Anago Franchising, Inc. v. Shaz, LLC

• Decision Date: 23 April 2012
• Docket Number: No. 10–15098.,10–15098.
• Parties: ANAGO FRANCHISING, INC., Plaintiff–Counter–Defendant–Appellee, v. SHAZ, LLC, Defendant–Counter–Claimant–Appellant,Eco Building Services LLC, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

23 Fla. L. Weekly Fed. C 962

677 F.3d 1272

ANAGO FRANCHISING, INC., Plaintiff–Counter–Defendant–Appellee,

v.SHAZ, LLC, Defendant–Counter–Claimant–Appellant,Eco Building Services LLC, Defendant–Appellant.

No. 10–15098.

United States Court of Appeals, Eleventh Circuit.

April 23, 2012.

Joseph D. Garrity, Marlon Weiss, Garrity Weiss, PA, Deerfield Beach, FL, for Plaintiff–Appellee.

Robert M. Einhorn, Melissa Lyn Bernheim, Devona Alicia Reynolds, Zarco, Einhorn, Salkowski & Brito, PA, Miami, FL, for Defendants–Appellants.

Appeal from the United States District Court for the Southern District of Florida.Before WILSON and COX, Circuit Judges, and RESTANI,^* Judge.WILSON, Circuit Judge:

This case arises out of an alleged breach of a settlement agreement signed in a franchise dispute. The district court found that it had never dismissed the case and retained jurisdiction to decide the motion to compel compliance with the settlement agreement. After careful consideration and briefing by the parties, we find that the parties dismissed the case by filing a stipulation in accordance with Federal Rule of Civil Procedure 41(a)(1)(A)(ii) and that the district court did not retain jurisdiction to enforce the settlement agreement. The court was therefore without jurisdiction to consider the motion to compel. We remand this case to the district court to dismiss it for lack of jurisdiction.

I. FACTS AND PROCEDURAL HISTORY

Anago Franchising, Inc. (“Anago”), a Florida corporation, is a commercial cleaning services franchisor. Shaz, LLC (“Shaz”) was its subfranchisor in the state of Utah and was obligated under the Subfranchise Rights Agreement to sell a certain number of unit franchises each year within its territory. Shaz members separately own and operate Eco Building Services, LLC (“Eco”), a Utah limited liability corporation unaffiliated with Anago. In the underlying case, Anago terminated Shaz's Subfranchise Rights Agreement for failure to meet the minimum annual performance requirement. Eco then began to service Shaz's former clients' cleaning needs, and Anago filed suit against both Shaz and Eco. Shaz subsequently filed counterclaims against Anago. On February 3, 2009, Shaz, Eco, and Anago resolved their dispute in mediation and entered into a final mediated settlement agreement (“the Settlement Agreement”) containing a confidentiality clause.¹ The next day, a managing member of both Shaz and Eco made a disclosure that Anago alleges is a material breach of the Settlement Agreement's confidentiality clause. Despite the alleged breach, both parties continued to perform under the terms of the Settlement Agreement.

On February 27, 2009 the district court administratively closed the case and requested that the parties file “a Stipulation for Final Order of Dismissal within fifteen days.” It noted that after the stipulation was filed, it would enter an order dismissing the case with prejudice. Pursuant to the Settlement Agreement, on March 2, 2009, Anago, Shaz, and Eco filed a Stipulation for Dismissal with Prejudice in district court. The Stipulation referenced Federal Rule of Civil Procedure “41(a)(1)(A)(ii) and (2),”² stated that all parties agreed to dismiss the entire matter with prejudice, and asserted “that the Court shall reserve jurisdiction to enforce the settlement between the parties pursuant to the terms contained therein.” The Stipulation was signed by the attorneys representing each of the parties. That day the parties also filed a Joint Motion for Entry of Final Judgment by Consent. The district court never filed an order dismissing the case with prejudice.

On March 20, 2009 Anago sent Shaz and Eco a letter indicating that the February 4 disclosure constituted a breach of a material term of the Settlement Agreement which allowed them to forego any obligation to make future payments.

On March 26, 2009, the district court signed the consent final judgment that had been attached to the parties' March 2 joint motion. The final judgment did not mention the March 2 Stipulated Dismissal or the Settlement Agreement, and it did not explicitly dismiss the case.

In July 2009, after months of nonpayment, Shaz and Eco filed a motion in district court seeking to compel Anago's compliance with the Settlement Agreement. The district court referred the case to a magistrate judge who found continuing jurisdiction to consider the motion because the district court had never dismissed the case—it had only administratively closed it. The magistrate judge's jurisdictional analysis focused on the text of the final judgment. Because the final judgment did not order the clerk to dismiss the case, the magistrate judge concluded that the case had not been dismissed. The magistrate judge's order does not discuss the Stipulation of Dismissal beyond noting that it was filed and that the parties agreed that the district court would retain jurisdiction to enforce the Settlement Agreement.

After an evidentiary hearing, the magistrate judge recommended that the district court deny Shaz and Eco's Motion to Compel. The district court adopted the magistrate judge's findings and denied the motion on the merits, concluding that Shaz had breached the Settlement Agreement and that this discharged Anago's obligation to perform. Shaz and Eco now appeal.

II. JURISDICTION

We have an independent obligation to determine whether jurisdiction exists in each case before us, so we may consider questions of jurisdiction sua sponte even when, as here, the parties have not raised jurisdictional challenges. Arbaugh v. Y&H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 1244, 163 L.Ed.2d 1097 (2006).

Our jurisdictional inquiry requires us to determine if the case was dismissed below and whether the district court retained jurisdiction to enforce the Settlement Agreement after that dismissal. This inquiry requires us to clarify two points of law: (1) whether a stipulation of dismissal filed under Federal Rule of Civil Procedure 41(a)(1)(A)(ii) dismisses a case automatically, and (2) whether under Kokkonen v. Guardian Life Insurance of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), a district court may enter an order retaining jurisdiction over a settlement agreement after a stipulation of dismissal is effectuated.

The case below could only have been dismissed through the March 2 Stipulation of Dismissal filed by the parties or through the district court's March 26 entry of Final Judgment. Because voluntary dismissal of a case strips the court of jurisdiction and leaves it without power to make legal determinations on the merits, we begin our inquiry by determining the nature of the document filed by the parties on March 2. See SmallBizPros, Inc. v. MacDonald, 618 F.3d 458, 463 (5th Cir.2010) (per curiam) (noting that any action by the district court after a voluntary dismissal is “superfluous”); Smith v. Phillips, 881 F.2d 902, 904 (10th Cir.1989) (stating that once a stipulation is filed pursuant to Rule 41(a)(1)(A)(ii), all action on the merits of the case is terminated).

A. Dismissal under Federal Rule of Civil Procedure 41

After settlement of a case, parties may dismiss the case themselves by utilizing Federal Rule of Civil Procedure 41(a), which allows plaintiffs to voluntarily dismiss an action. Generally, a plaintiff may ask the court to dismiss an action at any time. See Fed.R.Civ.P. 41(a)(2). Under Rule 41(a)(2), the court has discretion to dismiss the case through an order and to specify the terms of that dismissal. A plaintiff may dismiss an action voluntarily without a court order in two circumstances: by filing a notice of dismissal before the opposing party serves an answer or motion for summary judgment, Fed.R.Civ.P. 41(a)(1)(A)(i), or at any time during the litigation by filing a stipulation of dismissal signed by all parties who have appeared, Fed.R.Civ.P. 41(a)(1)(A)(ii).

1. Standard of Review

Anago, Shaz, and Eco filed a document with the court entitled “Stipulation for Dismissal with Prejudice” which stated that it was filed pursuant to “Rule 41(a)(1)[ (A) ](ii) and (2).” The parties made an obvious drafting mistake by citing two different modes of dismissal—Rule 41(a)(1), which allows for dismissal without a court order, and Rule 41(a)(2), which requires the court to order the case dismissed—so to determine whether the case was dismissed, we must identify which rule the parties used to dismiss the case.

We have never specifically addressed the standard we use when reviewing a district court's construction of a Rule 41(a) filing. We review a district court's decision to dismiss a case pursuant to a Rule 41(a)(2) motion for abuse of discretion, Negron v. City of Miami Beach, 113 F.3d 1563, 1571 (11th Cir.1997), and a district court's interpretation of Rule 41(a) de novo, ASX Inv. Corp. v. Newton, 183 F.3d 1265, 1267 (11th Cir.1999). The determination of whether a document was filed under Rule 41(a)(1) or Rule 41(a)(2) is a legal conclusion that can be made on the face of the filing and does not depend on facts the district court should find in the first instance. We therefore review the district court's determination de novo. See Cunningham v. Whitener, 182 Fed.Appx. 966, 968–69 (11th Cir.2006) (per curiam) (considering a court order on its face to determine if it was issued pursuant to 41(a)(1) or (a)(2)); De Leon v. Marcos, 659 F.3d 1276, 1282–83 (10th Cir.2011) (reviewing de novo the district court's determination on whether a stipulation was filed pursuant to Rule 41(a)(1) or 41(a)(2)).

A de novo review requires us to determine the parties' intent when they filed the March 2 document, and the best indication of that intent is the document itself. See generally De Leon, 659 F.3d at 1283–84 (interpreting a filing de novo, analyzing its contents and comparing them to the requirements found in Rule 41(a)(1)(A)(ii) and Rule 41(a)(2) to determine which controls). The parties styled the document a “Stipulation,” which is...