Price, Charles v. Wyeth Holdings Corp ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-2072
CHARLES PRICE,
Plaintiff-Appellant,
v.
WYETH HOLDINGS CORPORATION,Œ
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 04 C 242—Phillip P. Simon, Judge.
____________
ARGUED DECEMBER 4, 2006—DECIDED SEPTEMBER 20, 2007
____________
Before EASTERBROOK, Chief Judge, and CUDAHY and
SYKES, Circuit Judges.
SYKES, Circuit Judge. Charles Price voluntarily dis-
missed his Indiana state-court lawsuit against American
Cyanamid Company and Lederle Laboratories in 1993.
Unbeknownst to the defendants, Price then reinstated the
suit five years later and obtained a $5 million default
judgment from the state court. Price’s attorney gave the
defendants no notice of these proceedings until he sought
Œ
American Cyanamid Company and Lederle Laboratories
were the original named defendants. We have adjusted the
caption for reasons explained at note 3, infra.
2 No. 06-2072
to collect on the judgment in 2004, at which point the
defendants quickly removed the case to federal court and
had the default judgment vacated based on the lack of
notice. The district court ultimately granted summary
judgment for the defendants dismissing Price’s claim on
statute of limitations grounds.
Price has appealed, challenging the removal of the
action and the district court’s orders granting relief from
the default judgment and summary judgment for the
defendants. Price’s attorney takes the extraordinary
position that his ex parte reinstatement of the lawsuit
was perfectly appropriate under Indiana law. It certainly
was not. The defendants were entitled to notice of the
motion to reinstate and all subsequent proceedings under
Indiana’s trial procedure rules; ex parte conduct of this
sort also violates Indiana’s Rules of Professional Conduct
for attorneys. We affirm the orders of the district court
and order Price’s attorney to show cause why he should
not be sanctioned for filing this frivolous appeal. We also
direct the clerk of this court to transmit a copy of this
opinion to the Indiana Supreme Court Disciplinary Com-
mission for any action it deems appropriate.
I. Background
On June 10, 1993, Cathy and Charles Price filed suit
in Indiana state court against American Cyanamid Com-
pany and Lederle Laboratories (a division of American
Cyanamid) after Cathy contracted polio from a child who
recently had been vaccinated. Cathy’s claim was based on
product liability, and Charles’s claim was for loss of
consortium. The summons and complaint were served by
certified mail on June 14, 1993, and a return of service
was entered for American Cyanamid on June 23, 1993. On
June 25, 1993, the manager of American Cyanamid’s legal
department faxed a letter to plaintiffs’ counsel, Delmar
No. 06-2072 3
Kuchaes, informing him that the National Childhood
Vaccine Injury Act, 42 U.S.C. § 300aa-1 et seq., requires
that vaccination claims first be brought in the U.S. Court
of Federal Claims (“Vaccine Court”) pursuant to the
federal vaccination compensation program. The letter
provided plaintiffs’ counsel with the telephone number
and mailing address of the federal program and asked
that the lawsuit be terminated as required by the Act.
After receiving the facsimile letter, plaintiffs’ counsel
voluntarily dismissed the suit that same day, before
either defendant filed an appearance or responsive plead-
ing. Plaintiffs’ counsel sent American Cyanamid a copy of
the dismissal order, along with a letter stating that the
suit had been “discontinue[d], or non-suit[ed].”
Over the next few years, the Prices pursued their claims
in the Vaccine Court, where they ultimately learned that
Charles’s derivative claim was not compensable under the
Vaccine Act.1 Accordingly, in March 1998, Charles volun-
tarily dismissed his claim in the Vaccine Court. Cathy
subsequently obtained a judgment from the Vaccine
Court in excess of $1 million. On July 17, 1998, the Prices
moved to reinstate their state-court action, but they
did not provide any notice of that motion to the defen-
dants. The state court reinstated the case on July 20, 1998,
again without notice to either defendant. For the next
year and a half, no effort was made to notify the defen-
dants of the reinstated state-court proceedings.
On April 11, 2000, Charles Price filed motions for de-
fault judgment against the defendants, stating that
process had been served in June 1993 and the defendants
had subsequently failed to appear or respond; the mo-
tions said nothing about the circumstances of the volun-
1
See, e.g., Shafer v. Am. Cyanamid, 20 F.3d 1 (1st Cir. 1994)
(Vaccine Act does not apply to derivative claims).
4 No. 06-2072
tary dismissal and were not served on the defendants. The
court entered default judgments against the defendants
on April 26, 2000, and scheduled an evidentiary hearing
on damages. At that point, the court (not Price’s attorney)
forwarded a notice of the damages hearing to Lederle
Laboratories at the address on the original summons
served in 1993. On July 7, 2000, the notice was returned
to sender, stating “no such office in state.” As it turned
out, the address on the original summons had incor-
rectly attributed Lederle’s New York address to New
Jersey, but the post office had delivered it to the New York
address anyway, presumably based on the New York zip
code. Price’s attorney made no attempt to notify Lederle
or American Cyanamid of the reinstated proceedings, the
default judgment motions, or the damages hearing. The
hearing went forward on June 16, 2000, and the court
awarded $5 million to Charles Price.2
The default judgments languished in state court for
approximately four years until Price initiated garnish-
ment proceedings on June 1, 2004. At that time, Price
provided the state court with a new address at which to
serve the defendants, that of the registered agent for
American Cyanamid and Lederle. Process for the garnish-
ment proceedings was served on June 14, 2004, marking
the first time since June 23, 1993, that the defendants
received any notice of the proceedings that were taking
place in Indiana state court.3
2
Cathy Price voluntarily dismissed her state-court claim on
June 16, 2000, the day of the damages hearing, pursuant to a
Vaccine Act provision prohibiting a person from seeking addi-
tional recovery in state court if that party accepts an award from
the Vaccine Court.
3
We note that the defendants’ Circuit Rule 26.1 Disclosure
Statement and Jurisdictional Statement both state that Ameri-
(continued...)
No. 06-2072 5
On June 22 the defendants jointly filed a notice of
removal to federal court and the case was removed. Price
challenged the removal as untimely and sought a remand
to state court. The district court denied remand, holding
that the removal was timely because the defendants
had no notice that the previously dismissed case had been
reinstated until a week before they sought removal. The
district court then vacated the default judgments due to
Price’s failure to comply with notice requirements under
Indiana law. The defendants moved for summary judg-
ment on statute of limitations grounds; the district court
granted the motion, holding that the two-year statute of
limitations had expired during the intervening years
between the voluntary dismissal and the reinstatement of
the lawsuit. Price now appeals the denial of his remand
motion, the order vacating the default judgments, and the
grant of summary judgment for the defendants.
II. Discussion
A. Timeliness of Removal
We review a district court’s denial of a motion to remand
to state court de novo. Tifft v. Commonwealth Edison Co.,
366 F.3d 513 (7th Cir. 2004). Price’s claim was removable
3
(...continued)
can Cyanamid is now known as Wyeth Holdings Corporation, and
their brief indicates that a garnishment summons was served
on the registered agent for Wyeth Holdings Corporation. We also
note that Lederle Laboratories, as a division of American
Cyanamid (now Wyeth Holdings Corporation), has no juridical
existence and can neither sue nor be sued. See Schiavone v.
Fortune, 477 U.S. 21, 23 (1986). Accordingly, it appears that
Wyeth Holdings Corporation is the appropriate defendant. We
have adjusted the caption accordingly, but for ease of reading
will continue to refer to the defendants in the plural.
6 No. 06-2072
based on diversity of citizenship.4 28 U.S.C. §§ 1332(a),
1441(a). Price argues that the removal was not timely
under two provisions of 28 U.S.C. § 1446(b). Because
federal procedure does not apply until removal occurs,
FED. R. CIV. P. 81(c), we apply state rules to preremoval
conduct. Romo v. Gulf Stream Coach, Inc., 250 F.3d 1119,
1122 (7th Cir. 2001).
1. The 30-Day Removal Clock
Price first invokes the time limit in 28 U.S.C. § 1446(b),
which requires a defendant to file for removal within 30
days of receiving the initial pleading setting forth the
claim for relief (or receipt of the summons if the initial
pleading is not required to be served). Price argues that
this period expired 30 days after the defendants re-
ceived the complaint in 1993, even though the case was
voluntary dismissed two weeks after it was filed. He
claims that under Indiana law, a lawsuit is not actually
terminated when it is voluntarily dismissed, but rather
remains pending indefinitely until such time as the
plaintiff may seek reinstatement. He bases this argument
on the distinction between a “cause of action” and a “cause”
in Indiana law; a “cause” refers to a lawsuit, whereas a
“cause of action” refers to an individual theory of liability
within a “cause.” See e.g., Songer v. Civitas Bank, 771
N.E.2d 61, 66-67 (Ind. 2002). Price maintains that he
voluntarily dismissed only his “cause of action” in 1993; he
insists that his “cause” remained pending (emptied, as it
were, of its “cause of action”), and the 30-day removal clock
kept on ticking and expired.
4
Price’s attorney attempted to argue to the contrary during oral
argument, but eventually admitted he had conceded this point
both in district court and in his appellate brief.
No. 06-2072 7
What utter nonsense. To the extent there is a difference
between a “cause” and a “cause of action” under Indiana
law, that difference is completely irrelevant here. Songer
defined these terms in the context of determining wheth-
er a single lawsuit containing both legal and equitable
claims required a jury trial; the case neither involved nor
made any mention of voluntary dismissals. See id. at 66.
Price cannot identify a single case supporting the notion
that a voluntary dismissal terminates the “cause of action”
but not the “cause.” This is undoubtedly because the
idea is so ridiculous; a “cause” (that is, lawsuit) cannot
continue to exist once every “cause of action” within it has
been dismissed. The Prices’ voluntary dismissal termi-
nated the entire case against the defendants. The “cause”
did not remain pending, nor did the removal clock con-
tinue to run after the voluntarily dismissal.
Based on this same theory of a continuously pending
lawsuit, Price also maintains that the defendants had
a duty to continuously check the docket and therefore
should be charged with constructive notice of the rein-
stated proceedings. This argument badly misconstrues
basic principles of voluntary dismissal under Indiana law.
“[O]nce a suit is voluntarily dismissed[,] the situation is
just as though the suit has never been filed.” Burnett v.
Camden, 254 N.E.2d 199, 201 (Ind. 1970). A voluntarily
dismissed suit may be reinstated pursuant to Rule 41(F) of
the Indiana Rules of Trial Procedure, and “[w]hen a case
is dismissed and then reinstated, it stands as if it had
not been dismissed.” Waitt v. Waitt, 429 N.E.2d 6, 7 (Ind.
App. 1981) (holding that a party who failed to move for
a change of venue within 30 days of receiving the initial
complaint was not entitled to a new 30-day time limit
when the case was reinstated after voluntary dismissal).
Accordingly, although the procedural obligations of the
parties pick up exactly where they left off once a volun-
tarily dismissed action is validly reinstated, the defen-
8 No. 06-2072
dants obviously have no ongoing obligations during the
time in which the suit is dismissed. Upon reinstatement,
the notice rights and duties of the parties depend upon
the position the parties were in when the action was
voluntarily dismissed. Price’s theory of constructive
notice is unsupported and unsupportable; the defendants
were entitled under Indiana law to actual notice of the
motion for reinstatement and all subsequent pleadings.
The Indiana Rules of Trial Procedure require a party
to serve notice of all pleadings and motions on any party
who is not in default. IND. R. TRIAL P. 5(A). The record
establishes that the defendants could have been in posses-
sion of the complaint for no more than 11 days at the
time it was voluntarily dismissed.5 This is well within
the 23 days which Indiana allows a defendant served by
mail to file an appearance or answer. No default could
have been entered against either defendant prior to
dismissal; the defendants were in good standing when the
case was voluntarily dismissed and thus were in good
standing when it was reinstated. Price therefore had a
duty under Rule 5(A) of the Indiana Rules of Trial Proce-
dure to serve the motion to reinstate on the defendants—a
duty that his counsel apparently deliberately ignored.
Price cites Lyerson v. Hogan, 441 N.E.2d 683 (Ind. Ct.
App. 1982), but that case involved neither a voluntary
dismissal nor a defendant in good standing. Lyerson
involved a lawsuit that languished for two years with-
5
The American Cyanamid return of service lacks a date of
delivery, so it is unclear precisely when the defendant first
received the complaint and summons. However, the summons
states that it was mailed on June 14, 1993, and even assuming it
was delivered that same day, only 11 days would have passed by
June 25. The Lederle Laboratories return of service indicates
that it was delivered June 24, 1993.
No. 06-2072 9
out an appearance or answer by the defendants and
without any activity from the plaintiffs. The court dis-
missed the case for failure to prosecute; the plaintiffs
orally moved to reinstate without notifying the defendants.
The Court of Appeals of Indiana held that no notice
was necessary in these circumstances because the defen-
dants were in default at the time the case was dismissed.
Id. at 686. The court cited a provision in Rule 5(A) of the
Indiana Rules of Trial Procedure that excludes parties
in default from the notice requirement unless the plead-
ing asserts new or additional claims for relief. Id. Rather
than supporting Price’s position, Lyerson thus confirms
that parties not in default at the time of dismissal must
be served with the motion for reinstatement.
The record demonstrates that the defendants did not
receive notice of the reinstated lawsuit until June 14,
2004, when they were served with process in the garnish-
ment proceedings. They sought removal eight days later,
well within the 30-day limit even when the 11 days from
June 1993 are counted. Accordingly, removal was timely,
and the district court properly denied the motion to
remand.
2. The One-Year Removal Limit in Diversity Cases
Price also seeks refuge in the one-year limitation found
in the second paragraph of § 1446(b). Section 1446(b)
provides:
The notice of removal of a civil action or proceeding
shall be filed within thirty days after the receipt by
the defendant, through service or otherwise, of a copy
of the initial pleading setting forth the claim for relief
upon which such action or proceeding is based, or
within thirty days after the service of summons upon
the defendant if such initial pleading has then been
10 No. 06-2072
filed in court and is not required to be served on the
defendant, whichever period is shorter.
If the case stated by the initial pleading is not
removable, a notice of removal may be filed within
thirty days after receipt by the defendant, through
service or otherwise, of a copy of an amended plead-
ing, motion, order or other paper from which it may
first be ascertained that the case is one which is or has
become removable, except that a case may not be
removed on the basis of jurisdiction conferred by
section 1332 of this title more than 1 year after com-
mencement of the action.
(Emphasis added.) Price claims that the emphasized
language prevents removal in all diversity cases more
than one year after the case was commenced; the defen-
dants counter that the one-year bar applies only to cases
that were not removable when initially filed.
The most obvious problem with Price’s argument is
that it rests on the illogical premise we have already
rejected: that the removal clock somehow continues to run
after a lawsuit has been voluntarily dismissed. It goes
without saying that a dismissed case cannot be removed;
removal time limits do not continue to run after a case has
been dismissed. The Prices voluntarily dismissed their
lawsuit two weeks after it was filed, and their counsel
failed—intentionally, it seems—to give the defendants
notice of its reinstatement. The defendants filed for
removal eight days after first receiving service of any sort
of notice of the reinstated lawsuit. This is well within the
one-year bar, even assuming it has any relevance here.6
6
Although not necessary to our decision here, we note that every
circuit to have considered the question (albeit in very different
procedural contexts) has held that the one-year bar is applicable
(continued...)
No. 06-2072 11
Before moving on, we pause to emphasize the absurdity
of Price’s arguments about the timeliness of the removal.
Neither the language of nor the purposes behind the
time limits contained in § 1446(b) could possibly support
a reading that the limits run against defendants who are
unaware of the pending claim. See 28 U.S.C. § 1446(b)
(removal shall be sought within 30 days of receipt of the
complaint or within 30 days of receiving the first remov-
able pleading) (emphasis added); Murphy Bros., Inc. v.
Michetti Pipe Stringing, Inc., 526 U.S. 344, 347 (1999) (“An
individual or entity named as a defendant is not obliged
to engage in litigation unless notified of the action, and
brought under a court’s authority, by formal process.”);
Wilson v. Intercollegiate (Big Ten) Conference Athletic
Ass’n, 668 F.2d 962, 965 (7th Cir. 1982) (“The purpose of
the 30-day limitation is twofold: to deprive the defendant
of the undeserved tactical advantage that he would have
if he could wait and see how he was faring in state court
before deciding whether to remove the case to another
court system; and to prevent the delay and waste of
resources involved in starting a case over in a second
court after significant proceedings, extending over months
or even years, may have taken place in the first court.”).
6
(...continued)
to cases that are not initially removable. See Brown v. Tokio
Marine & Fire Ins. Co., 284 F.3d 871, 873 (8th Cir. 2002); Brierly
v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534 (6th Cir.
1999), cert. denied, 528 U.S. 1076, (2000); N.Y. Life Ins. Co. v.
Deshotel, 142 F.3d 873, 886 (5th Cir. 1998); Ritchey v. Upjohn
Drug Co., 139 F.3d 1313, 1316-17 (9th Cir.), cert. denied, 525 U.S.
963 (1998). The clause containing the one-year bar is part of the
paragraph specifically addressing the time limits for cases that
are not initially removable; its placement in this paragraph
indicates that it modifies only the immediately preceding
language in the same paragraph, not the more general time
limitation contained in the preceding paragraph.
12 No. 06-2072
That an attorney could in good faith expect to prevail on
such baseless arguments is difficult to fathom.
B. Default Judgment
Price next challenges the district court’s order granting
the defendants’ motion to vacate the default judgments
pursuant to Rule 60(b) of the Federal Rules of Civil
Procedure. Although relief under Rule 60(b) is subject to
review for abuse of discretion, if a “judgment is void, it
is a per se abuse of discretion for a district court to deny
a movant’s motion to vacate the judgment.” United States
v. Indoor Cultivation Equip. from High Tech Indoor
Garden Supply, 55 F.3d 1311, 1317 (7th Cir. 1995). A
judgment is void and should be vacated pursuant to
Rule 60(b)(4) if “the court that rendered the judgment
acted in a manner inconsistent with due process of law.”
Id. at 1316 (citations omitted); see also Ervin v. Wilkinson,
701 F.2d 59, 61 (7th Cir. 1983) (“Where the moving
party has been prevented from presenting the merits of
his case by the conduct of which he complains, Rule 60(b)
relief is most appropriate.”). In determining whether
relief under Rule 60(b) is appropriate, “federal courts
may apply state procedural rules to pre-removal conduct.”
Romo, 250 F.3d at 1122.
As we have noted, Rule 5(A) of the Indiana Rules of
Trial Procedure requires that all parties not in default be
served with any motions or pleadings filed with the court.
The defendants were not in default, yet Price’s attorney
did not provide them with notice of the motion to rein-
state the lawsuit, the motions for default judgment, or
any other proceedings that occurred subsequent to
reinstatement—that is, until collection was attempted
with the commencement of garnishment. Moreover, the
Supreme Court of Indiana has held that an attorney has
a duty under the Indiana Rules of Professional Conduct
No. 06-2072 13
to provide any known counsel with a motion for default
before allowing entry of a default judgment; failure to
comply with that duty requires relief from the judgment.
Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind. 1999) (“A
default judgment is appropriate only where a party has
not appeared in person or by counsel and, if there is a
lawyer known to represent the opposing party in the
matter, counsel had made reasonable effort to contact
that lawyer.”); see also IND. R. PROF. COND. 3.3(d), 3.5(b),
8.4(d). As is clear from the 1993 correspondence in the
record, Price’s attorney knew the defendants had legal
representation, yet he made no effort to inform either the
defendants or known counsel that the default proceed-
ings were occurring. Because the default judgments failed
to comply with these requirements of Indiana law, they
were void; the district court was therefore required to
vacate the judgments, making this appeal of its order
doing so frivolous.7
C. Summary Judgment
We review the district court’s entry of summary judg-
ment de novo, viewing the facts in the light most favorable
to Price. See Healy v. City of Chicago, 450 F.3d 732, 738
(7th Cir. 2006). Summary judgment is appropriate when
“the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as
a matter of law.” FED. R. CIV. P. 56(c).
7
Price also contends that the district court was barred from
vacating the judgment by a one-year time limitation found in
Rule 60(b), but this limit only applies to relief based upon
60(b)(1)-(3). Because this judgment was vacated under
Rule 60(b)(4), the one-year limit is inapplicable.
14 No. 06-2072
The statute of limitations in Indiana for loss-of-consor-
tium claims is two years. The district court concluded
that the latest possible date on which Price’s claim accrued
is February 3, 1992, making his July 1998 attempted
reinstatement of the claim more than four years too
late. In hopes of circumventing this time bar, Price first
maintains that the filing date for his reinstated claim
relates back to the initial filing of his case in 1993. To
the contrary, under Indiana law, “a voluntary dismissal
does not warrant a statutory tolling of the ordinarily
applicable limitations period.” Morris v. Jenkins, 819
F.2d 678, 681 (7th Cir. 1987) (applying Indiana law); see
also Al-Challah v. Barger Packaging, 820 N.E.2d 670, 675
(Ind. Ct. App. 2005) (“A complaint that is voluntarily
dismissed is treated as if it never existed and, thus, cannot
toll the statute of limitations.” (citing Kohlman v.
Finkelstein, 509 N.E.2d 228, 232 (Ind. Ct. App. 1987))).8
Price next contends that the statute of limitations was
tolled when he filed with the Vaccine Court in July 1994.
But this was five months after the two-year limitations
period had expired (the claim accrued no later than
February 3, 1992). Because no intervening occurrence
tolled the two-year statute of limitations, the district
court properly concluded that his claim was barred under
Indiana law.
8
Although Indiana law contains a provision that permits a
plaintiff to refile a dismissed claim despite the expiration of the
statute of limitations, that provision does not apply to voluntarily
dismissed cases. See Morris v. Jenkins, 819 F.2d 678 (7th Cir.
1987) (applying Indiana law); Al-Challah v. Barger Packaging,
820 N.E.2d 670 (Ind. Ct. App. 2005); Ferdinand Furniture Co.,
Inc. v. Anderson, 399 N.E.2d 799 (Ind. Ct. App. 1980). Moreover,
that provision requires that applicable cases be refiled within
three years of dismissal, which Price’s claim was not. See IND.
CODE 34-11-8-1.
No. 06-2072 15
III. Conclusion
For the foregoing reasons, we affirm the district court’s
orders denying remand, vacating the default judgments,
and dismissing Price’s claim on statute of limitations
grounds. Price’s attorney, Delmar Kuchaes, is ordered to
show cause why he should not be sanctioned for filing a
frivolous appeal. See FED. R. APP. P. 38. He has 21 days to
file a response. We also direct the clerk of this court to
transmit a copy of this opinion to the Indiana Supreme
Court Disciplinary Commission for any action it deems
appropriate.
AFFIRMED, WITH ORDER TO SHOW CAUSE AND
DIRECTIONS TO CLERK.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-20-07