2006 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-6-2006

DIRECTV Inc v. Leto

Precedential or Non-Precedential: Precedential

Docket No. 05-3908

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Recommended Citation

"DIRECTV Inc v. Leto" (2006). 2006 Decisions. Paper 148.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 05-3908

 

DIRECTV, INC., a

California Corporation,

Appellant

v.

BENNIE LETO

 

Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil Action No. 04-cv-00020)

District Judge: Honorable Gary L. Lancaster

 

Argued October 4, 2006

Before: McKEE, AMBRO, and NYGAARD, Circuit Judges

(Opinion filed November 6, 2006)
2

Howard R. Rubin, Esquire

William E. Copley, III (Argued)

Sonnenschein, Nath & Rosenthal

1301 K Street, N.W.

Suite 600, East Tower

Washington, DC 20005

Counsel for Appellant

John W. Gibson, Esquire (Argued)

1035 Fifth Avenue

Pittsburgh, PA 15219-6201

Counsel for Appellee

 

OPINION OF THE COURT

 

AMBRO, Circuit Judge

DirecTV, a satellite cable company, caught persons

pirating (that is, intercepting without payment) its television

transmissions. Its policy is to sue, and it did so here. Eight

defendants, including Bennie Leto, were joined in one suit

brought in the United States District Court for the Western

District of Pennsylvania. The claims against the defendants

were timely brought.
3

The District Court, responding to a motion by the

defendants under Federal Rule of Civil Procedure 21, entered in

December 2003 what appeared to be an order severing

DirecTV’s claims against each defendant. The order reads:

It is hereby ORDERED that the

case shall proceed under the

caption of DIRECTV v. Garry

Bloch, No. 03-0752, as to

defendant Garry Bloch. As to each

of the other defendants, the case

shall proceed as a separate action

under a separate civil action

number upon payment by plaintiff

of the requisite filing fee as to each

defendant.

It is FURTHER ORDERED that all

separate actions arising from this

order shall be deemed RELATED

and shall be assigned to the docket

of the undersigned in anticipation

of consolidation for the purposes of

pretrial discovery.

Within days of the order, DirecTV paid a separate filing

fee and filed a separate complaint against Leto. He responded

by moving to dismiss on the ground that the later-filed
 1

 The District Court had subject matter jurisdiction under

28 U.S.C. § 1331 because DirecTV’s causes of action arise

under federal law. We have jurisdiction under 28 U.S.C. § 1291

because this is an appeal from a final order. 

We exercise plenary review of a District Court’s grant of

a Rule 12(b)(6) motion (the means by which Leto moved to

dismiss here). In re Merck & Co. Sec. Litig., 432 F.3d 261, 266

(3d Cir. 2005). In so doing, “we apply the same test as the

district court,” accepting as true “all facts alleged in the

complaint and view[ing] them in the light most favorable to

4

complaint was outside the statute of limitations. This made

sense only if the 2003 order dismissed DirecTV’s complaint

rather than severed one suit into eight separate suits.

Counterintuitively, the District Court agreed with Leto that it

had dismissed the initial DirecTV suit, and dismissed it with

prejudice. 

Feeling blindsided, DirecTV appeals. While we normally

give great deference to a court’s interpretation of its own orders,

we cannot do so here, as the order is too clear to permit any

interpretation but a severance. Even were that not the case,

while district judges have discretion to remedy misjoinders

either by severing claims or dismissing them without prejudice,

that discretion, while accorded a wide fairway, ventures into

unplayable rough when it prejudices substantial rights. Here

DirecTV, initially having filed a timely complaint that misjoined

defendants, is substantially prejudiced if that suit is deemed

dismissed and not severed. We thus reverse and remand.1
[DirecTV].” Id. (internal quotation marks omitted). We review

the District Court’s decision to drop parties under Rule 21 for an

abuse of discretion. See, e.g., Letherer v. Alger Group, L.L.C.,

328 F.3d 262, 266 (6th Cir. 2003); Coughlin v. Rogers, 130 F.3d

1348, 1351 (9th Cir. 1997). Under this standard, we must affirm

the District Court’s ruling unless we are “left with a definite and

firm conviction that the trial court committed a clear error of

judgment.” Letherer, 328 F.3d at 266 (internal quotation marks

omitted).

5

Federal Rule of Civil Procedure 20(a) permits

“joinder”—the joining together of more than one party—if the

plaintiff’s claim “aris[es] out of the same transaction . . . and if

any question of law or fact common to all defendants will arise

in the action.” Misjoinder, on the other hand, occurs when there

is no common question of law or fact or when, as here, the

events that give rise to the plaintiff’s claims against defendants

do not stem from the same transaction.

Misjoinder is governed by Rule 21, which reads: 

Misjoinder of parties is not ground

for dismissal of an action. Parties

may be dropped or added by order

of the court on motion of any party

or of its own initiative at any stage

of the action and on such terms as

are just. Any claim against a party

may be severed and proceeded with
 2 See also Elmore, 227 F.3d at 1011–12 (noting that, although

“[w]e cannot find a case on the point,” this “seems to us clear as

a matter of first principles”).

6

separately.

To remedy misjoinder, then, a court may not simply dismiss a

suit altogether. Instead, the court has two remedial options: (1)

misjoined parties may be dropped “on such terms as are just”; or

(2) any claims against misjoined parties “may be severed and

proceeded with separately.” Fed. R. Civ. P. 21. 

The effect of each option is quite different. When a court

“drops” a defendant under Rule 21, that defendant is dismissed

from the case without prejudice. Publicker Indus., Inc. v.

Roman Ceramics Corp., 603 F.2d 1065, 1068 (3d Cir. 1979);

see also Elmore v. Henderson, 227 F.3d 1009, 1011–12 (7th Cir.

2000) (Posner, J.). When that occurs, the “statute of limitations

is not tolled” because we treat the initial complaint “as if it

never existed.” Brennan v. Kulick, 407 F.3d 603, 606 (3d Cir.

2005) (internal quotation marks omitted).2

 But when a court

“severs” a claim against a defendant under Rule 21, the suit

simply continues against the severed defendant in another guise.

White v. ABCO Eng’g Corp., 199 F.3d 140, 145 n.6 (3d Cir.

1999); Elmore, 227 F.3d at 1012. The statute of limitations is

held in abeyance, and the severed suit can proceed so long as it

initially was filed within the limitations period. Id.
 3 In re Fine Paper Antitrust Litig., 695 F.2d 494, 498 (3d Cir.

1982). Accord WRS, Inc. v. Plaza Entm’t, Inc., 402 F.3d 424,

428 (3d Cir. 2005); Pittsburgh Terminal Corp. v. Balt. & Ohio

R.R. Co., 824 F.2d 249, 254 (3d Cir. 1987) (quoting In re Fine

Paper).

7

Because a district court’s decision to remedy misjoinder

by dropping and dismissing a party, rather than severing the

relevant claim, may have important and potentially adverse

statute-of-limitations consequences, the discretion delegated to

the trial judge to dismiss under Rule 21 is restricted to what is

“just.” In this context, we turn to the DirecTV/Leto case. 

While we normally “give particular deference to [a]

district court’s interpretation of its own order,”3

 we cannot do so

where the plain language of the order is completely contrary to

the Court’s interpretation. The District Court’s initial 2003

order on its face was a severance, rather than a dismissal, of

DirecTV’s claim against Leto. That order specifically stated

that the case against Leto “shall proceed as a separate action . . .

upon payment by plaintiff of the requisite filing fee” (emphasis

added). Taking this clear cue, within ten days DirecTV paid the

filing fee and filed a separate complaint against Leto. Yet in a

surprising response to Leto’s subsequent motion to dismiss, the

District Court interpreted its prior order as a drop and dismissal

rather than a severance. It read “shall proceed” out of its 2003

order. To do so trades concise clarity for confusion. 
8

In its 2003 order, the District Court made no reference to

dropping—or even dismissing—any defendants. To repeat, it

said that each case (other than against the first defendant) “shall

proceed as a separate action under a separate civil action

number.” This language follows the language in Rule 21: “Any

claim against a party may be severed and proceeded with

separately.” In addition, this language also reflects our Court’s

description of severance: “[I]f claims are severed pursuant to

Rule 21 they become independent actions with separate

judgments entered in each.” White, 199 F.3d at 145 n.6 (internal

quotation marks omitted). 

Moreover, if the District Court had intended to drop the

misjoined defendants, it should not have said that their “case[s]

shall proceed.” Dismissed cases do not proceed at all. In

addition, the Court itself expected all, now separate, suits to

continue, as it further ordered that “all separate actions arising

from this order shall be deemed RELATED and shall be

assigned to [the Judge’s docket] in anticipation of consolidation

for the purposes of pretrial discovery.” 

For these reasons, the District Court’s 2003 order was no

doubt a severance. In light of the precise wording of the order,

it cannot subsequently be deemed a dismissal. 

Even if the language of the District Court’s 2003 order

had not clearly severed DirecTV’s claim against Leto, it

nonetheless would have been improper for the Court to choose
9

dismissal instead, as this misjoinder remedy would have

imposed adverse statute-of-limitations consequences on

DirecTV. Although a district court has discretion to choose

either severance or dismissal in remedying misjoinder, it is

permitted under Rule 21 to opt for the latter only if “just”—that

is, if doing so “will not prejudice any substantial right.” See

Sabolsky v. Budzanoski, 457 F.2d 1245, 1249 (3d Cir. 1972)

(emphasis added). Hence, a court must analyze the

consequences of a dismissal on a claimant’s ability to meet the

statute of limitations prior to choosing dismissal over severance.

 This principle was recognized by the Court of Appeals

for the Seventh Circuit in Elmore v. Henderson. That case, like

the one at hand, involved a district court judge’s decision to

drop and dismiss—rather than sever—a claim under Rule 21 to

remedy misjoinder. The judge subsequently dismissed the

plaintiff’s separately filed complaint as untimely because it was

filed outside of the statute-of-limitations period. The Seventh

Circuit held that the district court’s decision was almost

certainly erroneous because, “in formulating a remedy for a

misjoinder[,] the judge is required to avoid gratuitous harm to

the parties,” and is therefore “duty-bound” to prevent a

dismissal that would have adverse “statute[-]of[-]limitations

consequences.” Elmore, 227 F.3d at 1012. The district court

instead should have severed the claim and allowed it “to

continue as a separate suit so that it would not be time-barred”

rather than dropping and dismissing the claim. Id. 
 4

 Several district courts, both in and outside the Seventh

Circuit, have followed this principle. See, e.g., DIRECTV, Inc.

v. Adrian, No. 03-C-6366, 2004 WL 1146122, at *4 (N.D. Ill.

May 18, 2004) (“We are duty-bound to sever claims rather than

dismiss defendants if a dismissal would bring statute of

limitations consequences.”); Direct TV, Inc. v. Delaney, No. 03-

C-3444, 2003 WL 24232530, at *5 (N.D. Ill Nov. 20, 2003)

(same); Berry v. Ill. Dep’t of Human Servs., No. 00-C-5538,

2001 WL 111035, at *18 (N.D. Ill. Feb. 2, 2001) (avoiding “a

dismissal prejudicing a substantial right” by severing claims and

tolling the statute of limitations for complaints refiled “within a

reasonable period of time”); Franconia Assocs. v. United States,

61 Fed. Cl. 335, 337 (Fed. Cl. 2004) (“[I]t is important to

determine whether there is a statute of limitations problem—if

the filing of new suits is barred by the statute, severance is really

the only appropriate option, as the original filing date carries

over to the new cases.”). Contra DIRECTV Inc. v. Hudson, No.

2:03-cv-457, at 3–4, 6–8 (S.D. Ohio July 1, 2004) (order)

(remedying a misjoinder issue by dismissing, rather than

severing, misjoined defendants and stating that DirecTV

presumably, “as a part of its litigation strategy, chose to take that

risk rather than file separate actions and incur substantial

litigation costs in the process”).

10

We follow suit and hold that the discretion to drop and

dismiss claims against misjoined defendants under Rule 21 is

abated when it “prejudic[es] any substantial right” of plaintiffs,4

see Sabolsky, 457 F.2d at 1249, which includes loss of otherwise

timely claims if new suits are blocked by statutes of limitations.
11

With this backdrop of cabined discretion, the outcome

here writes itself. Even had the District Court been correct in

interpreting its 2003 order as a dismissal and not a severance,

this still would have affected adversely DirecTV’s right to

recover from Leto: the new suit, lacking a link back to the

timely initial action, would be out of time. Because a dismissal

improperly would have imposed adverse statute-of-limitations

consequences on DirecTV, we hold that the District Court

would have abused its discretion in choosing dismissal as a

misjoinder remedy. 

* * * * *

The plain language of the District Court’s 2003 order

requires the conclusion that it severed, rather than dismissed,

DirecTV’s suit against Leto. That order was so direct and clearcrafted that no contrary conclusion was later conceivable. Once

a District Court speaks with such clarity, any deference to its

discretion falls away. In addition, even if the language of the

District Court’s 2003 order did not clearly constitute a severance

but instead a dismissal, Rule 21 requires that, in remedying

misjoinder, the Court must analyze the consequences of

choosing dismissal over severance, and is obliged to avoid

prejudicing any substantial right in exercising its discretion.

Under this principle, dropping and dismissing DirecTV’s claim

against Leto, rather than severing the claim and allowing it to

continue as a separate suit so that it would not be time-barred,
 5

 Because of our holdings, we need not reach DirecTV’s plea

for equitable tolling. However, it is worth noting that equitable

tolling would not fit here, as DirecTV does not allege that it was

prevented from filing a complaint within the limitations period.

Instead, it contends that its initial suit, which was filed within

the limitations period, was improperly dismissed. As noted by

the Seventh Circuit in Elmore, “equitable tolling is not a remedy

for an erroneous judgment” by the District Court; instead,

appeal of the erroneous judgment is the proper course. Elmore,

227 F.3d at 1013.

12

would have been an abuse of discretion.5

We therefore reverse the District Court’s grant of

dismissal in favor of Leto and remand this case to the Court for

further proceedings consistent with this opinion.