Shoup v. Bell & Howell Co.

• Court: U.S. Court of Appeals — Fourth Circuit
• Writing for the Court: Before PHILLIPS, MURNAGHAN and WILKINSON; WILKINSON; MURNAGHAN
• Citation: Shoup v. Bell & Howell Co., 872 F.2d 1178 (4th Cir. 1989)
• Decision Date: 26 April 1989
• Docket Number: No. 88-1041,88-1041
• Parties: , 13 Fed.R.Serv.3d 571 Mary SHOUP; Larry R. Shoup, Sr., Plaintiffs-Appellees, v. BELL & HOWELL COMPANY, Defendant-Appellant.

Page 1178

872 F.2d 1178

57 USLW 2649, 13 Fed.R.Serv.3d 571

Mary SHOUP; Larry R. Shoup, Sr., Plaintiffs-Appellees, v. BELL & HOWELL COMPANY, Defendant-Appellant.

No. 88-1041.

United States Court of Appeals Fourth Circuit.

Argued Dec. 5, 1988.

Decided April 26, 1989.

Clement Dumont Erhardt, III (John J. Boyd, Jr., Smith, Somerville & Case, on brief) for defendant-appellant.

Benedict A. Casey (Beasley, Casey, Colleran, Erbstein, Thistle, Kline & Murphy; Marvin Ellin, Ellin & Baker, on brief) for plaintiffs-appellees.

Before PHILLIPS, MURNAGHAN and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

In this case we must determine if a dismissal by one federal court on statute of limitations grounds bars subsequent litigation of the same claim between the same parties in a second federal forum. The district court held it does not. We reverse and hold that pursuant to Fed.R.Civ.P. 41(b) the earlier statute of limitations ruling is a judgment on the merits subject to claim preclusion.

I.

On July 19, 1984, plaintiff Mary Shoup was injured while operating a mass mailing machine manufactured by defendant Bell & Howell Company. On July 14, 1986, she and her husband filed an action against defendant in the Court of Common Pleas of Pennsylvania alleging injury from the defective design and manufacture of the machine. Service was not obtained on defendant within the time required and the Shoups' complaint was reinstated with the Court of Common Pleas in January, 1987. Service was then obtained on defendant, which removed the case to the United States District Court for the Eastern District of Pennsylvania on the basis of diversity of citizenship.

Following removal of the suit, Bell & Howell filed a motion for summary judgment asserting that the Shoups' claims were barred by the Pennsylvania statute of limitations applicable to personal injury actions. Because service of process was not obtained on defendant until after the statute of limitations had run, the court granted defendant's motion. The Shoups did not appeal the dismissal of their action.

On July 14, 1987, the Shoups filed lawsuits identical to the Pennsylvania action against Bell & Howell in both the United States District Court for the District of Maryland and the Circuit Court for Baltimore, Maryland. Defendant removed the latter action to the District of Maryland on the basis of diversity of citizenship and the two actions were consolidated. Bell & Howell then argued that the prior dismissal of plaintiffs' action in the Pennsylvania federal court required a dismissal in the Maryland action. The district court held that claim preclusion did not bar plaintiffs' suit, and this appeal followed. See 28 U.S.C. Sec. 1292(b).

II.

Pursuant to claim preclusion doctrine "[a] valid and final personal judgment rendered in favor of the defendant bars another action by the plaintiff on the same claim." Restatement (Second) of Judgments Sec. 19 (1982). Three requirements exist for the invocation of claim preclusion: 1) the parties must be the same or in privity with the original parties; 2) the claims in the subsequent litigation must be substantially the same as those in the prior litigation; and 3) the earlier litigation must have resulted in a final judgment on the merits. Id.; see also Adkins v. Allstate Ins. Co., 729 F.2d 974, 976 (4th Cir.1984). Of these requirements, only the third is at issue. We hold that the federal district court's dismissal of plaintiffs' Pennsylvania action on statute of limitations grounds is a final judgment on the merits.

We note at the outset that federal, not state, law determines the preclusive effect of a prior federal judgment, including the question of whether that judgment was on the merits. It is true that plaintiff filed her Maryland lawsuit within that state's three-year limitations period for personal injury actions. Md.Cts. & Jud.Proc.Ann. Sec. 5-101 (1984); Levin v. Friedman, 271 Md. 438, 317 A.2d 831, 835 (1974). That fact, however, does not determine whether an earlier identical action between the parties, found to be time barred because it was not filed within Pennsylvania's two year statute of limitations, 42 Pa.Cons.Stat.Ann. Sec. 5524 (Purdon 1981), precluded the plaintiffs from bringing the Maryland lawsuit.

The district court permitted the Maryland action to proceed on two grounds. First, the court held plaintiffs' action was not precluded because Maryland conflicts law determines in a diversity action the effect of the earlier judgment and Maryland law regards the Pennsylvania statute of limitations as procedural. Because the statute is procedural, the district court reasoned, it merely bars plaintiffs' remedy, not their right, and thus does not preclude plaintiffs from enforcing their right in a Maryland federal court where the Pennsylvania statute is inapplicable. Second, the district court held that Fed.R.Civ.P. 41(b) does not preclude plaintiffs' present action because the prior summary judgment dismissal was not a dismissal on the merits for Rule 41(b) purposes.

We disagree on both grounds. While state law certainly controls the rights and duties of the parties in a federal action founded upon diversity of citizenship, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), this circuit has recognized that "whether a federal court sits in diversity or has some other basis of jurisdiction, questions of the effect and scope of its judgment involve the power of the federal tribunal itself, and are not varied merely because state rules of decision underlie the judgment." Harnett v. Billman, 800 F.2d 1308, 1312 (4th Cir.1986); see also Firemen's Fund Insurance Co. v. International Market Place, 773 F.2d 1068, 1069 (9th Cir.1985); Precision Air Parts, Inc. v. Avco Corp., 736 F.2d 1499, 1503 (11th Cir.1984); Hunt v. Liberty Lobby, Inc., 707 F.2d 1493, 1497 (D.C.Cir.1983). The judgment of a federal court is no less a federal judgment because it was rendered in diversity. "Federal law determines the effects under the rules of res judicata of a judgment of a federal court," Restatement (Second) of Judgments Sec. 87 (1982), just as in a state court the law of the state in which the judgment was rendered determines the preclusive effect a federal court must give the judgment. Migra v. Warren City School Dist. Bd. of Ed., 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984). Any other result would consign the effect of federal judgments to the uncertainties of state law in whatever jurisdiction a subsequent suit happened to be brought.

Here, the applicable federal law is Fed.R.Civ.P. 41(b). See 5 J. Moore, Moore's Federal Practice p 41.14 (2d ed. 1987). It provides in pertinent part that:

Unless the court in its order for dismissal otherwise specifies, a dismissal under this subsection and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits.

The plain language of the Rule indicates that the dismissal of plaintiffs' Pennsylvania action on statute of limitations grounds is an adjudication on the merits. The federal court in Pennsylvania did not otherwise specify the dismissal to be "without prejudice," and the Shoups failed to move the court, pursuant to Fed.R.Civ.P. 59(e) or 60(b)(6), to specify that the judgment was "without prejudice." Moreover, the dismissal was not one "for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19," nor was it a dismissal for want of a proper case or controversy, which some courts have held to be within the jurisdictional exception of Fed.R.Civ.P. 41(b). See McCarney v. Ford Motor Co., 657 F.2d 230 (8th Cir.1981) (dismissal for lack of standing); Korvettes, Inc. v. Brous, 617 F.2d 1021 (3rd Cir.1980) (dismissal for mootness).

Numerous courts have held that a Rule 41(b) limitations dismissal is a judgment on the merits. See PRC Harris, Inc. v. Boeing Company, 700 F.2d 894, 896 (2d Cir.1983); Nilsen v. City of Moss Point, Miss., 701 F.2d 556, 562 (5th Cir.1983); Nathan v. Rowan, 651 F.2d 1223, 1226 (6th Cir.1981); Cemer v. Marathon Oil Company, 583 F.2d 830, 832 (6th Cir.1978); Chang v. Northwestern Memorial Hospital, 549 F.Supp. 90, 95 (N.D.Ill.1982); see also 5 J. Moore, Moore's Federal Practice p 41.14 (2d ed. 1987). In a case analogous to the present one, PRC Harris, 700 F.2d 894 (2d Cir.1983), plaintiffs brought an action in New York state court against Boeing identical to a federal action in Washington dismissed earlier on statute of limitations grounds. That case, like this one, was removed to federal court. The Second Circuit affirmed the judgment of the district court in Boeing's favor, holding that a "dismissal for failure to comply with the statute of limitations will operate as an adjudication on the merits, ..." Id. at 896. The court added that Rule 41(b) dictates this result because "all but certain enumerated dismissals will be considered 'on the merits,' and the Rule does not exempt a dismissal on statute of limitations grounds from its general operation." Id. We find this reasoning compelling.

Appellees contend, however, that PRC Harris conflicts with Costello v. United States, 365 U.S. 265, 81 S.Ct. 534, 5 L.Ed.2d 551 (1961). See Burgess v. Cohen, 593 F.Supp. 1122, 1124 (E.D.Va.1984) (Costello indicates "scope of Rule 41(b) was not intended to include a dismissal on limitations grounds as an unqualified decision upon the merits"). At issue in Costello was whether a district court's previous dismissal of a denaturalization proceeding because the government had failed to file an affidavit of good cause should operate as a dismissal on the merits so as to bar a subsequent denaturalization proceeding. The Supreme Court held that the dismissal was essentially one " 'for lack of jurisdiction,' within the meaning of the exception under Rule 41(b)." Costello, ...