State of Oregon v. City of Rajneeshpuram/1984 05 25

by United States District Court for the District of Oregon

Case summary

STATE OF OREGON Plaintiff, v. CITY OF RAJNEESHPURAM, a putative Oregon municipal corporation; RAJNEESH FOUNDATION INTERNATIONAL, a New Jersey corporation; RAJNEESH INVESTMENT CORPORATION, an Oregon corporation; RAJNEESH NEO-SANNYAS INTERNATIONAL COMMUNE, an Oregon corporation; MA ANAND SHEELA, individually; SWAMI PREM JAYANANDA, MA YOGA VIDYA, SWAMI KRISHNA DEVA, MA PREM ARCHAN, SWAMI DEVA SANDESH, MA PREM PATIPADA, MA DEVA JAYAMALA, MA SAT PRABODHI, individually and as representatives of the class of all current residents of the City of Rajneeshpuram; Defendants

Civil No. 83-1892 FR

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

1984, 39 Fed. R. Serv. 2d (Callaghan) 237

May 25, 1984, Decided and Filed

CASE SUMMARY

PROCEDURAL POSTURE: After the denial of plaintiff state's motion to remand the case back to state court, but prior to defendant residents' filing an answer or a motion for summary judgment, the state filed a notice of dismissal of its class action pursuant to Fed. R. Civ. P. 41(a)(1). The residents then filed a motion to vacate the dismissal and a motion to enjoin further proceedings in a second action filed by the state in state court.

OVERVIEW: The court denied the residents' motions. The right to dismiss voluntarily a case under Rule 41(a)(1) was made expressly subject to Fed. R. Civ. P. 23(e), which provided that a class action could not be dismissed without the court's approval. However, the dismissal in the instant case was executed unilaterally under Fed. R. Civ. P. 41(a)(1)(i), which generally allowed dismissal as a matter of right. Further, the party with the unilateral right to dismiss the case, the state, was not the representative of the proposed class. The substantive legal rights of the putative defendant class were wholly unaffected by the dismissal. It followed that the court should approve the dismissal of the present action. The court rejected the argument that the state should not be allowed to subvert the removal procedure through the course of dismissal followed by refiling. None of the policies and purposes behind Fed. R. Civ. P. 23(e) were implicated by the state's dismissal. Further, the state's right to dismiss under Fed. R. Civ. P. 41(a)(1)(i) was absolute and the motive of the state in dismissing an action -- even if to avoid federal jurisdiction -- was irrelevant.

OUTCOME: The court denied the motion to vacate the dismissal and denied the motion to enjoin further proceedings on the state's second complaint in state court.

Opinion

Opinion and order

COUNSEL: [*1] Dave Frohnmayer, Attorney General, William F. Gary, Deputy Attorney General, John A. Reuling, Jr., Special Counsel, Robert W. Muir, Asst. Attorney General, and Margaret Rabin, Asst. Attorney General, for Plaintiff.

Ma Prem Sangeet, Rajneesh Legal Services Corporation, Swami Prem Niren, Swami Prartho Subhan, Roy S. Haber, and Robert D. Durham, for Defendants.

OPINION BY: FRYE

OPINION

Helen J. Frye, United States District Judge

OPINION AND ORDER

FRYE, Judge:

The matters before the court are defendants' motion to vacate plaintiff's voluntary dismissal and defendants' motion to enjoin further proceedings in a second action.

Three days after this court ruled against plaintiff on its motion to remand this case back to state court, plaintiff filed a notice of dismissal pursuant to Fed. R. Civ. P. 41(a)(1). This rule states in relevant part:

Voluntary Dismissal: Effect Thereof.

(1) By Plaintiff; by Stipulation. Subject to the provisions of Rule 23(e), of Rule 66, and of any statute of the United States, an action may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for [*2] summary judgment, whichever first occurs, . . . Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice, . . .

Defendants had neither served an answer nor a motion for summary judgment at the time plaintiff filed the notice. Immediately after dismissing the present action, plaintiff refiled an almost identical action in state court. This second action named as defendants Wasco County and the Sheriff of Wasco County, apparently in an attempt to preclude removal by defendants of the second action to federal court. 1 ^[1]

Defendants' motion to vacate plaintiff's voluntary dismissal is based on two grounds: first, because plaintiff's complaint contains class action allegations, and because a dismissal under Rule 41(a)(1) is expressly made "[s]ubject to the provisions of Rule 23(e)," which requires court approval for the dismissal of a class action, defendants contend that plaintiff's dismissal was ineffective since court approval was [*3] not given; second, because plaintiff's actions appear to be motivated solely by a desire to avoid litigation in federal court, and because defendants contend the second suit is also removable, defendants contend that this court should use its inherent equitable power to vacate plaintiff's voluntary dismissal.

The court will first address defendants' contention that plaintiff's dismissal cannot be allowed to stand because of Fed. R. Civ. P. 23(e). The right to voluntarily dismiss a case under Rule 41(a)(1) is made expressly subject to Rule 23(e). Rule 23(e) reads: A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.

The purpose of this rule is clear. The representative of a class of plaintiffs or defendants may be presented with a settlement opportunity which, although quite favorable to him individually, does not give due regard to the legal interests of the absent class members who may be bound by the settlement. See Norman v. McKee, 431 F.2d 769 (9th Cir. 1970), cert. denied 401 U.S. 912; 7A C. Wright [*4] & A. Miller, Federal Practice and Procedure § 1797 (1972). The requirement that the court examine the proposed settlement to insure that the settlement to insure that the settlement is fair and reasonable protects the absent class members from this potential abuse.

The dismissal in the present case, however, differs from the typical dismissal or compromise anticipated by Rule 23(e) in at least three ways: first, the class in this case has not yet been certified; second, the dismissal in this case was executed unilaterally under Rule 41(a)(1)(i), which generally allows dismissal as a matter of right, and hence there is no substantive "settlement" in this case for the court to examine; and finally, the party with the unilateral right to dismiss the case -- the plaintiff -- is not the representative of the proposed class. 2 ^[2] It is difficult to determine what weight to give cases cited as authority which differ from the present case in one or more of these respects.

[*5] With respect to the first point above, the plaintiff argues that because the class has not yet been certified, the action is not yet a "class action" within the meaning of Rule 23(e), and hence plaintiff's right to dismiss it is not subject to court approval. However, an examination of the cases and authorities indicates that it is the majority rule that a dismissal of a complaint containing class allegations is subject to Rule 23(e) even though the class has not yet been certified. See 3B J. Moore § J. Kennedy, Moore's Federal Practice A.23.80 [2.-1] at 508-09 (2nd ed. 1982); Wright & Miller, supra, § 1797 at 236-37; 3 H. Newberg, Class Actions § 4920 (1977). 3 ^[3]

Approval of a dismissal of a class action under Rule 23(e) is within the discretion of the trial court, and subject to reversal only for abuse of discretion. Moore's, supra, A23.80 [4] at 518-19. In considering such approval, the court must guard the interests of the absent class members and insure that the settlement is fair, reasonable, and adequate. Id. at 519-20. As discussed more fully below, the rule upon which plaintiff bases its dismissal gives a plaintiff an unqualified right to dismiss his action, even as against the objection of a court to the dismissal. In the present case, the party holding this unqualified right to dismiss is not the representative of the putative class. Here plaintiff simply proposes to drop its entire action against defendants and the defendant class. The substantive legal rights of the putative defendant class are wholly unaffected by the dismissal; substantively the defendant class is in the same position it would have been had the plaintiff never brought suit. It follows that the court should approve the dismissal of the present action.

Defendants also argue that the defendant class has an interest in a speedy determination in federal [*7] court of the constitutional issues involved in this case, and that to allow plaintiff to dismiss the case and refile a second almost identical case in state court to defeat removal is offensive to principles of justice and comity. Moreover, because defendants believe that the motion to remand the second case back to state court will be denied, defendants argue that to allow dismissal of the present case will only result in delay, which is prejudicial to the defendant class. However, these arguments are not relevant to the Rule 23(e) issue. The purpose of Rule 23(e) is to insure that a class representative does not "sell out" the interests of absent class members in favor of his own interests. Here, the effect of the dismissal on the defendants is identical with its effect on the putative class members. Defendants' primary complaint is that plaintiff should not be allowed to subvert the removal procedure through the course of dismissal followed by refiling. However, this argument is unrelated to the existence of class allegations in the complaint; it is valid or invalid without regard to whether plaintiff made any class allegations in its pleading. None of the policies and purposes [*8] behind Rule 23(e) are implicated by plaintiff's dismissal. Rule 23(e) does not bar plaintiff's dismissal of this case. 4 ^[4]

Defendants next argue that plaintiff's dismissal should be vacated because the dismissal was a part of a scheme by plaintiff to avoid federal jurisdiction by dismissing and refiling an almost identical case that added two nominal parties for the purpose of avoiding removal. Defendants argue that the court has inherent power to vacate the dismissal in order to keep the state from avoiding federal jurisdiction through procedural artifice. 5 ^[5] However, the cases [*9] indicate that a plaintiff's right to dismiss under Rule 41(a)(1)(i) is absolute, and that the motive of a plaintiff in dismissing an action -- even if to avoid federal jurisdiction -- is irrelevant. See Williams v. Ezell, 531 F.2d 1261 (5th Cir. 1976); Scam Instrument Corp. v. Control Data Corp., 458 F.2d 885 (7th Cir. 1972); Miller v. Reddin, 422 F.2d 1264 (9th Cir. 1970). A court has no power to invalidate a properly filed notice of dismissal under Rule 41(a)(1)(i). D.C. Electronics v. Nartron Corp., 511 F.2d 294 (4th Cir. 1975). As one commentator states:

The right of dismissal by notice prior to answer or motion for summary judgment extends as fully to cases removed from a state court as it does to cases commenced in the federal court. Indeed it is frequently used in this situation when a plaintiff, unhappy at being taken to the federal forum, wishes to dismiss so that he may start a new action in state court and preclude removal by joinder of nondiverse parties, change in the amount sought, or otherwise.

9 C. Wright & A. Miller, Federal Practice and Procedure § 2363 at 153-54 (1971) (footnote omitted). 6 ^[6]

Defendants have also filed a motion to enjoin further proceedings in the second case in the event the motion to vacate dismissal is granted. Because defendant's motion to vacate plaintiff's dismissal will be denied, the motion to enjoin further proceedings will also be denied.

Order

IT IS THEREFORE ORDERED that defendant's motion to vacate plaintiff's dismissal is denied. It is further ordered that defendant's motion to enjoin further proceedings on plaintiff's second complaint is denied.

DATED this 25th day of May, 1984.

Helen J. Frye, United States District Judge

Footnotes

1. 1 Generally, all defendants must join in a petition for removal before a case may be removed. See 1A J. Moore, B. Ringle & J. Wicker, Moore's Federal Practice A0.168 [3.-2-2] (2nd ed. 1983).
2. 2 The class allegations appear in the complaint because the Oregon Declaratory Judgment Act requires that all persons "who have or claim any interest which would be affected by the declarat[ory judgment]" be named as parties. ORS 28.110. Because all resident of Rajneeshpuram will be affected by the outcome of this case, the plaintiff sought to create a defendant class comprised of Rajneeshpuram residents in order to meet the requirement of the Declaratory Judgment Act.
3. 3 Plaintiff relies heavily on Shelton v. Pargo, Inc., 582 F.2d 1298 (4th Cir. 1978), which indicates that an action only becomes a "class action" for purposes of Rule 23(e) upon certification of the class. See also Sosna v. Iowa, 419 U.S. 393, 399 n.8 (1975) ("Once the suit is certified as a class action, it may not be settled or dismissed without the approval of the court."). But Pargo does not stand for the proposition that a pre-certification settlement and dismissal is immune from judicial supervision. Rather, in Pargo the court's power and duty to monitor the settlement and dismissal is derived from Rule 23(d) and from the fiduciary obligation of the representative party to the members of the class. Pargo, supra, 582 F.2d at 1304-06; see also Newberg, supra, § 4920 n..08 (Cum. Supp. 1980). Under either theory, it appears that the mere fact that no certification order has been entered in a case does not alone obviate the need for judicial scrutiny over and approval of the settlement and dismissal under Rule 41(a)(1).
4. 4 Rule 23(e) requires not only that the court approve a dismissal of a class action, but also that "notice . . . be given to all members of the class in such manner as the court directs." However, the courts have interpreted the phrase "in such manner as the court directs" as giving a district court power to determine that no notice is necessary where no prejudice to the class results from a dismissal. See Newberg, supra, §§4950, 4960. Because in the present case no substantive legal rights of the putative defendant class are implicated by the dismissal, the court finds that notice is unnecessary.
5. 5 That the state has acted in an attempt to avoid federal jurisdiction over its complaint appears clear. [*10]
6. 6 Defendants rely on Myers v. Hertz Penske Truck Leasing, Inc., 572 F. Supp. 500 (N.D. Ga. 1983) for support. However, Hertz involves a motion to dismiss under Rule 41(a)(2), not a dismissal of right under Rule 41(a)(1)(i), and is therefore not on point.

---