Sealed v. Sealed

United States Court of Appeals Fifth Circuit F I L E D REVISED JUNE 12, 2006 June 12, 2006 In the Charles R. Fulbruge III Clerk United States Court of Appeals for the Fifth Circuit _______________ m 04-11173 _______________ SEALED APPELLANT, Plaintiff-Appellant, VERSUS SEALED APPELLEE, Defendant-Appellee. _________________________ Appeal from the United States District Court for the Northern District of Texas _________________________ Before SMITH, GARZA, and OWEN, provisions of the False Claims Act, 31 U.S.C. Circuit Judges. §§ 3729-3744 (the “FCA”). In August 2002, the United States filed its Notice of Election to JERRY E. SMITH, Circuit Judge: Decline Intervention, stating that it would de- cline to intervene and directing the district The Appellant appeals the dismissal of his court to the provision of the FCA, id. § 3730- qui tam suit for failure timely to serve process (b)(1), that allows the relator to pursue the and to prosecute. We affirm. action in the name of the United States.1 I. In May 2000, Appellant sued Appellee, a 1 The United States also reserved the right to in- corporation, alleging claims under the qui tam (continued...) That same month, the court ordered the judice, the court “decline[d] to dismiss the complaint, the government’s Notice of De- case with prejudice and, in its discretion, dis- clination, and its order unsealed and required misse[d] it instead without prejudice.” that those documents be served on Appellee. Appellant, however, never served the com- II. plaint or any other documentation on Appel- A. lee. Nor did he take any other action in the On appeal, Appellant asserts that some of case, such as filing motions or pleadings, seek- his FCA claims could be time-barred under the ing discovery, or notifying Appellee of the Act’s statute of limitations, and thus the pending claims, during the two years that the dismissal without prejudice should be reviewed case remained unsealed and pending. more stringently as a dismissal with prejudice.2 As to the claims that would not be barred by In May 2004, an attorney for the United limitations upon refiling, we treat the dismissal States informed Appellee that a qui tam com- as without prejudice and affirm. Federal Rule plaint had been filed against it. It was only of Civil Procedure 4(m) provides that if ser- through that conversation that Appellee vice of the summons and complaint is not learned of Appellant’s lawsuit that the district made on a defendant within 120 days after the court had ordered unsealed twenty-one months filing of the complaint, the court, “upon mo- earlier. tion or its own initiative after notice to the plaintiff, shall dismiss the action without preju- In July 2004, Appellee filed a motion to dis- dice.” Appellant has been unable to show miss under Federal Rules of Civil Procedure good cause why process has not been served 9(b) and 12(b)(6) and for failure to prosecute during the two years after it was ordered by under Federal Rule of Civil Procedure 41(b). the court. He can refile these claims, because Appellee requested that the court dismiss with the statute of limitations has not yet run. prejudice for failure to plead the FCA claims with the particularity required by rules 9(b) We treat the dismissal without prejudice as and 12(b)(6) and, alternatively, for failure to a dismissal with prejudice, however, as to Ap- prosecute the lawsuit during the two years it pellant’s claims that would be barred by limi- had been unsealed. tations. Berry, 975 F.2d at 1191. Rule 41(b) dismissals with prejudice will be affirmed only In August 2004, the court dismissed the on a showing of “‘a clear record of delay or complaint for failure to prosecute and was sil- contumacious conduct by the plaintiff’ . . ., ent as to Appellee’s grounds for dismissal and where lesser sanctions would not serve the based on rules 9(b) and 12(b)(6). Despite Ap- pellee’s request that the dismissal be with pre- 2 See Berry v. CIGNA/RSI-CIGNA, 975 F.2d 1 (...continued) 1188, 1191 (5th Cir. 1992) (finding that where ap- tervene in the future based on good cause; it re- plicable statute of limitations bars refiling, a quested service of all pleadings and orders filed in dismissal without prejudice “is no less severe a the action and asked that only the complaint, its sanction than a dismissal with prejudice, and the Notice of Election to Decline Intervention, and the same standard of review is used”) (internal cita- order be unsealed and served on Appellee. tions omitted). 2 best interests of justice.”3 B. In any event, at least two aggravating fac- Appellant argues that a dismissal with pre- tors are present in this case. First, there is ac- judice is appropriate only if, in addition to the tual prejudice to the defendant. We found two “requisite” factors described above, one of similar actual prejudice resulting from failure several “aggravating factors” is also found. to serve process within the statute of limita- The so-called “aggravating factors” are “the tions period in Veazey v. Young’s Yacht Sale extent to which the plaintiff, as distinguished & Serv., 644 F.2d 475, 477-78 (5th Cir. from his counsel, was personally responsible Unit A May 1981), although we did not use for the delay, the degree of actual prejudice to the term “aggravating factor.” Nonetheless, in the defendant, and whether the delay was the Rogers, 669 F.2d at 320, we noted that Veazey result of intentional conduct.” Rogers, 669 had all the three aggravating factors.5 F.2d at 320. In Veazey, we explained that failure to We disagree with Appellant’s contention serve process within the statute of limitations that, to affirm a dismissal with prejudice, an period is extremely prejudicial because it af- aggravating factor must be present; the pres- fects all the defendant’s preparations: ence of requisite factors “can alone justify dis- missal.” Id. We have stated that aggravating We view a delay between filing and service factors must “usually” be found; we have not as being more likely to result in prejudice said they must “always” be found.4 than a delay occurring after service, for in the former situation the defendant is not put on formal notice and allowed a full oppor- 3 tunity to discover and preserve relevant Rogers v. Kroger Co., 669 F.2d 317, 320 (5th evidence when the matter is still relatively Cir. 1982); Tello v. Comm’r, 410 F.3d 743, 744 (5th Cir.), cert. denied, 126 S. Ct. 381 (2005). fresh and the evidence is intact and avail- Tello and Berry use a slightly different standard able. than does Rogers, but as we discuss in part C, infra, the Rogers standard is the one applicable in Veazey, 644 F.2d at 478. Delay alone can re- cases where plaintiff failed to serve process and the sult in prejudice if the statute of limitations has limitations period expired during plaintiff’s delay. run: “[E]vidence deteriorates or disappears, memories fade, and witnesses die or move 4 See Rogers, 669 F.2d at 320 (explaining that away.” Id. Further, if the statute has run, a “such a sanction is reserved for the most egregious potential defendant that has not been served is of cases, usually cases where the requisite factors of clear delay and ineffective lesser sanctions are bolstered by the presence of at least one of the aggravating factors) (emphasis added); Tello, 410 4 (...continued) F.3d at 744 (“We generally will affirm a dismissal (emphasis added). only if we find at least one of three aggravating 5 factors”) (emphasis added); Berry, 975 F.2d at See also Fournier v. Textron, Inc., 776 F.2d 1191 (“Additionally, in most cases where this 532, 534 (5th Cir. 1985) (citing Veazey and hold- Court has affirmed dismissals with prejudice, we ing that failure to serve within limitations period found at least one of three aggravating factors.”) creates actual prejudice and justifies dismissal with (continued...) prejudice). 3 entitled to expect that it will no longer have to the acts of his attorney. Link v. Wabash R.R., defend the claim: “If service can be delayed 370 U.S. 626 (1962). Also, although it is true indefinitely once the complaint is filed within that this case has had periods of inactivity in the statutory period, these expectations are the past, when before the unsealing the gov- defeated and the statute of limitations no ernment took two years to make a decision longer protects defendants from stale claims.” with respect to intervention, it would be un- Id. reasonable for Appellant to expect similar de- lays after the unsealing. After the unsealing, Another aggravating factor that is present Appellant retained new counsel, and the bur- here is that the delay could have only been in- den to prosecute rested solely on Appellant, tentional. Appellee is a U.S. corporation with not the government. a known address. Therefore, Appellant’s counsel could not have encountered any hard- One does not have to be legally sophisti- ship in perfecting service. As we explained in cated to understand that if he is the only plain- Veazey, in light of a prolonged delay and de- tiff in the case and does not hear from his spite the “habitual slow movement of cases in attorney for almost two years, his case is not the district ,” we “can only conclude that being diligently prosecuted. “We believe that counsel intentionally failed to cause effectua- there comes a point at which the deficiency in tion of service” when the furnishing of infor- counsel’s performance puts the plaintiff on no- mation for service of process is a simple task: tice that, unless a new lawyer is obtained, the very continuation of the lawsuit is threatened.” The explanations offered byplaintiff's coun- Callip v. Harris County Child Welfare Dep’t, sel, including the move of his office loca- 757 F.2d 1513, 1522 (5th Cir. 1985) (affirm- tion, the transfer of the case from the ing dismissal with prejudice). docket of one judge to the docket of an- other, and the suggested habitual slow Moreover, the issue of whether the delay movement of cases in the district do not was the result of intentional conduct does not justify the extent of inaction we perceive in depend on whether the intentional conduct this record. The furnishing of information was by the party as distinguished from his at- for proper service of process was not that torney. Rather, as explained, conduct by the difficult or laborious a task. We can only attorney is sufficient.6 There is a separate ag- conclude that counsel intentionally failed to gravating factor dealing with delay attributable cause effectuation of service. to the party, rather than his attorney. Veazey, 644 F.2d at 477. Further, Appellant C. has not missed the 120-day deadline by only a With respect to the “requisite” factors, day or a week or two, but by almost 600 days. Therefore, the delay is not a “simple inadver- tence.” 6 See also Porter v. Beaumont Enter. & Jour- nal, 743 F.2d 269, 271 (5th Cir. 1984) (“Two of Appellant contends he was not informed the three aggravating factors recognized in Rogers about the delay by his attorney. It is well-es- were present in this case. The delay was the result tablished, however, that a party is bound by of intentional conduct by plaintiff’s attorney . . . .”). 4 there is a “a clear record of delay” in this case: lesser sanctions would not prompt diligent almost two years of total inactivity on Appel- prosecution, or whether the record shows that lant’s side.7 The other requisite factor is also the district court employed lesser sanctions present. As we explained in Veazey, that proved to be futile, see Berry, 975 F.2d at 1191, Rogers and Veazey predate these cases A delay between filing and service ordi- and employ the standard we used above, which narily is to be viewed more seriously than a is derived from an even earlier case, Brown v. delay of a like period of time occurring Thompson, 430 F.2d 1214, 1216 (5th Cir. after service of process. 1970). We decline to decide whether Berry is in tension with Rogers, so the standard dis- In this type situation, “a lesser sanction cussed in Rogers is the correct one under the would not better serve the interests of jus- prior panel rule. tice.” Brown v. Thompson, 430 F.2d 1214, 1216 (5th Cir. 1970). We do conclude that in cases such as this one, where the limitations period expired dur- Veazey, 644 F.2d at 478.8 ing the delay, later panels such as Berry or Tello could not have overruled Veazey and We note that although later cases discuss Porter, which found that there was no abuse of the second requisite factor in terms of whether discretion in dismissing a case for failure to a district court has expressly determined that prosecute, even if the district court judge did not previously employ a lesser sanction or ex- pressly determined that lesser sanctions would 7 not prompt diligent prosecution. There is no See Veazey, 644 F.2d at 478 (affirming dis- need for the district court expressly to deter- missal where plaintiff had a 21-month delay in mine that lesser sanctions would not prompt serving process and limitations expired during the delay); see also Fournier, 776 F.2d at 534 (affirm- diligent prosecution when this court has deter- ing dismissal where plaintiff had 32-month delay in mined that it is precisely such prosecution that serving process and limitations expired during the the statute of limitations is meant to stop. If delay), Porter, 743 F.2d at 271 (affirming dis- the statute has run, a potential defendant that missal where plaintiff delayed 2½ years in serving has not been served is entitled to expect that it process and limitations expired during the delay); will no longer have to defend the claim.9 Harrelson v. United States, 613 F.2d 114 (5th Cir. 1980) (affirming dismissal given the 22-month Although Veazey stated that “[w]e are not delay between last pleading filed and dismissal). unmindful of the need to be cognizant of the Other courts also have affirmed dismissals with innocent plaintiff who may be harmed by the prejudice for failure to serve process where lim- inaction of counsel,” 644 F.2d at 479, Veazey itations has run, even where the delay was as short itself affirmed the dismissal with prejudice, as four months. See, e.g., Geiger v. Allen, 850 even if the plaintiff in that case was innocent F.2d 330 (7th Cir. 1988). 8 See also Porter, 743 F.2d at 272 (“[W]hen a plaintiff has been guilty of a series of inexcusable delays in serving process on a defendant, and then 9 perfects service improperly, ‘a lesser sanction Appellant never raised, in the district court, would not better serve the interests of justice.’”). the limitations bar as a reason not to dismiss. 5 and the inaction was that of counsel.10 There- fore, the court did “weigh” the fact that the plaintiff was not involved in the delay, but nonetheless found that the prejudice to the de- fendant from the limitations lapse was so se- vere that it warranted dismissal. Id.11 AFFIRMED. 10 Veazey does not discuss whether the plaintiff participated in the delay or whether he was inno- cent. It only mentioned that the counsel caused the delay. See Veazey, 644 F.2d at 477 (“We can only conclude that counsel intentionally failed to cause effectuation of service.”). Because, however, the opinion refers to the inaction of counsel and says that “[w]e are not unmindful of the need to be cognizant of the innocent plaintiff who may be harmed by the inaction of counsel,” the only in- ference is that the plaintiff was innocent or else the court would have discussed his participation in the delay. 11 See also Porter, 743 F.2d at 271-72 (affirm- ing dismissal where plaintiff delayed 2½ years in serving process and limitations expired during the delay and where “[t]he delay was the result of in- tentional conduct by plaintiff’s attorney,” without discussing whether the plaintiff participated in the delay or was innocent.) 6 EMILIO M. GARZA, Circuit Judge, dissenting in part: I respectfully dissent from that part of the majority’s opinion affirming the dismissal of those claims that would be barred by the statute of limitations. It is well-established that a dismissal with prejudice is “an extreme sanction that deprives a litigant of the opportunity to pursue his claim.” Gonzales v. Firestone Tire & Rubber Co., 610 F.2d 241, 247 (5th Cir. 1980). Accordingly, “[w]e will affirm dismissals with prejudice for failure to prosecute only when (1) there is a clear record of delay or contumacious conduct by the plaintiff, and (2) the district court has expressly determined that lesser sanctions would not prompt diligent prosecution, or the record shows that the district court employed lesser sanctions that proved to be futile.” Berry v. CIGNA, 975 F.2d 1188, 1191 (1992). In this case, the district court did not consider or employ lesser sanctions. In fact, the district court did not intend to dismiss the case with prejudice to a future filing at all: “The court declines to dismiss this case with prejudice and, in its discretion, dismisses it instead without prejudice.” It is only by operation of the statute of limitations, an issue that was not before the district court and of which it had no notice, that the dismissal became prejudicial as to certain claims. See McGowan v. Faulkner Concrete Pipe Co., 659 F.2d 554, 556 (5th Cir. 1981) (“Where further litigation of [a] claim will be time-barred, a dismissal without prejudice is no less severe a sanction than a dismissal with prejudice, and the same standard of review is used.”). In such circumstances, we have consistently vacated and remanded to the district court for an initial determination regarding the use or futility of lesser sanctions. See, e.g., Hatchet v. Nettles, 201 F.3d 651, 653 (5th Cir. 2000); Long v. Simmons, 77 F.3d 878, 880 (5th Cir. 1996); Berry, 975 F.2d at 1191; Burden v. Yates, 644 F.2d 503, 505 (5th Cir. Unit B May 1981); Gray v. Fid. Acceptance Corp., 634 F.2d 226, 228 (5th Cir. Unit B Jan. 1981); 7 Boazman v. Econ. Lab., Inc., 537 F.2d 210, 213 (5th Cir. 1976); Pond v. Braniff Airways, Inc., 453 F.2d 347, 349 (5th Cir. 1972). The majority rejects the Berry standard and the litany of prior cases counseling remand. Instead, it relies upon Porter v. Beaumont Entertainment & Journal, 743 F.2d 269 (5th Cir. 1984), Rogers v. Kroger, 669 F.2d 317 (5th Cir. 1982), and Veazey v. Young’s Yacht Sale & Service, 644 F.2d 475 (5th Cir. Unit A May 1981), for the suggestion that an express determination of futility or the use of lesser sanctions by the district court is unnecessary. In the majority’s view, this court may independently determine, without the district court’s intimate understanding of the vagaries of the case and the issues facing the parties, whether there is a “a clear record of delay or contumacious conduct by the plaintiff” and whether “a lesser sanction would not better serve the interests of justice.” Id. at 477.1 Applying those cases, the majority opines that no lesser sanction would better serve the interests of justice based upon an ill-advised rule of law for service of process dismissals. The majority’s reliance on these cases is misplaced because they differ from this case, and the Berry-line of cases, in one critical respect. The district courts in Porter, Rogers, and Veazey all intentionally and expressly dismissed with prejudice. Where the dismissal is with prejudice, the district court implicitly rejected lesser sanctions as futile, opting instead for the most severe sanction. In such situations, an appellate court may properly assume that the district court considered lesser sanctions futile and review that determination against the record. If, however, the district court dismissed without prejudice and did not address the potential effect of the statute of limitations, as 1 See Estate of Solis-Rivera v. United States, 993 F.2d 1, 3 (1st Cir. 1993) (remanding because a “district court, which has direct and continuous contact with attorneys, is best able to judge in the first instance whether an attorney’s misconduct is sufficiently egregious to warrant the ‘death knell’ of a lawsuit . . . or whether some lesser sanction would be more appropriate” (citation omitted)); Ciralsky v. CIA, 355 F.3d 661, 674 (D.C. Cir. 2004) (similar). 8 in this case, there can be no implicit district court determination regarding futility for the appellate court to review. In fact, there is no guarantee that the district court considered the full import and effect of its dismissal at all. See McNeal v. Papasan, 842 F.2d 787, 794 (5th Cir. 1988) (noting that the “harshness of the sanction” demands that the district court be the first to “examine[] all the circumstances . . . , test[] those circumstances by the correct standard, and supplement[] the record in a way which lets us understand that it has complied with those standards”); Hornbuckle v. Arco Oil & Gas Co., 732 F.2d 1233, 1237 (5th Cir. 1984) (“When a district court dismisses an action with prejudice for counsel’s failure to prosecute, such findings of fact are essential for our consideration of the inevitable argument that the dismissal was an abuse of its discretion.”). The majority declines to decide whether the standard in Berry is in tension with the standard in Rogers and Veazey. Rather, it simply concludes that Rogers and Veazey are earlier in time and, therefore, must present the correct standard. In my view, our cases are consistent and display a common-sense approach to dismissals that are prejudicial, by intent or effect, to a future filing. Where a district court dismisses with prejudice, this court may find an abuse of discretion where we determine that lesser sanctions would better serve the interests of justice. See, e.g., Porter, 743 F.2d at 276.2 But, where a district court dismisses without prejudice and is unaware that the dismissal is effectively with prejudice because, for example, the statute of limitations has run, this court will find an abuse of discretion unless, through conduct or statement, the district court gave some indication that lesser sanctions would be futile. See, e.g., Berry, 975 F.2d 1192. Unfortunately, the majority 2 Appellate review begins with any district court action or statement evidencing the futility of lesser sanctions. See Porter, 743 F.2d at 272 (“Besides the clear record of delay, the district court did impose a lesser sanction before dismissing the case with prejudice.”); Rogers, 669 F.2d at 321 (“[T]here is nothing in the district court’s order and opinion or the record indicating that less severe sanctions were considered and found to be futile or contrary to the interests of justice.”). 9 elides the rule of law evident in our cases. Because the district court did not intend to dismiss the case with prejudice to a future filing and because it did not expressly consider or apply lesser sanctions, our cases require that we vacate and remand.3 Accordingly, I dissent from the majority’s opinion affirming the district court’s unintended dismissal with prejudice. I would leave to “the discretion of the district court the decision on the precise sanction which should be applied” and note that the “district court might reimpose the dismissal” with prejudice should it “find on remand that [plaintiff’s] conduct was contumacious and that dismissal with prejudice is the least sanction which would serve the ends of justice.” McNeal, 842 F.2d at 794. 3 In footnote 9, the majority asserts that “Appellant never raised, in the district court, the limitations bar as a reason not to dismiss.” See supra n.9. (More accurately, neither party raised the issue before the district court.). It is clear from the record, however, that Appellant’s counsel absented himself from the case without withdrawing and without notice to his client or the court. Although Appellant never raised the limitations bar as a reason not to dismiss, whether Appellant’s case should be dismissed with prejudice under these circumstances is a question the district court should consider in the first instance. 10