GIOIA v. BLUE CROSS HOSPITAL SERVICE, INC. OF MO.

VAN PELT, Senior District Judge.

Anthony M. Gioia, Receiver of the Estate of North St. Louis Hospital Association (hereinafter the Hospital), appeals a decision by the District Court for the Eastern District of Missouri dismissing with prejudice the Hospital's1 third suit against Blue Cross Hospital Service, Inc. of Missouri (hereinafter Blue Cross). The dismissal was based on a finding by the district court that the plaintiff had voluntarily dismissed two earlier suits, and that under Fed.R.Civ.P. 41(a)(1)2 the second dismissal operated as an adjudication on the merits. The Hospital argues that the district court erred in that (1) the second dismissal was in fact a dismissal by the court without prejudice as provided for in Fed.R.Civ.P. 41(a)(2);3 and (2) that defendant cannot now in a separate suit collaterally attack the order of dismissal entered in the second suit but should have made a motion to alter, amend or vacate under Fed.R.Civ.P. 59(e) within 10 days after entry of the judgment.

The facts of this case show multiple procedural errors. The first suit was brought by appellant in state court. The state court suit is of little consequence here other than to note that it was voluntarily dismissed by plaintiff on a form entitled "Memorandum for Clerk." A second suit was filed, this time in federal district court. Soon after filing, nearly 100 individuals moved to intervene. The district court denied the motion, and an interlocutory appeal was taken to the United States Court of Appeals for the Eighth Circuit.4 Blue Cross had fully briefed this appeal in the Eighth Circuit, when the Hospital again decided to dismiss. The Hospital's attorney wrote a letter on July 25, 1978 to the Blue Cross attorney. The first paragraph stated:

On Monday, August 7, 1978, a document entitled "Memorandum for Clerk" was sent to Blue Cross' counsel. The memorandum was handwritten and stated:

It is at this point that the procedural snafus and ambiguity begin. The document looks exactly the same as the earlier voluntary dismissal of the state court case. It does recite "by leave of Court", but it is not addressed to the court in the form of a motion, and no order for the court to sign was attached. Somehow, this document entitled "Memorandum for Clerk" made its way to the judge handling the suit — whether by hand delivery or mail is not shown. The judge wrote on the side of such memorandum "So ordered" and signed his name and it was duly filed by the clerk on August 9, 1978. A copy of the Memorandum with the clerk's filing stamp and the judge's notation and signature was mailed to counsel for Blue Cross by the clerk's office. Blue Cross took no action.

There is no question but that in order to have a valid court dismissal under Fed.R.Civ.P. 41(a)(2) a motion, so entitled, should have been filed. Notice should have been given Blue Cross with an opportunity for a hearing. Both local and federal rules support this procedure.5 Case law on the issue has vacated similar purported dismissals without prejudice where defendant was not provided with notice and a hearing. See Diamond v. United States, 267 F.2d 23 (5th Cir. 1959). See also 5 J. Moore, Federal Practice ¶ 41.05[1], at 41-68:

Footnote 51 of Moore's indicates:

There was no separate document here. The judge's notation "So ordered" and signature are written on the Memorandum for Clerk.

On July 25, 1978, the Hospital filed its third suit based on the same allegations as the earlier two suits. This is the suit contemplated in the letter of July 25, 1978 above mentioned. It was assigned to Judge Meredith, who had not handled the second suit. The third suit was filed approximately two weeks before the Memorandum for Clerk was given to Judge Regan who was handling the second case. While court-ordered second dismissals are subject to the discretion of the judge as to whether they should be granted, and if so on what terms and conditions, the Hospital obviously either did not consider this a court dismissal or, if it was, that the court had any discretion, since they had proceeded to file the third suit without leave of court or waiting to find out if there would be any terms and conditions attached.

Finally, to make procedural matters even more difficult, one of the Hospital's grounds of appeal in this court — that the order of dismissal cannot be collaterally attacked — was never presented to the trial judge in the third suit.

Judge Meredith found that the only question before him on the Blue Cross motion to dismiss was whether the dismissal was by court order or was a unilateral notice of dismissal.6 From the facts, he concluded that the August 7 memorandum was voluntary notice of unilateral dismissal because (1) defendants had not filed an answer or a motion for summary judgment and under the rule plaintiff was entitled as a matter of right to dismiss its complaint; (2) that defendants were given no opportunity to oppose the dismissal; and (3) that considerable time and expense had been required of the defendants, which is one of the reasons Rule 41(a)(1) was enacted.

On review here, we have serious doubt as to whether the Hospital can raise for the first time in this court the claim that Blue Cross in a third suit cannot collaterally attack the order entered in the second suit. See United States ex rel. Huisinga v. Commanding Officer, 446 F.2d 124, 125 (8th Cir. 1971) and cases cited therein. See also Katsev v. Coleman, 530 F.2d 176, 179 (8th Cir. 1976).

Further, the very issue of collateral attack assumes that there is an order to attack. As mentioned before, in order for there to be a final order or judgment, the Federal Rules require that it be entered on a separate document. This was not done. Does that mean that there is no order and thus no judgment? No one has addressed that question. It is true that the Supreme Court in Bankers Trust Co. v. Mallis, 435 U.S. 381, 98 S.Ct. 1117, 55 L.Ed.2d 357 (1978) concluded that:

Id. at 384, 98 S.Ct. at 1119-1120. A major distinction between Bankers Trust Co. supra, and the instant fact situation is that in Bankers both parties and the district court proceeded on the assumption that there was an adjudication of dismissal. The plaintiff in Bankers appealed the dismissal, despite the fact no separate order had been entered. Here, there is no indication that Blue Cross ever considered the dismissal as anything other than voluntary, and not by court order. The Hospital has argued that Blue Cross had a duty to challenge the order by motion to alter, amend or vacate, or by some other means pointing out the procedural error to the court and suggesting the due process to which they were entitled. However, Blue Cross' inaction is consistent with its theory that it never considered that a valid court order had been entered. Thus, it is unlikely that Blue Cross here waived the requirement that the judgment be entered on a separate document.

Secondly, in Bankers there was a lengthy opinion granting the motion to dismiss. All of the factors had been considered. Here there is no indication that the court considered the merits of dismissing the second suit under 41(a)(2) without the prejudice or without attaching terms and conditions to the dismissal. The Hospital asks us to assume the words "So ordered" have some meaning, and that the judge was aware of the prior dismissal. To do this, is to assume facts that are not in evidence. Judges are human. Unless someone told the trial judge in the second suit that this was the second dismissal of this action, the judge probably could not divine that information on his own. There is no indication that the Hospital informed the judge at the time of dismissal that they had earlier dismissed a state court suit. That information does not appear anywhere in the body of the Memorandum for Clerk. And just as obviously, Blue Cross was not there to inform the judge of that fact and ask that the dismissal be with prejudice or at the minimum that plaintiff be required to pay court costs and attorneys fees before proceeding with a third suit. Thus, this case did not have the full consideration on the merits as in Bankers where both parties proceeded on the assumption that a directive contained in an opinion operated as a final order.

We note that the Supreme Court in Bankers found that the sole purpose of the separate document requirement was to clarify when the time for an appeal began to run. The opinion cites from the Advisory Committee's statement of intent which seems to indicate that one purpose was to avoid the confusion when some directive words were included in a memorandum. Certainly, there is no less confusion here as to whether there was an order which should have been challenged along with all of the other procedural inadequacies.

All in all, we cannot fault the logic of Judge Meredith who found that the dismissal was not by court order and granted Blue Cross' Motion to Dismiss the third suit with prejudice. The plaintiff proceeded in a manner which would lead one to believe that the dismissal was voluntary and unilateral — no proper motion, no notice, no hearing, no waiting for five days before presenting the matter to the judge in accord with the local rules, and no formal order. And, finally, no indication that they believed the court had any discretion in the matter since their third suit was filed before they ever "applied" for dismissal of the second.

While it is with reluctance that we affirm the judgment of dismissal, since there may have been some merit in plaintiff's claims which they will now be foreclosed from pursuing, that result is clearly in accord with previous decisions in this Circuit. Judge Meredith realized this also quoting from Engelhardt v. Bell & Howell Company, 299 F.2d 480, 485 (8th Cir. 1962):7

The judgment of dismissal with prejudice is affirmed.