Harvey's Wagon Wheel, Inc. v. Van Blitter

• Decision Date: 25 March 1992
• Docket Number: No. 90-16477,90-16477
• Parties: HARVEY'S WAGON WHEEL, INC., Plaintiff-Appellee, v. Toshi VAN BLITTER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 153

959 F.2d 153

HARVEY'S WAGON WHEEL, INC., Plaintiff-Appellee, v. Toshi VAN BLITTER, Defendant-Appellant.

No. 90-16477.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 10, 1991.

Decided March 25, 1992.

Robert N. Black, Black & Kopper, Davis, California, and Meredith S. Watts, San Francisco, Cal., for defendant-appellant.

Richard Glasson and Chris D. Nichols, Manoukian, Scarpello & Alling, Ltd., Stateline, Nev., for plaintiff-appellee.

Appeal from the United States District Court for the District of Nevada.

Before NORRIS, BEEZER and LEAVY, Circuit Judges.

BEEZER, Circuit Judge:

This appeal raises a choice of law question of first impression: In a diversity action, should a district court apply federal rule of civil procedure 41(b), which permits dismissal for failure to prosecute, or should it apply Nevada rule of civil procedure 41(e), which mandates dismissal for failure to prosecute after five years? Applying the analytical framework set forth in Olympic Sports Prod. v. Universal Athletic Sales Co., 760 F.2d 910 (9th Cir.1985), cert. denied, 474 U.S. 1060, 106 S.Ct. 804, 88 L.Ed.2d 780 (1986), we hold that the federal law applies and we affirm.

I

Toshi Van Blitter gambled and lost. She says she racked up "millions of dollars in gaming losses to Harrah's Club and to Harvey's." Some of these gaming losses are evidenced by the six negotiable instruments, totaling $60,000, that she executed, negotiated and delivered to Harvey's Wagon Wheel. Her bank dishonored the instruments, setting the stage for this suit. ¹

On May 9, 1985, Harvey's filed suit in federal district court in Nevada seeking payment of the $60,000 debt. Federal jurisdiction rested on diversity: Harvey's is a Nevada corporation and Van Blitter is a California citizen. On July 16, 1990--more than five years after the case was filed--Harvey's moved for summary judgment.

Van Blitter did not raise a substantive challenge to the motion. Her opposition rested on Harvey's failure to bring the case to trial within five years as required by Nev.R.Civ.P. 41(e). She also argued that if the district court looked to the federal rules instead, it should dismiss the case for failure to prosecute pursuant to Fed.R.Civ.P. 41(b). Van Blitter subsequently moved to dismiss the Harvey's complaint based on the Nevada rule.

The district court looked to the federal rule, declined to dismiss the complaint and granted Harvey's summary judgment motion. Van Blitter timely appealed, arguing that the Nevada rule applies and, therefore, that the district court was obliged to dismiss Harvey's action.

II

We review de novo the legal question whether state or federal law applies in a diversity action. Olympic Sports Prods. v. Universal Athletic Sales Co., 760 F.2d 910, 912 (9th Cir.1985), cert. denied, 474 U.S. 1060, 106 S.Ct. 804, 88 L.Ed.2d 780 (1986). In construing a state law, we follow the decisions of the state's highest court. Id. at 912-13.

"Ever since Erie, the [Supreme] Court has struggled to provide criteria to determine when federal law may be used in diversity cases." Erwin Chemerinsky, Federal Jurisdiction 266 (1989). It does not suffice to state that a federal rule is generally procedural and therefore presumptively applicable. We determine the choice of law by undertaking a multi-step inquiry. Id.; see also John Hart Ely, The Irrepressible Myth of Erie, 87 Harv.L.Rev. 693 (1974); Abram Chayes, The Bead Game, 87 Harv.L.Rev. 741, 741 (1974) (response to Myth of Erie, noting that "all of the mystification has not gone out of the Erie myth"); John Hart Ely, The Necklace, 87 Harv.L.Rev. 753 (1974) (reply).

The Olympic majority set forth the multi-step inquiry as follows:

First, we must determine if the federal rule and state rule are actually coextensive. If the federal rule does not address the situation, there would be no conflict between state and federal rules. We would then apply the Erie[ R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ] analysis to determine if the federal court should enforce the state rule. If the federal rule does address the situation, there would be an unavoidable conflict between the state and federal rules. We would then apply the Hanna[ v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) ] analysis: if the federal rule is within the scope of constitutional power and the Rules Enabling Act, it applies unless the Erie considerations are so strong that they can justify interrupting the normal function of the federal court processes.

760 F.2d at 914-15.

In Olympic, the district court had entered a dismissal for lack of prosecution based on section 583(b) of the California Code of Civil Procedure. Id. at 912. The appellant argued that Federal Rule 41(b)--the same rule at issue here--governed dismissals in diversity cases. The Olympic majority interpreted the California rule to be discretionary, not mandatory. Its discretionary nature supplied one of the factors supporting the court's conclusion that the California and federal rules were coextensive. Id. at 915. Accordingly, the Olympic court reversed the district court and held that the federal rule applies. Id. at 916.

Unlike the majority, the dissent interpreted the California rule to be mandatory. Given that interpretation, the dissent argued that Erie principles required application of the state rule. Id. at 917-918 (Wallace, J., dissenting). As discussed below, the Nevada rule is mandatory. Even so, application of the Olympic multi-step analysis, as informed by a subsequent Supreme Court decision, leads us to conclude that the federal rule applies.

III

The initial inquiry is whether the federal and state rules are coextensive. As Chemerinsky notes, "[s]ometimes that is quite unclear." Chemerinsky at 269.

Federal Rule 41(b) provides in part that "[f]or 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." When applying this discretionary rule, a trial court "considers the housekeeping interests of the court and the reasonable diligence displayed by the parties." Olympic, 760 F.2d at 915.

Nevada Rule 41(e) provides in part that:

Any action heretofore or hereafter commenced shall be dismissed by the court in which the same shall have been commenced or to which it may be transferred on motion of any party, or on the court's own motion, after due notice to the parties, unless such action is brought to trial within five years after the plaintiff has filed his action, except where the parties have stipulated in writing that the time may be extended.

Nev.R.Civ.P. 41(e).

This rule nearly mirrors the convoluted California rule considered by the court in Olympic. See 760 F.2d at 915. ² The phrase "shall be dismissed," found in the California and Nevada rules, facially provides for mandatory dismissal. Looking to California case law, however, the Olympic majority determined that judicially recognized exceptions imparted discretion into the rule. Id. In appropriate situations, the California courts could decline to dismiss cases that fell within the rule. Id.

Nevada's judiciary declined to adopt California's discretion-imparting exceptions. See Thran v. First Judicial Dist. Court, 79 Nev. 176, 380 P.2d 297, 299-300 (1963) (declining to adopt exceptions recognized by California courts); see also Erickson v. One Thirty-Three, Inc., 104 Nev. 755, 757-58, 766 P.2d 898, 899-900 (1988) (reaffirming mandatory nature of dismissal under Rule 41(e)). If a case has not been brought to trial within five years and the parties do not stipulate to an extension, the court must dismiss the case. This aspect is mandatory.

Nevada's rule does have a discretionary aspect. The last sentence of 41(e) states that "[a] dismissal under this subdivision (e) is a bar to another action upon the same claim for relief against the same defendants unless the court otherwise provides." Accordingly, courts may dismiss these lingering actions with prejudice or without prejudice. United Ass'n of Journeymen & Apprentices v. Manson, 105 Nev. 816, 821, 783 P.2d 955, 958 (1989).

Although the possibility of dismissal without prejudice imparts an element of discretion, the rule still permits less discretion than did the California rule at issue in Olympic. Olympic, therefore, does not dispositively answer the question whether the Nevada and federal rule are coextensive.

Van Blitter interprets the case law to require a "direct collision between the Federal Rule and the state law" before the rules will be deemed coextensive. Walker v. Armco Steel Corp., 446 U.S. 740, 749, 100 S.Ct. 1978, 1984, 64 L.Ed.2d 659 (1980) (citation and internal quotation omitted). The Olympic dissent stressed this interpretation. Olympic, 760 F.2d at 917 (Wallace, J., dissenting). Van Blitter perceives no direct collision here because the rules differ somewhat in scope. The federal rule does not require dismissal at any point; the Nevada rule requires dismissal after five years. Accordingly, she argues that the rules do not directly collide and so are not coextensive.

A Supreme Court decision handed down after Olympic clarified the meaning of its "inquiry into whether there is a 'direct collision' between state and federal law." Stewart Org. v. Ricoh Corp., 487 U.S. 22, 26 n. 4, 108 S.Ct. 2239, 2242 n. 4, 101 L.Ed.2d 22 (1988) (citing Walker, 446 U.S. at 749, 100 S.Ct. at 1984; Hanna, 380 U.S. at 472, 85 S.Ct. at 1144). The Court wrote that this "direct collision" language "is not meant to mandate that federal law and state law be perfectly coextensive and equally applicable to the issue at hand; rather, the 'direct collision' language, at least where the applicability of a federal statute is at issue, expresses the requirement that the federal statute be sufficiently broad to cover the point in dispute." Id. (citing Hanna, 380 U.S. at 472, 85 S.Ct. at...