Regions Bank v. Nathan I. Prager
W2019-00782-SC-R11
| Tenn. | Jul 8, 2021Background
- Regions Bank filed a breach-of-contract suit against Nathan Prager in May 2014 based on a promissory note.
- The trial court sua sponte entered an order dismissing that case for failure to prosecute on August 11, 2016; the order (not in the record) did not state with or without prejudice and was not served on the parties.
- Regions learned of the dismissal on June 29, 2017, moved (promptly and within one year) to set aside the dismissal, and the court denied relief but entered an August 4, 2017 order stating (incorrectly as to the law) that the dismissal did not bar refiling.
- Regions refiled on August 8, 2017; Prager moved to dismiss, asserting res judicata based on the initial 2016 dismissal; the trial court granted dismissal and a divided Court of Appeals affirmed.
- The Tennessee Supreme Court held the August 4, 2017 order manifested the court’s intent that the dismissal not operate as an adjudication on the merits, reversed the Court of Appeals, vacated the dismissal of the refiling, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether res judicata bars Regions’ refiled suit | Regions: the August 4, 2017 order shows the dismissal was not on the merits, so res judicata does not bar refiling | Prager: the initial August 11, 2016 dismissal (which did not state prejudice) operated as an adjudication on the merits under Rule 41.02(3) and thus bars refiling | Held: res judicata does not bar the refiled suit because the August 4, 2017 order manifested intent that the dismissal not operate as an adjudication on the merits |
| Which order is the operative judgment for preclusion | Regions: the later August 4, 2017 order is operative because it altered substantive rights by allowing refiling | Prager: the initial dismissal controlled because it was a final involuntary dismissal that did not specify otherwise | Held: the August 4, 2017 order is the operative order because it affected parties’ substantive rights and manifested intent to permit refiling |
| Whether Rule 41.02(3) requires specific wording to avoid adjudication on the merits | Regions: Rule 41.02(3) requires only that the court manifest intent on the record, not magic words | Prager: court should apply the plain Rule 41.02(3) presumption that unspecified involuntary dismissals are on the merits | Held: the rule does not demand particular phrasing; an on-the-record manifestation suffices and the August 4 order met that standard |
| Effect of lack of notice/service or Rule 58 technicalities on finality | Regions: even if initial order’s finality is questionable, the subsequent proceedings and August 4 order control the preclusion analysis | Prager: absence of August 11 order from the record/notice supports treating that dismissal as final and preclusive | Held: Court noted concerns about notice and Rule 58 compliance but concluded the August 4 order superseded and negated preclusive effect regardless |
Key Cases Cited
- Elvis Presley Enters., Inc. v. City of Memphis, 620 S.W.3d 318 (Tenn. 2021) (sets out elements of res judicata/claim preclusion)
- Jackson v. Smith, 387 S.W.3d 486 (Tenn. 2012) (res judicata principles and use of Rule 12.02(6) to raise affirmative defenses)
- Napolitano v. Bd. of Pro. Resp., 535 S.W.3d 481 (Tenn. 2017) (purposes of res judicata and finality)
- Creech v. Addington, 281 S.W.3d 363 (Tenn. 2009) (Rule 41.02(3): involuntary dismissals operate as adjudications on the merits unless court specifies otherwise)
- Ball v. McDowell, 288 S.W.3d 833 (Tenn. 2009) (a subsequent judgment is operative if it alters substantive rights established by an earlier judgment)
- Henry v. Goins, 104 S.W.3d 475 (Tenn. 2003) (setting aside involuntary dismissals for excusable neglect; notice as a critical step)