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) a notice of dismissal before the opposing party serves
either an answer or a motion for summary judgment; or
(ii) a stipulation of dismissal signed by all parties who have
appeared.
(B) 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.
(2) 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