Systems Associates, Inc. v. Motorola Communications and Electronics, Inc.

• Decision Date: 08 August 1989
• Docket Number: No. 17732,17732
• Citation: 116 Idaho 615,778 P.2d 737
• Parties: SYSTEMS ASSOCIATES, INC., an Idaho Corporation, and Michael D. Dahmer, Plaintiffs-Appellants, v. MOTOROLA COMMUNICATIONS AND ELECTRONICS, INC., a corporation; Does I to XX, inclusive, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 737

778 P.2d 737

116 Idaho 615

SYSTEMS ASSOCIATES, INC., an Idaho Corporation, and Michael D. Dahmer, Plaintiffs-Appellants, v. MOTOROLA COMMUNICATIONS AND ELECTRONICS, INC., a corporation; Does I to XX, inclusive, Defendant-Respondent.

No. 17732.

Supreme Court of Idaho.

Aug. 8, 1989.

David W. Thompson, Jerome, for plaintiffs-appellants.

Eberle, Berlin, Kading, Turnbow & Gillespie, Boise, and Roger H. Dusberger, Schaumburg, Ill., for respondents. Roger H. Dusberger argued.

HUNTLEY, Justice.

I.

This case involves the alleged theft of trade secrets which is claimed to have arisen out of dealings between the parties in 1979 relating to the sale of communications equipment to the Sun Valley, Idaho Police Department. Appellants allege this theft took place while Motorola Communication and Electronics, Inc., ("Motorola") worked with Appellants in regard to the functioning of Motorola's equipment. The Complaint alleges that Motorola "took Plaintiff's [sic] trade secret design concepts * * * on or about March, 1981." Appellants delayed serving Motorola with their Summons and Complaint until 364 days later, on September 22, 1986, despite the fact that their Complaint sought injunctive relief.

The applicability of the doctrine of res judicata and the question of abuse of discretion in applying I.R.C.P. 41(b) to dismiss the cause for failure to timely prosecute are presented on this appeal. Both parties seek attorney fees on appeal.

II.

On September 3, 1985, Appellants filed their Complaint against Motorola. On September 2, 1986, 364 days later, Appellants served Motorola with Summons and Complaint. On or about September 23, 1986, Motorola filed its Petition for Removal to federal court. Appellants filed nothing in response and the case was removed.

On February 24, 1988, the United States District Court for the District of Idaho issued, on its own motion, a Notice to Show Cause why the case should not be dismissed for want of prosecution pursuant to Local Rule 2-127 of that Court. During the time the case was pending in the federal court, (seventeen months) the Appellants had done nothing to prosecute their case. No pleadings or motions had been filed nor had any discovery been initiated by Appellants. Motorola filed a brief in support of dismissal and on March 24, 1988, Appellants filed their formal response opposing dismissal. That same day, all of Appellants' original counsel, consisting of the three attorneys from three separate firms, withdrew from the case by substitution of Appellants' current counsel. On March 30, 1988, the federal court issued its order declining to dismiss the case and retained it on its active docket.

On April 21, 1988, the case was remanded to the State District Court pursuant to Hise v. Garlock, Inc., 841 F.2d 342 (9th Cir.1988), a then recent opinion by the United States Court of Appeals for the Ninth Circuit on the subject of diversity jurisdiction in an unrelated case (discussed infra ).

On May 25, 1988, Appellants served their first discovery on Motorola, a set of interrogatories which were subsequently stricken by the court. This case was pending at the trial level for nearly three years (over 32 months or 995 days) before Appellants took any action in May 1988, to prosecute their claims.

In addition, on June 9, 1988, the Appellants filed a Motion for Leave to File Amended Complaint. That motion sought to add four new causes of action, which had never been previously raised. Motorola argued that not only were the new causes of action barred by the statute of limitations, but so too was the cause of action alleged in the original Complaint. The court never ruled on the Appellants' Motion to Amend and Motorola was never required to move to dismiss the action based upon the statute of limitation since Motorola appropriately first filed its Motion to Dismiss for lack of prosecution and on August 15, 1988, the court issued its Opinion and Order granting that Motion and dismissing the case with prejudice.

Appellants claim that the trial court's decision to dismiss this cause for failure to timely prosecute was in error because: (1) the trial court's disposition of the motion should have been precluded by operation of the doctrine of res judicata; ¹ and, (2) the trial court abused its discretion by failing to correctly apply the factors relevant in ruling on a motion to dismiss for failure to timely prosecute.

III. Res Judicata

The res judicata argument is based on the idea that the federal court's consideration of its sua sponte motion to dismiss for want of prosecution and subsequent retention order is entitled to full faith and credit in the state court proceedings and, thus, the motion to dismiss for failure to timely prosecute herein addressed should have been barred from consideration by the doctrine of res judicata.

The doctrine of res judicata does not preclude the state trial court's dismissal for want of timely prosecution because there was no final judgment and because the federal court lacked subject matter jurisdiction.

The doctrine of res judicata generally prevents re-litigation of matters which have proceeded to a final conclusion between parties to litigation or their privies. Andre v. Morrow, 106 Idaho 455, 458, 680 P.2d 1355 (1984). One of the more important requirements of the doctrine is that res judicata only applies to final judgments on the merits. E.g., Busick v. Workmen's Compensation Appeals Board, 7 Cal.3d 967, 104 Cal.Rptr. 42, 500 P.2d 1386 (1972); Reed v. Frey, 10 Ariz.App. 292, 458 P.2d 386 (1969); and Restatement 2d, Judgments § 13. Implicit in such a requirement is that an interlocutory order, such as the denial of a motion to dismiss for lack of prosecution, is not a final order for purposes of res judicata. E.g., Diaz v. Indian Head, Inc., 686 F.2d 558 (7th Cir.1982) (denial of motion to dismiss); Horner v. Ferron, 362 F.2d 224 (9th Cir.1966) cert. denied, 385 U.S. 958, 87 S.Ct. 397, 17 L.Ed.2d 305 (1966) (denial of motion to amend complaint); United States v. Stonehill, 420 F.Supp. 46 (C.D.Ca.1976) (denial of motion to suppress); and Martin v. Indiana Bell Telephone Co., Inc., 415 N.E.2d 759 (Ind.App.1981) (denial of motion for summary judgment). Here, the federal district court's decision to retain the case on its docket was an interlocutory order. Accordingly, the retention order did not have any res judicata effect since it did not possess the requisite element of finality.

Second, as recognized by the state trial court, the federal district court's decision to retain the case on its calendar cannot have a res judicata effect since the federal district court, when it entered that order, was without subject matter jurisdiction over the case. As this Court has recognized, one of the necessary prerequisites to granting full faith and credit, is that the rendering court must have had valid jurisdiction. Andre v. Morrow, 106 Idaho at 459, 680 P.2d 1355.

The Ninth Circuit Court of Appeals in Bryant v. Ford Motor Co., 832 F.2d 1080 (9th Cir.1987), decided that the inclusion of "John Doe" defendants in a suit removed from state court defeats diversity jurisdiction. The Bryant case was in reference to Doe pleading practice under California law. On March 10, 1988, the Ninth Circuit Court of Appeals rendered its decision in Hise v. Garlock, 841 F.2d 342 (9th Cir.1988), which held that Bryant applied with equal force to Doe pleading under Idaho law. The Ninth Circuit stated:

The presence of Doe defendants in this case destroys diversity, and thus federal jurisdiction. These cases are remanded to the district court. The district court is ordered to vacate its judgment and award of attorneys fees, and remand the case to the Idaho state court in which it originated.

841 F.2d at 344. In Bryant 832 F.2d at 1080, the court stated:

We conclude that the district court lacked jurisdiction over this action because of the presence of Doe defendants at the time of removal from state court. (Emphasis added).

The trial court correctly decided that the federal district court, as a result of the March 10, 1988 decision in Hise v. Garlock, Inc., 841 F.2d 342 (9th Cir.1988), did not have jurisdiction over the case when it rendered its retention order on March 30, 1988. The federal district court did not have any jurisdiction to enter its March 30, 1988 retention order because it was declared to be without jurisdiction by the Ninth Circuit on March 10, 1988. Therefore, the federal district court's order retaining the case on its active calendar was void.

IV. Abuse of Discretion

We issued a per curiam opinion in Day v. CIBA Geigy Corporation, 115 Idaho 1015, 772 P.2d 222 (1989) on April 17, 1989, which reviewed the law applicable to this issue in detail. We note that the trial court operated without benefit of this decision when it made its ruling on August 15, 1988, out Day discussion of the law reading in part:

A trial court has rule authority to dismiss a case because of a failure to prosecute diligently. I.R.C.P. 41(b) provides in relevant part:

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 any claim against him.

The trial court's exercise of this authority will not be reversed absent demonstration of a manifest abuse of discretion. Kirkham v. 4.60 Acres of Land, 100 Idaho 781, 605 P.2d 959 (1980). Since it is a sanction rather than a remedy, involuntary dismissal should be used sparingly. Ellis v. Twin Falls Canal Co., 109 Idaho 910, 712 P.2d 611 (1985).

In its deliberations, the trial court should consider the length of the delay occasioned by the plaintiffs' failure to move the case, any justification for the delay, and the resultant prejudice to the defendant. Rudy-Mai Farms v. Peterson, 109 Idaho 116, 705 P.2d 1071 (Ct.App.1985).

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