SEMTEK INTERNATIONAL INC. v. LOCKHEED MARTIN CORP.

• Decision Date: 27 February 2001
• Citation: 531 U.S. 497
• Court: U.S. Supreme Court

OCTOBER TERM, 2000

Syllabus

SEMTEK INTERNATIONAL INC. v. LOCKHEED MARTIN CORP.

CERTIORARI TO THE COURT OF SPECIAL APPEALS OF MARYLAND

No.99-1551. Argued December 5, 2000-Decided February 27, 2001

Respondent removed petitioner's California state-court suit to a California Federal District Court based on diversity of citizenship, and successfully moved to dismiss the case "on the merits" as barred by California's statute of limitations. Petitioner then brought suit in a Maryland Circuit Court, alleging the same causes of action, which were not time barred under Maryland's statute of limitations. That court dismissed the case on the ground of res judicata. In affirming, the Maryland Court of Special Appeals held that, regardless of whether California would have accorded claim-preclusive effect to a statute-oflimitations dismissal by one of its own courts, the California federal court's dismissal barred the Maryland complaint because the res judicata effect of federal diversity judgments is prescribed by federal law, under which the earlier dismissal was on the merits and claim preclusive.

Held: Because the claim-preclusive effect of a federal court's dismissal "upon the merits" of a diversity action on state statute-of-limitations grounds is governed by a federal rule, which in turn (in diversity cases) incorporates the claim-preclusion law that would be applied by state courts in the State in which the federal court sits, the Maryland Court of Special Appeals erred in holding that the California federal court's dismissal "upon the merits" necessarily precluded the Maryland statecourt action. Pp. 500-509.

(a) Dupasseur v. Rochereau, 21 Wall. 130, held that the res judicata effect of a federal diversity judgment "is such as would belong to judgments of the State courts rendered under similar circumstances," id., at 135. That case is not dispositive here, however, because it was decided under the Conformity Act of 1872, which required federal courts to apply the procedural law of the forum State in nonequity cases. Neither is claim-preclusive effect demanded by Rule 41(b)-which provides that, unless the court "otherwise specifies," an involuntary dismissal, other than a dismissal for lack of jurisdiction, improper venue, or failure to join a party under Rule 19, "operates as an adjudication upon the merits." Although the original connotation of a judgment "on the merits" was one that passes directly on the substance of a claim

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(which would be claim preclusive), the meaning of the term has undergone change, and does not necessarily designate a judgment effecting claim preclusion. There are a number of reasons for believing it does not bear that meaning in Rule 41(b). It would be peculiar to announce a federally prescribed rule on claim preclusion in a default rule for determining a dismissal's import, or to find a rule governing the effect to be accorded federal judgments by other courts ensconced in rules governing the internal procedures of the rendering court itself. Moreover, as so interpreted, the Rule would in many cases violate the federalism principle of Erie R. Co. v. Tompkins, 304 U. S. 64, 78-80, by engendering substantial variations in outcomes between state and federal litigation which would likely influence forum choice, Hanna v. Plumer, 380 U. S. 460, 467-468. Finally, this Court has never relied upon the Rule when recognizing the claim-preclusive effect of federal judgments in federal-question cases. Rule 41(a) makes clear that "an adjudication upon the merits" in Rule 41(b) is the opposite of a dismissal without prejudice-that is, it is a dismissal that prevents refiling of the claim in the same court. That is undoubtedly a necessary condition, but not a sufficient one, for claim-preclusive effect in other courts. Pp. 500-506.

(b) Federal common law governs the claim-preclusive effect of a dismissal by a federal court sitting in diversity, and it is up to this Court to determine the appropriate federal rule. Since in diversity cases state, rather than federal, substantive law is at issue, there is no need for a uniform federal rule; and nationwide uniformity is better served by having the same claim-preclusive rule (the state rule) apply whether the dismissal has been ordered by a state or a federal court. Any other rule would produce the sort of forum shopping and inequitable administration of the laws that Erie seeks to avoid. While the federal reference to state law will not obtain in situations in which the state law is incompatible with federal interests, no such conflict exists here. Pp. 506-509.

128 Md. App. 39, 736 A. 2d 1104, reversed and remanded.

SCALIA, J., delivered the opinion for a unanimous Court.

Michael Gottesman argued the cause for petitioner. With him on the briefs were Jonathan S. Massey, Kenneth J. Chesebro, Thomas v: Girardi, Thomas C. Goldstein, Walter J. Lack, Andrew W Zepeda, and Steven L. Hogan.

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Walter E. Dellinger argued the cause for respondent.

With him on the brief were Robert E. Willett, Francis B. Burch, Jr., and Martin H. Redish. *

JUSTICE SCALIA delivered the opinion of the Court.

This case presents the question whether the claimpreclusive effect of a federal judgment dismissing a diversity action on statute-of-limitations grounds is determined by the law of the State in which the federal court sits.

I

Petitioner filed a complaint against respondent in California state court, alleging inducement of breach of contract and various business torts. Respondent removed the case to the United States District Court for the Central District of California on the basis of diversity of citizenship, see 28 U. S. C. §§ 1332, 1441 (1994 ed. and Supp. IV), and successfully moved to dismiss petitioner's claims as barred by California's 2-year statute of limitations. In its order of dismissal, the District Court, adopting language suggested by respondent, dismissed petitioner's claims "in [their] entirety on the merits and with prejudice." App. to Pet. for Cert. 59a. Without contesting the District Court's designation of its dismissal as "on the merits," petitioner appealed to the Court of Appeals for the Ninth Circuit, which affirmed the District Court's order. 168 F. 3d 501 (1999) (table). Petitioner also brought suit against respondent in the State Circuit Court for Baltimore City, Maryland, alleging the same causes of action, which were not time barred under Maryland's 3-year statute of limitations. Respondent sought injunctive relief against this action from the California federal court under the All Writs Act, 28 U. S. C. § 1651, and removed the action to the United States District Court for the

*Griffin B. Bell, Chilton Davis Varner, Paul D. Clement, and Jeffrey S. Bucholtz filed a brief for the Product Liability Advisory Council, Inc., as amicus curiae urging affirmance.

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District of Maryland on federal-question grounds (diversity grounds were not available because Lockheed "is a Maryland citizen," Semtek Int'l, Inc. v. Lockheed Martin Corp., 988 F. Supp. 913, 914 (1997)). The California federal court denied the relief requested, and the Maryland federal court remanded the case to state court because the federal question arose only by way of defense, ibid. Following a hearing, the Maryland state court granted respondent's motion to dismiss on the ground of res judicata. Petitioner then returned to the California federal court and the Ninth Circuit, unsuccessfully moving both courts to amend the former's earlier order so as to indicate that the dismissal was not "on the merits." Petitioner also appealed the Maryland trial court's order of dismissal to the Maryland Court of Special Appeals. The Court of Special Appeals affirmed, holding that, regardless of whether California would have accorded claim-preclusive effect to a statute-of-limitations dismissal by one of its own courts, the dismissal by the California federal court barred the complaint filed in Maryland, since the res judicata effect of federal diversity judgments is prescribed by federal law, under which the earlier dismissal was on the merits and claim preclusive. 128 Md. App. 39, 736 A. 2d 1104 (1999). After the Maryland Court of Appeals declined to review the case, we granted certiorari. 530 U. S. 1260 (2000).

II

Petitioner contends that the outcome of this case is controlled by Dupasseur v. Rochereau, 21 Wall. 130, 135 (1875), which held that the res judicata effect of a federal diversity judgment "is such as would belong to judgments of the State courts rendered under similar circumstances," and may not be accorded any "higher sanctity or effect." Since, petitioner argues, the dismissal of an action on statute-oflimitations grounds by a California state court would not be claim preclusive, it follows that the similar dismissal of this diversity action by the California federal court cannot be

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claim preclusive. While we agree that this would be the result demanded by Dupasseur, the case is not dispositive because it was decided under the Conformity Act of 1872, 17 Stat. 196, which required federal courts to apply the procedural law of the forum State in nonequity cases. That arguably affected the outcome of the case. See Dupasseur, supra, at 135. See also Restatement (Second) of Judgments § 87, Comment a, p. 315 (1980) (hereinafter Restatement) ("Since procedural law largely determines the matters that may be adjudicated in an action, state law had to be considered in ascertaining the effect of a federal judgment").

Respondent, for its part, contends that the outcome of this case is controlled by Federal Rule of Civil Procedure 41(b), which provides as follows:

"Involuntary Dismissal: Effect Thereof. For 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. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided...