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In Lewis C. Nelson & Sons, Inc. v. Lynx Iron Corp. (May 22, 2009) 09
C.D.O.S. 6220, the Fifth Appellate District of the Court of Appeal
reversed the trial court’s decision to grant defendant’s motion to
set aside plaintiff’s voluntary dismissal of its action.
Plaintiff was the general contractor on a school construction
project in Kern County. Lynx was a subcontractor who had a contract
with plaintiff under which Lynx would provide and install all
structural steel on the project for a contract price of $2.7
million. The owner of the project was the Delano Union School
District. During construction, disputes between plaintiff and
defendant arose. During February and March of 2007, both sides
corresponded on multiple occasions setting forth their respective
positions and proposals to resolve the disputes.
On April 13, 2007, plaintiff filed a complaint in Fresno County
against defendants for, among other things, breach of contract for
failing to perform work in accordance with the subcontract by
“causing delay” and therefore damaging plaintiff.
On May 7, 2007, before the complaint in the Fresno action was served
on defendants, the parties met to discuss settlement. At that
meeting, the parties signed a document that “listed and resolved,
item by item, the disputed change orders and backcharges.” This was
referred to as the “settlement agreement.” The document was
ambiguous, however; the court noted that “while the settlement
agreement provided for Lynx’s release of its claims against
plaintiff, it did not expressly state that plaintiff agreed to
release any of its claims against Lynx.”
Plaintiff retained new counsel in the Fresno action on July 12,
2007; defendants were served in the Fresno action on July 19, 2007.
Defendants “responded by filing the first of three motions seeking
to enforce the settlement and enter judgment in defendants’ favor
pursuant to section 664.6” on September 10, 2007. They argued that
the settlement agreement reached on May 7 “was intended to globally
resolve all of the parties’ claims.” The motion was set for hearing
on October 11, 2007. Plaintiff’s opposition was due September 27,
2007. Rather than file an opposition, however, on September 28,
2007, plaintiff filed a voluntary dismissal of the Fresno action
without prejudice. The clerk accepted and entered the dismissal on
September 28, 2007.
On September 20, 2007, “plaintiff filed essentially the same lawsuit
in Kern County Superior Court” and served defendants with that
complaint on October 5, 2007. Defendants again filed a motion to
enforce settlement, but in Kern County. The Kern County Court denied
the motion because it did not have jurisdiction over the matter when
the settlement occurred. “The trial court expressed that it
understood defendants’ frustration, and suggested that defendants
might attempt to return to Fresno.”
So, defendants did return to Fresno and on March 6, 2008 filed their
motion to vacate plaintiff’s voluntary dismissal. Plaintiff opposed
the motion because it was not a foregone conclusion that the motion
to enforce the settlement would have been granted. On tentative, the
trial court denied the motion because “a plaintiff’s right to
voluntarily dismiss an action is only deemed to be cut off when an
adverse dispositive ruling is a foregone conclusion.” However, after
oral argument the trial court ended up granting the motion and
vacating the dismissal on the grounds the dismissal was “purely a
tactical maneuver and that defendants were “likely” to have
prevailed on the motion to enforce settlement.
Once the dismissal was set aside, the defendants then made their
motion to enforce the settlement. The trial court found—as plaintiff
had argued—the settlement agreement to be ambiguous, but allowed
parol evidence that the parties intended a global settlement, which
plaintiff denied. It granted the motion and entered a dismissal with
prejudice. Plaintiff appealed on the grounds that the trial court
abused its discretion by vacating the Fresno dismissal and granting
the motion to enforce the settlement. The appellate court agreed
with the first, dispositive contention, and reversed.
The Court of Appeal held a plaintiff has a right to voluntarily
dismiss an action at any time before the commencement of trial
pursuant to Code of Civil Procedure section 581. “Commencement of
trial” is not limited to a trial in the strict sense, but may also
include dispositive motions that resolve the entire case, such as
demurrers and motions for summary judgment. For example, a
plaintiff’s right to voluntarily dismiss is cut off after a general
demurrer is sustained without leave to amend. The court said that
whether a plaintiff’s dismissal is timely “depends upon—and must
remain tethered to—a reasonable construction and application of the
statutory term ‘commencement of trial.’”
Most vexing to defendants, though, will be the court’s observation
that a “plaintiff’s subjective lack of good faith in seeking a
dismissal does not, by itself, terminate the statutory right to
dismiss.” Whether a voluntary dismissal is timely is based on an
“objective, not a subjective, standard.” Here, there was nothing in
the opinion of the court that would constitute a “commencement of
trial,” and therefore the plaintiff’s right to dismiss was not cut
off, and the trial court erred in setting aside the Fresno
dismissal.
Though the “settlement agreement” in this case happened very early
on, a plaintiff can dismiss a case after reaching a settlement on
the eve of trial if the “commencement of trial” has not occurred. A
plaintiff can also dismiss a case voluntarily without prejudice
after the filing of a summary judgment motion anytime before the
ruling on the motion. It’s worth noting that at least one court has
held that when a defendant makes a motion for summary judgment and
meets her burden under 437c, the burden then shifts to plaintiff to
demonstrate the existence of a triable issue. If plaintiff does not
file an opposition brief the court could find that judgment in
defendant’s favor was “a formality which [the plaintiff] could not
avoid by the stratagem of filing a last minute request for dismissal
without prejudice.”
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