Fuentes Fernandez Consulting, LLC v. Municipality of San Juan
3:12-cv-01744
D.P.R.Aug 30, 2016Background
- Two related actions: Civ. No. 11-1133 (copyright action by FM‑IP Holding and affiliates) and Civ. No. 12-1744 (Fuentes‑Fernández Consulting (FFC) alleging breach of contract and fraudulent inducement against Municipality of San Juan (MSJ) and its Housing Director).
- In Civ. No. 11-1133 plaintiffs filed a Rule 41(a)(1) notice dismissing MSJ without prejudice; the court treated that dismissal as effective and entered partial judgment dismissing MSJ without prejudice.
- Later in Civ. No. 11-1133 the parties submitted a Joint Stipulation dismissing all claims with prejudice as to all parties and the court entered judgment with prejudice (despite the earlier Rule 41(a)(1) dismissal).
- FFC (parent of the 11‑1133 plaintiffs) alleges that MSJ and its director induced subsidiaries to sign the with‑prejudice stipulation and seeks relief in Civ. No. 12‑1744, including vacatur of the judgment in 11‑1133.
- MSJ raised res judicata, collateral estoppel, and statute‑of‑limitations defenses; Magistrate Judge recommended denying summary judgment and held the Rule 41(a)(1) dismissal deprived the court of jurisdiction to enter the later with‑prejudice judgment, so that dismissal with prejudice is void and does not bar FFC’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of Rule 41(a)(1) dismissal in 11‑1133 on later with‑prejudice judgment | The with‑prejudice judgment should be vacated because it was procured by fraud and the stipulation is voidable | The with‑prejudice judgment is valid and bars FFC’s claims (res judicata/collateral estoppel) | The Rule 41(a)(1) dismissal was effective on filing and divested the court of jurisdiction; the subsequent judgment with prejudice is void as to MSJ and does not bar the current action |
| Applicability of res judicata to Civ. No. 12‑1744 | FFC argues res judicata does not apply because claims differ and dismissal without prejudice does not preclude relitigation | MSJ argues res judicata/collateral estoppel bar the claims and that statute of limitations expired | Court agrees res judicata does not apply: different causes of action and parties; dismissal without prejudice is not an adjudication on the merits |
| Statute of limitations (one‑year under Puerto Rico law) | FFC: claim accrued when plaintiff knew of the alleged inducement; suit filed within limitations | MSJ: plaintiffs had one year from June 2011 dismissal to refile; Civ. No. 12‑1744 filed after one year and is time‑barred | Court finds defendants did not prove plaintiff knew of injuries before Sept. 10, 2012; statute‑of‑limitations defense fails on present record |
| Proper remedy to contest judgment in 11‑1133 | FFC seeks vacatur of judgment via this independent action | MSJ contends any relief must be through Rule 60 or is barred by final judgment | Court notes vacatur may require Rule 60 proceedings but, on jurisdictional grounds, the with‑prejudice judgment is void and thus has no effect on this action |
Key Cases Cited
- Smith v. Potter, 513 F.3d 781 (7th Cir. 2008) (void judgments have no preclusive effect)
- National R.R. Passenger Corp. v. Int'l Ass'n of Machinists and Aerospace Workers, 915 F.2d 43 (1st Cir. 1990) (Rule 41(a)(1) dismissal is effective on filing)
- Commercial Space Mgmt. Co. v. Boeing Co., 193 F.3d 1074 (9th Cir. 1999) (Rule 41(a)(1) dismissal divests court of jurisdiction)
- Sandstrom v. ChemLawn Corp., 904 F.2d 83 (1st Cir. 1990) (voluntary dismissal under Rule 41(a) leaves parties as if no action had been brought)
- Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001) (dismissal without prejudice does not constitute an adjudication on the merits)
- Universal Ins. Co. v. Office of Ins. Comm'rs, 755 F.3d 34 (1st Cir. 2014) (res judicata preclusion requires final, on‑the‑merits judgment)
- R.G. Fin. Corp. v. Vergara‑Nuñez, 446 F.3d 178 (1st Cir. 2006) (elements required for res judicata)