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 GarcíaBenítez, 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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