Seventh Circuit Affirms Denial of Voluntary Dismissal Where Such Dismissal Would Plainly Prejudice the Defendant

Per Wojtas v. Capital Guardian Trust Co., --- F.3d ---, 2007 WL 475823 (7th Cir. Feb. 15, 2007):

Bonnie and Richard Wojtas appeal the district court's denial of their motion to voluntarily dismiss their suit against the former custodian of Bonnie Wojtas's IRA account, Capital Guardian Trust (“Capital”), and the court's order dismissing the suit with prejudice on statute of limitations grounds. The district court determined that permitting voluntary dismissal without prejudice under Rule 41(a)(2) of the Federal Rules of Civil Procedure would deprive Capital of its statute of limitations defense under Wisconsin law, resulting in plain legal prejudice. The court then granted judgment on the pleadings dismissing the suit as time-barred. We affirm.

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The Wojtases . . . contend they were entitled to voluntarily dismiss their suit under Rule 41(a)(2) [so they could file a new suit in Illinois, where the statute of limitations had not run]. When sought after a defendant has filed an answer, voluntary dismissal may be obtained only “upon order of the court and upon such terms and conditions as the court deems proper.” Fed.R.Civ.P. 41(a)(2). Motions for voluntary dismissal under Rule 41(a)(2) are committed to the district court's discretion, but it is an abuse of discretion for the district court to permit the voluntary dismissal of an action where the defendant would suffer “plain legal prejudice” as a result. United States v. Outboard Marine Corp., 789 F.2d 497, 502 (7th Cir.1986); Kovalic v. DEC Int'l, Inc., 855 F.2d 471, 474 (7th Cir.1988). The Wojtases argue that the prospect of a new lawsuit in Illinois does not constitute plain legal prejudice to Capital, citing Bolten v. Gen. Motors Corp., 180 F.2d 379, 382 (7th Cir.1950), for the proposition that facing a second suit in another state with a longer statute of limitations is not the type of prejudice that justifies the denial of a Rule 41 motion for voluntary dismissal.

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To the extent Bolten held that voluntary dismissal under Rule 41(a)(2) is a matter of right and not discretion, the case has been explicitly repudiated. Adney v. Miss. Lime Co. of Mo., 241 F.2d 43, 45-46 (7th Cir.1957); Grivas v. Parmelee Transp. Co., 207 F.2d 334, 336 (7th Cir.1953). . . .

. . . Capital, having acquired a right to assert the statute of limitations bar by operation of Wisconsin law, would suffer plain legal prejudice if the Wojtases' motion for voluntary dismissal were granted. See Metro. Fed. Bank v. W.R. Grace & Co., 999 F.2d 1257, 1263 (8th Cir.1993) (it is an “abuse of discretion for a district court to find no legal prejudice, and thus to grant voluntary dismissal, where the nonmoving party has demonstrated a valid statute of limitations defense”); see also Phillips v. Ill. Cent. Gulf R.R., 874 F.2d 984, 987 (5th Cir.1989). The district court did not abuse its discretion in denying the motion for voluntary dismissal.