Allen Thatcher v. Hanover Insurance Group, Inc., et al
Filing
OPINION FILED - THE COURT: ROGER L. WOLLMAN, KERMIT E. BYE and BOBBY E. SHEPHERD. Bobby E. Shepherd, Authoring Judge (PUBLISHED) [3846598] [11-1610]
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 11-1610
___________
Allen Thatcher, Individually and as a
Class Representative on Behalf of all
Similarly Situated Persons,
*
*
*
* Appeal from the United States
Plaintiff-Appellee,
* District Court for the
* Western District of Arkansas.
v.
*
*
Hanover Insurance Group, Inc.;
*
Massachusetts Bay Insurance
*
Company,
*
*
Defendants-Appellants.
*
___________
Submitted: September 22, 2011
Filed: November 4, 2011
___________
Before WOLLMAN, BYE, and SHEPHERD, Circuit Judges.
___________
SHEPHERD, Circuit Judge.
Plaintiff Allen Thatcher filed a putative class action in Arkansas state court
against Defendants Hanover Insurance Group, Inc. and Massachusetts Bay Insurance
Co. asserting causes of action for unjust enrichment, fraud, constructive fraud, and
breach of contract. After Defendants removed the case to federal district court
pursuant to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), Thatcher
sought permission to voluntarily dismiss his case without prejudice so that he could
Appellate Case: 11-1610
Page: 1
Date Filed: 11/04/2011 Entry ID: 3846598
refile an amended complaint in state court that would avoid federal jurisdiction. The
district court granted Thatcher’s voluntary motion to dismiss without prejudice.
Defendants now appeal the district court’s decision, arguing that the district
court should have considered whether the motion to voluntarily dismiss was an
improper forum-shopping measure. We agree and therefore reverse the district
court’s dismissal and remand for consideration of the issue.
I
On October 28, 2010, Thatcher filed an amended complaint against Defendants
in the Circuit Court of Miller County, Arkansas. Thatcher’s amended complaint
included a putative class action that claimed that Defendants failed to properly pay
insureds for general contractors’ overhead and profit under the terms of their
insurance policies.
On November 30, 2010, Defendants filed a notice of removal, asserting federal
jurisdiction under CAFA. On December 7, 2010, Defendants filed their answer in the
district court. That same day, Thatcher filed a notice of voluntary dismissal.
However, because Defendants had already filed an answer, permission from the court
was necessary for voluntary dismissal. See Fed. R. Civ. P. 41(a)(2). Accordingly,
Thatcher requested leave to voluntarily dismiss his complaint without prejudice so
that he could refile his case as a breach of contract action in state court. After
receiving briefing on the issue from both sides, the district court granted Thatcher’s
motion and dismissed the complaint without prejudice.
II
After “the opposing party serves either an answer or a motion for summary
judgment . . . an action may be dismissed at the plaintiff’s request only by court order,
-2-
Appellate Case: 11-1610
Page: 2
Date Filed: 11/04/2011 Entry ID: 3846598
on terms that the court considers proper.” Fed. R. Civ. P. 41(a)(1) & (2). “A district
court’s decision to allow a plaintiff to dismiss a case voluntarily is reviewed for abuse
of discretion.” Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 763 (8th Cir.
2001). “An abuse of discretion . . . can occur in three principal ways: when a
relevant factor that should have been given significant weight is not considered; when
an irrelevant or improper factor is considered and given significant weight; and when
all proper factors, and no improper ones, are considered, but the court, in weighing
those factors, commits a clear error of judgment.” Kern v. TXO Prod. Corp., 738
F.2d 968, 970 (8th Cir. 1984).
Our Court has previously opined on the considerations to be taken into account
by a district court prior to dismissing under Rule 41(a)(2):
A decision whether to allow a party to voluntarily dismiss
a case rests upon the sound discretion of the court. In
exercising that discretion, a court should consider factors
such as whether the party has presented a proper
explanation for its desire to dismiss; whether a dismissal
would result in a waste of judicial time and effort; and
whether a dismissal will prejudice the defendants.
Likewise, a party is not permitted to dismiss merely to
escape an adverse decision nor to seek a more favorable
forum.
Hamm v. Rhone-Poulenc Rorer Pharm., Inc., 187 F.3d 941, 950 (8th Cir. 1999)
(internal citations omitted). In the instant case, several of the factors support the
decision of the district court. The motion to dismiss came at the outset of the action,
so little judicial time and effort had been expended. Likewise, any prejudice to
defendants was limited because the case had not progressed beyond the pleading
stage. See Brown v. Baeke, 413 F.3d 1121, 1124 (10th Cir. 2005) (“Prejudice does
not arise simply because a second action has been or may be filed against the
defendant, which is often the whole point in dismissing a case without prejudice.”
(internal citation omitted)).
-3-
Appellate Case: 11-1610
Page: 3
Date Filed: 11/04/2011 Entry ID: 3846598
At the same time, however, the district court failed to address Thatcher’s
purpose in seeking to voluntarily dismiss. If the trial court had done so, it could have
concluded that Thatcher was dismissing so he could return to the more favorable state
forum. Thatcher’s expressed intent was to amend his complaint in order to avoid
federal jurisdiction. See Pl.’s Mot. to Dismiss Without Prejudice and Br. in Supp.,
J.A. at 105 (“To alleviate any confusion concerning the claims set forth in Plaintiff’s
Complaint, Plaintiff is seeking the current dismissal so he can re-file his Complaint
in the Circuit Court of Miller County asserting a breach of contract claim only.”).
This reading of Thatcher’s purpose is supported by his failure to consider the effects
of his actions on the putative class that he purportedly represents. In the original
complaint, Thatcher included claims for unjust enrichment, fraud, constructive fraud,
and breach of contract. In his motion to dismiss without prejudice, Thatcher set forth
his intention to refile this matter in state court as a breach of contract claim only.
Thatcher set forth no adequate reason why it would benefit the class to abandon these
additional claims.
In addressing whether a district court should allow voluntary dismissal, we
have repeatedly stated that it is inappropriate for a plaintiff to use voluntary dismissal
as an avenue for seeking a more favorable forum. See, e.g., Cahalan v. Rohan, 423
F.3d 815, 818 (8th Cir. 2005) (“A party may not dismiss simply to . . . seek a more
favorable forum.”). In the removal context, this rule coincides with other measures
which “strike a balance between the plaintiff’s right to select a particular forum and
the defendant’s right to remove the case to federal court.” Knudson v. Sys. Painters,
Inc., 634 F.3d 968, 976 (8th Cir. 2011). For example, under the fraudulent-joinder
exception, a plaintiff cannot defeat a defendant’s right of removal by “fraudulently
joining a defendant who has no real connection with the controversy.” Id. (citation
omitted). Likewise, under the St. Paul Mercury rule, in a diversity action a plaintiff
may not merely amend his complaint after removal to claim damages below the
jurisdictional amount and deprive the federal court of jurisdiction. St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 292, 294 (1938) (“If the plaintiff could, no
-4-
Appellate Case: 11-1610
Page: 4
Date Filed: 11/04/2011 Entry ID: 3846598
matter how bona fide his original claim in the state court, reduce the amount of his
demand to defeat federal jurisdiction the defendant’s supposed statutory right of
removal would be subject to the plaintiff’s caprice.”); see also Jones v. Mosher, 107
F. 561, 564 (8th Cir. 1901) (“As the right to remove an action which falls within the
jurisdiction of the federal courts is a substantial right, the federal courts . . . should
be astute not to permit devices to become successful which are used for the very
purpose of destroying that right.” (internal citation omitted)).
In this case, the determination of whether the motion to dismiss was an
improper forum-shopping measure, by its very nature, called into question the trial
court’s subject matter jurisdiction. Defendants exercised their right to removal under
CAFA, and Thatcher appears to have sought dismissal merely to deprive the federal
court of jurisdiction. As a result, determining whether the district court had subject
matter jurisdiction was at the crux of the issue of whether the motion to dismiss was
being used for the improper purpose of seeking a more favorable forum. The district
court erred in failing to take up the jurisdictional question, thereby necessitating
remand of this matter. After the trial court determines whether it has subject matter
jurisdiction, it can consider whether dismissal without prejudice is appropriate, taking
into consideration whether the motion to dismiss is a forum-shopping measure.
Alternatively, if the court finds that it does not have subject matter jurisdiction, it
should remand to the state court.
III
We find that the district court abused its discretion in granting Thatcher’s
motion to voluntarily dismiss without first addressing whether the motion was an
improper forum-shopping measure. Implicit in this error was the district court’s
failure to consider subject matter jurisdiction. Therefore, the district court’s order
-5-
Appellate Case: 11-1610
Page: 5
Date Filed: 11/04/2011 Entry ID: 3846598
dismissing the case without prejudice is reversed. The case is remanded to the district
court to conduct proceedings in accordance with this opinion.
______________________________
-6-
Appellate Case: 11-1610
Page: 6
Date Filed: 11/04/2011 Entry ID: 3846598
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?