Opinion
22-55843
10-04-2023
IT'S MY SEAT, INC., a California Corporation; VAHE SHAHINIAN, an individual, Plaintiffs-Appellants, v. KEVIN WOODLEY, an individual; EIN CAP, INC., a New York Corporation; RUSSELL NAFTALI, an individual; GENE SLAVIN, an individual, Defendants-Appellees.
NOT FOR PUBLICATION
Submitted October 2, 2023 [**]
Appeal from the United States District Court for the Central District of California, No. 2:22-cv-02192-ODW-AFM, Otis D. Wright II, District Judge, Presiding
Before: GRABER, BYBEE, and BENNETT, Circuit Judges.
MEMORANDUM [*]
Vahe Shahinian and It's My Seat, Inc. (Plaintiffs) appeal the district court's dismissal, without prejudice, of their claims alleging that Defendants committed fraud. The district court dismissed the case pursuant to Fed.R.Civ.P. 41(b), finding that Plaintiffs effectively violated a court order in a previous case (IMS I) concerning the same alleged fraud. In the alternative, the district court dismissed the complaint as an improper attempt to pursue the same claims against the same defendants in separate lawsuits. Exercising jurisdiction under 28 U.S.C. § 1291, we reverse.
Plaintiffs also move this court to take judicial notice of a bar complaint and accompanying declaration filed against their original counsel which allege counsel committed malpractice by failing to properly serve Defendants in IMS I while representing to Plaintiffs that he had properly served them. The motion is GRANTED.
We review the district court's dismissal under Rule 41(b) for abuse of discretion, Applied Underwriters, Inc. v. Lichtenegger, 913 F.3d 884, 890 (9th Cir. 2019), but whether there "was an order for purposes of Rule 41(b) is a question of law that we review de novo." Yourish v. Cal. Amplifier, 191 F.3d 983, 986 (9th Cir. 1999). Dismissals for improper claim-splitting are also reviewed for abuse of discretion, Adams v. Cal. Dep't of Health Servs., 487 F.3d 684, 688 (9th Cir. 2007), overruled on other grounds by Taylor v. Sturgell, 553 U.S. 880, 904 (2008), although whether two lawsuits involve the same claims and parties is a question of law that we review de novo, Mendoza v. Amalgamated Transit Union Int'l, 30 F.4th 879, 886 (9th Cir. 2022).
1. The district court abused its discretion in dismissing the case under Rule 41(b) because Plaintiffs never violated a court order. In relevant part, the rule provides that "[i]f the plaintiff fails to . . . comply with . . . a court order, a defendant may move to dismiss the action or any claim against it." Fed.R.Civ.P. 41(b); see also Yourish, 191 F.3d at 986 (holding that district courts have the authority to dismiss a case for failure to comply with a court order). But "[b]y its plain text, a Rule 41(b) dismissal under these circumstances requires 'a court order' with which an offending plaintiff failed to comply." Applied Underwriters, 913 F.3d at 891 (quoting Fed.R.Civ.P. 41(b)).
Here, neither the district court nor Defendants point to any court order that Plaintiffs violated. Instead, the court found that Plaintiffs acted in bad faith by procuring a stipulated court order continuing the trial date in IMS I without disclosing that they had filed this case in state court, which brings virtually identical claims against defendants who were previously dismissed from IMS I without prejudice. But the stipulated order memorialized only the agreement that, in exchange for a continued trial date, Plaintiffs would "not seek to reopen or extend any deadlines already expired . . ., including, without limitation, the . . . deadline to hear any Motion to Amend Pleadings or Add Parties." The parties agreed only that Plaintiffs would not seek to re-add previously dismissed Defendants to IMS I. The stipulated order did not provide that Plaintiffs were somehow abandoning or voluntarily dismissing with prejudice their claims against the dismissed Defendants. Nor did Plaintiffs represent that they would not pursue additional litigation against parties that were dismissed without prejudice from IMS I. Accordingly, Plaintiffs never violated a court order in IMS I because they never sought to re-add Defendants to that case. And because violation of a court order is needed to support a dismissal under Rule 41(b), the district court abused its discretion.
Indeed, the district court acknowledged that "technically, Plaintiffs did not affirmatively violate an obligation in the" relevant court order.
Defendants in this case were dismissed in IMS I because Plaintiffs failed to properly serve them. The remaining Defendant in IMS I suggests that he only agreed to the stipulation on the understanding that Plaintiffs abandon any claims against the previously dismissed defendants. But as discussed below, that understanding is not reflected in the plain text of the stipulation.
Our precedents confirm that procuring a court order through a misleading omission does not justify dismissal under Rule 41(b). But even were it possible, we find nothing in the record here that could support such a dismissal. First, Defendants cite no authority suggesting that Plaintiffs had an affirmative duty to disclose the filing of this case (which was a matter of public record) while negotiating for a stipulation in IMS I. Second, the remaining Defendant in IMS I knew that the previously dismissed parties were dismissed without prejudice, thus remaining subject to future litigation. If the IMS I Defendant's goal was to prevent all future litigation against those parties, he should have bargained for that in the stipulation, but did not. Nothing in this decision should be read as permitting any Defendant to raise this argument following remand. Though, of course, we express no view on the merits of Plaintiffs' claims, a dismissal based on some type of misleading omission regarding the stipulated order, or based on the filing of this case following the stipulation, is foreclosed by our decision here.
2. The district court also erred in dismissing this case as an improper attempt to split claims. "Plaintiffs generally have 'no right to maintain two separate actions involving the same subject matter at the same time in the same court and against the same defendant.'" Adams, 487 F.3d at 688 (quoting Walton v. Eaton Corp., 563 F.2d 66, 70 (3d Cir. 1977) (en banc)). "[I]n assessing whether the second action is duplicative of the first, we examine whether the causes of action and relief sought, as well as the parties or privies to the action, are the same." Id. at 689.
But this case and IMS I (as the stipulated order left it) involve different parties. Defendants in this case include entities and individuals who were not parties to IMS I at the time the district court dismissed this case. And the Defendants in this case were not in privity with the sole remaining Defendant in IMS I at the time of the district court's order because their interests were not aligned. See Mendoza, 30 F.4th at 887 (holding that privity requires, among other things, alignment of interest between a party and a nonparty). Accordingly, the "parties or privies" in this case are not the same as in IMS I, so the doctrine against claim-splitting cannot support dismissal. Adams, 487 F.3d at 689.
Specifically, Defendants in both IMS I and this case each had an incentive to blame the others for the alleged fraud. See Kourtis v. Cameron, 419 F.3d 989, 997 (9th Cir. 2005) ("[A] conflict of interest between a non-party and his purported representative forecloses the possibility of privity because a nonparty cannot be adequately represented by a person with whom he is in conflict."), abrogated in part on other grounds by Taylor, 553 U.S. at 904.
REVERSED AND REMANDED.
[*] This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
[**] The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).