Stevenson v. United States

• Decision Date: 25 September 1961
• Docket Number: Civ. No. 2989.
• Citation: 197 F. Supp. 355
• Parties: Cleo STEVENSON and Jean Stevenson, Plaintiffs, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Middle District of Tennessee

197 F. Supp. 355

Cleo STEVENSON and Jean Stevenson, Plaintiffs, v. UNITED STATES of America, Defendant.

Civ. No. 2989.

United States District Court M. D. Tennessee, Nashville Division.

September 25, 1961.

Elwood L. Edwards, of Donelson, Adams, O'Hearn, Grogan & Edwards, Memphis, Tenn., for plaintiffs.

John B. Jones, Jr., Acting Asst. Atty. Gen., and Kenneth Harwell, U. S. Atty., Middle Dist. of Tennessee, Nashville, Tenn., for defendant.

WILLIAM E. MILLER, Chief Judge.

The plaintiffs, residents of Shelby County in the Western District of Tennessee, instituted their action in the Middle District against the United States under 28 U.S.C.A. § 1346, for recovery of income taxes and interest thereon for the calendar years 1956, 1957 and 1958, alleging that such taxes were erroneously and illegally assessed and collected.

In its answer filed January 17, 1961, the defendant interposed the defense that the action had been brought in the wrong district since the applicable venue statute, 28 U.S.C.A. § 1402(a) (1), provides that actions against the United States for recovery of taxes under 28 U.S.C.A. § 1346(a) shall be prosecuted only "in the judicial district where the plaintiff resides."

On February 16, 1961, the defendant filed its motion for change of venue to the Western District of Tennessee, pursuant to 28 U.S.C.A. § 1406(a), the motion proceeding upon the theory that it would be "in the interest of justice" that such transfer be made since all persons with knowledge of the essential facts and all material and relevant documents are within the Memphis area in the Western District. On March 1, 1961, the plaintiffs, recognizing that venue was improperly laid, filed their motion to dismiss the action without prejudice pursuant to Rule 41(a) (2) of the Federal Rules of Civil Procedure, 28 U.S.C.A., the motion alleging that the plaintiffs desire to file an action for the recovery of the income taxes in question against the District Director of Internal Revenue, who resides in Nashville within the jurisdiction of the Middle District of Tennessee, to the end that such action may be heard and tried in that district. The motion further alleges that the plaintiffs "intended to bring suit against the said James M. Rountree, District Director of Internal Revenue, in the present action but inadvertently made the United States of America the defendant."

The issue for decision is therefore whether the Court should enter an order dismissing the action without prejudice on payment of costs, as insisted upon by the plaintiffs, or whether it should transfer the action for trial to the Western District of Tennessee.

The plaintiffs' chief reliance in support of their insistence that the action should be dismissed without prejudice is predicated upon the construction of Rule 41(a) (2) approved by the Seventh Circuit in Bolten v. General Motors Corporation, 180 F.2d 379, 21 A.L.R.2d 623, to the effect that the absolute right of the plaintiff to dismiss under Rule 41(a) (2) is restricted only by the requirement that it be done "upon order of the court and upon such terms and conditions as the court deems proper", and that the discretion vested in the Court is as to the terms and conditions rather than as to the right of the plaintiff to have such terms and conditions fixed and to dismiss without prejudice upon compliance therewith. In the alternative the plaintiffs rely upon another view of Rule 41(a) (2) approved by some courts to the effect that the Rule is declaratory of a long established practice both in law and in equity and was intended only to clarify and make certain such practice under which a plaintiff might dismiss his case without prejudice only by payment of the costs and when the defendant would not be subjected thereby to some plain legal prejudice beyond the incidental annoyance of a second litigation upon the same subject matter. Home Owners Loan Corp. v. Huffman, 8 Cir., 134 F.2d 314; New York C. & St. L. R. Co. v. Vardaman, 8 Cir., 181 F.2d 769. Under either of these theories the plaintiffs insist that the Court has no discretion other than to dismiss the action without prejudice upon payment of costs pursuant to the plaintiffs' motion, since the defendant will be subjected to no prejudice consequent upon the dismissal beyond the possible inconvenience of defending the action in the Middle District rather than in the Western District of Tennessee.

The better view, however, and the one apparently supported by the weight of authority is that Rule 41(a) (2) vests in the Court in the exercise of a sound discretion the power to deny an application to dismiss without prejudice after an answer has been filed, or to grant the application with or without conditions. United States v. Lyman, 1 Cir., 125 F.2d 67; Butler v. Denton, 10 Cir., 150 F.2d 687; Roth v. Great Atlantic & Pacific Tea Company, D.C.Ohio, 2 F.R.D. 182; and cf. United States v. Pacific Fruit & Produce Co., 9 Cir., 138 F.2d 367. The purpose of the Rule was to eliminate the evils resulting from the unqualified right of a plaintiff to take a voluntary nonsuit at any stage of the proceeding before pronouncement of judgment and after the defendant had incurred substantial expense or acquired substantial rights. It seems clear from the history and text of the Rule itself that the granting of the motion to dismiss is within the Court's discretion and not a matter of right. 5 Moore's Federal Practice, (2nd Ed.) Sec. 41.05.

Sec. 1406(a) as originally enacted in the 1948 revision of Title 28 U.S.C.A., provided that a district court in which is filed a case laying venue in the wrong district was required to transfer the case to any district in which it could have been brought. Because the statute in this form permitted a plaintiff to sue deliberately in a wrong forum to obtain service of process and then to have the action transferred to the forum of proper venue, 1 Moore's Federal Practice (2nd Ed.), p. 1906, it was amended in 1949 to its present form providing that a case filed in the wrong district was to be dismissed "or if it be in the interest of justice" transferred to any district in which it could have been brought. As pointed out in the defendant's brief in the present case, most of the reported cases dealing with Sec. 1406(a) arise in the context of a defendant seeking to dismiss an action for improper venue and a plaintiff seeking to transfer the action to another district because the statute of limitations would prevent him from filing a new complaint. While no cases have been found by the Court or cited by counsel presenting the exact problem of the instant case, i. e., a plaintiff seeking to dismiss the action without prejudice under Rule 41(a) (2) and the defendant seeking to transfer the case under Sec. 1406(a) to the district which would be most convenient for trial purposes, it would appear both from the text and the broad purpose of the statute that the District Court is vested with authority in such situation to transfer the action in the interest of justice to another district where it could have been brought — in this case to the Western District of Tennessee. Although not exactly in point on the facts, this construction of the statute is supported by the opinion of the District Court for the Eastern District of New York in Wood v. Pennsylvania Greyhound Lines, 86 F.Supp. 91.

In the view the Court takes of the present case, construing Rule 41(a) (2) and 28 U.S.C.A. § 1406(a), in pari materia, the Court is vested with the discretionary authority to grant, with or without conditions, or to deny the plaintiffs' motion to dismiss under Rule 41 (a) (2), and at the same time the discretion under 28 U.S.C.A. § 1406(a) to transfer the action to the Western...