RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0376p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

MICHIGAN SURGERY INVESTMENT, LLC,

VEI - MICHIGAN, INC., and VISIONARY

ENTERPRISES, INC.,

Plaintiffs-Appellants,

v.

MOHAMMED ARMAN, M.D., et al.,

Defendants-Appellees,

OAKWOOD ENTERPRISES, INC. and OAKWOOD

HEALTHCARE, INC.,

Defendants.

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No. 10-1612

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 09-14656—Anna Diggs Taylor, District Judge.

Argued: October 12, 2010

Decided and Filed: December 14, 2010 

Before: BATCHELDER, Chief Judge; KEITH and ROGERS, Circuit Judges.

_________________

COUNSEL

ARGUED: Wayne C. Turner, BINGHAM McHALE LLP, Indianapolis, Indiana, for

Appellants. Paul P. Asker, ASKER PERLMUTER, PLC, Farmington Hills, Michigan,

for Appellees. ON BRIEF: K. Scott Hamilton, J. Benjamin Dolan, DICKINSON

WRIGHT PLLC, Detroit, Michigan, for Appellants. Paul P. Asker, Gary E. Perlmuter,

ASKER PERLMUTER, PLC, Farmington Hills, Michigan, for Appellees. 

ROGERS, J., delivered the opinion of the court, in which BATCHELDER, C.J.,

and KEITH, J., joined with BATCHELDER, C. J. (pp. 9–10), delivering a separate

concurring opinion.

1
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 2

_________________

OPINION

_________________

ROGERS, Circuit Judge. Plaintiff-appellant Michigan Surgery Investment, LLC

and its affiliates appeal the dismissal of this civil action with prejudice after the plaintiffs

had moved for voluntary dismissal without prejudice under Rule 41(a)(2) of the Federal

Rules of Civil Procedure. Because the district court did not give the plaintiffs notice of

its intention to dismiss with prejudice, along with an opportunity to withdraw the request

for voluntary dismissal, the court should not have dismissed with prejudice.

This case arises out of a power struggle between doctors and investors for control

of the Dearborn Surgery Center, an outpatient surgery center in Dearborn, Michigan.

Plaintiffs are three affiliated Indiana businesses, collectively referred to here as

“Michigan Surgery.” Defendants are two affiliated Michigan corporations, collectively

referred to here as “Oakwood,” and thirty-six individual physicians.

Michigan Surgery filed this suit against Oakwood and the thirty-six physicians

on November 30, 2009, alleging various state law claims including breach of contract,

breaches of fiduciary duty, and oppression of minority-share members of the Dearborn

Surgery Center. Count III of the complaint sought a declaration that an agreement

between Oakwood and the thirty-six physicians was invalid as against public policy

because the consideration paid to the physicians violated the federal Anti-Kickback Act,

42 U.S.C. § 1320a-7b(b). Michigan Surgery asserted there was federal question

jurisdiction on the theory that its right to have the agreement between Oakwood and the

physicians declared invalid “depend[ed] on the validity, construction, or effect of federal

law,” under Mikulski v. Centerior Energy Corp., 501 F.3d 555, 565 (6th Cir. 2007). 

The physicians responded by filing a parallel action against Michigan Surgery

in Wayne County Circuit Court on December 29, 2009, alleging breach of contract,

conversion, breach of fiduciary duty, fraud, and civil conspiracy. The physicians also

filed a timely Rule 12(b)(1) response to Michigan Surgery’s complaint, arguing that the
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 3

case should be dismissed for lack of jurisdiction because Michigan Surgery’s claim that

the agreement between Oakwood and the physicians was invalid failed to raise a federal

question under 28 U.S.C. § 1331.

On January 6, 2010, Michigan Surgery filed a motion for a temporary restraining

order against the physicians, seeking to enjoin them from activities that allegedly

amounted to breach of contract. The motion was denied the following day. At the

hearing, the district court expressed some reservations about whether there was

jurisdiction and whether Michigan Surgery had sued the proper parties. However, the

court did not consider the physicians’ Rule 12(b)(1) motion to dismiss.

On February 9, 2010, Michigan Surgery filed a motion for voluntary dismissal

without prejudice under Rule 41(a)(2). Michigan Surgery argued that the parallel action

filed by the physicians was currently pending in Wayne County Circuit Court, and that

the cases should be consolidated in state court “[i]n the interest of judicial efficiency and

economy.” In their response to Michigan Surgery’s motion for voluntary dismissal, the

physicians argued that if the district court granted Michigan Surgery’s motion, dismissal

should be with prejudice. On March 4, 2010, Michigan Surgery and Oakwood stipulated

to a dismissal without prejudice of all claims against Oakwood, leaving only the claims

against the physicians.

On March 22, 2010, the district court, with a different judge now assigned to the

case, held a hearing to consider the parties’ pending motions to dismiss: the physicians’

Rule 12(b)(1) motion to dismiss for lack of jurisdiction, and Michigan Surgery’s Rule

41(a)(2) motion for voluntary dismissal without prejudice. At the conclusion of the

hearing, the court dismissed the case with prejudice for lack of jurisdiction, and entered

a minute entry that denied Michigan Surgery’s motion for voluntary dismissal and

granted, with prejudice, the physicians’ motion to dismiss for lack of jurisdiction. The

minute entry was followed by a March 30, 2010 written order to the same effect.

On March 25, 2010, prior to the entry of the written order, Michigan Surgery

filed a motion to alter or amend the judgment, arguing that the court could not dismiss

with prejudice an action for which it lacked jurisdiction. Michigan Surgery asked the
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 4

court to change its order granting the physicians’ motion to dismiss for lack of

jurisdiction from being with prejudice to being without prejudice. On April 1, 2010, the

district court entered an amended order different from its earlier order. The amended

order granted with prejudice Michigan Surgery’s Rule 41(a)(2) motion for voluntary

dismissal and denied the physicians’ Rule 12(b)(1) motion to dismiss for lack of

jurisdiction. Michigan Surgery now appeals.

The only issue on appeal is whether the district court abused its discretion by

entering an order of voluntary dismissal with prejudice, without first giving Michigan

Surgery notice or an opportunity to withdraw the motion and proceed with the litigation.

See Bridgeport Music, Inc. v. Universal-MCA Music Pub., Inc., 583 F.3d 948, 953 (6th

Cir. 2009) (stating the scope of review). Reversal is required here because Michigan

Surgery was entitled to such notice and an opportunity to withdraw the motion before

accepting a voluntary dismissal with prejudice.

The district court improperly converted Michigan Surgery’s motion for voluntary

dismissal without prejudice into a dismissal with prejudice because the court did not give

Michigan Surgery notice of its intention to dismiss with prejudice. See United States v.

One Tract of Real Property, 95 F.3d 422, 425-26 (6th Cir. 1996). One Tract laid out

“three factors [that] must be considered in determining whether a court abused its

discretion when it dismissed a complaint with prejudice in response to a plaintiff’s

request for dismissal without prejudice”:

First, the district court must give the plaintiff notice of its intention to

dismiss with prejudice. Second, the plaintiff is entitled to an opportunity

to be heard in opposition to dismissal with prejudice. Third, the plaintiff

must be given an opportunity to withdraw the request for voluntary

dismissal and proceed with the litigation. This third requirement is

essential because, unlike a dismissal without prejudice, a dismissal with

prejudice operates as a rejection of the plaintiff’s claims on the merits

and res judicata precludes further litigation.

95 F.3d at 425-26 (citations omitted). In One Tract, the district court had dismissed with

prejudice a civil forfeiture action brought by the United States after the government had

moved for voluntary dismissal without prejudice under Rule 41(a)(2). On appeal, we
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 5

doubted the government’s assertion that it did not have notice of the court’s intention to

dismiss with prejudice, because the government knew that the opposing party had asked

for dismissal with prejudice and the opposing party had argued for dismissal with

prejudice at the hearing on the government’s motion. However, it was unnecessary to

decide whether the first two requirements were satisfied, because the third

requirement—that the plaintiff be given an opportunity to withdraw the motion and

proceed with the litigation—had not been met. Id. at 426.

The physicians argue that the notice requirement was satisfied here because

Michigan Surgery was well aware that the district court was considering dismissal with

prejudice, since the physicians’ response to the plaintiffs’ Rule 41(a)(2) motion

specifically requested that if the court granted the motion, that it dismiss with prejudice.

Although we reversed in One Tract based on the lower court’s failure to meet the third

requirement, rather than the notice requirement, the “notice” and “opportunity to

withdraw” requirements logically work together. The government in One Tract did not

have a meaningful opportunity to withdraw its request for voluntary dismissal because

it had no notice of the court’s intention to dismiss with prejudice. Stated differently, at

least where dismissal with prejudice is the condition, an opportunity to withdraw a

request for voluntary dismissal is meaningful only after the plaintiff has been given

notice of the terms on which the district court intends to condition a voluntary dismissal.

One Tract’s requirement of “notice of the court’s intention to dismiss with

prejudice” thus means that the district court must inform the plaintiff that the court

intends to grant a Rule 41(a)(2) motion with prejudice. See id. at 425. It is not enough

that the plaintiff is aware that dismissal with prejudice is possible under Rule 41(a)(2),

or even that the defendant has requested that any grant of a Rule 41(a)(2) motion be with

prejudice. The language of Rule 41(a)(2), providing that the district court may grant a

voluntary dismissal “on terms that the court considers proper,” Fed. R. Civ. P. 41(a)(2),

permits the court to “condition” the grant of a Rule 41(a)(2) motion on dismissal with

prejudice. See One Tract, 95 F.3d at 425. Because dismissal with prejudice is a “term”

or “condition” of voluntary dismissal, it must be presented to the plaintiff as such.
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 6

Otherwise, the plaintiff has to gamble on what the court will do. Forcing plaintiffs to

forecast the terms on which a district court intends to condition a voluntary dismissal

would discourage plaintiffs from filing Rule 41(a)(2) motions in the first place. Because

a dismissal with prejudice precludes further litigation, a plaintiff “need not . . . accept

the risk that his claim, not yet adjudicated, will be effectively rejected on its merits.”

Gravatt v. Columbia Univ., 845 F.2d 54, 56 (2d Cir. 1988).

This conclusion is supported by decisions from other circuits that have

considered the issue. See Marlow v. Winston & Strawn, 19 F.3d 300, 304 (7th Cir.

1994); Andes v. Versant Corp., 788 F.2d 1033, 1037 (4th Cir. 1986); GAF Corp. v.

Transamerica Ins. Co., 665 F.2d 364, 368 (D.C. Cir. 1981). Thus, the plaintiffs were

entitled to notice of the court’s intention to dismiss with prejudice. Because the district

court did not inform Michigan Surgery that it planned to grant the Rule 41(a)(2) motion

with prejudice, the court’s dismissal with prejudice was not proper.

Likewise, the district court did not provide Michigan Surgery with an opportunity

to withdraw the request for voluntary dismissal and proceed with the litigation. See One

Tract, 95 F.3d at 425-26. The physicians argue that the district court was not required

to permit the plaintiffs to withdraw their motion because the court was going to dismiss

the case anyway under Rule 12(b)(1).

However, a dismissal for lack of jurisdiction was not a foregone conclusion in

this case. While the hearing on Michigan Surgery’s motion for a temporary restraining

order suggests that the district court had “a very serious question about subject matter

jurisdiction,” the court did not decide that issue, and a different judge presided over the

March 22 hearing on the parties’ motions to dismiss. Moreover, the physicians’

argument overlooks Michigan Surgery’s right to appeal a dismissal with prejudice for

lack of jurisdiction. Assuming Michigan Surgery had withdrawn its Rule 41(a)(2)

motion and the district court had granted the physicians’ Rule 12(b)(1) motion with

prejudice, that disposition could have been appealed on at least two grounds. First,

Michigan Surgery thought it had a good argument that dismissal for lack of jurisdiction

could not be with prejudice, because a dismissal with prejudice was equivalent to
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 7

adjudication on the merits. See Mitan v. Int'l Fid. Ins. Co., 23 F. App’x 292, 298 (6th

Cir. 2001) (“Dismissals of actions that do not reach the merits of a claim, such as

dismissals for lack of jurisdiction, ordinarily are without prejudice.”); C. Wright, A.

Miller, & M. Kane, Federal Practice and Procedure § 2713, p. 239 (3d ed. 1998) (“If the

court has no jurisdiction, it has no power to enter a judgment on the merits and must

dismiss the action.”). Second, Michigan Surgery maintained that the district court did

have jurisdiction because a federal question was “embedded” in the claim that the

agreement between Oakwood and the physicians was invalid as a matter of public

policy. See Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312

(2005). Michigan Surgery could have gone at least one more round in federal court if

it had been given an opportunity to withdraw its motion for voluntary dismissal. And

even if a dismissal for lack of jurisdiction had been upheld on appeal, Michigan Surgery

could have continued litigating in state court.

The physicians rely on GAF, which held that the plaintiff need not have been

given an opportunity to withdraw the motion because “it [was] highly unlikely” that the

plaintiff would have done so. 665 F.2d at 368-69. However, in GAF the condition for

voluntary dismissal was not dismissal with prejudice, but instead the imposition of

attorneys’ fees. Dismissal with prejudice is more extreme in this context than an award

of attorneys’ fees, because “a dismissal with prejudice operates as a rejection of the

plaintiff’s claims on the merits.” One Tract, 95 F.3d at 426; see also Marlow, 19 F.3d

at 304. Indeed, in One Tract we distinguished GAF precisely on the difference between

dismissal with prejudice and voluntary dismissal with the imposition of fees. 95 F.3d

at 426 n.7.

The physicians also rely on Beard v. Sheet Metal Workers Union, 908 F.2d 474

(9th Cir. 1990), in arguing that an opportunity to withdraw the motion was present

because Michigan Surgery “should have known” of the option of withdrawing the

motion. In Beard, the Ninth Circuit considered “whether Beard knew or should have

known that pursuant to Fed. R. Civ. P. 41(a)(2) he had the option of withdrawing his

motion for voluntary dismissal in lieu of accepting the dismissal on condition that he pay
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 8

the union’s costs and attorneys’ fees.” 908 F.2d at 476. The court concluded that Beard

“should have known” of this option because the requirement that the plaintiff be given

an opportunity to withdraw the motion was settled law in the Ninth Circuit when Beard

moved for voluntary dismissal, and because Beard had at all times been represented by

counsel. Id. at 477.

Beard does not support the physicians’ argument for two reasons. First, like

GAF, Beard involved the imposition of attorneys’ fees—not dismissal with

prejudice—as a condition of voluntary dismissal. See id. at 476-77. More importantly,

the Ninth Circuit’s reasoning was that because of clear Ninth Circuit precedent, the

movant both had, and knew or should have known he had, the opportunity to withdraw

after learning of the court’s intended condition. Whatever the state of Ninth Circuit law

in this regard, the district court’s order in the instant case did not provide such an

opportunity. 

Because the district court did not give Michigan Surgery notice of its intention

to dismiss with prejudice and an opportunity to withdraw the request for voluntary

dismissal, we reverse the district court’s judgment and remand for proceedings

consistent with this opinion. 
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 9

1

The physicians’ choice to label as a motion for summary judgment what was clearly a motion

to dismiss raises the specter of gamesmanship on the part of the physicians, forcing Michigan Surgery to

expend additional resources in order to obtain permission of the court for voluntary dismissal.

______________________

CONCURRENCE

______________________

ALICE M. BATCHELDER, Chief Judge, concurring. I am in complete

agreement with the lead opinion’s conclusion and reasoning. The district court’s

decision to dismiss, with prejudice, Michigan Surgery’s claims without any notice or

opportunity to withdraw the motion for voluntary dismissal is troubling, and I believe

it is completely appropriate to reverse and remand. I write separately only to highlight

a peculiar point of procedural history in this case which deserves additional scrutiny.

The physicians filed, as their first responsive pleading in this case, a “Motion for

Summary Judgment Pursuant to Fed. R. Civ. P. 12(b)(1),” arguing a lack of subject

matter jurisdiction. After Michigan Surgery filed its Amended Complaint, the

physicians filed a second “Motion for Summary Judgment,” again arguing lack of

subject matter jurisdiction. Prior to the resolution of the physicians’ second motion,

Michigan Surgery filed its motion for voluntary dismissal, pursuant to Fed. R. Civ. P.

41(a)(2). Rule 41(a)(2) requires permission of the court, and the question before us is

whether the district court erred in its grant of Michigan Surgery’s motion with prejudice.

However, it is not clear that Rule 41(a)(2) was the correct rule to apply in this case.

Prior to the filing of an answer or a motion for summary judgment, a plaintiff

may voluntarily dismiss its claims without obtaining permission of the court, and that

dismissal would be without prejudice. Fed. R. Civ. P. 41(a)(1). Only after an answer

or motion for summary judgment has been filed does the plaintiff require the permission

of the opposing party or the court to dismiss the claims. Fed. R. Civ. P. 41(a)(1)-(2).

The physicians’ motion was not a motion for summary judgment, regardless of the title

chosen by the physicians,1

 so when Michigan Surgery filed its motion for voluntary

dismissal, the physicians had filed nothing with the court that would have precluded
No. 10-1612 Michigan Surgery Inv. et al. v. Arman et al. Page 10

Michigan Surgery from dismissing their claims under Rule 41(a)(1). Interestingly, the

district court treated the physicians’ motion as a motion to dismiss, which it clearly was,

yet the district court failed to recognize the full import of that determination.

Specifically, because the physicians had filed neither an answer nor a motion for

summary judgment, the district court could have, and perhaps should have, treated

Michigan Surgery’s motion for voluntary dismissal as having been filed under Rule

41(a)(1) and directed the dismissal of the claims under that Rule.

Having failed to do so, of course, the district court was bound to follow our prior

decisions requiring notice, opportunity to be heard on the issue, and opportunity to

withdraw the motion for voluntary dismissal. As the lead opinion correctly notes, the

district court failed to do so, requiring reversal and remand. The concerns I raise here

serve only to strengthen the arguments in favor of dismissal without prejudice.