Morris v. Morgan Stanley & Co.

• Decision Date: 09 September 1991
• Docket Number: 89-16129,Nos. 89-15727,s. 89-15727
• Citation: 942 F.2d 648
• Parties: Fed. Sec. L. Rep. P 96,246, 20 Fed.R.Serv.3d 466 William MORRIS; Jeanne Morris, Plaintiffs-Appellants, v. MORGAN STANLEY & CO.; Randal Longfield, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 648

942 F.2d 648

Fed. Sec. L. Rep. P 96,246, 20 Fed.R.Serv.3d 466

William MORRIS; Jeanne Morris, Plaintiffs-Appellants, v. MORGAN STANLEY & CO.; Randal Longfield, Defendants-Appellees.

Nos. 89-15727, 89-16129.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 11, 1990.

Decided Aug. 20, 1991.

As Amended Sept. 9, 1991.

Robert E. Gyemant and Dennis A. Babbits, San Francisco, Cal., for plaintiffs-appellants.

Dale E. Barnes, Jr., McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before HUG, BEEZER and BRUNETTI, Circuit Judges.

BRUNETTI, Circuit Judge:

William and Jeanne Morris appeal from a July 1989 Order of the District Court for the Northern District of California dismissing their action for failure to prosecute under Federal Rule of Civil Procedure 41(b). We review a dismissal under Rule 41(b) for abuse of discretion. Carey v. King, 856 F.2d 1439, 1440 (9th Cir.1988) (per curiam). Appellants also assert the district court was without jurisdiction to issue either the order dismissing their suit or a subsequent order clarifying the order dismissing the action. The existence of subject matter jurisdiction is a question of law we review de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). We now affirm.

FACTS

In April 1985 the Morrises filed a complaint against Morgan Stanley and Company ("Morgan") alleging violations of state and federal securities laws. They amended the complaint in May 1985. In July 1985 Morgan responded with a motion to compel arbitration ¹ of certain of the state law claims, and to dismiss the remaining state and federal causes of action. The district court granted the motion in part, referring five state law counts to arbitration, dismissing two remaining state law claims, and retaining jurisdiction over four federal counts. In November 1985 the parties entered into the discovery process. For twenty-one months, through August 1987, the federal claims proceeded towards trial.

There appears from the record early evidence Appellants did not intend to pursue this case to trial in a reasonably diligent manner. In May 1986 the district court set a discovery deadline of October 24, 1986, and a trial date in January 1987. The Morrises requested and Morgan stipulated to a continuance to February 1987 and April 1987 for discovery and trial. In March Appellants moved for a second continuance for the purpose of pursuing discovery and settlement, and in April 1987 they moved to reopen discovery. A hearing to consider these motions was scheduled for July 21, 1987.

Two weeks before the July hearing Appellants substituted counsel for the second time. At the hearing they requested extra time for discovery due to this latest substitution. The district court granted the continuance but cautioned against further delay.

In August 1987 the parties apparently agreed to dismiss, with prejudice, two federal claims, and to arbitrate the remaining two federal counts. The parties agreed they would enter into a stipulation and thereafter pursue the dispute to its conclusion through arbitration. ² Matters did not proceed according to plan.

On August 11, 1987, Appellees mailed the first of several proposed stipulations to Appellants for their review and signature. Appellants refused to sign the stipulation, and requested the federal claims be consolidated with the state claims then pending arbitration before the National Association of Securities Dealers ("NASD"), and the entire matter be resolved by the American Arbitration Association ("AAA").

Morgan agreed to this new plan and on August 22 sent a new stipulation incorporating Appellants' demands. Appellees also withdrew the claims before the NASD which were scheduled for hearing in the fall of 1987. They received no response to the latest stipulation proposal.

On September 10, 1987, Appellees again wrote to Appellants to request action on the stipulation. Appellants returned an unsigned draft stipulation on September 22. Appellees signed the agreement and returned it to Appellants on September 30. Appellants did not respond. Appellees wrote to the plaintiffs on October 25 and 30 requesting action on the stipulation and received no response. In November 1987 Morgan wrote to Appellants requesting action on a discovery matter and were unanswered.

Beginning in June 1988, the parties engaged in a series of status conferences with the district court. During telephone conferences on June 21 and October 6, 1988, Appellants promised to send the arbitration stipulation and discovery materials but failed to do either. The parties agreed to meet on October 25 to discuss the arbitration and discovery matters, but Appellants did not appear at the meeting, did not call Appellees to provide an excuse, and did not answer a letter from Morgan requesting an explanation.

Status conferences three and four were held on December 8, 1988, and February 8, 1989. During these phone meetings Appellants said either that they would provide the long awaited stipulation, or had already done so. Appellees received nothing. On March 8, 1989, Morgan filed a motion to dismiss for failure to prosecute and in a fifth status conference the next day, informed the court and Appellants of its motion. Again, Appellants stated that they had sent the stipulation to Morgan and again, Morgan received nothing.

In April 1989, without the necessary stipulation having been signed by the parties, Appellants made a demand for arbitration to the AAA which included both state and federal claims. On May 19, 1990, the district court issued an order granting the motion to dismiss for failure to prosecute pursuant to Federal Rule of Civil Procedure 41(b). The Morrises filed a notice of appeal on May 30. On May 24 Appellants sent a letter to the AAA stating that the court's order did not apply to the state law claims and thereafter the AAA informed Morgan that it intended to begin arbitration on those claims. On July 27, 1989, upon a motion by Morgan to clarify the May 19 order, the district court issued an order stating that it had intended to dismiss all of Appellants' claims with prejudice, and that the dismissal should render the case res judicata in any subsequent attempt to arbitrate any of the claims. The Morrises filed a notice of appeal from the clarifying order on August 25.

I. DISCUSSION

Appellants assert the order dismissing the action pursuant to Rule 41(b) was improper; the district court had no jurisdiction to dismiss the state claims already submitted for arbitration; the court was without jurisdiction to dismiss the federal claims; and the court had no jurisdiction to issue the clarifying order. We address each of these assertions in turn.

A.

Upon a motion to dismiss for failure to prosecute, a district court is required to weigh the following factors in arriving at a decision:

the court's need to manage its docket, the public interest in expeditious resolution of litigation, the risk of prejudice to defendants from delay, the policy favoring disposition of cases on their merits.

Citizens Utilities Co. v. American Tel. & Tel. Co., 595 F.2d 1171, 1174 (9th Cir.), cert. denied, 444 U.S. 931, 100 S.Ct. 273, 62 L.Ed.2d 188 (1979). We said in Anderson v. Air West, Inc., 542 F.2d 522 (9th Cir.1976): "[T]he failure to prosecute diligently is sufficient by itself to justify a dismissal, even in the absence of a showing of actual prejudice to the defendant from the failure." Id. at 524.

Finally, we said in Anderson that in the context of Rule 41(b) dismissals "[a] rule of thumb as to the meaning of the abuse of discretion standard provides that the trial court's exercise of discretion should not be disturbed unless there is a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors." Id. (quotation omitted).

In light of these factors and deference due the district court, we cannot say the court abused its discretion in dismissing Appellants' entire action with prejudice. The Morrises unnecessarily delayed the adjudication of the federal claims for almost two years: from the August 1987 agreement to arbitrate those claims to the time of Morgan's Rule 41(b) motion. Morgan voluntarily withdrew the state claims from NASD in August 1987 and might have had that part of the action resolved by the fall of 1987 had Appellants not requested the state and federal claims be consolidated and submitted to the AAA.

Appellants repeatedly failed to respond to correspondence from Appellees regarding discovery and the arbitration, failed to appear at at least one scheduled meeting, and misrepresented their intentions to the district court during five separate status conferences. As of the time of this appeal, the Morrises have substituted counsel four times which has resulted in serious delay.

Considering the extent of the delay by Appellants and the repeated attempts by the court and Appellees to move them into some kind of meaningful action, the court did not abuse its discretion in weighing the four factors described above. Although there is indeed a policy favoring disposition on the merits, it is the responsibility of the moving party to move towards that disposition at a reasonable pace, and to refrain from dilatory and evasive tactics. Prejudice to Morgan here is obvious: it withdrew the claims before NASD that could have been resolved in 1987. And, we may presume from the length of time that has elapsed between the events at issue here and the present, that Appellees ability to present its case has been prejudiced. Citizens, 595 F.2d at 1174. Finally, this case has been in the federal courts for nearly five years for no reason other than inability or...