Mariner Health v. Pricewaterhousecoopers

• Decision Date: 10 October 2006
• Docket Number: No. A06A1372.,A06A1372.
• Citation: 638 S.E.2d 340,282 Ga. App. 217
• Parties: MARINER HEALTH CARE, INC. v. PRICEWATERHOUSECOOPERS, LLP et al.
• Court: Georgia Court of Appeals

282 Ga. App. 217

638 S.E.2d 340

MARINER HEALTH CARE, INC. v. PRICEWATERHOUSECOOPERS, LLP et al.

No. A06A1372.

Court of Appeals of Georgia.

October 10, 2006.

Reconsideration Denied November 2, 2006.

Jones Day, Michael J. McConnell, Joseph E. Finley, David C. Kiernan, G. Lee Garrett, Jr., Atlanta, for appellant Sutherland, Asbill & Brennan, John A. Chandler, Elizabeth V. Tanis, Drew D. Dropkin, William D. Barwick, Bondurant, Mixson & Elmore, Jill Pryor, Atlanta, for appellees.

Daugherty, Crawford, Fuller & Brown, Jason L. Crawford, for amicus curiae.

JOHNSON, Presiding Judge.

In 1998, Paragon Health Network, Inc., acquired and merged with Mariner Health Group, Inc. (MHG). After the merger, both companies ended up in bankruptcy, resulting in the post-bankruptcy creation of Mariner Health Care, Inc. (Mariner). On August 29, 2002, Mariner filed a complaint, which it later amended, in Fulton County State Court. The complaint alleges that auditor PricewaterhouseCoopers, LLP, and former MHG officers Arthur Stratton, Jr., David Hansen, Paul Diaz and Douglas Stone committed fraud that caused Paragon to purchase MHG at an artificially inflated cost of more than $535 million.

Pricewaterhouse filed no counterclaims against Mariner, but filed a third-party complaint against former MHG directors Stiles Kellett, Jr., and Samuel Kellett, for indemnification or contribution should it be found liable to Mariner in the primary action. The Kelletts filed their own third-party complaint against Stratton, Hansen, Diaz, Stone and a Pricewaterhouse partner for contribution or indemnification.

Stratton, Hansen, Diaz and Stone, in turn, asserted counterclaims against the Kelletts for contribution, and Stratton also filed a claim for indemnification against the Kelletts. Stratton, Hansen, Diaz and Stone initially filed counterclaims against Mariner. But in March 2004, pursuant to OCGA § 9-11-41(a) and (c), they voluntarily dismissed their counterclaims against Mariner.

In May 2004, Pricewaterhouse filed a motion for sanctions pursuant to OCGA § 9-11-37(b), alleging discovery abuses by Mariner and seeking dismissal of the complaint with prejudice. On July 22, 2004, the day before the hearing scheduled on the motion for sanctions, Mariner filed a written notice of voluntary dismissal without prejudice under OCGA § 9-11-41(a), and a renewal action in Fulton County Superior Court.

Pricewaterhouse and the four former MHG officers objected to and moved to strike Mariner's notice of voluntary dismissal. The state court sustained their objections and struck Mariner's notice of voluntary dismissal, ruling that the pending third-party claims for contribution and indemnification against the Kelletts preclude Mariner from voluntarily dismissing its action. Thereafter, the court granted Pricewaterhouse's motion for discovery sanctions, dismissing the action with prejudice. Mariner appeals.

1. Mariner argues that the trial court erred in striking its notice of voluntary dismissal under OCGA § 9-11-41(a) because there were no counterclaims or other claims for affirmative relief pending against it. We agree.

At the time Mariner filed its lawsuit, OCGA § 9-11-41(a) provided that a plaintiff could voluntarily dismiss its action before resting its case, so long as no counterclaiming defendant objected to the dismissal.¹

Subject to the provisions of subsection (c) of Code Section 9-11-23, of Code Section 9-11-66, and of any statute, an action may be dismissed by the plaintiff, without order or permission of court, by filing a written notice of dismissal at any time before the plaintiff rests his case. After the plaintiff rests his case, permission and an order of the court must be obtained before dismissal. If a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court.²

The Supreme Court has liberally construed the counterclaim limitation on voluntary dismissals by applying it, not only to counterclaims, but to other defensive pleadings seeking affirmative relief from the plaintiff.³ "The purpose of the counterclaim limitation on voluntary dismissals is to prevent a plaintiff from invoking the jurisdiction of the court and then withdrawing when the defendant seeks affirmative relief from the plaintiff."⁴

At the time Mariner filed its notice of voluntary dismissal, no counterclaims or other claims seeking affirmative relief were pending against it. Pricewaterhouse and the former MHG officers had filed only third-party claims for contribution or indemnification that are wholly derivative of Mariner's main action. Because those third-party claims seek no affirmative relief from Mariner, they cannot be used to invoke the counterclaim limitation on voluntary dismissals.⁵

Pricewaterhouse and the four former officers contend that subsection (c) of OCGA § 9-11-41, as interpreted by Thomas v. Auto Owners Ins. Co.,⁶ extends the counterclaim limitation of subsection (a) to cross-claims and third-party claims, and thus the pending third-party claims against the Kelletts for contribution or indemnification support the trial court's decision to strike Mariner's voluntary dismissal. The contention is without merit.

Subsection (c) is entitled Dismissal of counterclaim, cross-claim, or third-party claim, and provides in its entirety, "This Code section also applies to the dismissal of any counterclaim, cross-claim, or third-party claim."⁷ It is apparent that subsection (c) simply extends the same right of voluntary dismissal afforded to plaintiffs by subsection (a) to parties that have filed counterclaims, cross-claims or third-party claims.⁸ So just as plaintiffs may voluntarily dismiss their actions, defendants filing counterclaims, cross-claims and third-party claims can voluntarily dismiss their respective claims. In fact, as noted above, the four former MHG officers availed themselves of this right by voluntarily dismissing, pursuant to OCGA § 9-11-41(a) and (c), the counterclaims that they had initially brought against Mariner. But nothing in the plain language of subsection (c) extends the counterclaim limitation to wholly derivative third-party claims for contribution or indemnification so that such claims can be used to bar a plaintiff's voluntary dismissal of its action.

Likewise, Thomas⁹ does not hold that a cross-claimant or third-party claimant can prevent a plaintiff's voluntary dismissal. Indeed, that issue was not even before the court in Thomas. Rather, the sole issue in that case was whether an insurance carrier could continue its cross-claim for indemnification against a co-defendant who had been dismissed by the plaintiff in the principal action.¹⁰ The Thomas court answered that question in the negative, holding that the insurance company's failure to object to the dismissal of the main claim meant that the entire action, including the insurance company's cross-claim, had been terminated.¹¹

Pricewaterhouse and the former officers reason that this holding implies that if the cross-claiming insurance company had actually objected to the plaintiff's voluntary dismissal, then the entire action would have continued. We cannot speculate as to what the Thomas court might have held based on hypothetical circumstances. But what is clear from the facts under which that case was decided is that Thomas does not support the proposition that the counterclaim limitation on voluntary dismissals has been extended to derivative cross-claims or third-party claims.

Instead, under OCGA § 9-11-41(a), Mariner had the right to dismiss its action at any time before resting its case, so long as there were no counterclaims or other claims for affirmative relief pending against it. Since Pricewaterhouse and the former MHG officers did not file counterclaims or otherwise seek affirmative relief from Mariner, but asserted only third-party claims for contribution or indemnification, the trial court erred in ruling that their objections could prevent Mariner's voluntary dismissal of its action.

2. Pricewaterhouse and the four former MHG officers further argue that the Pricewaterhouse motion for sanctions for alleged discovery abuses pursuant to OCGA § 9-11-37(b) provided a basis for application of the counterclaim limitation of OCGA § 9-11-41(a). Although the trial court did not strike Mariner's notice of voluntary dismissal on this basis, Pricewaterhouse and the former officers claim that we should nevertheless affirm the trial court's ruling if it is right for any reason.

But Pricewaterhouse and the former officers cite no case in which a motion for sanctions has served as a basis for barring a plaintiff from voluntarily dismissing its action. Indeed, this court has consistently reversed trial court decisions disallowing voluntary dismissals in the face of pending sanctions motions.¹² For instance, the case of C & S Indus. Supply Co. v. Proctor & Gamble Paper Products Co.¹³ is virtually identical to the instant case.

In that case, only minutes before a scheduled hearing on a defense motion for sanctions, the plaintiff filed a notice of voluntary dismissal pursuant to OCGA § 9-11-41(a).¹⁴ The trial court struck the notice of voluntary dismissal and then dismissed the complaint and assessed attorney fees as sanctions.¹⁵ On appeal, this court reversed the trial court's rulings, finding that the plaintiff had the right to voluntarily dismiss despite the pending motion for sanctions under OCGA § 9-11-37(b).¹⁶

Pursuant to OCGA § 9-11-41(a) a plaintiff may voluntarily dismiss his action, without order or permission of the trial court, at any time before he rests his case. However, the announcement by a trial judge of a decision that will terminate a civil case, though that decision has not been formally reduced to writing and entered, will preclude...