Appellate Court Affirms Dismissal in Federal Court Without Prejudice; Allows Plaintiffs to Refile in State Court

Plaintiffs Richard Zanowick and Joan Clark-Zanowick filed suit in state court in July 2014. The defendants timely removed the case to federal court on diversity grounds a month later. With the case now in federal court, Richard Zanowick passed away on October 12, 2014. The plaintiffs filed and electronically served a notice of his death on November 17, 2014. Pursuant to Rule 25(a)(1), the plaintiffs were required to file a motion to substitute a new party for Richard Zanowick within 90 days, or in this case February 19, 2015. The plaintiffs failed to do so.

Joan Clark-Zanowick and her children contemporaneously filed a new lawsuit in state court. This claim alleged similar claims against the same defendants. It also included additional defendants that arguably prevented diversity jurisdiction. The defendants argued that the new defendants were merely added for the sole purpose of defeating diversity. In April 2015, the defendants filed a motion to dismiss the federal case with prejudice for noncompliance with the 90-day substitution requirement of Rule 25(a)(1). Shortly after, on May 1, 2015, the plaintiffs moved to dismiss the federal action voluntarily without prejudice under Rule 41(a)(2), or in the alternative, to substitute a new party or extend the Rule 25(a)(1) deadline. The District Court heard these motions in June 2015 and held because Rule 25(a)(1) was not jurisdictional, the court reasoned that it could allow the substitution of a party despite non-compliance with the 90-day rule. After confirming that Zanowick preferred dismissal without prejudice even if late substitution were permitted, the district court granted Zanowick’s Rule 41(a)(2) motion to dismiss without prejudice. The defendants appealed.

The United States Court of Appeals for the Ninth Circuit heard the appeal and outlined that Rule 41(a)(2) “allows a plaintiff, pursuant to an order of the court, and subject to any terms and conditions the court deems proper, to dismiss an action without prejudice at any time. And “[w]hen ruling on a motion to dismiss without prejudice, the district court must determine whether the defendant will suffer some plain legal prejudice as a result of the dismissal. “Legal prejudice” is “prejudice to some legal interest, some legal claim, some legal argument.” [Citation Omitted]. In addressing any potential prejudice against the defendants, the court stated that “unfortunately for defendants, the “history of Rule 25(a) and Rule 6(b) makes it clear that the 90 day time period was not intended to act as a bar to otherwise meritorious actions, and extensions of the period may be liberally granted.” Id.

The court ultimately rejected the defendants’ contentions that Rule 25(a)(1) required dismissal with prejudice, and affirmed the district court’s order dismissing this action without prejudice under Rule 41(a)(2).

Read the full decision here.