States Court of Appeals
For the First Circuit
No. 02-2071
MUNICIPALITY OF SAN JUAN,
Plaintiff, Appellant,
v.
JOHNNY RULLAN, SECRETARY OF HEALTH OF THE
COMMONWEALTH OF PUERTO RICO, ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José Antonio Fusté, U.S. District Judge]
Before
Boudin, Chief Judge,
Selya and Lipez, Circuit Judges.
Juan B. Soto-Balbas, with whom Ana L. Velilla-Arce and Mercado
& Soto, P.S.C. were on brief, for appellant.
Camelia Fernández Romeu, Assistant Solicitor General, with
whom Roberto J. Sánchez Ramos, Solicitor General, and Vanessa Lugo
Flores, Deputy Solicitor General, were on brief, for appellees.
January 24, 2003
SELYA, Circuit Judge. This case involves the power of a
district court, after a settled case has been voluntarily dismissed
under Fed. R. Civ. P. 41(a)(1)(ii), to police the settlement
through summary enforcement proceedings. We hold that a district
court does not retain supplemental enforcement jurisdiction over a
settlement after granting a Rule 41(a)(1)(ii) motion unless the
parties either have agreed to incorporate the terms of the
settlement into the dismissal order or have executed a stipulation
authorizing the court to retain jurisdiction over the
implementation of the settlement. Because the record reflects no
such agreement here, we affirm the order denying a writ of
execution designed to enforce summarily a settlement reached many
years ago by and between the parties.
The origins of this dispute go back more than three and
one-half decades. On August 25, 1966, the Municipality of San Juan
(the Municipality) and the Department of Health of the Commonwealth
of Puerto Rico (the Department) entered into a contract relative to
the allocation of federal Medicaid dollars.1 As Medicaid funding
increased, the parties periodically redefined the terms of their
relationship. Over time, the payments to the Municipality rose
dramatically.
1
Medicaid payments are made to the several states, and to the
Commonwealth of Puerto Rico, under Title XIX of the Social Security
Act, 42 U.S.C. §§ 1396-1396v.
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In or around 1986, the parties reached an impasse over
how to allocate federal Medicaid funds. On May 13, 1987, the
Municipality initiated an action against the Department in the
United States District Court for the District of Puerto Rico,
claiming that the Department was in violation of the Medicaid Act
and in breach of contract. The case was assigned to Judge Fusté.
In short order, the parties reached an accord. The
settlement agreement provided the Municipality with certain
Medicaid funds for the fiscal years 1986-1987 and 1987-1988. It
also established a formula by which the parties could adjust the
1987-1988 payments if Congress increased Puerto Rico's Medicaid
allotment for that fiscal year.
On August 17, 1987, the parties informed Judge Fusté of
the settlement. At a chambers conference, the parties and the
court discussed how the pending action would be terminated. The
Municipality told Judge Fusté that it was contemplating a motion
for voluntary dismissal. The judge voiced no disapproval but
suggested that the parties proffer a copy of the settlement
agreement under seal and stipulate to the entry of judgment.
Although the Municipality embraced this suggestion, the Department
balked. At that point, Judge Fusté washed his hands of the matter;
he stated that how to terminate the case was up to the parties, and
the conference ended on that note.
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Later that day, the parties submitted two documents to
the district court. The first — to be placed under seal — limned
the terms of the settlement. The second was a motion for voluntary
dismissal. The judge, on his own initiative, entered an order
memorializing the basis for the court's jurisdiction over the
dispute, the fact of the settlement, and the court's intention to
enter judgment in favor of the Municipality. In that order, the
court expressed its opinion that "both [parties] need the
protection of a judgment on a matter of public interest and
concern." The court then proceeded to enter a judgment for the
Municipality against the Department, incorporating in the judgment
the terms of the settlement agreement. Both the order and the
judgment were promulgated on August 17, 1987.
The Department promptly moved to vacate these filings,
arguing that it had never agreed to the entry of an adverse
judgment. On November 2, 1987, the district court vacated both the
order and the judgment, entering in lieu thereof an amended order
and judgment. The amended order recited that the case had been
settled, approved the settlement (without elaborating upon its
terms), and granted the motion for voluntary dismissal pursuant to
Rule 41(a)(1). The text went on to remind the parties that the
district court had "inherent power to enforce settlement
agreements" and expressed the view that, notwithstanding the
voluntary dismissal, the district court retained jurisdiction over
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the case.2 The amended judgment dismissed the action without
prejudice pursuant to Rule 41(a)(1). Although it incorporated by
reference the terms of the amended order, it made no direct
reference to the settlement agreement.
Despite these revisions, the Department feared that the
district court's editorial comments about the retention of
jurisdiction exposed it to summary enforcement proceedings should
the Municipality claim, in the future, that the Department had not
lived up to the terms of the settlement. To set this poltergeist
to rest, the Department appealed. We clarified, and then affirmed,
the amended order and judgment in an unpublished opinion.
Municipality of San Juan v. Izquierdo Mora, No. 88-1047, slip op.
(1st Cir. May 16, 1988) (per curiam). We characterized the amended
judgment as "a straightforward dismissal pursuant to Rule
41(a)(1)(ii)" and held that it did "not operate to incorporate by
reference the settlement agreement." Id. at 6. In the same vein,
we treated the district court's references to its inherent
enforcement powers as mere dicta and ruled that, since the action
2
The relevant language, shorn of citations, reads:
We remind both sides of this court's inherent power
to enforce settlement agreements in cases pending before
it. If asked, we shall not hesitate to take appropriate
action protecting this agreement, either summarily or, if
necessary, following an evidentiary hearing. Both
parties moved from irreconcilable positions to the point
of settlement and, therefore, the settlement agreement
must be protected as a matter of public interest and
concern against further litigation on the same subject.
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had been dismissed, "there [was] no warrant to review the dicta."3
Id. To cinch matters, we emphasized that any suggestion that the
dicta "could be enforced via the [district] court's contempt power
[was] farfetched and without basis." Id.
For nearly fourteen years, the dismissed action remained
dormant. But this proved to be the calm before the storm. On
March 26, 2002, the Municipality, alleging that the 1987 settlement
agreement had served as the foundation for the allocation of
Medicaid disbursements during the intervening years and that the
Department had unilaterally cut off the flow of funds (with the
result that the Department owed it some $40,000,000), filed a
motion asking the district court to enforce the 1987 settlement
agreement.4 The district court initially granted this motion and
issued an ex parte order of execution. The Department quickly
obtained a stay. After considerable skirmishing — the details of
which are unimportant for present purposes — Judge Fusté reversed
direction, vacated the order of execution, referred to our earlier
3
Dicta comprises observations in a judicial opinion or order
that are "not essential" to the determination of the legal
questions then before the court. Dedham Water Co. v. Cumberland
Farms Dairy, Inc., 972 F.2d 453, 459 (1st Cir. 1992). Dicta — as
opposed to a court's holdings — have no binding effect in
subsequent proceedings in the same (or any other) case.
4
This motion named, as a respondent, Johnny Rullan, in his
official capacity as Puerto Rico's Secretary of Health. The
original action named Dr. Luis A. Izquierdo Mora, who at the time
occupied that position. By operation of law, Rullan is now the
proper party. See Fed. R. Civ. P. 25(d)(1).
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unpublished opinion, and denied the Municipality's motion for
summary enforcement. He subsequently rejected the Municipality's
request for reconsideration.
Displeased by this turn of events, the Municipality
sought a writ of mandamus directing the district court to reinstate
its original ex parte order. We treated that petition as a notice
of appeal. Following full briefing, we heard oral argument on
January 6, 2003.
The Municipality's appeal rests on two pillars. First,
the Municipality contends that the 1987 settlement agreement
applies beyond the 1987-1988 fiscal year (up to the present time).
Second, it posits that the district court retained jurisdiction
over that agreement, thus making summary enforcement proceedings
appropriate. But stating the arguments in this order puts the cart
before the horse: the district court's jurisdiction to conduct a
summary enforcement proceeding must be examined before we can
undertake an inquiry into the merits of the case. See Steel Co. v.
Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998) (collecting
cases); Berner v. Delahanty, 129 F.3d 20, 23 (1st Cir. 1997). We
turn, therefore, to the jurisdictional issue.
We begin our analysis by rehearsing the familiar "law of
the case" doctrine. That doctrine has two components:
One branch involves the so-called mandate rule
(which, with only a few exceptions, forbids,
among other things, a lower court from
relitigating issues that were decided by a
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higher court, whether explicitly or by
reasonable implication, at an earlier stage of
the same case). The other branch . . .
provides that unless corrected by an appellate
tribunal, a legal decision made at one stage
of a civil or criminal case constitutes the
law of the case throughout the pendency of the
litigation.
Ellis v. United States, ___ F.3d ___, ___ (1st Cir. 2002) [No. 01-
2055, slip op. at 20] (citations and internal quotation marks
omitted). Here, the first branch — the mandate rule — obliged the
district court to follow our disposition of issues actually decided
in our earlier opinion.
In that opinion, we ruled unequivocally that the district
court's amended order and judgment constituted a straightforward
dismissal pursuant to Rule 41(a)(1)(ii).5 See Izquierdo Mora, slip
op. at 6. While there are exceptions to the mandate rule, none
applies here, and so that determination was binding on the district
court. United States v. Rivera-Martinez, 931 F.2d 148, 150 (1st
Cir. 1991). Viewed in this light, the question as to whether the
district court had jurisdiction over the Municipality's motion for
5
The rule reads in pertinent part:
[A]n action may be dismissed by the plaintiff without
order of court . . . by filing a stipulation of dismissal
signed by all parties who have appeared in the action.
Unless otherwise stated in the notice of dismissal or
stipulation, the dismissal is without prejudice . . . .
Fed. R. Civ. P. 41(a)(1)(ii).
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summary enforcement of the 1987 judgment hinges on the consequences
that attach to a Rule 41(a)(1)(ii) dismissal.
The Supreme Court spoke directly to that issue in
Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375 (1994).
There, as here, the parties reached a settlement, and the district
court dismissed the case pursuant to Rule 41(a)(1)(ii). Id. at
376-77. A problem subsequently arose, and a disappointed party
moved for summary enforcement of the settlement agreement. The
district court exercised jurisdiction over the motion and granted
relief. Id. at 377. The court of appeals affirmed the exercise of
supplemental enforcement jurisdiction in an unpublished rescript,
and the Supreme Court granted certiorari to consider the
jurisdictional question. Kokkonen v. Guardian Life Ins. Co., 510
U.S. 930 (1993).
In its ensuing opinion, the Court pointed out that
enforcing a settlement agreement "requires its own basis for
jurisdiction." Kokkonen, 511 U.S. at 378. It debunked the notion
that a district court always enjoys inherent power to enforce
settlement agreements. Id. at 377-78. Moreover, it found that
"[n]either [Rule 41(a)(1)] nor any provision of law provides for
jurisdiction of the [rendering] court over disputes arising out of
an agreement that produces [a Rule 41(a)(1) dismissal]." Id. at
378. The Court went on to explain that, if a voluntary dismissal
is contemplated, the parties may arrange for the rendering court to
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retain supplemental enforcement jurisdiction over a related
settlement by having the court either (1) incorporate in the
dismissal order the terms of the settlement agreement, or (2) enter
a separate stipulation (signed by all the parties) that authorizes
the retention of jurisdiction. Id. at 381. Should neither of
these routes be traveled, a party claiming a breach of a settlement
agreement must pursue a separate action to seek enforcement of the
agreed terms. Id. at 382.
Kokkonen is controlling here. The original action ended
in what we termed a straightforward dismissal under Rule
41(a)(1)(ii). Izquierdo Mora, slip op. at 6. We ruled that the
settlement agreement was not incorporated into the dismissal order,
and we classified the district court's comments anent its inherent
power as mere dicta. Id. These are now established facts under
the mandate rule. Together with the absence of any stipulation
memorializing the parties' mutual assent to the retention of
supplemental enforcement jurisdiction, they bring this case
squarely within Kokkonen's precedential orbit.
In an effort to obscure the clarity of this reasoning,
the Municipality asseverates that the district court in fact
retained jurisdiction in a manner consistent with Kokkonen. Its
asseveration relies primarily on the district court's promise to
protect the settlement and its pledge to take whatever action might
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prove necessary to do so. See supra note 2 (quoting the district
court's language).
This is a cut-and-paste argument, which erroneously
presupposes that our earlier opinion excised only the first
sentence of the paragraph purporting to retain jurisdiction while
leaving intact the remainder of that paragraph. We reject that
attempt to balkanize our previous ruling. Our core holding in
Izquierdo Mora was stated unambiguously: the amended order and
judgment operated as a Rule 41(a)(1)(ii) dismissal — with no
strings attached. See Izquierdo Mora, slip op. at 6 (explaining
that the district court's amended order and judgment "do[] no more
than accept[] the settlement and voluntarily dismiss[] the case as
the parties had requested"). Since the course of action that the
Municipality sought to pursue below is based upon the very argument
that we previously dismissed as "farfetched and without basis,"
id., the mandate rule obliged the lower court to reject it.
This result is perfectly consistent with Kokkonen.
Although the Kokkonen Court spelled out certain ways in which a
district court could retain enforcement jurisdiction over a
settlement coincident with a Rule 41(a)(1) dismissal, it
conditioned that outcome on the mutual consent of the parties. See
Kokkonen, 511 U.S. at 381 ("If the parties wish to provide for the
court's enforcement of a dismissal-producing settlement agreement,
they can seek to do so.") (emphasis in original); id. at 381-82
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("[W]e think the court is authorized to embody the settlement
contract in its dismissal (or, what has the same effect, retain
jurisdiction over the settlement contract) if the parties agree.").
There is no such mutuality here. The record shows beyond hope of
contradiction that the Department never agreed to imbue the
district court with summary enforcement authority over the
settlement agreement (indeed, the Department's insistence that the
district court not be so endowed was the raison d'être for the
earlier appeal). See Izquierdo Mora, slip op. at 2, 5. Nor did
the Municipality, at the relevant time, "clearly dispute [the
Department's] assertion that [it] had never agreed to anything
other than a voluntary dismissal pursuant to Fed. R. Civ. P.
41(a)(1)." Id. at 4-5. Given the absence of mutual consent, the
district court did not have the authority, under Kokkonen, to
retain supplemental enforcement jurisdiction.
We need go no further. The law of the case required the
lower court to adhere to our earlier opinion interpreting the
amended order and judgment as a routine application of Rule
41(a)(1)(ii). Characterizing the order and judgment in that
fashion, the district court correctly concluded that it lacked
jurisdiction to entertain the Municipality's attempted summary
enforcement proceeding. In short, the Municipality has identified
no legally sufficient basis for the district court's retention of
jurisdiction over the 1987 settlement.
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These determinations do not leave the Municipality
remediless. If it believes that the Department is in breach of a
preexisting contractual obligation, it may seek to vindicate its
rights in a separate action. See Kokkonen, 511 U.S. at 381-82;
Malave v. Carney Hosp., 170 F.3d 217, 220 (1st Cir. 1999). That
action may be prosecuted in any court of competent jurisdiction.
We express no opinion, however, as to whether any such action would
(or would not) fall within the jurisdiction of the federal courts.
By the same token, we do not reach (and take no view of) any
interpretive comments that the district court may have made anent
the reach of the 1987 settlement agreement.
We affirm the order of the district court denying the
plaintiff's motion for summary enforcement of the 1987 judgment.
Costs are to be taxed in favor of the defendants.
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