Smallbizpros Inc v. Macdonald

• Decision Date: 01 September 2010
• Docket Number: No. 09-50879.,09-50879.
• Citation: 618 F.3d 458
• Parties: SMALLBIZPROS, INC., doing business as Padgett Business Services, Plaintiff-Appellee,v.Frank MacDONALD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

618 F.3d 458

SMALLBIZPROS, INC., doing business as Padgett Business Services, Plaintiff-Appellee,v.Frank MacDONALD, Defendant-Appellant.

No. 09-50879.

United States Court of Appeals Fifth Circuit.

Sept. 1, 2010.

Timothy J. Bryant, Preti, Flaherty, Beliveau & Pachios, LLP, Portland, ME, Mark Joseph Barrera, Leslie Sara Hyman, Cox Smith Matthews, Inc., San Antonio, TX, for Plaintiff-Appellee.

Carl Pipoly, Pipoly Law Office, San Antonio, TX, for Defendant-appellant.

Appeals from the United States District Court for the Western District of Texas.

Before JOLLY, DeMOSS and DENNIS, Circuit Judges.

PER CURIAM:

This appeal arises from the district court's entry of a contempt order against Frank MacDonald (MacDonald) enforcing a settlement agreement with SmallBizPros, Inc. d/b/a Padgett Business Services (Padgett). MacDonald argues that the district court's jurisdiction ceased on August 7, 2009, upon the filing of a voluntary “Stipulation of Dismissal” (the Stipulation) pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). Padgett counters that because the Stipulation referenced and attached the terms of the settlement agreement, styled a “Stipulated Settlement Order” (the Order), and because the district court later signed the Order as requested by the parties, the district court retained ancillary jurisdiction to enforce the terms of the Order (i.e., the terms of the settlement agreement). For the following reasons we vacate the contempt order and remand to the district court with instructions to dismiss for lack of jurisdiction.¹

BACKGROUND AND FACTS

Padgett sued MacDonald in district court over the termination of a franchise agreement. Immediately prior to a hearing scheduled for July 30, 2009, the parties orally agreed on settlement terms. The parties read the terms of their agreement into the record at the hearing. The district court asked that the parties reduce the terms to a writing to be signed by the judge. On August 7, 2009, the parties filed the Stipulation stating in full:

Pursuant to Federal Rule of Civil Procedure 41(a)(1)[A](ii), Plaintiff SmallBizPros, Inc. d/b/a Padgett Business Services and Defendant Frank MacDonald stipulate to the dismissal of this case, with each party to bear its own costs. The parties have settled and compromised the matters in dispute in this action, and request that the Court sign and enter the attached Stipulated Settlement Order, which contains the terms and conditions of the parties ['] settlement, as they were stated to the Court on the record on July 30, 2009.

Both parties signed the Stipulation but the court did not. Attached to the Stipulation was the settlement agreement, styled a “Stipulated Settlement Order,” which recited verbatim the terms as read into the record. The terms of the Order did not expressly provide for the district court to retain jurisdiction to enforce the agreement. The Order contained a signature block but no “so ordered” or other operational language. The district court signed the Order on August 14, 2009.

Shortly thereafter, MacDonald refused to comply with the terms of the Order related to returning certain documents and files to Padgett, and on September 28, 2009, the district court issued a contempt order against MacDonald, asserting that it retained jurisdiction to enforce the Order's terms. In the contempt order, the district court stated:

[T]he parties specifically requested in their Stipulation of Dismissal that the Court sign and enter their attached Stipulated Settlement Order, which contained the terms of the settlement they agreed to in open court. The Court did so. The Stipulated Settlement Order is an order of the court enforceable pursuant to Kokkonen.

This appeal followed.

DISCUSSION

I. Standard of Review

Issues of subject matter jurisdiction are questions of law and are reviewed de novo. See Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 327 (5th Cir.2008). “It is to be presumed that a cause lies outside [a federal court's] limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (internal citations omitted).

II. Voluntary Dismissal Under Rule 41(a)(1)(A)(ii)

Rule 41(a)(1)(A)(ii) provides for the voluntary dismissal of actions by a plaintiff, stating that “the plaintiff may dismiss an action without a court order by filing ... a stipulation of dismissal signed by all parties who have appeared.” Fed.R.Civ.P. 41(a)(1)(A)(ii) (emphasis added). “Except in special circumstances ... a voluntary order of dismissal requested by both parties is effective upon filing and does not require the approval of the court.” Ramming v. Natural Gas Pipeline Co. of Am., 390 F.3d 366, 369 n. 1 (5th Cir.2004); see Meinecke v. H & R Block of Houston, 66 F.3d 77, 82 (5th Cir.1995) (“According to [Rule 41(a)(i)(A)(ii)], such stipulations take effect when filed and do not require an order of the court. Therefore, the district court's order approving the dismissal is of no consequence.”) (emphasis in original and internal citation omitted).

According to the text of Rule 41(a)(1)(A)(ii) and our precedent, a district court's jurisdiction over a case that is settled and voluntarily dismissed by stipulation cannot extend past the filing date absent an express contingency or extension of jurisdiction, and “any further actions by the court [are] superfluous.” Meinecke, 66 F.3d at 82 (quoting United States v. Kellogg (In re W. Tex. Mktg. Corp.), 12 F.3d 497, 501 (5th Cir.1994)) (changes in original).

III. Kokkonen and its Progeny

The Supreme Court provided its most thorough analysis of a district court's ancillary jurisdiction in Kokkonen. Similar to this case, in Kokkonen

the parties arrived at an oral agreement settling all claims and counterclaims, the substance of which they recited, on the record, before the District Judge in chambers.... [Pursuant to Rule 41(a)(1)(A)(ii)], the parties executed a Stipulation and Order of Dismissal with Prejudice, dismissing the complaint and cross-complaint.... [T]he District Judge signed the Stipulation and Order under the notation “It is so ordered.” The Stipulation and Order did not reserve jurisdiction in the District Court to enforce the settlement agreement; indeed it did not so much as refer to the settlement agreement. Thereafter the parties disagreed on petitioner's obligation to return certain files to respondent under the settlement agreement [and the district court entered an enforcement order over a jurisdictional objection].

511 U.S. at 376-77, 114 S.Ct. 1673. Unanimously, the Court held the district court did not have jurisdiction to enter any enforcement order. Id. at 381-82, 114 S.Ct. 1673.

The Court noted that ancillary jurisdiction properly exists where it enables a court “to manage its proceedings, vindicate its authority, and effectuate its decrees,” id. at 380, 114 S.Ct. 1673, but its analysis focused on the fact that the joint stipulation and order failed to expressly reserve jurisdiction in the district court. It reasoned that “[e]nforcement of the settlement agreement ... is more than just a continuation or renewal of the dismissed suit, and hence requires its own basis for jurisdiction.” Id. at 378, 114 S.Ct. 1673. “The situation would be quite different if the parties' obligation to comply with the terms of the settlement agreement had been made part of the order of dismissal-either by separate provision (such as a provision ‘retaining jurisdiction’ over the settlement agreement) or by incorporating the terms of the settlement agreement in the order.” Id. at 381, 114 S.Ct. 1673. “In that event, a breach of the agreement would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist.” Id.

The Court confirmed that “[i]f the parties wish to provide for the court's enforcement of a dismissal-producing settlement agreement, they can seek to do so,” and gave particular guidance for Rule 41(a)(1)(A)(ii) voluntary dismissals:

Even when, as occurred here, the dismissal is pursuant to Rule 41(a)(1) [(A)](ii) (which does not by its terms empower a district court to attach conditions to the parties' stipulation of dismissal) we think the court is authorized to embody the settlement contract in its dismissal order (or, what has the same effect, retain jurisdiction over the settlement contract) if the parties agree.

Id. at 381-82, 114 S.Ct. 1673 (italics in original).

Our leading case in the Kokkonen line is Hospitality House, Inc. v. Gilbert, 298 F.3d 424 (5th Cir.2002). In Hospitality House, we considered the parties' settlement agreement and joint motion to dismiss and walked carefully through the Kokkonen instructions. See id. at 428-32. We found that the district court did not make the settlement agreement part of its order because the order both failed to include a separate provision expressly retaining jurisdiction and failed to incorporate or embody the terms of the settlement agreement directly into the order.² Id. at 430. Even assuming arguendo that the settlement agreement was attached directly to the order, we found that “[a]t most, physical attachment of a settlement agreement to a dismissal order evinces the district judge's ‘awareness and approval of the terms of the settlement agreement,’ which ‘do not suffice to make them part of his order.’ ” Id. at 431 (quoting Kokkonen, 511 U.S. at 381, 114 S.Ct. 1673). We held that the district court lacked the ancillary jurisdiction necessary to enforce the settlement terms. Id. at 434.

IV. Reconciling Rule 41(a)(1)(A)(ii) and Kokkonen

Under Rule 41(a)(1)(A)(ii), it is clear that the parties to a case may enter into a settlement agreement, sign and file a stipulation of dismissal with the district court, and the dismissal will be effective upon filing notwithstanding any other action by the district court. Under Kokkonen and Hospitality...