Wilson-Cook Medical, Inc. v. Wilson, WILSON-COOK
| Citation | 942 F.2d 247 |
| Decision Date | 23 August 1991 |
| Docket Number | 90-1155,Nos. 90-1076,WILSON-COOK,s. 90-1076 |
| Parties | MEDICAL, INCORPORATED; William A. Cook; Cook Group, Incorporated; Robert K. Irie; Dan G. Sterner, Defendants-Appellants, v. Jon S. WILSON, Plaintiff-Appellee. In Re:MEDICAL, INCORPORATED; William A. Cook; Cook Group, Incorporated; Robert K. Irie; Dan G. Sterner, Petitioners. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
Ronald Wilder, argued (Linda K. Stevens, Schiff, Hardin & Waite, Chicago, Ill., Max Daniel McGinn, Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, N.C., on brief), for defendant-appellants.
David C. Smith, argued (James R. Hubbard, John N. Taylor, Jr., Allman, Spry, Humphreys, Leggett & Howington, P.A., Winston-Salem, N.C., on brief), for plaintiff-appellee.
Before PHILLIPS and SPROUSE, Circuit Judges, and BUTZNER, Senior Circuit Judge.
Wilson-Cook, a North Carolina corporation, is engaged in the design, manufacture and distribution of medical equipment, principally endoscopic devices. The Cook Group, a holding company with investments in health care companies throughout the world, owns 80% of the stock of Wilson-Cook. Plaintiff, Jon Wilson, is a citizen of Canada and a resident of North Carolina, and served as President of Wilson-Cook until his resignation in January 1989. Wilson owned 10% of the stock in Wilson-Cook.
He brought this action in federal district court for the Middle District of North Carolina, contending that defendants (Wilson-Cook, the Cook Group and individual officers and directors of the two companies, hereinafter "the Company") forced him to enter into a stock purchase agreement, failed to pay him dividends, and wrongfully terminated his employment as President of Wilson-Cook. We are not concerned here, however, with the merits of these issues. Instead, our chore on appeal is to determine if the district court correctly unraveled the considerably tangled procedural web woven by the litigants.
The procedural rulings we review center around the district court's allowance of Wilson's voluntary dismissal of his complaint.
On May 5, 1989, Wilson filed an amended complaint in the Middle District of North Carolina, alleging seven causes of action. Count I of this complaint seeks rescission of both Wilson's stock purchase agreement with the Company and his resignation on the grounds of duress, economic coercion and undue influence. Count II demands the same relief based on a claimed breach of fiduciary duties by the officers, directors and majority shareholders of Wilson-Cook and the Cook Group. The next four Counts look for relief under North Carolina statutory provisions: Count III, recovery for wrongful employment termination, wrongful forced execution of the stock purchase agreement and failure to pay dividends; Counts IV and V, failure to pay dividends; and Count VI, dissolution of Wilson-Cook or, alternatively, for fair compensation for stock. Finally, Count VII alleges wrongful termination of employment.
On May 26, 1989, the Company moved to dismiss the amended complaint, asserting lack of venue and personal jurisdiction, failure to state a claim upon which relief may be granted, and misjoinder of claims and parties. After a hearing, the district court dismissed Wilson's claims alleging wrongful discharge (Count VII and part of Count III), pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a cause of action. It transferred the claims relating to the stock agreement (Counts I, II, and part of III) to the United States District Court for the Southern District of Indiana because the individual defendants were citizens and residents of Indiana and the events "having operative significance" to these claims occurred in Indiana. Finally, the district court retained jurisdiction over the remaining claims (Counts IV, V and VI), which related principally to the Company's alleged failure to pay dividends.
After the district court's dismissal and transfer orders, but before the files pertaining to the transferred claims were sent to Indiana, Wilson filed three separate notices of voluntary dismissal, pursuant to Rule 41(a)(1)(i): 1 on August 21, 1989, in the Southern District of Indiana (directed to the transferred claims); on August 22, 1989, in the Middle District of North Carolina (directed to the complaint remaining in the North Carolina District Court); and on August 23, 1989, again in the Middle District of North Carolina (directed to the transferred claims in the event the North Carolina District Court retained jurisdiction of those claims). 2 In the meantime, the Company filed an answer and counterclaim on August 22, 1989, in the Southern District of Indiana, some two hours after Wilson had filed his notice of voluntary dismissal of his complaint in the Middle District of North Carolina.
After Wilson filed his notices of voluntary dismissal, the Company moved the North Carolina District Court to vacate the notices, alleging (1) that the court lacked jurisdiction to rule on the transferred claims, (2) that the notices were invalid under Rule 41(a)(1)(i) because each dismissed only part of the action and Rule 41(a)(1)(i) applies only to entire actions and (3) that since the parties had filed affidavits in support of and in objection to the motion to dismiss, that it had been automatically converted to a Rule 56 motion for summary judgment which should have precluded voluntary dismissal. The district court ruled against the Company on all issues. We affirm that judgment.
On appeal, the Company contests the district court's rulings, arguing that the district court lacked jurisdiction over the claims transferred to Indiana and, therefore, could not have dismissed that portion of the complaint; that Wilson's August 22, 1989 notice failed to comply with Rule 41(a)(1)(i) in that it did not apply to the entire action; that the Company's Rule 12(b)(6) motion to dismiss had been converted to a Rule 56 motion for summary judgment prior to Wilson's attempted Rule 41(a)(1)(i) motion, therefore precluding voluntary dismissal; and, that the district court erred in failing to dismiss the entire action with prejudice. We consider the Company's contentions in that order.
The Company first contends that after the district court's order transferring a portion of the claims to federal district court in Indiana, the North Carolina district court lacked jurisdiction over those claims and, therefore, could not grant Wilson's voluntary dismissal with respect to them. It argues that the Supreme Court's decision in Koehring Co. v. Hyde Constr. Co., 382 U.S. 362, 86 S.Ct. 522, 15 L.Ed.2d 416 (1966), requires a finding that the Middle District of North Carolina lost jurisdiction over the transferred claims when the transfer order was entered, not when the files were physically transferred. Koehring, however, is distinguishable. In Koehring, the Fifth Circuit directed a district court to transfer a case to another jurisdiction. The district court ignored the Fifth Circuit's order and granted a motion to dismiss. In response, the Fifth Circuit ordered an "instanter transfer" of the case. In determining that the transfer occurred when the instanter order was entered by the Fifth Circuit, not when the files were transferred, the Supreme Court emphasized the "extraordinary circumstances" of the case, stating:
Although a federal appellate court does not ordinarily itself transfer a case to another district, but remands to the District Court for that purpose, the extraordinary action in this case was taken as a result of extraordinary circumstances.
....
We do not read 28 U.S.C. § 1404(a), providing that "a district court may transfer any civil action," as precluding an appellate court, where unusual circumstances indicate the necessity thereof, from effecting a transfer by direct order.
Koehring, 382 U.S. at 364, 365, 86 S.Ct. at 523, 524. No such "extraordinary circumstances" exist in the instant case. The Seventh Circuit distinguished Koehring in the same way:
[U]nlike the situation in Koehring, there has been no extraordinary intervention by an appellate court, with an explicit assertion that its transfer order is instanter. The Illinois federal district court also made no similar express assertion, as did the court in Koehring, that its transfer order was to be effective at the moment of entry of the order, and further there is no suggestion that any urgency existed here.
Robbins v. Pocket Beverage Co., 779 F.2d 351, 355 (7th Cir.1985); see also Semro v. Halstead Enter., Inc., 619 F.Supp. 682, 682-83 n. 1 (N.D.Ill.1985).
The general rule, which was not disturbed by Koehring and which we adopt, is that jurisdiction is not conveyed from the transferor court to the transferee court until the record is physically transferred to the transferee court. Robbins, 779 F.2d at 355; Semro, 619 F.Supp. at 682-83 n. 1.; Sheldon v. Amperex Elec. Corp., 52 F.R.D. 1, 5 (E.D.N.Y.), aff'd, 449 F.2d 146 (2nd Cir.1971). Simply stated, some court should have jurisdiction over a case at all times, and this rule helps ensure the maintenance of that principle. Semro, 619 F.Supp. at 682-83 n. 1; Sheldon, 52 F.R.D. at 5. It is conceded that the record was never physically transferred to the Southern District of Indiana. We conclude, therefore, that the North Carolina district court retained jurisdiction of those claims which it initially attempted to transfer to the Indiana district court.
The Company next argues that the district court erred in interpreting Wilson's August 22, 1989, notice of voluntary dismissal as effecting dismissal of the entire action. It maintains that Wilson filed three separate notices of dismissal, each seeking to dismiss only portions of the action and...
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