Thirrd Circuit Discusses Remedies for Misjoinder

Per DirectTV, Inc. v. Leto, 467 F.3d 842 (3rd Cir. Nov. 6, 2006):

DirecTV, a satellite cable company, caught persons pirating (that is, intercepting without payment) its television transmissions. Its policy is to sue, and it did so here. Eight defendants, including Bennie Leto, were joined in one suit brought in the United States District Court for the Western District of Pennsylvania. The claims against the defendants were timely brought. The District Court, responding to a motion by the defendants under Federal Rule of Civil Procedure 21, entered in December 2003 what appeared to be an order severing DirecTV's claims against each defendant. Within days of the order, DirecTV paid a separate filing fee and filed a separate complaint against Leto. He responded by moving to dismiss on the ground that the later-filed complaint was outside the statute of limitations. This made sense only if the 2003 order dismissed DirecTV's complaint rather than severed one suit into eight separate suits. Counterintuitively, the District Court agreed with Leto that it had dismissed the initial DirecTV suit, and dismissed it with prejudice. Here DirecTV, initially having filed a timely complaint that misjoined defendants, is substantially prejudiced if that suit is deemed dismissed and not severed. We thus reverse and remand.

Misjoinder . . . occurs when there is no common question of law or fact or when, as here, the events that give rise to the plaintiff's claims against defendants do not stem from the same transaction. . . . To remedy misjoinder . . . a court may not simply dismiss a suit altogether. Instead, the court has two remedial options: (1) misjoined parties may be dropped "on such terms as are just"; or (2) any claims against misjoined parties "may be severed and proceeded with separately." Fed.R.Civ.P. 21. The effect of each option is quite different. When a court "drops" a defendant under Rule 21, that defendant is dismissed from the case without prejudice. Publicker Indus., Inc. v. Roman Ceramics Corp., 603 F.2d 1065, 1068 (3d Cir.1979); see also Elmore v. Henderson, 227 F.3d 1009, 1011-12 (7th Cir.2000) (Posner, J.). When that occurs, the "statute of limitations is not tolled" because we treat the initial complaint "as if it never existed." Brennan v. Kulick, 407 F.3d 603, 606 (3d Cir.2005) (internal quotation marks omitted). But when a court "severs" a claim against a defendant under Rule 21, the suit simply continues against the severed defendant in another guise. White v. ABCO Eng'g Corp., 199 F.3d 140, 145 n. 6 (3d Cir.1999); Elmore, 227 F.3d at 1012. The statute of limitations is held in abeyance, and the severed suit can proceed so long as it initially was filed within the limitations period. Id.

Because a district court's decision to remedy misjoinder by dropping and dismissing a party, rather than severing the relevant claim, may have important and potentially adverse statute-of-limitations consequences, the discretion delegated to the trial judge to dismiss under Rule 21 is restricted to what is "just." In this context, we turn to the DirecTV/Leto case. While we normally "give particular deference to [a] district court's interpretation of its own order," we cannot do so where the plain language of the order is completely contrary to the Court's interpretation. . . . In its 2003 order, the District Court made no reference to dropping--or even dismissing--any defendants. . . . Moreover, if the District Court had intended to drop the misjoined defendants, it should not have said that their "case[s] shall proceed." Dismissed cases do not proceed at all. . . . For these reasons, the District Court's 2003 order was no doubt a severance. In light of the precise wording of the order, it cannot subsequently be deemed a dismissal.

Even if the language of the District Court's 2003 order had not clearly severed DirecTV's claim against Leto, it nonetheless would have been improper for the Court to choose dismissal instead, as this misjoinder remedy would have imposed adverse statute-of-limitations consequences on DirecTV. Although a district court has discretion to choose either severance or dismissal in remedying misjoinder, it is permitted under Rule 21 to opt for the latter only if "just"--that is, if doing so "will not prejudice any substantial right." See Sabolsky v. Budzanoski, 457 F.2d 1245, 1249 (3d Cir.1972) (emphasis added). . . . We follow suit and hold that the discretion to drop and dismiss claims against misjoined defendants under Rule 21 is abated when it "prejudic[es] any substantial right" of plaintiffs, see Sabolsky, 457 F.2d at 1249, which includes loss of otherwise timely claims if new suits are blocked by statutes of limitations.

The plain language of the District Court's 2003 order requires the conclusion that it severed, rather than dismissed, DirecTV's suit against Leto. . . . In addition, even if the language of the District Court's 2003 order did not clearly constitute a severance but instead a dismissal, Rule 21 requires that, in remedying misjoinder, the Court must analyze the consequences of choosing dismissal over severance, and is obliged to avoid prejudicing any substantial right in exercising its discretion. We therefore reverse the District Court's grant of dismissal in favor of Leto and remand this case to the Court for further proceedings consistent with this opinion.