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1 IN THE SUPREME COURT OF THE UNITED STATES

2 - - - - - - - - - - - - - - - -X

3 SEMTEK INTERNATIONAL :

4 INCORPORATED, :

5 Petitioner :

6 v. : No. 99-1551

7 LOCKHEED MARTIN CORPORATION :

8 - - - - - - - - - - - - - - - -X

9 Washington, D.C.

10 Tuesday, December 5, 2000

11 The above-entitled matter came on for oral

12 argument before the Supreme Court of the United States at

13 10:02 a.m.

14 APPEARANCES:

15 MICHAEL GOTTESMAN, ESQ., Washington, D.C.; on behalf of

16 The Petitioner.

17 WALTER E. DELLINGER, III, ESQ., Washington, D.C.; on

18 Behalf of the Respondent.

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1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 MICHAEL GOTTESMAN, ESQ.

4 On behalf of the Petitioner 3

5 ORAL ARGUMENT OF

6 WALTER E. DELLINGER, III, ESQ.

7 On behalf of the Respondent 25

8 REBUTTAL ARGUMENT OF

9 MICHAEL GOTTESMAN, ESQ.

10 On behalf of the Petitioner 50

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1 P R O C E E D I N G S

2 (10:02 a.m.)

3 CHIEF JUSTICE REHNQUIST: We'll hear argument

4 now in Number 99-1551, Semtek International Incorporated

5 v. Lockheed Martin Corporation.

6 Mr. Gottesman.

7 ORAL ARGUMENT OF MICHAEL GOTTESMAN

8 ON BEHALF OF THE PETITIONER

9 MR. GOTTESMAN: Mr. Chief Justice, and may it

10 please the Court:

11 This is a business tort action based entirely on

12 State law, filed in the Maryland State court. The suit

13 was filed within Maryland's time limits, but the Maryland

14 courts believed that they could not entertain the suit

15 because it was barred by operation of Rule 41(b) of the

16 Federal Rules of Civil Procedure. It was barred, they

17 believed, because a Federal district court in California

18 had dismissed an earlier assertion of the claim on the

19 ground that it was untimely under the California statute

20 of limitations and it declared that dismissal to be on the

21 merits.

22 Now, that earlier California case had been filed

23 by the plaintiffs in State court and, of course, we now

24 know it was untimely. If the case had remained in State

25 court and had been dismissed as untimely by the State

3

1 court, it is absolutely clear that under California law it

2 would not have precluded the suit in Maryland, and that's

3 because the California supreme court has stated repeatedly

4 that dismissals based on the statute of limitations do not

5 extinguish the substantive right. So far as California is

6 concerned --

7 QUESTION: Would it have been -- would the

8 California judgment have been binding on Maryland if the

9 same issues were involved, i.e., the statute of

10 limitations are about the same, and the question was when

11 the tolling period -- whether there was a tolling period

12 or something like that, and the California court had ruled

13 on the merits in the sense of -- on the issue, on the

14 issue of whether or not there was tolling?

15 MR. GOTTESMAN: Well --

16 QUESTION: Then I take it Maryland, a) would

17 have and b) perhaps must give credit to the earlier

18 judgment?

19 MR. GOTTESMAN: Well, certainly if it -- if

20 Maryland was borrowing the California statute of

21 limitations it would certainly have to give credit, but

22 even if it was relying --

23 QUESTION: No, suppose the statutes were exactly

24 parallel, and the issues were exactly parallel, but a

25 disputed issue of fact as to whether or not there had been

4

1 tolling?

2 MR. GOTTESMAN: Well, I think if it was a

3 disputed issue of fact it would probably be collaterally

4 estopped. There would be issue preclusion. But of course

5 Maryland might have a different definition of what

6 constitutes fraud, in which case the finding of fact in

7 California would not necessarily dispose of the comparable

8 question under the Maryland statute of limitations. There

9 was a close question here about exactly how much knowledge

10 do you have to have to be compelled to file.

11 QUESTION: So there is some instance in which

12 California's judgment has extraterritorial effect. That's

13 all I was trying to say.

14 MR. GOTTESMAN: Yes. It might have

15 issue-preclusive effect, but what the California supreme

16 court has been very clear about is that so far as your

17 right to assert the underlying -- you still possess your

18 underlying tort rights, this being a tort suit, even

19 though we have dismissed this suit on the basis of the

20 statute of limitations.

21 QUESTION: If it's an ordinary statute of

22 limitations; but suppose it was what was once called a

23 built-in statute of limitations, a proscription period

24 that bars not merely the remedy, but the very right.

25 MR. GOTTESMAN: Well, surely, if California had

5

1 a statute and it was construed to mean that it bars the

2 right, then yes, that would preclude you going to another

3 State. We would agree with that, Your Honor. But here,

4 California is clear that its general statutes of

5 limitations do not have that effect.

6 Now, as a result, when the defendant removed the

7 California case to the Federal court and immediately moved

8 to dismiss, so it's clear that it understood at the time

9 it was removing, we're going to move to dismiss this case

10 based on the statute of limitations, but by moving it from

11 the State court to the Federal court and getting the exact

12 same ruling, a ruling on California law, because, of

13 course, the Federal court was obliged to apply the State's

14 statute of limitations, by getting that ruling in a

15 Federal court, it is now claimed, and the Maryland courts

16 accepted the claim, that the rights which California's

17 statute of limitations preserve had been extinguished

18 because the statute of limitations was applied by the

19 Federal court.

20 QUESTION: Well, isn't the position of your

21 opponents here, Mr. Gottesman, that there is a Federal

22 rule as to res judicata issue preclusion? Do you disagree

23 with the idea that there is a Federal rule, or just

24 disagree with their version of the Federal rule?

25 MR. GOTTESMAN: Well, that's -- as this Court

6

1 has said in the O'Melveny & Myers case, it's -- you know,

2 it -- there's a little riddle attached to that. We -- I

3 mean, if Erie, for example, is a Federal rule, if

4 Dupasseur is a Federal rule, then yes, we would agree that

5 it is a Federal rule, but the Federal rule is that the

6 State's determination controls, so in some sense, clearly

7 it is a Federal rule, because this Court decides what law

8 applies.

9 QUESTION: Your opponents also argue, I think

10 with some merit, that Dupasseur has been superseded by the

11 Rules of Civil Procedure. What's your position on that?

12 MR. GOTTESMAN: Well, absolutely, that we regard

13 as the critical -- for us, the critical threshold question

14 is, we must persuade you that Rule 41(b) is not a rule of

15 preclusion, or that if it is, it violates the Rules

16 Enabling Act, because it is substantive, and so let me

17 turn to that. Rule 41(b) we submit for five reasons

18 should be not understood to be a rule of preclusion.

19 QUESTION: May I ask you, before you --

20 QUESTION: Before you say that, do you mean

21 issue preclusion or claims preclusion, or does that make a

22 difference?

23 MR. GOTTESMAN: Well, it doesn't --

24 QUESTION: I mean, can we say that it is a rule

25 of issue preclusion and you still prevail?

7

1 MR. GOTTESMAN: Well, I mean yes, we would

2 prevail if you said that in this case, but I don't think

3 that that's -- analytically it's not our position that it

4 is a rule of preclusion, but only issue preclusion. We --

5 QUESTION: It isn't termed as a rule of issue

6 preclusion, because Rule 41(b) says that unless it's a

7 jurisdictional thing it counts as a dismissal on the

8 merits, even though nothing may have been adjudicated, so

9 it may be that 41(b) would be applicable despite the

10 absence of any specific issue of adjudication.

11 MR. GOTTESMAN: Well, that's correct, Your

12 Honor, surely, but I understand the question to be, what

13 if an issue was adjudicated, would the party be barred

14 from relitigating that issue. I think the answer is, they

15 may well be barred, but it's not 41(b) that causes the

16 bar. They'll be barred because whether you apply Federal

17 or State law, issue preclusion rules generally are --

18 QUESTION: Well, you had five reasons and I

19 sidetracked you. I'm sorry.

20 MR. GOTTESMAN: Yes, five reasons. The first is

21 the text, and I'll come to that. Let me just rattle off

22 the five, and then I'll go back and talk about each of

23 them if time permits. The first is the text. It is not

24 by its terms a rule-preclusion provision.

25 Secondly, that's not inadvertent. As the

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1 advisory committee notes, and states repeatedly, the

2 Federal rules do not state rules of preclusion and it

3 would be improper if they attempted to do so, because such

4 rules are substantive.

5 The third is this Court's decisions since the

6 Federal rules were enacted. Now, this Court has not had a

7 preclusion case involving a State law diversity action

8 since the rules were enacted, but it's had a number of

9 Federal question cases, and so it's had an opportunity to

10 discuss what are the sources of the preclusion rule that

11 the Court applies in Federal question cases and it has

12 never suggested that the source is Rule 41(b).

13 Quite the contrary, the Court has repeatedly

14 said these rules of preclusion are judge-made and the

15 decisions of this Court that we have the power to

16 determine when exceptions to the general rule are

17 appropriate, et cetera, so that it's clear that this court

18 does not understand Rule 41(b) to be directing the answer

19 to rule preclusion questions.

20 The fourth, and I hope I have time to explain

21 this, is that the rule would be incongruous and in some

22 respects implausible in operation if it were a rule

23 preclusion law, and the fifth is that it would violate the

24 Rules Enabling Act and would undermine important questions

25 of sensitivity to State interests, these being things that

9

1 would cause the Court, when in doubt, to interpret it as

2 not being a rule of preclusion.

3 Let me start with the text, because the argument

4 on the other side is principally that the words of 41(b)

5 are a rule of preclusion. The words of 41(b) are that a

6 dismissal, unless it's in one of the exceptions, quote,

7 operates as a judgment on the merits, end quote.

8 Now, it doesn't say how a judgment on the merits

9 operates. Often, judgments on the merits do operate to be

10 rule -- to be claim-preclusive.

11 QUESTION: So what happens if we have a

12 litigated case, a litigated diversity case in the Federal

13 court and a judgment is entered, and then a question

14 arises as to the preclusive effect of that judgment, any

15 of the many different issues surrounding res judicata? Is

16 it established, or is -- are those matters adjudicated --

17 are they determined as a matter of State law or Federal

18 law?

19 MR. GOTTESMAN: Well, if they were State matters

20 that were adjudicated we would suggest it would be State

21 law. There is --

22 QUESTION: I'm asking -- it must arise fairly

23 often. A judgment's entered. It's a diversity case and

24 plaintiff wins, and now, later on, there is a question in

25 any -- in another Federal court to make it simple, as to

10

1 what the meaning of that litigated judgment is in terms of

2 res judicata. Does that second Federal judge look to the

3 State law, or is there some kind of Federal law on this?

4 MR. GOTTESMAN: Well, we believe that the judge

5 looks to State law. It may be a Federal rule that is

6 using the State law, but we believe that the question of

7 its --

8 QUESTION: Federal law renvoi, so to speak.

9 MR. GOTTESMAN: I'm sorry, Your Honor.

10 QUESTION: Federal law renvoi, so to speak.

11 Federal law looks to the sea --

12 MR. GOTTESMAN: Yes, Your Honor, good phrase for

13 it. Federal law renvoi is what Justice Scalia said, and I

14 think --

15 QUESTION: Yes, and if there is a precedent, I

16 mean, the obvious thing is they should be treated

17 similarly. That's your argument.

18 MR. GOTTESMAN: Right.

19 QUESTION: So I was just looking for a precedent

20 on that and I didn't find it.

21 MR. GOTTESMAN: I don't know of a case like

22 that, and part of -- one of the reasons is that in all 50

23 States if you had a case litigated on the true merits to a

24 judgment, everybody would regard that as claim-preclusive,

25 so the issue would never arise.

11

1 QUESTION: No, no, no, there are all kinds of --

2 you know, peripheral matters --

3 MR. GOTTESMAN: Right.

4 QUESTION: -- and my law clerk told me that

5 it's split on that, that there's a split in the circuits.

6 MR. GOTTESMAN: In the circuits, just as there

7 is a split on this.

8 QUESTION: Well, then we're really deciding that

9 when we decide this, I guess.

10 MR. GOTTESMAN: Well, the first step is to

11 decide whether Rule 41(b) is the controlling answer. If

12 it's not, you then have to decide, well, if it's not, what

13 is, and I -- that's the second part of our argument, and

14 our argument for what is, is that Dupasseur or Erie, we

15 think they are both actually grounded in exactly the same

16 principles.

17 QUESTION: Mr. Gottesman, at least 41(b) would

18 govern if you tried to bring the very same case back in

19 the district court in California, would you agree that

20 far, that this would operate as an adjudication on the

21 merits, it would be preclusive of any further claim? If

22 the very same tort claim were reinstituted it would at

23 least be preclusive of bringing it back to the very same

24 court.

25 MR. GOTTESMAN: We would agree that it would be

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1 preclusive, but not because 41(b) says so. 41(b) says

2 it's on the merits, and California would regard that as --

3 QUESTION: All right. Then let's switch to the

4 district court in Maryland now, the Federal district court

5 in Maryland, not, as we have here, the State court. Two

6 Federal courts. Would the district court in Maryland be

7 in the same situation as the State court in Maryland, or

8 would it look to the district court in California and copy

9 what that court would do?

10 MR. GOTTESMAN: We think it doesn't matter

11 whether the second suit is filed in the State court or a

12 Federal court, that either way preclusion is determined by

13 the law of the place where the original judgment was

14 rendered, because it's there that a ruling or judgment

15 gets its preclusive effect, and whatever court is

16 receiving that, or is considering that in a second case,

17 must refer back to the first case to determine that.

18 So as we understand what the right answer should

19 be, it would not matter whether the second case is in a

20 State court or a Federal court. The question is, is what

21 happened in that first court preclusive of the suit that's

22 being filed in the second court, and we have to answer

23 that by looking to the law that appropriately applies to

24 the first ruling.

25 QUESTION: Can this question be answered en

13

1 masse, or doesn't it depend upon what the dismissal was

2 for? Suppose, for example, the Federal case was dismissed

3 not on statute of limitations grounds, this removed case,

4 this diversity case, but because the plaintiff was

5 recalcitrant and wouldn't comply with discovery requests,

6 and the district judge gives lots of warnings and he said

7 finally, plaintiff, I'm dismissing your case as a sanction

8 under Rule 37 for your recalcitrance.

9 MR. GOTTESMAN: Well, we think in that case the

10 dismissal is not for a reason of State law. In the case

11 that Your Honor is describing, the dismissal is for

12 behavior in front of a Federal court, a matter which the

13 Federal court polices as a matter of Federal law. If

14 that's what causes the dismissal, then we would agree that

15 there is certainly at least a strong argument and maybe a

16 compelling argument that a Federal rule of preclusion

17 would apply to that, but the Federal rule of preclusion

18 still would not be 41(b). The Federal rule of preclusion

19 would be something independent of that.

20 But -- in other words, to us it's not just that

21 it's a diversity case that's important here. It's a

22 diversity case that was dismissed for a reason of State

23 law. That being so, we need to know whether that reason

24 of State law precludes, and California says no, it does

25 not.

14

1 QUESTION: Well, what if a case is dismissed on

2 the grounds of frivolousness, and that's an application of

3 State law. It's a diversity case, but the Federal rules

4 provide for dismissal of something on the grounds it's

5 frivolous. Which one is that?

6 MR. GOTTESMAN: If the frivolous -- if it is a

7 penalty sanction, if adjudication is simply, you have

8 obviously not stated a claim --

9 QUESTION: Yes.

10 MR. GOTTESMAN: -- under State law, then because

11 it is under State law it is the State preclusion rule that

12 would apply. If what the court is saying is, you are

13 being vexatious and we want to punish you by the dismissal

14 of your lawsuit, that might be Federal, because then the

15 animus for the ruling is not state law but something about

16 the Federal court and the Federal court's --

17 QUESTION: No, where that's likely to come up, I

18 think would be, you could imagine a Federal court

19 dismissing on the ground that this is no legal issue, that

20 the State has a rule that if it was a pro se litigant you

21 get two or three chances. Then what happens?

22 MR. GOTTESMAN: It gets harder, Your Honor.

23 (Laughter.)

24 MR. GOTTESMAN: I grant that it's harder, but I

25 can identify what the principle is. It's just the

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1 application of it to all these cases. Each one of them is

2 an interesting question. The principle is that if this is

3 a decision that -- if the dismissal by the Federal court

4 is rooted in State law, then State law controls the

5 preclusive effect of that dismissal.

6 QUESTION: But it wouldn't be --

7 MR. GOTTESMAN: Once you move -- and that's our

8 case. Once you move me away from that and start

9 introducing Federal elements that induce the dismissal,

10 the case becomes more complicated.

11 MR. GOTTESMAN: Well, isn't that example that

12 Justice Breyer just gave, it's a Federal procedural policy

13 that isn't going to go very -- won't be very effective if

14 the recalcitrant litigant or the frivolous litigant can

15 bring the very same case somewhere else, Federal or State,

16 so don't you have to look at the particular reason for the

17 dismissal, and you can't say it's always State law, it's

18 always Federal law, but at least -- well, let me give you

19 another concrete example.

20 Suppose there's a whole claim, and it gets

21 adjudicated, there is a counterclaim that defendant failed

22 to bring. Federal courts have a compulsory counterclaim

23 rule. Defendant then goes in as plaintiff to a State

24 court, brings what would have been a compulsory

25 counterclaim in the Federal court, in the State court

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1 where it's not a compulsory counterclaim. Would the State

2 court then be obliged to defer to the Federal dismissal,

3 what a Federal court would have done, that's --

4 MR. GOTTESMAN: That is, I think, a difficult

5 middle ground case, and it was actually addressed by the

6 advisory committee to the rules, not in the case of Rule

7 13, which is what Your Honor is referring to. The same

8 issue arises under Rule 23(b)(3), the class action

9 provision. What if people don't opt out of a (b)(3) class?

10 Are they then precluded -- if they lose, if the class

11 loses, are they precluded from bringing their own lawsuit

12 in another court?

13 When Rule 23(b)(3) and (c) were drafted the

14 advisory committee said, we cannot state in the rules that

15 your failure to opt out means you are bound because we are

16 not allowed, by the Rules Enabling Act, to declare what

17 the res judicata effect of that is, so all we say in the

18 rules is, if you don't opt out of the class you will be,

19 quote, included in the judgment, and it will be then for

20 those who determine what the preclusion rules are to

21 determine what that means, and we think they're likely to

22 say that that means that they are preclusive, but that's

23 not for us to say.

24 QUESTION: Mr. Gottesman, I hope you can spend

25 some time on what happens if we agree with you that Rule

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1 41(b) does not answer the question. What does answer the

2 question, then?

3 MR. GOTTESMAN: Yes. We think, Your Honor, that

4 the question is then answered by either Dupasseur and that

5 line of cases which, if Rule 41(b) did not overturn that,

6 which is what our first position is, then that is still

7 the law of this Court.

8 Now, of course, one more thing has intervened

9 since Dupasseur, and that is this Court's decision in

10 Erie, and this Court's decision in Erie would

11 independently suggest that if this is, quote, substantive

12 in the sense that Erie makes the distinction, that State

13 law would control, and it would be difficult to find

14 anything that was more substantive than this in the two

15 senses, the twin aims of Erie.

16 First of all, California law says that the fact

17 that you filed untimely here does not extinguish your

18 substantive right. You still have it, if you can find

19 somebody who will hear it. The right is still alive, but

20 the Federal court is -- if it invokes a rule that would

21 say, ah, but your right is not alive if it was issued by a

22 Federal court you're getting exactly the opposite outcome

23 on whether there exists a tort right, depending on --

24 QUESTION: Has the California court ever given

25 any explanation of this doctrine, that it's a State law

18

1 question, you're barred under State law by the statute of

2 limitations, but the right isn't extinguished? I mean,

3 have they ever applied that to allow a plaintiff to

4 prevail?

5 MR. GOTTESMAN: Yes, they have, Your Honor.

6 There are three different ways that rule plays out in

7 California. Two of them are within California. You can

8 -- if you -- for example, if you are dismissed because

9 your complaint did not state a claim, because you failed,

10 for example, to allege one of the elements, even on that

11 very claim you can file it again in a California court if

12 you can, you know, write a complaint that does state a

13 claim.

14 Secondly, even if you are foreclosed from

15 pursuing that claim in California, you can take the same

16 set of facts and say, well, we first alleged it as a tort.

17 That was untimely, but those same facts actually add up to

18 a breach of contract, and California will allow you to

19 refile and pursue the claim as a contract claim.

20 But thirdly, the California court has expressly

21 said, and this is the Western Coal case, which is cited in

22 our brief at page 48, that even if you are precluded from

23 coming back to the courts in California you are free to go

24 to a sister State if they are willing to hear the claim.

25 Now, Your Honor's question is why? Why does

19

1 California do that?

2 QUESTION: No, I wouldn't ask any question like

3 that.

4 (Laughter.)

5 MR. GOTTESMAN: Okay. Well, then I will --

6 QUESTION: Mr. Gottesman, I would have thought

7 that the rule, Rule 41, does appear expressly to cover

8 this situation. You say no, it doesn't. If it doesn't,

9 then it seems that we would have to look to Erie and to

10 Hannah.

11 MR. GOTTESMAN: Right.

12 QUESTION: And Hannah seems to say that a

13 Federal diversity court should apply a Federal rule of

14 civil procedure to the case before it whenever the rule

15 covers the point in dispute and isn't unlawful under the

16 Rules Enabling Act or the Constitution.

17 So you would then have to persuade us that the

18 Rules Enabling Act makes this rule unlawful, as applied in

19 this situation.

20 MR. GOTTESMAN: If this rule is a rule of

21 preclusion, then --

22 QUESTION: So you have to persuade us, 1) the

23 rule doesn't cover it, if it does, it's unlawful.

24 MR. GOTTESMAN: Correct, or that, 3) that we are

25 in fact covered under the exception in the rule, but that

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1 argument I'd prefer to leave to the briefs.

2 Yes, that is why Rule 41(b) has to be the

3 threshold point. Now, the reason -- in explaining why it

4 does -- it is not itself a rule of preclusion, even the

5 respondent's brief at page 5 recognizes that it's not.

6 What their brief says there is that Rule 41(b) addresses

7 one of the elements of claim preclusion, and when --

8 QUESTION: What about Justice --

9 MR. GOTTESMAN: I'm sorry.

10 QUESTION: I just don't want you to lose, before

11 you sit down, Justice O'Connor's argument that she just

12 asked about, why would it be a violation of Erie? That

13 is, another way of looking at this is, what you've all

14 described, you've described what California does that

15 isn't a judgment on the merits, so the district court here

16 used the wrong word. It made a mistake. It wasn't

17 dismissing it on the merits, or it shouldn't have, but it

18 did, so your remedy was to appeal from that.

19 MR. GOTTESMAN: Well --

20 QUESTION: If it says on the merits, it means on

21 the merits, and what you all want is something that wasn't

22 on the merits.

23 MR. GOTTESMAN: Well, but that's not the --

24 again, the -- California has law in this, too. It is not

25 what the judgment says that --

21

1 QUESTION: Yes, but if -- I'm just trying to get

2 you to respond to the question of, assuming you lost on

3 the point about what it means, then would this in fact

4 violate Erie, et cetera?

5 MR. GOTTESMAN: Well, it would -- I mean, I

6 think on the merits in Rule 41(b) it has a fixed meaning.

7 I don't think it's a meaning that is variable with the

8 nature of the case. It would make Rule 41(b) quite

9 unusual, because the consistent rulings of this Court have

10 been that the Federal rules --

11 QUESTION: Mr. Gottesman, let me pursue one more

12 thing that I think bears on what I'm interested in and

13 perhaps what Justice Breyer's asking about.

14 After the Federal district court in California

15 proposed to enter the order it did, did your client then

16 ask for an amendment of that judgment or explain the

17 problem, or ask the court, look, here's the problem, we

18 want to go to Maryland, would you clarify this and make

19 sure that we're not bound or prevented from going to

20 Maryland?

21 It seemed to me that your client had the first

22 opportunity to do that and perhaps just bypassed it, and

23 so there's no inequity here if you're bound.

24 MR. GOTTESMAN: Well, surely they had the

25 opportunity. We don't know whether they would have

22

1 prevailed or not on that, and if they -- if Rule 41(b) is

2 a rule of preclusion their failure to avail themselves of

3 that opportunity obviously will be fatal, but if we're

4 right that it is not a rule of preclusion, then their

5 failure is irrelevant. The --

6 QUESTION: Didn't you go back to the district

7 court at some point --

8 MR. GOTTESMAN: Yes.

9 QUESTION: -- after the litigation in Maryland

10 and the district court refused to say --

11 MR. GOTTESMAN: Yes. It was too late. The

12 Federal district court said, sorry, you're too late. It

13 said a lot of things that suggested that she certainly had

14 not intended to --

15 QUESTION: I don't want to use up your rebuttal

16 time, but Mr. Dellinger's brief says, and he's going to

17 get up here and say they're running away from Rule 41.

18 They're running away. Why don't you just say, Rule 41 is

19 claim preclusion and this claim is different, end of

20 story?

21 MR. GOTTESMAN: Well, that actually turns on the

22 question --

23 QUESTION: I missed it. It is issue preclusion.

24 It is issue preclusion, and this issue is different.

25 MR. GOTTESMAN: Well, certainly this -- if all

23

1 41(b) is is issue preclusion, then yes, this issue is

2 different, because the issue here is, is it timely under

3 Maryland's statute of limitations.

4 QUESTION: Yes, but that -- isn't that a pretty

5 tough argument, because the text of the rule says,

6 operates as an adjudication on the merits --

7 MR. GOTTESMAN: Right.

8 QUESTION: -- which sounds like issue-preclusion

9 language, and I guess that -- which leads to my question.

10 MR. GOTTESMAN: Claim preclusion.

11 QUESTION: Is -- yeah. Assuming that we accept

12 your position, what function does the phrase, operates as

13 adjudication of the merits, perform in a case like this?

14 MR. GOTTESMAN: Well, first of all it is there

15 because it informs whatever the rule preclusion rule is.

16 When 41(b) was adopted there were two preclusion rules

17 announced by this Court, one for Federal question cases,

18 one for State cases. The Federal question rule was that

19 if it was, quote, on the merits it is precluded unless we

20 find an exception.

21 The State rule was, we look to the State law to

22 determine what the rule preclusion is, so obviously 41(b)

23 plays an important role. Wherever the operative

24 preclusion rule says that on the merits dictates claim

25 preclusion, then it will have that effect, but it's having

24

1 that effect not because of Rule 41(b) but because of

2 whatever the operative preclusion rule is.

3 I would like to reserve the remainder of my

4 time.

5 QUESTION: Very well, Mr. Gottesman.

6 Mr. Dellinger, we'll hear from you.

7 ORAL ARGUMENT OF WALTER E. DELLINGER, III

8 ON BEHALF OF THE RESPONDENT

9 MR. DELLINGER: Thank you, Mr. Chief Justice,

10 and may it please the Court:

11 Mr. Gottesman has described what seems to be an

12 utterly unworkable system in which we have a State court

13 that is in the process of recognizing an earlier Federal

14 judgment begin the process of deciding what the Federal

15 district court should have done.

16 Rule 41 serves an extremely important function

17 in the structure of the Federal Rules of Civil Procedure.

18 It reflects an understanding by the Advisory Committee on

19 the Federal Rules that it is very important to determine

20 at the time a Federal civil action is dismissed whether

21 that judgment of dismissal brings an end to litigation

22 arising between those parties and their privities on the

23 same set of facts. It gives you that answer so that

24 everyone knows whether this is an adjudication on the

25 merits. It is not, as Mr. Gottesman suggests at some

25

1 point, a complete rule of preclusion.

2 QUESTION: But the question is, on the merits of

3 what? You want to say, on the merits of the suit, and the

4 rule doesn't say that. It's on the merits of what was

5 presented to the court, and this sounds to me like issue

6 preclusion.

7 Now, it may be that if you're dismissed on the

8 merits for failing to comply with the rules of the court

9 there's a strong Federal policy there, but here there's no

10 Federal policy.

11 MR. DELLINGER: With all due respect, Justice

12 Kennedy, two responses. One, I do not think that Rule 41

13 can be read to be merely issue-preclusive rather than

14 precluding the claim and, secondly, even if it were so

15 read, it would lead to very unpalatable consequences on

16 the first question.

17 This Court, I think, has passed this point in

18 Plout, where you specifically held that Congress violated

19 Article III of the Constitution when it tried to reopen

20 and revive Federal cases that had been adjudicated and

21 determined to be found outside the statute of limitations

22 and Congress tried to retroactively extend the statute of

23 limitations, and the parties seeking to defend the act of

24 Congress said, well, that's just statute of limitations,

25 and this Court says in Plout that --

26

1 QUESTION: But that was because they were trying

2 to reopen the judgment on the same grounds that the

3 judgment was granted.

4 MR. DELLINGER: I understand that, and I will

5 come to that point. I just wanted to make it clear that

6 there is -- there's clear -- that what the Court does in

7 Plout is to analogize a statute-of-limitations dismissal

8 to a failure to prove substantive liability and a failure

9 to prosecute. That is a judgment on the merits.

10 The Court said, to be precise, the rules of

11 finality treat a dismissal on statute-of-limitation

12 grounds the same way they treat a dismissal for failure to

13 state a claim, for failure to prove substantive liability,

14 or for failure to prosecute, as a judgment on the merits,

15 citing for that proposition Federal Rule of Civil

16 Procedure 41(b). That wasn't dicta. That was part and

17 parcel of why it violated Article III. 41(b) stands --

18 QUESTION: Mr. Dellinger, I don't think your

19 colleague contests that. I think he agrees that 41(b),

20 when it says, on the merits, does preclude another Federal

21 court, and any State court, where the question is a

22 Federal question and, therefore, where it is up to the

23 Federal Government to say what an on-the merits -- what

24 effect an on-the-merits decision has.

25 But I think what he says is, it's up to the

27

1 State courts to decide what an effect an on-the-merits

2 decision has with regard to State causes of action. Now,

3 is there some reason why that can't be true?

4 MR. DELLINGER: Yes, and since there are two

5 issues on the table, 1) that they should win because this

6 should be only claim-preclusive, which is what Justice

7 Kennedy asked, and your question, they should win because

8 this is a diversity case.

9 QUESTION: I'm talking the whole hog, right.

10 MR. DELLINGER: On the whole -- and if I could

11 just make the most critical point to Justice Kennedy, and

12 then I'll return, which is that the structure of Rule

13 41(b) says that all dismissals, involuntary dismissals are

14 on the merits except those for lack of jurisdiction, lack

15 of venue, and failure to join an indispensable party.

16 Those three are claim-preclusive. I'm sorry. Those three

17 are issue-preclusive, and because we know that the three

18 exceptions are issue-preclusive, we therefore know that

19 the basic part of the rule, not the exception,

20 extinguishes the claims, and I think Plout makes no sense

21 otherwise.

22 With respect to the fact that -- the notion that

23 Rule 41(b) should only operate where the first case is a

24 Federal question case and not a diversity case --

25 QUESTION: No, I'm not saying it should not only

28

1 operate. It operates all the time. But what is the

2 effect of being an adjudication on the merits is only

3 determined by 41(b) in Federal cases, because that is a

4 Federal determination of what the effect of an on-the-

5 merits decision is in a Federal case, and what Mr.

6 Gottesman is saying is that it's up to the States what the

7 effect of an on-the-merits decision is in a non-Federal

8 case.

9 MR. DELLINGER: Well, let's be precise about

10 this. This is a Federal case in the sense it is in

11 Federal court. The dismissal is a judgment of the United

12 States district court. It is --

13 QUESTION: Federal cause of action is what I

14 mean by Federal --

15 MR. DELLINGER: In only Federal causes of

16 action.

17 There has never been a holding that a Federal

18 rule whose text applies to all civil actions applies only

19 in cases in which there is a Federal question rather than

20 a diversity basis for --

21 QUESTION: It would be quite contrary to Hannah

22 to say so, wouldn't it?

23 MR. DELLINGER: It would be contrary to Hannah

24 to say so, because Hannah, the plain text of the rule

25 covers both of these.

29

1 Also, it's important to note how difficult it

2 would be to follow the notion that Rule 41 provides the

3 preclusive effect only in Federal question matters because

4 often, increasingly these days, a lawsuit will encompass

5 both Federal and pendant or supplemental State claims, so

6 that there's simply no indication in the rule that when a

7 Federal court reaches a judgment of dismissal in a case

8 involving Federal questions, in a case involving State law

9 claims, or in a case involving mixed claims, that you

10 don't judge the preclusive effect by looking at Rule 41

11 and how it operates as a judgment of dismissal in the

12 Federal courts.

13 Whether it is a Federal question case or a

14 diversity case, the Federal courts have a strong interest

15 in establishing at the time of dismissal, whether this

16 does extinguish the claim or not, and their suggestion

17 that, you know, why would the Federal courts have an

18 interest -- you may be asking whether the Federal courts

19 have an interest when it's a State law cause of action.

20 I'm just saying that that's the -- let me explain why the

21 Federal courts do have an interest.

22 They would say, look, this is a State law cause

23 of action, and the next lawsuit is going to be filed

24 outside the Federal court system in State courts, but it's

25 important to recognize that the Federal courts do have a

30

1 very vital interest in not allowing people casual access

2 to try their cases in Federal court and not be bound by

3 the results.

4 QUESTION: But access to what? This is my

5 problem, Mr. Dellinger, with your position. This is a

6 case that was begun in California State court -- you're

7 relying on Erie and no forum-shopping -- begun in a

8 California State court, removed by the defendant to a

9 California Federal court, and then the case is begun again

10 in Maryland, which has a longer statute of limitations.

11 But for the removal of that diversity case to

12 the Federal court, this case, when it's reinstated in

13 Maryland, would have been heard under the 3-year statute

14 of limitations and one thing we know for sure, there is no

15 substantive policy that either California or the Federal

16 court there is putting forward.

17 They're saying, we don't want to clog our courts

18 with a stale claim, a claim we regard as stale. If

19 Maryland wants to have its courts occupied by old claims,

20 it's none of our business. We don't care what they --

21 this is a procedural policy in that sense, what cases do

22 we want our courts to be dealing with. That kind of

23 statute of limitations, as opposed to one that bars the

24 right, is one that's directed to how long we want to open

25 our court door. Why should the Federal court or

31

1 California court care if another State wants to make it

2 longer?

3 MR. DELLINGER: I agree with the question that

4 California doesn't have much of an interest here, and if

5 you think of this, if we get to it in Erie terms, and I

6 think because this is a Hannah case with a Federal rule

7 squarely on point we never get to Erie, but if you think

8 of it as an Erie case, you're exactly right that

9 California doesn't have an interest.

10 California has determined that the substantive

11 policy should be that there will be a cause of action for

12 business torts. California has balanced the interest

13 between keeping that alive and the interest of repose in

14 favor of settling at 2 years for how long that should be

15 tried in California.

16 Mr. Gottesman infers from California decisions

17 that California would not preclude a suit brought in

18 Maryland.

19 QUESTION: But that's nothing, I mean, at all

20 unusual conjecture. It is normally the rule that a

21 statute of limitations that's merely a procedural one you

22 don't -- when you rule out the door you're ruling for your

23 forum and not for some other State.

24 MR. DELLINGER: My point is this. California

25 has no coherent interest. It may be indifferent to

32

1 whether the suit is brought in Maryland, but we're not

2 frustrating any interest of California's in deciding that

3 we're going to consider the dismissal conclusive, whereas

4 the Federal courts have a real interest in having Federal

5 lawsuits that are tried there absolutely conclude an issue

6 so that parties don't think --

7 QUESTION: Well, why? Why?

8 MR. DELLINGER: Because --

9 QUESTION: Yes.

10 QUESTION: No, I mean, I'm just going to say I'm

11 surprised, I thought your answer was going to be, and tell

12 -- perhaps it isn't -- that California has no interest in

13 preventing them from suing in Maryland, Maryland has no

14 interest, and the Federal courts have no interest, and

15 what they should have done is just say, don't dismiss it

16 on the merits.

17 MR. DELLINGER: Yes, right.

18 QUESTION: That's all, and they didn't say it. I

19 thought that -- now you didn't say that, so I'm sort of

20 interested.

21 MR. DELLINGER: Yes.

22 QUESTION: I mean, I thought your point was, you

23 know, a dismissal on the merits is a dismissal on the

24 merits --

25 MR. DELLINGER: It could well --

33

1 QUESTION: -- and maybe they're right, therefore

2 the thing to do is say, judge -- you see, that's --

3 MR. DELLINGER: No, no, that's exactly where I'm

4 going, after noting --

5 QUESTION: Can I throw a question in, just one

6 here? Does the form of the judgment make a difference to

7 you? In other words, if -- supposing that if the judge

8 had said, if I dismiss this, this won't hurt you because

9 you can sue in Maryland, but then he entered a judgment

10 which did not get outside the rule, would the rule trump

11 his -- would the rule require that they could not proceed

12 in Maryland even though he thought they could?

13 MR. DELLINGER: Not if you have an indication

14 that the judge is otherwise specified --

15 QUESTION: He enters the same judgment he enters

16 in this case.

17 MR. DELLINGER: I would think that that is a

18 bar. The only issue would be if the judge has expressly

19 stated, outside the four corners of the page of the

20 judgment, that he intends it not to be a dismissal, you

21 know, on the merits --

22 QUESTION: So it's a matter of subjective intent

23 of the judgment, of the judge who enters the judgment?

24 MR. DELLINGER: Well, I think that's a

25 possibility, but I would go with --

34

1 QUESTION: How could you, if you're relying on

2 41(b) and 41(b) says, unless the court in its order for

3 dismissal otherwise specifies --

4 MR. DELLINGER: Otherwise specifies would

5 suggest that you --

6 QUESTION: It would have to be within the four

7 corners of the order.

8 MR. DELLINGER: But you ought to stay within

9 the four corners of the order, and if the judge doesn't

10 specify otherwise, it is claim-preclusive, and there is an

11 opportunity at that moment --

12 QUESTION: Oh, excuse me. Why does it have to

13 be claim -- I would like to come back to your assertion

14 that the dismissal on the merits cannot mean one thing for

15 purposes of a Federal claim and something else for

16 purposes of a State claim. We've heard that California

17 allows you to rebring the same claim that has been

18 dismissed on the merits because you've left out one of the

19 elements of the claim. You can bring back the same claim

20 involving the same transaction. You put in the missing

21 elements, and you're allowed to proceed, even though there

22 has been a dismissal on the merits.

23 Now, that's not what a dismissal on the merits

24 means in the Federal system. It means something quite

25 different. Now, what if you have a dismissal in a Federal

35

1 court in California on the merits? Does that mean that

2 that suit cannot be rebrought even in a California State

3 court, when you put in an additional element that should

4 have been put in in the original complaint?

5 MR. DELLINGER: Yes.

6 QUESTION: It does?

7 MR. DELLINGER: It does. It does mean that, and

8 that's --

9 QUESTION: So you're dictating the --

10 California's own res judicata effect as to what should be

11 the effect of a judgment?

12 MR. DELLINGER: That is right, because the

13 Federal court system sets its own rule for when a

14 dismissal is on the merits and precludes further

15 litigation of that claim. The Federal interest in that --

16 QUESTION: But isn't -- again, isn't your answer

17 the same as before? You say, of course the Federal court

18 here should have allowed another suit to be brought in

19 California. That's why it says, unless the court

20 otherwise specifies. The lawyer's supposed to say, judge,

21 California doesn't dismiss this on the merits. What

22 California does is just bar you under the statute of

23 limitation. That's why those words are in the rule.

24 MR. DELLINGER: Let me go --

25 QUESTION: Now, is that right, or --

36

1 MR. DELLINGER: Yes.

2 QUESTION: Don't say I'm right if I'm not,

3 please.

4 MR. DELLINGER: Let me go directly to that

5 point. Almost all of their arguments are in fact

6 arguments that Judge Collins, the Federal district judge,

7 got it wrong. To the extent that they believe that she

8 got it wrong -- and there are a number of different

9 arguments you could make.

10 You could make the argument that Justice Scalia

11 is making that Judge Collins should have thought, and

12 counsel for Semtek should have argued to her, don't make

13 this dismissal a dismissal on the merits. Specify

14 otherwise, for any one of a number of reasons, either

15 because we think that it -- since this is a State law

16 matter, State law doesn't make it preclusive. They didn't

17 do that. They did not, after the dismissal comes down,

18 and not only under Rule 41 -- they didn't file under Rule

19 59(e) --

20 QUESTION: And you're saying because they

21 didn't, what would not have been preclusive under State

22 law has now been made preclusive by this Federal judgment,

23 and that brings you right up against the proposition that

24 Rule 41(b) cannot make any substantive change.

25 I think that's a massive substantive change, to

37

1 say that a -- an adjudication that under State law would

2 not prevent further State litigation, now, because a

3 Federal judge has said this is on the merits will preclude

4 further State litigation. Why isn't that a substantive

5 alteration, which the Federal rules should not be able to

6 produce?

7 MR. DELLINGER: That's because what is at issue

8 here is not a determination of what the law of business

9 torts ought to be in California. What is at issue here is

10 not even how long one has to sue.

11 What is at issue here is the effect of a

12 judgment of a case that has been adjudicated in a Federal

13 court, where the Federal Rules of Civil Procedure set up a

14 clear system, a signalling system for saying, all

15 voluntary dismissals are not on the merits, are not claim-

16 preclusive, all involuntary dismissals are, that's a

17 default rule unless you otherwise specify.

18 Now, there may be many reasons why you would

19 think, Justice Scalia, that a Federal judge sitting in

20 diversity ought to make a decision dismissing the case on

21 statute of limitation grounds or any other grounds not

22 claim-preclusive, that the judge ought to specify

23 otherwise, and Rule 41(b) provides for that, so that

24 whatever the reasons are, a Federal court sitting in

25 diversity and a party before that court can say, you

38

1 should not make this claim-preclusive. One of the factors

2 you ought to take into account is the existence of a

3 contrary California law on claim preclusion.

4 And if the judge insists on not otherwise

5 specifying, or in this case making it absolutely clear, by

6 saying this dismissal is in its entirety with prejudice

7 and on the merits, you can seek relief under Rule 59 from

8 the form of that judgment and you can go to the Ninth

9 Circuit Court of Appeals, where they went to contest the

10 merits of the statute of limitations claim. They didn't

11 do that. They didn't take it to the Ninth Circuit. They

12 didn't seek certiorari.

13 If that judgment was wrong, it is wrong in a way

14 that is still clearly preclusive under res judicata. As

15 this Court said --

16 QUESTION: What is the Federal interest that in

17 effect supports your entire argument? Why are we going

18 through this? You've gotten right up to the line a couple

19 of times to explain what the Federal interest is which

20 differs from the State interest, but you've never gotten

21 across the line. What is it?

22 MR. DELLINGER: It seems to me, Justice Souter,

23 that there are two Federal interests. One is in having a

24 clear determination at the time a suit is dismissed in

25 Federal court whether that is an adjudication on the

39

1 merits or not.

2 QUESTION: You would have a clear determination

3 if you simply followed the California rule. You don't

4 need this for a clear determination.

5 MR. DELLINGER: No, it is not --

6 QUESTION: The only time you need it is if the

7 State doesn't have a rule.

8 MR. DELLINGER: Well, it is not clear to me that

9 the State of California has a clear rule, but let me put

10 that to one side.

11 QUESTION: All right, but we're assuming it

12 does. I mean, that's the premise on which we're taking

13 this case.

14 MR. DELLINGER: If you assume for a moment that

15 it does, there's also a Federal interest in not providing

16 moot court opportunities for litigants. This is --

17 QUESTION: In other words, you say, we don't

18 want the Federal court used twice. There is a Federal

19 system, and if you've gone into a Federal court once, you

20 shouldn't be going into a Federal court twice, but why

21 does that preclude you from going into a State court?

22 MR. DELLINGER: Because it would certainly lead

23 to a too-casual resort to Federal court if the judgment

24 was not going to be preclusive. Let me give you a --

25 QUESTION: The point --

40

1 QUESTION: But the plaintiff didn't resort --

2 QUESTION: Exactly.

3 QUESTION: This was removed by the defendant,

4 and that's why this is -- the position you're taking,

5 frankly, is so troublesome, because it's the defendant

6 who's forum-shopping, and there is a reason for -- you

7 hesitated, why does California say, we don't care if

8 Maryland wants to entertain it longer.

9 It's kind of a sisterly or brotherly attitude

10 toward your fellow State courts. One says, we have a

11 short time. You have to come into our court, say, in 1

12 year. Another one is more laid back and says, you can

13 come any time within 3 years, so the first State says,

14 we're not going to clog our courts with this business. If

15 someone else want to entertain it longer, it doesn't -- no

16 skin off our teeth.

17 MR. DELLINGER: You raise a State interest.

18 Justice Souter raises the Federal interest. Let me

19 preface my responses by saying that I believe the Rules

20 Advisory Committee has settled this debate by the way it

21 has written the clear language of --

22 QUESTION: Well --

23 MR. DELLINGER: -- Rule 41, but I'm happy to

24 engage in it, if I --

25 QUESTION: Mr. Dellinger, to what extent should

41

1 we be guided by an opinion of this Court called Walker v.

2 Armco Steel?

3 Now, that case dealt with Rule 3 of the Federal

4 rules, and Rule 3 says an action is commenced by filing a

5 complaint, and this Court said, it does not determine when

6 an action is commenced for the purpose of triggering a

7 State statute of limitations in a diversity case, and the

8 Court in Walker said that the rule did not displace the

9 State's policy determinations underlying its statute of

10 limitations.

11 It seemed as clear a rule in its language as

12 Rule 41, and in -- was a diversity case, and invokes the

13 same concerns, I think, and yet we said, okay, there we're

14 not relying on Rule 3's text. Does that have a bearing on

15 this?

16 MR. DELLINGER: It does, but we still win. It

17 does in the following sense. I think that the best

18 argument that you can make for saying that a Federal court

19 ought to apply nonpreclusive, ought to reach a

20 nonpreclusive judgment when the State rule so provides.

21 The best rule, the best argument for that would be an

22 argument that follows from Walker and Justice Ginsburg's

23 opinion in Gasperini, where those cases take the position

24 that the Federal rules are to be construed, although under

25 Hannah they clearly prevail, they're to be construed with

42

1 sensitivity to State interest. So that you could imagine

2 that the proper thing for a Federal court to do sitting in

3 diversity is to say, well, look, it first looks like

4 there's a direct conflict between 41(b) and State law,

5 because 41(b) says these are all dismissals on the merits,

6 but State law is to the contrary, and I have this

7 otherwise-specifies clause, so I can make an exception, so

8 I could in the sense of Gasperini make an exception where

9 there's a contrary State law.

10 QUESTION: No, I don't think so, not -- because

11 Gasperini was talking about the way Federal judges

12 uniformly will operate. Rule 41(b) is set up, unless that

13 district judge otherwise so directs. That's the problem

14 with -- your out is, this district judge should have

15 otherwise specified, go up to the Ninth Circuit.

16 MR. DELLINGER: Yes.

17 QUESTION: There's a big difference between

18 leaving it in the hands of each individual district judge

19 and saying, as in the case of Rule 3, when this Court

20 interpreted that rule, not for one district judge but for

21 all them it says, your clock doesn't start ticking until

22 you actually serve the summons and complaint because we

23 want to honor State policies.

24 MR. DELLINGER: I appreciate the distinction,

25 but it's important to remember that any argument you have

43

1 with what Judge Collins should have done in the Federal

2 district court is an argument that should have been made

3 before her and taken up on the court of appeals, so that

4 if in the future you wanted to tell district judges that

5 they always had to defer to State statute of limitations

6 the way to do that is on direct review of a diversity

7 case.

8 There's a certain oddness here, if you think

9 about it, that we're talking about Erie and Hannah and

10 Federal diversity cases on review of a State court

11 judgment dealing with a matter of State law, because the

12 -- it's just as if Judge -- suppose Judge Collins had said

13 that she was going to decide this case, clearly

14 erroneously, as a matter of Federal common law business

15 torts, and they didn't appeal it to the Ninth Circuit,

16 they didn't seek cert from that. Even though that would

17 be clearly erroneous under Erie, they're bound by that and

18 can't second-guess it.

19 Now, I never got the question of the Federal

20 interest here. You could have a litigant that's got a

21 troublesome statute of limitations claim, because it

22 involves possible concealment, possible latent defects,

23 nondisclosure. They could say, look, we could bring this

24 in Federal court in California. We can try it for 3

25 years, and if we lose on the statute of limitations

44

1 grounds we'll have a very good practice opportunity,

2 because it won't preclude us at all from bringing the very

3 same case in some other State.

4 QUESTION: That's -- can you answer my other

5 question that I had before? I was not just trying to be

6 helpful to you. I was trying to build up to a question

7 that I have.

8 (Laughter.)

9 QUESTION: That the -- imagine we have a piece

10 of paper, which is called a judgment, after litigation in

11 Federal court on a diversity case and it says, defendant

12 wins. Now, a lot of questions can arise as to the res

13 judicata effect of that, peripheral questions, privity,

14 parties, et cetera.

15 Don't we normally use State law to determine the

16 meaning of that piece of paper called the judgment, which

17 came out of diversity after litigation, or do we? I'm not

18 positive. And then, of course, I'm thinking if we do,

19 shouldn't we get to the same result here?

20 MR. DELLINGER: That's a very good question, and

21 it clarifies a point that they make. Their best point

22 under the Rules Enabling Act, which has troubled Justice

23 Scalia in his questions, is that this is a -- all of a

24 sudden we're making Rule 41(b) into a whole Federal law of

25 preclusion. No, we're not. We're only saying it resolves

45

1 one of the issues of preclusion. It doesn't reach all

2 those other issues.

3 For example, you have to establish a final

4 judgment on the merits between the same parties involving

5 the same claims. The only issue that 41(b) addresses is

6 whether that first judgment was, in fact, on the merits.

7 It's not a rule of mutuality. It's not a rule of all of

8 these other things. There are a lot of preclusion issues

9 where you would look to State law, and that's a possible

10 outcome, some of which this Court hasn't resolved, but

11 those are not issues with respect to which there is a

12 Federal Rule of Civil Procedure squarely on point.

13 QUESTION: Well, you're just saying that, then,

14 it's only changing a very tiny bit of substantive law. I

15 mean, it's still changing substantive law, even if it's a

16 tiny bit.

17 The fact is that if a dismissal on the basis of

18 the statute of limitations under State law would not

19 prevent the plaintiff from bringing the suit again, and if

20 a Federal court, whether by mistake or not -- whether by

21 mistake or not -- makes a dismissal on the basis of the

22 statute of limitations and says it shall preclude further

23 actions under State law, you're going to allow that to

24 govern. I think that is an alteration of substantive law.

25 Now, it maybe just a tiny bit of substantive law, but I

46

1 don't see how you can --

2 MR. DELLINGER: Justice Scalia, if that is

3 considered an alteration of substantive law it would raise

4 havoc with the Federal Rules of Civil Procedure. There

5 are counterclaim rules, there are interpleader rules,

6 there are all kinds of rules that relate to and have some

7 effect on whether a judgment winds up being a judgment of

8 dismissal on the merits, and it's not the kind of issue

9 about which Justice Harlan was concerned in his concurring

10 opinion in Hannah v. Plumer when he said, we have to be

11 careful, I realize that the Federal rules, if they're

12 arguably procedural, take precedence over State law --

13 QUESTION: It seems to me your --

14 MR. DELLINGER: -- but we have to worry about

15 ordering people's private lives. This is not a rule that

16 orders -- that tells people how to order their private

17 lives. It makes political choices that a State ought to

18 make for itself.

19 QUESTION: Was your answer to me, then, that the

20 words, on the merits, are not peripheral because if they

21 mean anything they mean claim preclusion --

22 MR. DELLINGER: If they mean any --

23 QUESTION: -- and therefore, if you apply it,

24 you can't just look to State law because that would make

25 the words meaningless in that Heartland issue, and if you

47

1 put that -- you applied it where it's not applied, that's

2 just a mistake like any other court, any other Federal

3 court. That's -- is that what your answer is?

4 MR. DELLINGER: That's exactly right.

5 QUESTION: But that's not a good answer, because

6 they wouldn't --

7 (Laughter.)

8 QUESTION: I didn't say it was a good answer.

9 QUESTION: They would not make the words

10 meaningless, you acknowledge, in those cases where you're

11 dealing with a Federal cause of action and where it is

12 within the power of the Federal courts to say what the

13 effect of a judgment on the merits is. That's enough to

14 give the words meaning.

15 QUESTION: It would also finally resolve the

16 merits of the question whether the statute -- whether the

17 claim is barred by the California statute of limitations.

18 That issue is resolved on the merits.

19 MR. DELLINGER: Well, this Court has never held

20 that a Federal rule simply doesn't apply in diversity

21 cases when the plain text of the rule says it applies to,

22 you know, all suits of a civil nature under Rule 1, and

23 there's just no way to tease that out of the rule.

24 I think that the uncertainty that would occur --

25 for many reasons, California has never passed judgment on

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1 the question of whether the dismissal of a claim in

2 California for the running of statute of limitations

3 should preclude the same claim from being brought in

4 another State.

5 QUESTION: Mr. Dellinger, it is the normal rule,

6 and I think you're well aware that in the -- the Ryder

7 Miller Treatise puts this very issue. The longer period

8 of limitation in the second forum, the traditional rule

9 has been that it's free to proceed with the second action

10 if the State has a longer limitation.

11 MR. DELLINGER: Justice Ginsburg, if I may

12 interrupt, as a matter of full faith and credit, but

13 increasingly -- as a matter of full faith and credit if

14 there's not been a first lawsuit, a State -- the second --

15 the second State in a case like Sun Oil, the second case

16 can apply its own longer statute of limitations, period,

17 even though the first State has a shorter limitations

18 period and is providing the cause of action.

19 QUESTION: Well, I wish that you hadn't

20 interrupted --

21 MR. DELLINGER: I'm sorry.

22 QUESTION: -- only for this reason, because the

23 next sentence goes on to say, Civil Rule 41(b) is even

24 more clearly inapposite to these problems than to the many

25 other difficult preclusion questions it may seem to touch.

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1 QUESTION: Thank you, Mr. Dellinger.

2 MR. DELLINGER: Thank you.

3 QUESTION: Mr. Gottesman, you have 3 minutes

4 left.

5 REBUTTAL ARGUMENT OF MICHAEL GOTTESMAN

6 ON BEHALF OF THE RESPONDENT

7 MR. GOTTESMAN: Thank you, Your Honor. Three

8 short points. First, I think it must be evident that if

9 respondent is right, every defendant in the 25 to 30

10 States which still adhere to the traditional preclusion

11 rules is going to remove every possible case it can to

12 Federal court if it thinks there's a time bar question

13 because, by removing it, it will get preclusion unless,

14 and this is now my second point, unless Justice Breyer's

15 solution becomes the solution.

16 Now, I want to make clear we do not believe

17 41(b) is a preclusion rule, but still I will address the

18 question of whether these problems can get solved that

19 way. For three reasons, I think they can. First, the

20 advisory committee has said it is not the function of the

21 rendering court, the first court, to worry about the res

22 judicata effect of its decisions. That's in the advisory

23 committee notes to Rule 23(c) in 1966, and that is a

24 traditional Hornbook rule. The rendering court doesn't

25 sit around and say, now, let's see what the preclusive

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1 effect of my decision will be.

2 Secondly, it would be --

3 QUESTION: But the recognition court must look

4 to the rendition court to find out what the preclusive

5 effect --

6 MR. GOTTESMAN: Right. Well, to the law of the

7 rendition court. Not to the court itself, but to the law

8 of the state of the rendition court, that's correct, Your

9 Honor, but you rarely see an opinion in which the opinion

10 ends by saying, and I think this decision ought to have

11 res judicata effect. I mean, it just isn't done, and the

12 rules committee said it's not being done in the Federal

13 rules.

14 Secondly, it would be too complicated.

15 Preclusive of what, as Justice Kennedy asked. Every

16 decision precludes some things. The Court's going to have

17 to write a Hornbook.

18 If it's -- if the argument is, State law isn't

19 preclusive of certain things, Your Honor, you should

20 tailor your order appropriately, the parties are going to

21 sit there and analyze the entire jurisprudence of that

22 State in order to write in what it does preclude and what

23 it does not preclude. It would be an impossible task.

24 And thirdly, it would mean that you would have

25 constant appeals, because districts -- we now have created

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1 a whole nother issue to litigate in the rendering court.

2 Parties might not ultimately decide to bring a second

3 lawsuit, but they're got to worry that in case I might I'd

4 sure better get this thing right, and we are going to have

5 endless litigation in that first court, and it will be a

6 Federal court, because we're talking about Rule 41 here.

7 Now, the third point I want to make is this.

8 There's something very asymmetric about this. 41(b) --

9 CHIEF JUSTICE REHNQUIST: Thank you, Mr.

10 Gottesman.

11 The case is submitted.

12 (Whereupon, at 11:02 a.m., the case in the

13 above-entitled matter was submitted.)

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