Source: https://supreme.justia.com/cases/federal/us/531/497/
Timestamp: 2019-04-25 15:56:30+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 531 › Semtek Int'l Inc. v. Lockheed Martin Corp.
A dismissal of a claim by a federal court sitting in diversity may have the effect of precluding a claim, depending on federal common law.
Semtek brought breach of contract and tort claims against Lockheed in California state court. The claims were dismissed after they were removed to federal court, since a two-year statute of limitations had expired. Semtek tried to take advantage of the three-year statute of limitations in Maryland by bringing a claim based on the same allegations in that state. It was dismissed on the basis of res judicata.
State law is the basis of these claims rather than federal law, so claim preclusion rules should apply with the same force even if the dismissal was ordered by a federal rather than a state court. Federal procedure does not require a uniform rule, and there was no conflict between state law and any federal interests.
A dismissal often prevents a party only from bringing the case again in the same court, rather than bringing it in another federal court.
Respondent removed petitioner's California state-court suit to a California Federal District Court based on diversity of citizenship, and successfully moved to dismiss the case "on the merits" as barred by California's statute of limitations. Petitioner then brought suit in a Maryland Circuit Court, alleging the same causes of action, which were not time barred under Maryland's statute of limitations. That court dismissed the case on the ground of res judicata. In affirming, the Maryland Court of Special Appeals held that, regardless of whether California would have accorded claim-preclusive effect to a statute-oflimitations dismissal by one of its own courts, the California federal court's dismissal barred the Maryland complaint because the res judicata effect of federal diversity judgments is prescribed by federal law, under which the earlier dismissal was on the merits and claim preclusive.
Held: Because the claim-preclusive effect of a federal court's dismissal "upon the merits" of a diversity action on state statute-of-limitations grounds is governed by a federal rule, which in turn (in diversity cases) incorporates the claim-preclusion law that would be applied by state courts in the State in which the federal court sits, the Maryland Court of Special Appeals erred in holding that the California federal court's dismissal "upon the merits" necessarily precluded the Maryland statecourt action. Pp. 500-509.
(which would be claim preclusive), the meaning of the term has undergone change, and does not necessarily designate a judgment effecting claim preclusion. There are a number of reasons for believing it does not bear that meaning in Rule 41(b). It would be peculiar to announce a federally prescribed rule on claim preclusion in a default rule for determining a dismissal's import, or to find a rule governing the effect to be accorded federal judgments by other courts ensconced in rules governing the internal procedures of the rendering court itself. Moreover, as so interpreted, the Rule would in many cases violate the federalism principle of Erie R. Co. v. Tompkins, 304 U. S. 64, 78-80, by engendering substantial variations in outcomes between state and federal litigation which would likely influence forum choice, Hanna v. Plumer, 380 U. S. 460, 467-468. Finally, this Court has never relied upon the Rule when recognizing the claim-preclusive effect of federal judgments in federal-question cases. Rule 41(a) makes clear that "an adjudication upon the merits" in Rule 41(b) is the opposite of a dismissal without prejudice-that is, it is a dismissal that prevents refiling of the claim in the same court. That is undoubtedly a necessary condition, but not a sufficient one, for claim-preclusive effect in other courts. Pp. 500-506.
(b) Federal common law governs the claim-preclusive effect of a dismissal by a federal court sitting in diversity, and it is up to this Court to determine the appropriate federal rule. Since in diversity cases state, rather than federal, substantive law is at issue, there is no need for a uniform federal rule; and nationwide uniformity is better served by having the same claim-preclusive rule (the state rule) apply whether the dismissal has been ordered by a state or a federal court. Any other rule would produce the sort of forum shopping and inequitable administration of the laws that Erie seeks to avoid. While the federal reference to state law will not obtain in situations in which the state law is incompatible with federal interests, no such conflict exists here. Pp. 506-509.
128 Md. App. 39, 736 A. 2d 1104, reversed and remanded.
Michael Gottesman argued the cause for petitioner. With him on the briefs were Jonathan S. Massey, Kenneth J. Chesebro, Thomas v: Girardi, Thomas C. Goldstein, Walter J. Lack, Andrew W Zepeda, and Steven L. Hogan.
Walter E. Dellinger argued the cause for respondent.
This case presents the question whether the claimpreclusive effect of a federal judgment dismissing a diversity action on statute-of-limitations grounds is determined by the law of the State in which the federal court sits.
*Griffin B. Bell, Chilton Davis Varner, Paul D. Clement, and Jeffrey S. Bucholtz filed a brief for the Product Liability Advisory Council, Inc., as amicus curiae urging affirmance.
District of Maryland on federal-question grounds (diversity grounds were not available because Lockheed "is a Maryland citizen," Semtek Int'l, Inc. v. Lockheed Martin Corp., 988 F. Supp. 913, 914 (1997)). The California federal court denied the relief requested, and the Maryland federal court remanded the case to state court because the federal question arose only by way of defense, ibid. Following a hearing, the Maryland state court granted respondent's motion to dismiss on the ground of res judicata. Petitioner then returned to the California federal court and the Ninth Circuit, unsuccessfully moving both courts to amend the former's earlier order so as to indicate that the dismissal was not "on the merits." Petitioner also appealed the Maryland trial court's order of dismissal to the Maryland Court of Special Appeals. The Court of Special Appeals affirmed, holding that, regardless of whether California would have accorded claim-preclusive effect to a statute-of-limitations dismissal by one of its own courts, the dismissal by the California federal court barred the complaint filed in Maryland, since the res judicata effect of federal diversity judgments is prescribed by federal law, under which the earlier dismissal was on the merits and claim preclusive. 128 Md. App. 39, 736 A. 2d 1104 (1999). After the Maryland Court of Appeals declined to review the case, we granted certiorari. 530 U. S. 1260 (2000).
claim preclusive. While we agree that this would be the result demanded by Dupasseur, the case is not dispositive because it was decided under the Conformity Act of 1872, 17 Stat. 196, which required federal courts to apply the procedural law of the forum State in nonequity cases. That arguably affected the outcome of the case. See Dupasseur, supra, at 135. See also Restatement (Second) of Judgments § 87, Comment a, p. 315 (1980) (hereinafter Restatement) ("Since procedural law largely determines the matters that may be adjudicated in an action, state law had to be considered in ascertaining the effect of a federal judgment").
"Involuntary Dismissal: Effect Thereof. For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits."
Since the dismissal here did not "otherwise specif[y]" (indeed, it specifically stated that it was "on the merits"), and did not pertain to the excepted subjects of jurisdiction, venue, or joinder, it follows, respondent contends, that the dismissal "is entitled to claim preclusive effect." Brief for Respondent 3-4.
of [a particular] claim" before the court. Restatement § 19, Comment a, at 161. That connotation remains common to every jurisdiction of which we are aware. See ibid. ("The prototyp[ical] [judgment on the merits is] one in which the merits of [a party's] claim are in fact adjudicated [for or] against the [party] after trial of the substantive issues"). And it is, we think, the meaning intended in those many statements to the effect that a judgment "on the merits" triggers the doctrine of res judicata or claim preclusion. See, e. g., Park lane Hosiery Co. v. Shore, 439 U. S. 322, 326, n. 5 (1979) ("Under the doctrine of res judicata, a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action"); Goddard v. Security Title Ins. & Guarantee Co., 14 Cal. 2d 47, 51, 92 P. 2d 804, 806 (1939) ("[A] final judgment, rendered upon the merits by a court having jurisdiction of the cause ... is a complete bar to a new suit between [the parties or their privies] on the same cause of action" (internal quotation marks and citations omitted)).
ment a and Reporter's Note; 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4439, pp. 355358 (1981) (hereinafter Wright & Miller). That is why the Restatement of Judgments has abandoned the use of the term-"because of its possibly misleading connotations," Restatement § 19, Comment a, at 161.
In short, it is no longer true that a judgment "on the merits" is necessarily a judgment entitled to claim-preclusive effect; and there are a number of reasons for believing that the phrase "adjudication upon the merits" does not bear that meaning in Rule 41(b). To begin with, Rule 41(b) sets forth nothing more than a default rule for determining the import of a dismissal (a dismissal is "upon the merits," with the three stated exceptions, unless the court "otherwise specifies"). This would be a highly peculiar context in which to announce a federally prescribed rule on the complex question of claim preclusion, saying in effect, "All federal dismissals (with three specified exceptions) preclude suit elsewhere, unless the court otherwise specifies."
mandated claim-preclusive effect of its judgment) would seem to violate this limitation.
1 Rule 41(b), interpreted as a preclusion-establishing rule, would not have the two effects described in the preceding paragraphs-arguable violation of the Rules Enabling Act and incompatibility with Erie R. Co. v. Tompkins, 304 U. S. 64 (1938)-if the court's failure to specify an otherthan-on-the-merits dismissal were subject to reversal on appeal whenever it would alter the rule of claim preclusion applied by the State in which the federal court sits. No one suggests that this is the rule, and we are aware of no case that applies it.
mulgation of Rule 41(b), we have not once done so. See, e. g., Heck v. Humphrey, 512 U. S. 477, 488-489, n. 9 (1994); Federated Department Stores, Inc. v. Moitie, supra, at 398; Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U. S. 313, 324, n. 12 (1971).
"Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice, except that a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of the United States or of any state an action based on or including the same claim."
does not bar the plaintiff from refiling the lawsuit within the applicable limitations period," ibid.
2We do not decide whether, in a diversity case, a federal court's "dismissal upon the merits" (in the sense we have described), under circumstances where a state court would decree only a "dismissal without prejudice," abridges a "substantive right" and thus exceeds the authorization of the Rules Enabling Act. We think the situation will present itself more rarely than would the arguable violation of the Act that would ensue from interpreting Rule 41(b) as a rule of claim preclusion; and if it is a violation, can be more easily dealt with on direct appeal.
"The records and judicial proceedings of any court of any ... State, Territory or Possession ... shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory or Possession from which they are taken."
dresses the question. By their terms they govern the effects to be given only to state-court judgments (and, in the case of the statute, to judgments by courts of territories and possessions). And no other federal textual provision, neither of the Constitution nor of any statute, addresses the claim-preclusive effect of a judgment in a federal diversity action.
tice Bradley in Dupasseur v. Rochereau [which stated that the case was a diversity case, applying state law under state procedure]." Ibid.
In other words, in Dupasseur the State was allowed (indeed, required) to give a federal diversity judgment no more effect than it would accord one of its own judgments only because reference to state law was the federal rule that this Court deemed appropriate. In short, federal common law governs the claim-preclusive effect of a dismissal by a federal court sitting in diversity. See generally R. Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler's The Federal Courts and the Federal System 1473 (4th ed. 1996); Degnan, Federalized Res Judicata, 85 Yale L. J. 741 (1976).
ministration of the laws" that Erie seeks to avoid, Hanna, 380 U. S., at 468, since filing in, or removing to, federal court would be encouraged by the divergent effects that the litigants would anticipate from likely grounds of dismissal. See Guaranty Trust Co. v. York, 326 U. S., at 109-110.
This federal reference to state law will not obtain, of course, in situations in which the state law is incompatible with federal interests. If, for example, state law did not accord claim-preclusive effect to dismissals for willful violation of discovery orders, federal courts' interest in the integrity of their own processes might justify a contrary federal rule. No such conflict with potential federal interests exists in the present case. Dismissal of this state cause of action was decreed by the California federal court only because the California statute of limitations so required; and there is no conceivable federal interest in giving that time bar more effect in other courts than the California courts themselves would impose.
Because the claim-preclusive effect of the California federal court's dismissal "upon the merits" of petitioner's action on statute-of-limitations grounds is governed by a federal rule that in turn incorporates California's law of claim preclusion (the content of which we do not pass upon today), the Maryland Court of Special Appeals erred in holding that the dismissal necessarily precluded the bringing of this action in the Maryland courts. The judgment is reversed, and the case remanded for further proceedings not inconsistent with this opinion.

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