Opinion ID: 419996
Heading Depth: 2
Heading Rank: 2

Heading: Refusal to Enter Findings.

Text: 27 Appellant Telex also challenges the district court's refusal to enter findings of fact in accordance with its opinion that no fraud or failure of consideration in the patent assignment transaction was proved by Mechmetals. Telex contends that these issues were present in the case by virtue of the pretrial order, and that the district court did not have discretion to refuse to enter findings on the issues. 28 Under Rule 16, the pretrial order when entered controls the subsequent course of the action, unless modified at the trial to prevent manifest injustice. Fed.R.Civ.P. 16. Technically, inclusion of the fraud and failure of consideration issues in the pre-trial order reintroduced them into the action, even though the portions of the complaint raising these issues had earlier been dismissed. However, we cannot accept Telex's argument that the district judge lacked discretion to refuse to enter findings on these matters simply because they were listed as issues in the pretrial order. 29 A pretrial order is not an inexorable decree and may, under proper circumstances, be modified, even after trial. Jeffries v. United States, 477 F.2d 52, 55 (9th Cir.1973). Post-trial amendment to the pretrial order is a form of amendment to the pleadings, and as such, is specifically permitted by Fed.R.Civ.P. 15(b). See Wallin v. Fuller, 476 F.2d 1204, 1210 (5th Cir.1973); Monod v. Futura, Inc., 415 F.2d 1170, 1173-74 (10th Cir.1969); Deakyne v. Commissioners of Lewes, 416 F.2d 290, 297 n. 12 (3d Cir.1969); 6 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1527, at 612-13 (1971 ed.). We have held that it is proper for a district court to amend the pretrial order in a de facto fashion, without formal amendment, simply by entering findings. American Pipe & Steel Corp. v. Firestone Tire & Rubber Co., 292 F.2d 640, 643 (9th Cir.1961); see Interstate Plywood Sales Co. v. Interstate Container Corp., 331 F.2d 449, 452 (9th Cir.1964). The district court's decision to allow an amendment to the pretrial order after trial will be reversed only if it results in prejudice to one of the parties. 8 See Jeffries v. United States, 477 F.2d 52, 55 (9th Cir.1973); see also Bowles v. Wheeler, 152 F.2d 34, 42 (9th Cir.), cert. denied, 326 U.S. 775, 66 S.Ct. 265, 90 L.Ed. 468 (1945). 30 Telex maintains that it suffered prejudice as a result of the refusal to enter findings because it will now be forced to litigate the issues in the state court action filed by Mechmetals. The necessity to litigate the fraud and failure of consideration issues may indeed prove disadvantageous for Telex, but it does not constitute the type of legal prejudice that would preclude the district court's action. The Supreme Court has stated that the mere prospect of a second lawsuit is not the type of prejudice that should prevent the district court from granting voluntary dismissal without prejudice of an action under Fed.R.Civ.P. 41(a)(2). Cone v. West Virginia Pulp & Paper Co., 330 U.S. 212, 217, 67 S.Ct. 752, 755, 91 L.Ed. 849 (1947); see Hamilton v. Firestone Tire & Rubber Co., 679 F.2d 143, 145 (9th Cir.1982); Kotzen v. Levine, 678 F.2d 140, 141 (11th Cir.1982). Logically, the same test should apply to post-trial amendment of the pleadings, including the pretrial order, that results in a dismissal without prejudice of some issues but not the entire action. Cf. Wilson v. Crouse-Hinds Co., 556 F.2d 870, 873 (8th Cir.) (suggesting that it is immaterial whether court acts pursuant to Rule 15(a) or Rule 41(a)(2)), cert. denied, 434 U.S. 968, 98 S.Ct. 513, 54 L.Ed.2d 455 (1977). 31 No prejudice other than the threat of state court litigation has been cited by Telex. Telex does not claim that it expended significant effort in an attempt to defend the fraud and failure of consideration issues in district court. Rather, it appears that the parties informally agreed to remove these issues and to try them in state court. The purposes of Rule 16, to expedite litigation and prevent surprise during trial, would not have been served by the entry of findings on these issues. Cf. Perfection-Cobey Co. v. City Tank Corp., 597 F.2d 419, 420-21 (4th Cir.1979) (stating converse principle that where parties litigate issues not raised in pre-trial order, there is little policy reason to enforce pretrial elimination of issues). The record on the present appeal suggests the claims of fraud and failure of consideration asserted by Mechmetals are not frivolous. The district court therefore acted well within its discretion in refusing to enter such findings since the preclusive entry of findings on these issues could result in manifest injustice. 32 The judgment of the district court is AFFIRMED in part and REVERSED in part.