The Trouble with Voluntary Dismissals

There are a few different ways a lawsuit can end. Judgments we know about, and settlements are common. But what happens when the plaintiff just up and dismisses the lawsuit? Can the defendant get costs? And is the cost award appealable?

There is a split of authority on these questions, as noted in Thomas v. St. Joseph Health System (D4d3 Oct. 20, 2021) 2021 WL 4889873 (no. G059408) (nonpub. opn.). Seeing the writing on the wall on the defendants' motion to quash based on personal jurisdiction, the doctor-plaintiff dismissed his right-to-practice and unfair-competition lawsuit (which he would later refile in Texas). The defendants recovered the significant costs they had incurred through a number of depositions during jurisdictional discovery, and the plaintiff appealed.

The court noted a split of authority, but came down on the side of finding a cost order entered after a voluntary dismissal without prejudice is appealable as a final judgment. (But the court went on to affirm the cost order.)

The appealability holding seems to me clearly correct, with all due respect to the contrary authorities.

Even If a Voluntary Dismissal Without Prejudice Is Not Appealable, the Cost Award Itself May Be Considered a Judgment:

The Fourth District noted two cases disagreeing on the question of whether a cost award following a voluntary dismissal without prejudice is appealable.

Taking the con side is Mon Chong Loong Trading Corp. v. Superior Court (2013) 218 Cal.App.4th 87, 92 [costs order following voluntary dismissal without prejudice is not appealable post judgment order, but appellate court in its discretion may treat appeal therefrom as petition for writ of mandate].)

Taking the pro side is Gassner v. Stasa (2018) 30 Cal.App.5th 346, 351-355 [costs order following voluntary dismissal without prejudice is appealable "judgment" because it is a final determination of rights of the parties in the action].

The Fourth District takes the pro side represented by Gassner, and further stated that, regardless of the appealability issue, it would treat the appeal as a writ.

Gassner itself offers persuasive reasoning. It agrees with the basic premise that a voluntary dismissal without prejudice "is clearly not a judgment. (Cook v.?Stewart McKee & Co. (1945)?68 Cal.App.2d 758, 760-761 ?["there is no kinship of a voluntary dismissal to a final judgment"]...."

But Gassner goes on to note that does not end the matter: "It follows that a costs order following a voluntary dismissal by the clerk without prejudice is not appealable as a postjudgment order under Code of Civil Procedure section 904.1 , subdivision (a)(2). For the same reason, however, such a costs order is the final determination of the parties' rights; hence, it is a judgment and appealable as such under Code of Civil Procedure section 904.1 , subdivision (a)(1)." The court concluded the cost order was appealable as a judgment in its own right. (It also suggested, but did not decide, that it might also be appealable as a collateral order. In re Marriage of Skelley (1976) 18 Cal.3d 365, 368 .))

The Cost Order Probably Is Appealable as a Collateral Order:

On that question, a cost order may be appealable as a collateral order . It is a final order. It is collateral to the merits. And it requires the payment of money.

But note that Rutter points to a split of authority when it comes to orders on motions to tax costs. Barnes v. Litton Systems, Inc. (1994) 28 CA4th 681, 685, fn. 4, holds that an order to tax costs does not literally direct the payment of money, and thus is not appealable as a collateral order.?But Krikorian Premiere Theatres, LLC v. Westminster Central, LLC (2011) 193 CA4th 1075, 1083-1085, holds that there is "no meaningful distinction between an order awarding costs and an order denying a motion to tax costs." Thus, an order denying a motion to tax, in whole or in part, is appealable as a collateral order.

Comment: As a Matter of Logic, Every Case Must Have a Final Order:

While some cases end with a whimper rather than a bang, the internal physics of litigation suggest that every case must have a beginning, and an end. It would be surprising bordering on the ridiculous to suggest a case has ended without a final order of some sort.

Some authorities on point include: Rothschild v. Tyco Internat. (US), Inc. (2000) 83 Cal.App.4th 488, 493 [where no judgment entered, appeal from nonappealable order of dismissal deemed taken from a judgment of dismissal]; Gitmed v. General Motors Corp. (1994) 26 Cal.App.4th 824, 829 [where court neglected its ministerial duty to render an appealable judgment, appeal deemed taken from such a judgment].)

The great majority, bordering on unanimity, of such cases conclude the appellant’s right of review is to be respected. As the California Supreme Court observed, “[r]eviewing courts have discretion,” in cases of such dispositive yet technically nonappealable orders, to treat them “as appealable when they must.” (Alan v. American Honda Motor Co., Inc. (2007) 40 Cal.4th 894, 901.) This means that, where there has been a final ruling on the merits and the trial court intends to take no further action, the reviewing court should find appealability. (See Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 904 [rule applies where court “clearly intended” apparently unsigned decision on the merits to be final, and “[n]o party argues otherwise”].)

A Note About Limitations on the Right to Dismiss Without Prejudice:

Litigants considering a strategic voluntary dismissal should take caution: there is some question in the Thomas case whether the plaintiff was permitted to dismiss without prejudice once the writing was on the wall. Under Code of Civil Procedure section 581, a plaintiff only has the unilateral right to dismiss with or without prejudice “before the actual commencement of trial.” (§ 581(b)(1) & (c).) But if the plaintiff wishes to dismiss with prejudice, he may also do so after commencement of trial. (§ 581(e).) “[E]xceptions generally arise where the action has proceeded to a determinative adjudication, or to a decision that is tantamount to an adjudication.” (Bank of America, N.A. v. Mitchell (2012) 204 Cal.App.4th 1199, 1209.)

The test, in practical terms, is whether the plaintiff's intent was to end the litigation or “to manipulate the judicial process to avoid its inevitable end.” (Marina Glencoe, at p. 878; see Tire Distributors, Inc. v. Cobrae (2005) 132 Cal.App.4th 538, 544 [“[t]he legal principles that have evolved in this area tend to focus on the reasons for the dismissal and whether the plaintiff acted in good faith or merely for tactical reasons designed to prevent a defendant from obtaining an otherwise inevitable summary judgment”].)

“[T]he common thread running through all of these decisions is the notion of fairness, which in turn depends on the plaintiff's motivation and intent in dismissing his complaint.” (Tire Distributors, Inc. v. Cobrae (2005) 132 Cal.App.4th 538, 546.)

“The thread of fairness is twisted out of true” in such cases as where a party dismisses after fact-finding has commenced: “To allow real party to dismiss in the wake of an unfavorable referee's [fact-finding] recommendation would work an injustice. Trial had ‘actually commenced’ within the meaning of section 581 and within the policies of fairness in the cases set forth above.” (Gray v. Superior Court (1997) 52 Cal.App.4th 165, 173.)

The sort of tactics the cases seek to deter are on display in Mary Morgan, Inc. v. Melzark (1996) 49 Cal.App.4th 765. There, defendants moved for summary judgment against plaintiff’s complaint to cancel a deed of trust on real property. At the hearing on the motion, plaintiff requested and the court granted a continuance so plaintiff could adduce further opposition evidence?– deposition transcripts that had only just become available. Instead, plaintiff dismissed without prejudice. The trial court refused to enter dismissal, and upon plaintiff’s appeal, the decision was affirmed.

In the Thomas v. St Joseph case, the plaintiff waited until the trial court issued a tentative ruling indicating the court's intent to grant the motion to quash due to lack of personal jurisdiction. The court set a further hearing date, but before the hearing arrived, the plaintiff filed a voluntary dismissal without prejudice. Based on Mary Morgan, the trial court would have been well within its discretion to refuse to enter the dismissal, and to dismiss on the merits.

And in that case, there would clearly have been an appealable judgment, and the defendants clearly would have been entitled to their costs. The plaintiff's decision to voluntarily dismiss should not change that fact.

Consider consulting appellate counsel before proceeding with a strategic voluntary dismissal.

Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com , and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles . His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at [email protected] or (714) 641-1232.

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