Hyde v. Hoffmann-La Roche, Inc.

The issue in this diversity case is whether the district court abused its discretion in granting the plaintiffs motion to dismiss voluntarily all his claims without prejudice. Because the defendants would potentially be stripped of a defense based on a Texas statute of repose, 1 we vacate and remand for further proceedings.

I

George W. Hyde, a Texas citizen, sued Hoffman-La Roche Inc. and Roche Laboratories Inc., claiming he suffered physical and psychological injuries from ingesting the prescription drug Accutane during the early 1980s. The defendants are, respectively, the manufacturer and distributor of Accutane in the United States. The action was originally filed in Texas state court, but was removed to federal court based on diversity jurisdiction.

Shortly after removal, the Roche defendants filed a motion for summary judgment asserting that Hyde’s claims are barred by a Texas statute of repose that provides a fifteen-year period for filing a “products liability action,” beginning on “the date of the sale of the product by the defendant.” 2 The term “products liability action” is broadly defined to include

any action against a manufacturer or seller for recovery of damages or other relief for harm allegedly caused by a defective product, whether the action is based in strict tort liability, strict products liability, negligence, misrepresentation, breach of express or implied warranty, or any other theory or combination of theories, and whether the relief sought is recovery of damages or any other legal or equitable relief, including a suit for: (A) injury or damage to or loss of real or personal property; (B) personal injury; (C) wrongful death; (D) economic loss; or (E) declaratory, injunctive, or other equitable relief. 3

Hyde admits that he last took Accutane almost 20 years before he filed suit, but he asserted in his response to the motion for summary judgment that the statute of repose would violate the Texas Constitution’s “open courts” provision 4 if applied to his claims. He additionally asserted that his claims fall within an exception to the statute of repose for latent diseases. 5 Hyde did not produce any evidence that he has actually satisfied the conditions of the latent disease exception; he argued that it is sufficient under the statute’s provisions *508 that he “alleges” facts that meet the elements of the exception. 6

Before responding to the summary judgment motion, however, Hyde filed a motion to dismiss all his claims without prejudice pursuant to Fed.R.Civ.P. 41(a)(2), 7 stating that he “no longer desire[d] to prosecute th[e] action.” The Roche defendants opposed dismissal and urged the court to rule on the pending motion for summary judgment, arguing that Roche would be prejudiced if Hyde refiled the lawsuit in a state without an applicable statute of repose.

At some point, Hyde filed a virtually identical suit against the Roche defendants in New Jersey state court, and the Roche defendants brought this to the attention of the federal district court in Texas. They advised the court that New Jersey does not have an applicable statute of repose and asserted it was unlikely that New Jersey’s choice-of-law rules would result in that court applying the Texas statute of repose, citing Gantes v. Kason Corp., in which the New Jersey Supreme Court refused to apply Georgia’s statute of repose in a products-liability action arising from an industrial accident that occurred in Georgia. 8

After the summary judgment motion and motion to dismiss had been pending for several months, Hyde requested a continuance of the summary judgment proceedings to allow additional time for discovery as to whether the law of a forum other than Texas should apply in this case, “possibly” New Jersey. 9 In the same motion, Hyde urged the court to (1) grant his motion for dismissal without prejudice, (2) deny the motion for summary judgment on the merits, or (3) defer ruling on the summary judgment motion pending a decision on whether the case would be transferred to a Florida multi-district litigation panel for Accutane cases.

Four days after Hyde requested a continuance, the district court granted Hyde’s motion for voluntary dismissal without prejudice. Although dismissal of the case could have been subject to “terms that the court considers proper,” 10 the district court’s dismissal order was unconditional.

The Roche defendants appeal the dismissal order, seeking remand to the district court for consideration of its summary judgment motion. They argue that dismissal has deprived them of a favorable judgment on the merits and stripped them of an affirmative defense that is not available in the New Jersey litigation. Hyde’s *509 principal counter-argument is that his pursuit of the case in New Jersey would not prejudice the Roche defendants because New Jersey law might apply even if the case proceeded in Texas federal court.

II

As an initial matter, Hyde contends that we “should not view the instant appeal as one strictly involving the issue of whether the district court abused its discretion under Rule 41(a)(2)” because, Hyde asserts, the district court’s ruling is also referable to Hyde’s motion for continuance and therefore the district court was entitled to enter any order that was just pursuant to Rule 56(f). 11 We reject this argument. The district court’s order specifically referenced Hyde’s voluntary motion to dismiss without prejudice. The court did not rule on Hyde’s motion for continuance.

Rule 41(a)(2) of the Federal Rules of Civil Procedure precludes a plaintiff from dismissing a lawsuit without the court’s permission if either an answer or a motion for summary judgment has been served on the plaintiff and the defendant does not consent to dismissal. 12 A district court’s decision to dismiss a lawsuit under Rule 41(a)(2) is reviewed for abuse of discretion. 13 Dismissal without prejudice will generally be affirmed “unless the defendant will suffer some plain legal prejudice other than the mere prospect of a second lawsuit.” 14 A defendant may be substantially prejudiced by dismissal of a lawsuit if dismissal “effectively strips him of a defense that would otherwise be available. That [the] plaintiff may obtain some tactical advantage over the defendant in future litigation is not ordinarily a bar to dismissal.” 15

In determining whether Roche will suffer plain legal prejudice as a consequence of the dismissal, we are guided by prior decisions of this court including Ikospen-takis, 16 and Elbaor v. Tripath Imaging, Inc, 17 In Ikospentakis, the defendants argued that the voluntary dismissal of Jones Act claims stripped the defendants of a forum non conveniens defense that was available in federal court but unavailable in Louisiana state court. 18 We agreed there was prejudice because the courts of that state had “unequivocally rejected” the fo *510 rum non conveniens doctrine in Jones Act and maritime cases. 19 In analyzing what constitutes legal prejudice, we emphasized that the availability of a defense need not be established to a certainty:

[Wjhether [the defendants] can sustain this defense beyond the shadow of a doubt in federal court is not the point of the inquiry concerning legal prejudice, although that circumstance made the decision in Phillips [v. Illinois Central Gulf Railroad] 20 relatively easy. The point of the inquiry, rather is that appellants’ invocation of forum non conve-niens is far from frivolous, and that if appellants are relegated to litigating in the Louisiana state courts, they will not even have the opportunity to pursue a forum non conveniens dismissal. 21

Because the forum non conveniens defense was not frivolous and because it was virtually certain that the defense would be unavailable in state court, we vacated the dismissal order and remanded the case to the district court with instructions to consider the merits of the defense before proceeding further. 22

In Elbaor we further clarified that legal prejudice may exist even if it is not legally certain that the defense would be lost if the case were dismissed. 23 In Elbaor, we agreed with the district court that “dismissal would potentially strip [the defendant] of a viable statute of limitations defense” 24 under Texas law, even though the plaintiffs asserted that the discovery rule applied and even though it was not known whether limitations would be unavailable as a defense in a forum in which the suit might be refiled. With regard to the merits of the limitations defense, we held that the plaintiffs’ “potential ability to plead around the statute of limitations is irrelevant” in light of the holding in Ikospentak-is that “whether the defense will ultimately be successful is not the appropriate inquiry.” 25 Nor did the fact that it was unknown where the suit might be refiled and thus whether the limitations defense would be lost negate legal prejudice because it was the plaintiffs who failed to disclose the jurisdiction in which they intended to refile, a fact peculiarly within their knowledge. 26

Ill

Applying these principles, our first inquiry is whether the Roche defendants have a viable (non-frivolous) defense under Texas law. In diversity cases, a federal court must apply federal procedural rules and the substantive law of the forum state, including its conflict-of-law rules. 27 Although the parties disagree about whether Texas or New Jersey substantive law applies in this case, they agree the issue must be resolved by applying Texas’s choice-of-law rules. 28

*511 While as a general proposition, Texas applies the “most significant relationship” test in sections 6 and 145 of the Restatement (Second) of Conflict of Laws in determining what law applies in tort cases, 29 the Texas Legislature has enacted legislation to govern choice of law in some respects. Section 71.03 of the Texas Civil Practice and Remedies Code is such a codification. 30 It provides in pertinent part:

(a)An action for damages for the death or personal injury of a citizen of this state, of the United States, or of a foreign country may be enforced in the courts of this state, although the wrongful act, neglect, or default causing the death or injury takes place in a foreign state or country, if:

(1) a law of the foreign state or country or of this state gives a right to maintain an action for damages for the death or injury;

(2) the action is begun in this state within the time provided by the laws of this state for beginning the action;

(3) for a resident of a foreign state or country, the action is begun in this state within the time provided by the laws of the foreign state or country in which the wrongful act, neglect, or default took place; and

(4)in the case of a citizen of a foreign country, the country has equal treaty rights with the United States on behalf of its citizens.

(b) Except as provided by Subsection (a), all matters pertaining to procedure in the prosecution or maintenance of the action in the courts of this state are governed by the law of this state.

(c) The court shall apply the rules of substantive law that are appropriate under the facts of the case. 31

The Texas Legislature chose the phrase “within the time provided by the laws” rather than a more specific, more restrictive reference to “limitations.” At least one Texas state court has held that the phrase “within the time provided by the laws” in subsection (a)(3) includes both statutes of limitations and statutes of repose. 32 Nothing in the context of section 71.031 or its history indicates that the Texas Legislature meant the phrase “within the time provided by the laws” to mean one thing in subsection (a)(2) and another in subsection (a)(3). Accordingly, under Texas law, a resident plaintiff, such as Hyde, must establish under subsection (a)(2) that his action was instituted in Tex *512 as “within the time provided by the laws of [Texas] for beginning the action,” and that includes Texas statutes of repose.

Hyde points out that subsection (c) of section 71.031 explicitly states that courts “shall apply the rules of substantive law that are appropriate under the facts of this case” 33 and contends that statutes of repose are substantive, rather than procedural, laws. Even assuming that is so in this context, subsection (c) directs application of substantive law “as appropriate under the facts of the case,” 34 and this general directive does not override the more specific references in subsections (a)(2) and (a)(3) to “the time provided by the laws.” 35 We conclude that even if the Roche defendants’ wrongful acts occurred in New Jersey or another state, in order to prevail in the Texas action, Hyde would nevertheless be required to establish that his Texas suit was filed within the time permitted under the Texas statute of repose for products liability actions, which is section 16.012(a) & (b) of the Texas Civil Practice and Remedies Code. 36

Hyde asserts that section 71.031 does not apply to his claims because its application is limited to “some assertion of a statutory claim subject to that specific provision,” citing Beatty v. Isle of Capri Casino, Inc., 37 which in turn relied on the Texas Supreme Court’s decision in Gutierrez v. Collins. 38 The Gutierrez decision construed the 1973 version of a predecessor statute, 39 former article 4678, 40 and held that its directive to apply the Lex loci delicti rule was “mandatory only in statutory causes of action, such as a suit brought under the Wrongful Death Statute” and that “in a common law cause of action ... the statute is merely permissive; that is, it authorizes one to bring suit in Texas, but does not dictate any conflict of laws rules to be applied by the court.” 41

The Texas Legislature has since made significant changes in the law. Currently, the wrongful death provisions are contained in subchapter A of chapter 71 of the Texas Civil Practices and Remedies Code, entitled “Wrongful Death.” 42 Chapter 71 *513 is entitled “Wrongful Death; Survival; Injuries Occurring Out of State.” 43 The survival statute is now codified in subchapter B, which is, appropriately, entitled “Survival.” 44 Section 71.031 is found in sub-chapter C, which is entitled “Death or Injury Caused by Act or Omission Out of State.” 45 The structure of Chapter 71 reflects that section 71.031 is independent of the wrongful death and survival statutes, and by its terms section 71.031 applies to all personal injury claims in which “the wrongful act, neglect, or default causing the death or injury takes place in a foreign state or country” regardless of whether the claims are statutory or common-law claims. 46

In 1999, the Supreme Court of Texas considered the legislative history of section 71.031, particularly the 1997 amendments, in Owens Coming v. Carter.* 47 Although the court was primarily focused on section 71.031(a)(3) and its application to asbestos plaintiffs who resided in Alabama but had filed suits in Texas courts, the court confirmed that subsections (a)(2) and (a)(3) of section 71.031 “applfyj to all personal injury and wrongful death actions.” 48 Section 71.031 is not limited in its application to wrongful death or survival claims. Accordingly, even if it were determined that the Roche defendants’ wrongful acts, neglect or default occurred in New Jersey, the Texas statute of repose is applicable to a suit maintained in Texas.

If Hyde were permitted to pursue his claims in New Jersey state court, it seems unlikely that the Texas statute of repose would be applied in light of the New Jersey Supreme Court’s refusal to apply Georgia’s statute of repose in Gantes. 49 In that case, the court conducted a choice-of-law analysis in order to determine whether Georgia’s 10-year statute of repose would apply to the plaintiffs products-liability claim. The plaintiffs decedent was killed in Georgia by a machine manufactured and sold in New Jersey, and the complaint was otherwise governed by Georgia substantive law. 50 Applying a governmental interests choice-of-law analysis, the New Jersey Supreme Court refused to apply Georgia’s statute of repose because of New Jersey’s “strong interest in encouraging the manufacture and distribution of safe products for the public” and “deterring the manufacture and distribution of unsafe products within the state.” 51 The court also found it “significant ... that New Jersey does not have a statute of repose that qualifies or limits the liability of manufacturers.” 52 The court concluded that New Jersey’s interests outweighed Georgia’s interest in applying Georgia’s statute of repose and compensating its resident plaintiffs.

The Roche defendants’ defense based on section 16.012 of the Texas Civil Practice and Remedies Code 53 is potentially stripped, just as the defense in Elbaor was potentially stripped. 54 We need not resolve Hyde’s open courts challenge to sec-

*514 tion 16.012 under the Texas constitution 55 or whether Hyde comes within the exception to the Texas statute of repose. 56 Because the Roche defendants have established legal prejudice, the district court abused its discretion in granting Hyde’s voluntary motion to dismiss without prejudice.

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We VACATE the district court’s order dismissing this case without prejudice and REMAND for proceedings consistent with this opinion.