Earlier this week, in Dvorak v. Granite Creek GP Flexcap I, LLC, No. 18-1892, 2018 WL 5801244 (7th Cir. Nov. 6, 2018), the Seventh Circuit addressed the interaction between federal and state rules governing voluntary dismissals of actions. Both Federal Rule of Civil Procedure 41(a) and its corresponding Illinois statute provide a “two strikes” rule: a plaintiff may dismiss an action once without prejudice, but refiling and dismissing again serves as an adjudication on the merits that bars plaintiff from filing any future action based on the same claim.
Dvorak presented a twist: What if a plaintiff files and dismisses a federal suit, then refiles and dismisses in state court, and then files again in federal court? The Seventh Circuit’s ultimate holding—the plaintiff’s third suit was barred and properly dismissed—provides an important lesson for litigants and litigators alike.
All three suits Dvorak filed arose from an allegedly “mishandled … capital call for a limited partnership.” Dvorak first filed in federal court on the basis of diversity jurisdiction. But he and at least one other partner were both Florida citizens, destroying diversity as a basis for federal jurisdiction. So, he dismissed his initial federal suit with the consent of the defendants and refiled in Illinois state court. In this second suit, the state court dismissed one claim on the merits. Rather than litigate the remaining claims in the state court, Dvorak dismissed the rest of his suit and refiled those claims in the federal court where he had started. This new, third suit omitted the partnership and the claim dismissed by the state court.
The defendants moved to dismiss the third suit on the ground that Dvorak had refiled twice, even though under Illinois law his prior dismissals both counted as strikes. In response, Dvorak argued that his first dismissal did not count as a strike under Illinois law because it was entered with the consent of all parties. The district court rejected Dvorak’s argument, and dismissed the third suit with prejudice. Dvorak appealed.
The Seventh Circuit affirmed the district court’s dismissal order, in an opinion authored by Judge Frank Easterbrook and issued only eight days after oral argument. As an initial matter, the court had to characterize the dismissal of the first federal suit, as that characterization would affect the treatment of the second, state-court dismissal. Looking to the text of Rule 41(a), the court concluded that, regardless of whether Dvorak dismissed unilaterally or by stipulation of the parties, “both situations [are] voluntary dismissals by the plaintiff.” Slip op. at 5. A stipulated dismissal “is not less a voluntary dismissal by the plaintiff just because other parties agree that the suit should end.” Id. The court then held that, under Illinois precedent, the stipulated dismissal in the first federal suit was also voluntary for purposes of the state dismissal statute, 735 Ill. Comp. Stat. 5/13-217.
Applying the Illinois two-strikes rule, the Seventh Circuit reasoned that, if the dismissal of Dvorak’s first federal suit was one strike and dismissal of the unadjudicated claims in state court was the second strike, then the refiled suit in federal court (Dvorak’s third suit overall) was barred by § 5/13-217. The court was unmoved by Dvorak’s argument that his third suit included two defendants who had not been named parties to the first suit, because the Illinois statute “applies with respect to all persons who could have been named in the initial suits, whether or not they were, provided that the new suit arises from the same transaction (or, equivalently, the same core of operative facts).” Slip op. at 6.
The outcome would be the same if the state suit had been filed and dismissed in Wisconsin, which also has a “two-strikes” statute. Wis. Stat. § 805.04. Section one of that statute explicitly states that
“(u)nless otherwise stated in the notice of dismissal or stipulation, the dismissal is not on the merits, except that a notice of dismissal operates as an adjudication on the merits when filed by a plaintiff who has once dismissed in any court an action based on or including the same claim.”
(emphases added). As the second emphasized phrase demonstrates, Wisconsin clearly addresses the issue of forum. The Wisconsin statute expressly counts prior dismissals “in any court.” Note, however, that the first clause expressly encompasses both dismissals and stipulations, but that the exception references only notices of dismissals only. Does the statutory text leave room to argue that a stipulated dismissal does not count as a strike under the Wisconsin statute? Possibly, but such an argument would now need to overcome Dvorak’s interpretation of Rule 41(a).