Tenth Circuit Reaffirms that Dismissal for Lack of Jurisdiction is Without Prejudice, Clarifies Styskal

Per Brereton v. Bountiful City Corp., 434 F.3d 1213 (10th Cir. Jan. 26, 2006):

A longstanding line of cases from this circuit holds that where the district court dismisses an action for lack of jurisdiction, as it did here, the dismissal must be without prejudice. See, e.g., Albert v. Smith's Food & Drug Ctrs., Inc., 356 F.3d 1242, 1249 (10th Cir.2004); Martinez v. Richardson, 472 F.2d 1121, 1126 (10th Cir.1973) ("It is fundamental ... that a dismissal for lack of jurisdiction is not an adjudication of the merits and therefore ... must be without prejudice."). See also 9 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2373, at 406 (2d ed.1995). Since standing is a jurisdictional mandate, a dismissal with prejudice for lack of standing is inappropriate, and should be corrected to a dismissal without prejudice. County of Mille Lacs v. Benjamin, 361 F.3d 460, 464-65 (8th Cir.), cert. denied, 543 U.S. 956, 125 S.Ct. 408, 454, 160 L.Ed.2d 318 (2004).

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The continuing validity of the first of these principles has recently been qualified, if not disavowed, by a panel of this court. See Styskal v. Weld County Bd. of County Comm'rs, 365 F.3d 855 (10th Cir.2004). Styskal, while not purporting to overrule our prior authority on this question, nevertheless concludes that the Supreme Court's opinion in Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001) has effectively undermined the preclusion rationale that supported the "without prejudice" requirement. Styskal, 365 F.3d at 858 ("The premise underlying these decisions is that a dismissal of a claim with prejudice necessarily has claim-preclusive effects in other jurisdictions.... That premise, however, was recently rejected by the United States Supreme Court [in Semtek ]."). Because the broad language in Styskal concerning Semtek's effect on jurisdictional dismissals has the potential to create some confusion, we take this opportunity to clarify our law on this subject.

To begin with, Semtek must be read within its factual and analytical context. . . . The issue before the Supreme Court was "whether the claim-preclusive effect of a federal judgment dismissing a diversity action on statute-of-limitations grounds is determined by the law of the State in which the federal court sits." Id.

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The defendant in Semtek contended that Rule 41(b), which provides the default rule in federal court for determining when a judgment represents an "adjudication on the merits," also governed the issue of the preclusive effect of the prior federal judgment in state court. The Supreme Court disagreed, for three reasons. . . . [Third], the phrase "adjudication on the merits," as used in Rule 41(b), while preventing refiling in the same federal court, should not be read to preclude the assertion of claims in state court in cases where the federal court has not passed upon the substantive merits of the claim. Id. at 502-03, 121 S.Ct. 1021.

It is Semtek's third rationale that forms the basis of the decision in Styskal. Expanding on the reasoning in Semtek, the Styskal court declined to reverse the district court's dismissal with prejudice of state-law claims over which it lacked jurisdiction. Styskal, 365 F.3d at 859. But in Semtek, the Supreme Court had dealt only with the effect of a dismissal with prejudice on a non-jurisdictional ground. See Semtek, 531 U.S. at 501, 121 S.Ct. 1021 (noting that district court's dismissal "did not pertain to the excepted subjects of jurisdiction, venue, or joinder"). The Supreme Court did not indicate any intention to do away with the general rule, reflected in Rule 41(b) and endorsed in its prior decision in Costello, that a dismissal for lack of jurisdiction should be entered without prejudice.

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Styskal, then, could not have and did not purport to overrule our prior, long-standing line of cases requiring that a dismissal for lack of jurisdiction be without prejudice. Rather, we read Styskal only to say that where a federal court erroneously dismisses "with prejudice" claims over which it lacks jurisdiction, a state court need not be blinded by this nomenclature into barring a subsequent action on the same claim that is properly brought within its jurisdiction. Read in this way, Styskal is entirely consistent with Semtek, and with our prior cases. We specifically decline to read Styskal as abrogating our duty to correct a district court disposition erroneously entered "with prejudice" on jurisdictional grounds. While leaving such a dismissal with prejudice intact might have no effect on a plaintiff's attempt to bring his claim in state court, it is our responsibility to correct an action by the district court that exceeds its jurisdiction. Gold, 159 F.3d at 1311.