United States Court of Appeals

For the First Circuit

No. 99-1432

JOHN DOE,

Plaintiff, Appellee,

v.

UROHEALTH SYSTEMS, INC.,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Mary M. Lisi, U.S. District Judge]

Before

 Boudin, Stahl, and Lipez,

Circuit Judges

Brooks R. Magratten, with whom Benjamin V. White and Vetter

& White, were on brief for appellant.

Albert R. Romano, with whom Romano & Spinella, was on brief

for appellee.

June 26, 2000

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STAHL, Circuit Judge. Defendant-appellant Urohealth

Systems, Inc. (“Urohealth”) appeals the district court's order,

entered pursuant to Fed. R. Civ. P. 41(a)(2), granting

plaintiff-appellee John Doe's motion to dismiss voluntarily and

without prejudice this diversity suit. We reverse and remand.

I.

In the late summer of 1995, John Doe sought treatment

for impotence and consulted a urologist, Dr. Jacques Susset, who

recommended the surgical implantation of a penile prosthesis.

Doe met with another urologist, Dr. Alan Podis, who suggested

that implantation of the Dura-II semirigid penile prosthesis

would be appropriate. Doe agreed with the recommendation and

the Dura-II was implanted by Podis in February 1996.

The Dura-II originally was designed and manufactured

by the Dacomed Corporation (“Dacomed”), which Urohealth acquired

as a wholly owned subsidiary in 1995. After the acquisition,

Urohealth manufactured and sold the Dura-II to physicians and

hospitals. It is unclear whether the actual Dura-II installed

in Doe was manufactured before or after Urohealth's acquisition

of Dacomed, but Urohealth has eschewed this as a defense.

About two months after the surgery, Doe began to have

problems with the device. On August 6, 1997, plaintiff filed in

federal district court a complaint against Urohealth for strict
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liability, negligence, and breach of warranty. His complaint

alleged that the Dura-II implant caused him pain, made noises,

and would not operate properly. 

Although the parties commenced discovery before the

establishment of a discovery schedule, the district court

eventually set May 1, 1998, as the last day for Doe to make

expert disclosures; scheduled discovery to close on June 15,

1998; and set June 25, 1998, as the last day for the parties to

file dispositive motions. At the onset of the discovery

process, Doe requested many documents, and Urohealth propounded

interrogatories about Doe's experts. In response, Doe

identified four experts who would testify. When Urohealth

deposed them, none proffered an opinion about whether the

Dura-II was defective or unreasonably dangerous. In fact, it

turned out that none of them had agreed to serve as an expert

on Doe's behalf.

On May 4, Doe identified three new experts, but failed

to disclose their opinions or the grounds on which they would

base their opinions. On June 23, 1998, Urohealth moved for

summary judgment. That same day, the magistrate judge assigned

to supervise discovery extended the close of discovery to

September 1, 1998, and adjusted all other deadlines accordingly.

Urohealth objected to this extension of the discovery deadline,
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but on July 29, 1998, the district court affirmed that order.

In doing so, the court reprimanded Doe for his dilatory conduct

while attempting to secure an expert. Eventually, on August 28,

1998, Doe furnished the resume and report of his newly named

expert, Edward N. Reese, Ph.D., which prompted Urohealth to

supplement its pending summary judgment motion in order to

address Reese and his opinion.

Meantime, at 5:45 p.m. on August 27, 1998, the day

before naming Reese as his expert, Doe noticed depositions,

which were to take place in Providence, Rhode Island, of several

of Urohealth's California-based employees. The deposition

notices prescribed September 1, 1998, as the date for these

depositions. In response, Urohealth sought and received a

protective order striking the deposition notices, and the

district court reprimanded Doe for his “absolutely

inappropriate” discovery request. The next day, Doe filed

sixty-five requests for production from Urohealth, prompting

another motion for a protective order. The district court

referred this matter to the magistrate judge, who granted the

motion and noted that “to wait until the very last minute to

file something like this is a total abuse of discovery.”

On December 8, 1998, the magistrate judge heard

argument regarding Urohealth's motion for summary judgment, and
1Urohealth changed its name to “Imagyn Medical Technologies,

Inc.” in 1997. Doe inaccurately named it “Imagyn Technologies,

Inc.” in his state court complaint. For simplicity, we will

continue to refer to this company as Urohealth.

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two days later, ordered Urohealth to raise any objections it

might have to Reese's proposed testimony in a motion in limine.

Urohealth so moved on January 11, 1999. On January 26, 1999,

Doe filed in Rhode Island Superior Court a complaint against

Dacomed, Podis, Miriam Hospital, and Imagyn Technologies, Inc.1

Doe's state court action made the same substantive claims

against Urohealth as did his federal action, but added Dacomed

as a defendant as well. Subsequently, Doe moved in federal

court for dismissal without prejudice of his federal action,

pursuant to Rule 41(a)(2). Urohealth objected on the grounds

that it would be prejudiced by a Rule 41(a)(2) dismissal, but

the district court granted Doe's motion on March 23, 1999.

Urohealth appeals.
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II.

Rule 41(a)(2) provides that “an action shall not be

dismissed at the plaintiff's instance save upon order of the

court and upon such terms and conditions as the court deems

proper. . . . Unless otherwise specified in the order, a

dismissal under this paragraph is without prejudice.” Its

purpose is to permit the plaintiff, with approval of the court,

see Grover v. Eli Lilly & Co., 33 F.3d 716, 718 (6th Cir. 1994)

(noting that judicial approval is required “to protect the

nonmovant from unfair treatment”), voluntarily to dismiss an

action as long as “no other party will be prejudiced,” Puerto

Rico Maritime Shipping Auth. v. Leith, 668 F.2d 46, 50 (1st Cir.

1981) (internal quotation marks and citation omitted). The

district court is responsible under the rule for exercising its

discretion to ensure that such prejudice will not occur. See

Alamance Indus., Inc. v. Filene's, 291 F.2d 142, 146 (1st Cir.

1961).

In deciding whether to grant a Rule 41(a)(2) motion,

courts typically look to “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 for the need to take a dismissal, and

the fact that a motion for summary judgment has been filed by
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the defendant.” Pace v. Southern Express Co., 409 F.2d 331, 334

(7th Cir. 1969); accord Grover, 33 F.3d at 718. But, courts

need not analyze each factor or limit their consideration to

these factors. See Tyco Labs., Inc. v. Koppers Co., 627 F.2d

54, 56 (7th Cir. 1980) (“The enumeration of the factors to be

considered in Pace is not equivalent to a mandate that each and

every such factor be resolved in favor of the moving party

before dismissal is appropriate. It is rather simply a guide

for the trial judge, in whom the discretion ultimately rests.”);

see also Kern v. TXO Prod. Corp., 738 F.2d 968, 971 (8th Cir.

1984) (“The very concept of discretion presupposes a zone of

choice within which the trial courts may go either way [in

granting or denying the motion].”).

We review for abuse of discretion the district court's

decision to grant a Rule 41(a)(2) motion. See Puerto Rico

Maritime, 668 F.2d at 49; Alamance, 291 F.2d at 146. “[A]n

abuse of discretion is found only where the defendant would

suffer 'plain legal prejudice' as a result of a dismissal

without prejudice, as opposed to facing the mere prospect of a

second lawsuit.” Grover, 33 F.3d at 718 (quoting Cone v. West

Virginia Pulp & Paper Co., 330 U.S. 212, 217 (1947)).

In its order granting Doe's motion, the district court

first referenced the four factors enumerated in Pace. The court
2We agree with the district court's initial assessment of

the Pace factors, notwithstanding its less specific comments

later in its opinion.

3The district court suggested that because the discovery

from the federal case would apply in the state case, the fact

that Urohealth had considerable discovery expenditures did not

weigh against granting Doe's motion. We disagree. Much of

Urohealth's effort and expense, such as its efforts to respond

to Doe's dilatory and sometimes abusive discovery practices and

to weed through Doe's experts, will not benefit it in the state

case because those issues will not resurface there.

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began by stating that Urohealth was “probably home on three” of

the Pace factors.2 By the time Doe filed his motion to dismiss,

Urohealth had invested considerable resources, financial and

otherwise, in defending Doe's federal action. Urohealth had

produced numerous documents and deposed several of Doe's

purported experts. And, Urohealth had to file several

protective orders because of Doe's dilatory discovery tactics.3

Doe also was less than diligent in his prosecution of this case.

As Urohealth notes in its brief, Doe “conducted no discovery,

[and did nothing] to advance his case for that matter, from

October 8, 1997 to August 27, 1998.” The district court twice

reprimanded Doe for his failure to meet discovery deadlines and

for his discovery abuses. Finally, Urohealth had filed a motion

for summary judgment, which was pending when the court dismissed

the action.
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The district court then indicated that, even though the

Pace factors favored Urohealth, it did not believe that

Urohealth would “truly suffer legal prejudice” if it dismissed

the federal lawsuit without prejudice because Urohealth still

would have to litigate these claims on behalf of Dacomed in the

state suit. Urohealth argued that if the district court denied

Doe's Rule 41(a)(2) motion and granted Urohealth summary

judgment, the judgment would have preclusive effect for both

Urohealth and Dacomed; thus, Urohealth could avoid relitigating

the case in state court. The district court disagreed,

reasoning that even if summary judgment would preclude

relitigation for Urohealth in the state case, Dacomed, which “is

a separate entity, albeit wholly owned by Urohealth,” would not

be protected by res judicata because it was not a defendant in

the federal case. 

We think the district court erred in its assumption

that Dacomed would not be entitled to assert a res judicata

defense if Urohealth had garnered judgment in the federal

action. An evaluation of the res judicata effects normally would

not be part of the Rule 41(a)(2) analysis, but this case is

unusual because of the relationship of the two entities. To the

extent the district court permissibly considered the potential

prejudice stemming from Urohealth's having to litigate on behalf
4We do not decide today whether it was proper for the

district court to consider in its Rule 41(a)(2) determination

the effect dismissal without prejudice for Urohealth in the

federal case would have on Dacomed in the state case. Because

we conclude that the district court's conclusion about whether

Dacomed could use res judicata as a defense in the state case

was erroneous, we simply will assume without deciding that the

district court properly considered the effects on Dacomed.

5As a general rule, "[f]ederal law determines the effects

under the rules of res judicata of a judgment of a federal

court." 2 Restatement (Second) of Judgments § 87. Some courts

have held that the federal law of preclusion should incorporate

state law with respect to questions of privity--the central

issue here. See, e.g., Lowell Staats Mining Co. v. Philadelphia

Elec. Co., 878 F.2d 1271, 1274 (10th Cir. 1989); see also, e.g.,

2 Restatement, supra, §87 cmt. b; 18 Charles Alan Wright et al.,

Federal Practice & Procedure § 4472, at 737-78 & n.37.5 (1981 &

Supp. 2000). We need not decide this question, as we are

confident that the privity analysis here would be the same

whether governed by state or federal law.

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of Dacomed in the state case,4 we find an abuse of discretion

because the court erred in finding no privity between the

companies.

As a general matter, res judicata bars “parties to an

original action and those in privity with such parties” from

relitigating “all the issues that were tried or might have been

tried in the original suit.” Providence Teachers Union v.

McGovern, 319 A.2d 358, 361 (R.I. 1974).5 Because there is

little doubt that judgment for Urohealth in the federal suit

would have had preclusive effect with regard to Doe's claims

against Urohealth in the state case, see Eigabri v. Lekas, 681
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A.2d 271, 280 (R.I. 1996), the appropriateness of the dismissal

turns on whether Dacomed and Urohealth are in privity.

We believe that Urohealth and Dacomed are in privity

for several reasons. “Under the concept of privity, a non-party

may be bound by a prior judgment if that party substantially

controlled or [is] represented by a party to the original

action.” Commercial Union Ins. Co. v. Pelchat, 727 A.2d 676,

680 (R.I. 1999). Someone in privity with a party may also claim

the preclusive benefit of the prior action. See, e.g., Pan Am.

Match Inc. v. Sears, Roebuck & Co., 454 F.2d 871, 874 (1st Cir.

1972). In this case, the parent and subsidiary are in privity

because Urohealth always has taken legal responsibility for the

product and Dacomed's actions and stands ready to defend Dacomed

in the state case. Moreover, in determining whether two parties

are in privity, courts often look to the commonality of their

interest in the matter. See Commercial Union Ins., 727 A.2d at

680. In this case, Urohealth's and Dacomed's interests are

identical. See Aunyx Corp. v. Cannon U.S.A., Inc., 978 F.2d 3,

7 (1st Cir. 1992) (“The identity of parties requirement was also

satisfied, even though ABM was not a party to the [prior]

proceedings. [ABM's sister company] had adequate interest in

litigating ABM's interests before the [prior court].”); cf. id.
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at 7-8 (noting that companies who had represented themselves as

alter egos are in privity).

A further factor supporting determination of privity

here is that the companies are parent and wholly owned

subsidiary. This factor has been stressed in a number of cases,

including a decision of our own addressed to Rhode Island Law.

See, e.g., Hart Steel Co. v. Railroad Supply Co., 244 U.S. 294,

298 (1917); Acton Co. v. Bachman Foods, Inc., 668 F.2d 76, 78

(1st Cir. 1982); Pan Am. Match, 454 F.2d at 874; Capraro v.

Tilcon Gammino, Inc., 751 F.2d 56, 57 (1st Cir. 1985) (Rhode

Island law). We do not suggest that the parent-subsidiary

relationship automatically establishes privity, but given the

relationship of the companies in this case coupled with their

joint involvement with the product in question, we have little

doubt that a Rhode Island court would treat a merits judgment in

favor of Urohealth as resolving an identical claim against its

wholly owned subsidiary.

Accordingly, we disagree with the district court's

legal conclusion that the lawsuit against the subsidiary could

be maintained in state court if the motion for summary judgment

were granted in favor of the parent on the merits. We, in some

measure, are making a prediction because we do not know how a

Rhode Island court would review the matter. An assessment of
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the legal rules that would be applied by a Rhode Island court,

however, presents a clear-cut legal issue on which no special

deference is due to the district court. See Salve Regina

College v. Russell, 499 U.S. 225, 238-39 (1991).

Because the district court's main stated reason for

dismissing without prejudice was based on a legal error, the

matter must be remanded for further proceedings. This result

does not necessarily preclude the possibility that for some

other reason the district court could dismiss the case without

ruling on the summary judgment motion, but given the record, it

is somewhat difficult to discern what that reason might be. As

matters now stand, the defendant has made a significant

investment of time and money in the case, a motion for summary

judgment apparently is ripe for decision, and judgment in favor

of Urohealth would avoid what may be otherwise years of

litigation in state court against its subsidiary on an identical

claim.

While the reason given by the district court is

inadequate, it is far from clear from the case law what reason

adequately would justify dismissal at the present stage.

Although the courts talk about "legal prejudice," the governing

Federal Rule of Civil Procedure lays down no specific test, see

Fed. R. Civ. P. 41(a)(2), and the precedents could be read as
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saying that everything depends on the particular circumstances

and that a range of factors could be taken into account. See

generally 9 Charles Alan Wright & Arthur R. Miller, Federal

Practice & Procedure § 2364, at 290-96 (2d ed. 1995). One can

imagine a situation in which even though the plaintiff chose to

bring the case in federal court, peculiarities such as very

difficult issues of state law, for example, might make

resolution in the state court more appropriate, at least to the

extent of permitting the plaintiff voluntarily to dismiss its

federal case and pursue a state remedy. Cf. Kern, 738 F.2d at

971. We do not say that this is such a case, but merely offer

that as an illustrative example.

At the same time, it is very difficult to imagine in

the circumstances of this case a no-prejudice dismissal at

plaintiff's behest that would not involve payment by the

plaintiff of the defendant's attorney's fees and other expenses

of litigation in federal court to date. We do not suggest that

payment of attorney's fees and costs automatically would justify

a dismissal. But if there were other valid justifications for

dismissal, payment of attorney's fees and other expenses might

in some measure ameliorate the prejudice to the defendants of

the plaintiff's abortive federal court litigation.
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On remand, the plaintiff is free to offer any other

reasons it may have to justify a voluntarily dismissal, assuming

it wishes to pursue its motion. We appreciate that any decision

by the district court on such motion, if unaffected by error on

a matter of law, is entitled to considerable deference. We do

think that a plaintiff cannot conduct a serious product

liability claim in a federal court, provoke over a year's worth

of discovery and motion practice, allow the case to reach the

stage at which the defendant filed a full-scale summary judgment

motion, and then when matters seemed to be going badly for

plaintiff simply dismiss its case and begin all over again in a

state court in what is essentially an identical proceeding.

III.

The judgment dismissing the plaintiff's complaint

without prejudice is reversed and the matter remanded for

further proceedings consistent with this opinion. Reversed and

remanded.