CITIBANK, NA v. Data Lease Financial Corp.

• Decision Date: 02 December 1988
• Docket Number: No. 78-5747-CIV.,78-5747-CIV.
• Citation: 700 F. Supp. 1099
• Parties: CITIBANK, N.A., Plaintiff, v. DATA LEASE FINANCIAL CORP., Defendant.
• Court: U.S. District Court — Southern District of Florida

700 F. Supp. 1099

CITIBANK, N.A., Plaintiff, v. DATA LEASE FINANCIAL CORP., Defendant.

No. 78-5747-CIV.

United States District Court, S.D. Florida, Miami Division.

December 2, 1988.

John H. Schulte, Paul McMahon, Tew, Jorden, Schulte & Beasley, Miami, Fla., for plaintiff.

Bruce W. Greer, R. Lawrence Bonner, Laura Besvinick, Greer, Homer, Cope & Bonner, Miami, Fla., for defendant.

MEMORANDUM OPINION AND ORDER OF DISMISSAL

NESBITT, District Judge.

This cause is before the court for jury trial and on pending motions after remand from the United States Court of Appeals for the Eleventh Circuit. See Citibank, N.A. v. Data Lease Financial Corp., 828 F.2d 686 (11th Cir.1987). The court specially set this case for jury trial commencing November 28, 1988. Although the court selected a jury as scheduled and expected to proceed to trial, for the reasons stated below and by stipulation of the parties, the motion to dismiss is dispositive of all issues triable to a jury.

Because the case has been pending for ten years, a detailed recitation of the factual and procedural history of the litigation would be quite lengthy; therefore, the court will outline only the facts relevant to the resolution of the pending motions.¹ Beginning in 1973, Plaintiff Citibank made loans to Defendant Data Lease Financial Corporation ("Data Lease") in excess of seven million dollars. As collateral for these loans, Data Lease pledged 870,000 shares of stock of Miami National Bank ("MNB"). After Data Lease defaulted on the loans in 1974, the parties attempted to restructure Data Lease's indebtedness, as evidenced by a Memorandum of Understanding entered into by the parties in April 1975.² As contemplated by the restructuring arrangement, Citibank placed several individuals on the board of directors of MNB and eventually selected the entire board ("the directors") by voting the pledged shares.

In December 1978, Citibank filed this foreclosure action on the loans that had been in default since 1974. A predecessor judge of this court ordered an emergency judicial sale in February 1979 of the MNB stock pledged as collateral.³ Following the sale, Data Lease answered the complaint and asserted twelve affirmative defenses to the foreclosure. Data Lease also filed an eight-count counterclaim against Citibank, in which it named the directors as third-party defendants. In 1986 this court entered a series of orders that resolved all of the claims in favor of Citibank. After the Court of Appeals reversed and remanded for trial, this court established a detailed pretrial schedule by order dated April 22, 1988. That order set a cut-off date for dispositive motions of October 7, 1988; scheduled a pretrial conference for November 7th; and specially set the case for trial commencing November 28th.

On August 12, 1988 counsel for Data Lease and for the third-party defendants entered into a Settlement Agreement and Mutual Covenant Not to Sue, and executed a stipulation "Dismissing All Claims by Data Lease Against the Directors With Prejudice." The parties submitted a proposed order reciting the stipulation and on September 8, 1988 the court approved the stipulation and dismissed the third-party claims with prejudice. On September 26th, the law firm of Greer, Homer, Cope & Bonner filed its Notice of Appearance on behalf of Data Lease through Bruce W. Greer; by order dated November 15th, the Court granted a motion to withdraw filed by Robert M. Sondak of the firm of Paul, Landy, Beiley & Harper, who had represented Data Lease in this case since August 14, 1980.

Eleven weeks after the court approved the stipulation for dismissal of the third party defendants with prejudice, and four days before jury selection was set to begin, Citibank filed a Motion to Dismiss Data Lease's Counterclaims and Strike Data Lease's Affirmative Defenses. The basis of the motion is that the dismissal of the third-party defendants with prejudice constitutes an adjudication on the merits that precludes Data Lease from proceeding against Citibank.⁴ Although the motion was untimely by six weeks, the court directed Data Lease to respond to the motion by November 28th, the day jury selection was set to begin, because of the obvious importance of the issue. Data Lease filed a memorandum in opposition to the motion, and also filed a Motion for Evidentiary Hearing and to Vacate or Amend Stipulation and Order Dismissing All Claims by Data Lease Against the Directors With Prejudice. Data Lease contends that the court is required to hold an evidentiary hearing to ascertain the intent of the parties in stipulating to the dismissal of the third-party defendants with prejudice, and that the court should vacate the order of dismissal because it was the product of a mistake by Data Lease's former counsel.

At the first hearing on the motion,⁵ counsel for Data Lease stated that former counsel must have made a mistake in dismissing the third-party claims with prejudice because the stipulation is internally inconsistent in attempting to retain the right to proceed against Citibank. Counsel argued that assuming the attorneys who executed the stipulation of dismissal with prejudice knew that a dismissal with prejudice is an adjudication on the merits, Data Lease would not have agreed to dismiss only the directors and at the same time prejudice its claim and defenses against Citibank. Tr. at 13-14. Counsel acknowledged, "It is inadvertance in my view. It is a mistake. Perhaps it's neglect. I hope it comes under one of those phrases in Rule 60...." Tr. at 13. Counsel also stated several times that Data Lease had "no viable claims" against Citibank independent of the claims against the directors.

Even though Data Lease had presented oral arguments on the motions in the morning and afternoon of November 28th, and had asked for neither a continuance of the trial nor a recess, the court was reluctant to rule on the motions without giving counsel sufficient time to research the issues. Although both parties attempted to dissuade the court from beginning jury selection, the court selected a jury in the late afternoon, with the intention of proceeding to trial if there were any issues to be tried by a jury after resolution of the motion to dismiss. The court also scheduled additional oral argument on November 29th, at which time counsel for Data Lease merely reiterated his arguments from the previous day without citing any additional authority or presenting new analysis to support his position. Simply stated, Data Lease's position is that a consent dismissal with prejudice acts as an adjudication on the merits, except where a mistake by counsel undermines the intent of the parties who entered into a stipulation of dismissal. In such an instance, Data Lease contends, the court is required to hold an evidentiary hearing to determine whether the parties intended the dismissal with prejudice to be an adjudication on the merits.

In support of this proposition, Data Lease relies solely on Maryland v. Baltimore Transit Co., 38 F.R.D. 340 (D.Md. 1965), in which the court noted that the words "with prejudice" have significance only in light of the circumstances under which the dismissal took place. Id. at 343. The Baltimore Transit case does not purport to state a general rule of law, and can be distinguished on several grounds. Most important, the case on which the court relied specifically distinguishes dismissals with prejudice pursuant to a settlement of the case. Furthermore, the court had dismissed one defendant at the request of the plaintiffs, but had sua sponte added the words "on the merits" to the formal judgment. The court noted that it was the court's intention to preclude a new claim against the defendant, not the express intention of the parties. In this case, Data Lease settled with the third-party defendants, and entered into a stipulation dismissing its claims with prejudice. No intervention in the settlement process by the court was sought, nor would it have been appropriate. See United States v. City of Miami, 614 F.2d 1322, 1330 (5th Cir.1980), modified on other grounds, 664 F.2d 435 (5th Cir.1981).

An evidentiary hearing is unnecessary in this case to ascertain the intent of the parties to the stipulation of dismissal. The settlement agreement and mutual covenant not to sue, the stipulation, and the order of dismissal contain at least eleven references to the fact that the dismissal is only of the third-party defendants and not of Citibank. The Stipulation of Dismissal With Prejudice (so captioned by the parties) and the order of dismissal both state that "all claims by Data Lease solely against the Directors (but not Citibank)" are dismissed with prejudice. By way of example, one of many similar paragraphs of the settlement agreement provides:

this Agreement is not intended nor shall it be construed to extend to or to inure to the benefit of Citibank not shall it impair or diminish the right or ability of Data Lease to defend against the

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