FEC v. Salvi, Al

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 99-1508 and 99-2183
Federal Election Commission,
Plaintiff-Appellant,
v.
Al Salvi for Senate Committee
and Stephanie Mustell, as Treasurer,
Defendants-Appellees.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 98 C 4933 and No. 98 C 1321--George W. Lindberg, Judge.
Argued December 8, 1999--Decided March 8, 2000
Before Harlington Wood, Jr., Coffey and Flaum, Circuit
Judges.
Flaum, Circuit Judge. The Federal Election
Commission ("Commission") appeals an order of the
United States District Court for the Northern
District of Illinois denying the Commission’s
motion under Rules 60(b)(1) and (b)(4) for relief
from an order dismissing a civil enforcement
action the Commission had brought against the Al
Salvi for Senate Committee and its treasurer,
Stephanie Mustell, (collectively, "defendants")
for violations of the Federal Election Campaign
Act. The Commission also appeals the dismissal,
and refusal to alter or amend the judgment, of a
subsequent action, which the district court held
was barred by the first dismissal under res
judicata. For the reasons stated below, we
affirm.
Background
On March 3, 1998, the Commission filed a
complaint in the district court alleging that the
defendants violated the Federal Election Campaign
Act of 1971 by failing to properly report
campaign contributions. At the time it filed the
complaint, the Commission had no attorneys on the
case who were members of the Northern District of
Illinois Bar, and the Commission had neither
designated local counsel for service, as required
by the district court’s General Rule 3.13, nor
filed a petition for admission pro hac vice under
General Rule 3.12.
On April 2, 1998, the Commission filed an ex
parte motion for waiver of the local counsel and
admission requirements. On April 7, the district
court issued an order denying the Commission’s
motion for failure to comply with General Rule
15(B), which requires that an ex parte motion be
supported by an affidavit showing cause. The
front side of the order stated, at the bottom of
the page, that further details were printed on
the reverse side. On the reverse side, the order
indicated that the court had considered and
rejected the merits of the Commission’s motion
for waiver of the court’s requirements: "even if
the requirements of 15(B) had been met and even
if the court had determined plaintiff’s motion
was appropriate for consideration ex parte, the
motion would have been denied."
Due to a recording error at the court clerk’s
office, the Commission’s counsel only received
notice of the April 7 order on May 8, 1998. At
that time, the Commission’s counsel only copied
and read the front side of the order, and were
therefore unaware that the court had considered
and rejected the merits of the Commission’s April
2 motion. Consequently, the Commission refiled
its motion for waiver of the court’s local
counsel and admission requirements.
On June 10, 1998, the district court again
denied the Commission’s motion, and this time
struck all documents filed by the Commission for
failure to designate local counsel. The June 10
order also noted that the Commission’s counsel
had, in failing to do so, directly violated the
court’s previous, April 7 order. On July 8, 1998,
the court, sua sponte, entered an order pursuant
to Federal Rule of Civil Procedure 41(b)
dismissing the Commission’s action.
According to the Commission, it had begun
compliance with the court’s directives upon
receipt of the June 10 order by obtaining local
counsel, petitioning for admission pro hac vice,
and filing an amended complaint, appearance form,
and summonses. Following dismissal of its case,
on August 10, 1998, the Commission refiled its
case against the defendants, and this second case
was assigned to the same district court judge as
the first action. The Commission did not move to
alter or amend the July 8 dismissal order nor did
it file a notice of appeal of the court’s ruling
in the original action. On November 30, 1998, the
court granted the defendants’ motion to dismiss
the second action with prejudice on the ground
that it was barred by the doctrine of res
judicata, because the original action was
dismissed with prejudice.
Upon learning from the court’s November 30
order that the court’s first dismissal was with
prejudice, the Commission filed a motion under
Federal Rule of Civil Procedure 60(b) to vacate
the July 8 order dismissing the first action and
to thereby permit the Commission to file a
complaint to replace the one stricken by the
court in June. The Commission argued that the
dismissal was void as a matter of law; that it
was based on the court’s mistaken belief that the
Commission had failed to comply with previous
orders; and that any delay in complying with
prior orders was the result of "excusable
neglect." The Commission concurrently filed a
motion under Rule 59(e) to alter or amend the
judgment in the second action, arguing that the
second action was not barred by the first action
because, to the extent the earlier dismissal
constituted a final judgment, it was void. The
court denied these motions. The Commission now
appeals the district court’s denial of its Rule
60(b) motion as well as the judgment dismissing
the Commission’s second action.
Discussion
Although we are asked today to review several
decisions by the district court stemming from two
separate actions, the Commission ultimately seeks
to revisit the district court’s sua sponte
dismissal with prejudice of the first action. We
are somewhat sympathetic to the Commission--
though it seems clear that this case is before us
because the Commission’s counsel repeatedly
failed to heed clear directives from the district
court--because, as explained below, we believe
the district court abused its discretion in
dismissing the first action with prejudice.
However, the procedural posture of this case
leaves us no choice but to affirm the decisions
on which this appeal is based.
A.
The Commission argues that the district court
erred in concluding that the sua sponte dismissal
of the first action barred the second action
under res judicata. The Commission contends that
when the court dismissed the first action for
failure to satisfy local counsel and admission
requirements, the court did not purport to
address the merits and did not specify whether
the dismissal was with or without prejudice to
the Commission’s refiling its complaint. The
defendants respond that the district court’s
dismissal of the first action was not based on
technical, procedural shortfalls. Rather, they
argue, the district court ordered the first
action dismissed as a sanction for the
Commission’s violation of court orders. While the
July 1998 order of dismissal did not address the
merits of the first action, Rule 41(b)
establishes a presumption that such an order
operates as an adjudication of the merits. Any
later suit with the same allegations was
therefore subject to dismissal based on res
judicata.
The district court in the second action
resolved this dispute in favor of the defendants,
stating that its July 1998 dismissal was a
sanction for what amounted to lack of
prosecution. In its order dated November 30,
1998, dismissing the second action as barred by
res judicata, the district court stated that the
first action "was involuntarily dismissed as a
sanction for plaintiff’s violation of this
court’s rules and violation of a court order. .
. . The dismissal of the prior action was not for
lack of jurisdiction, improper venue, or failure
to join a party under Rule 19. Therefore, since
the order of dismissal did not otherwise specify,
dismissal of the prior action operated as
adjudication on the merits of the claims brought
in that action." The heart of the Commission’s
appeal is that the district court’s dismissal "on
the merits" was improper.
Although the local counsel rule, Northern
District of Illinois General Rule 3.13,
specifically indicates that a party’s documents
may be stricken as a sanction for failure to
obtain local counsel, the language of the rule
does not preclude alternative remedies when
necessary. Moreover, a federal court is granted
authority to dismiss an action pursuant to Rule
41(b) for failure to comply with a prior court
order. Fed.R.Civ.P. 41(b). Finally, courts have
discretion to impose sanctions to protect the
judicial process, Chambers v. Nasco, Inc., 501
U.S. 32, 44-45 (1991), and the authority of a
court to dismiss cases sua sponte for lack of
prosecution has long been considered an "inherent
power" that is "necessarily vested in courts to
manage their own affairs so as to achieve the
orderly and expeditious disposition of cases."
Link v. Wabash Railroad Co., 370 U.S. 626, 630-31
(1962).
We appreciate the district court’s frustration
with the Commission’s lack of diligence and its
failures to comply with court directives in the
first action. We also recognize that district
courts must have wide discretion to manage
litigation. "Because district judges have a
better understanding of their litigants and their
docket, review of managerial decisions such as
this one are appropriately deferential." Johnson
v. Kamminga, 34 F.3d 466, 468 (7th Cir. 1994). In
this case, however, we believe the district court
acted beyond its discretionary authority in
dismissing sua sponte the first action.
In Link, the Supreme Court held that the
absence of express notice prior to a sua sponte
dismissal with prejudice for failure to prosecute
is not an automatic denial of due process. 370
U.S. at 632. However, in Ball v. City of Chicago,
2 F.3d 752 (7th Cir. 1993), we restricted a
district court’s dismissal powers in this regard
by requiring the court to provide "due warning"
to plaintiff’s counsel. Although we recognized in
Ball that there may be extreme circumstances in
which an explicit warning is unnecessary before
sua sponte dismissal is used as a sanction, id.
at 756; see also Johnson, 34 F.3d at 468(encouraging, but not requiring, a warning before
dismissing a case for failure to prosecute where
the plaintiff repeatedly delayed the litigation
and finally failed to attend the trial without
sufficient excuse), we have repeatedly emphasized
the general rule that explicit warning must be
given to a plaintiff’s counsel prior to
dismissal. See Williams v. Chicago Bd. of Educ.,
155 F.3d 853, 858 (7th Cir. 1998). "[D]ismissals
without warning are appropriate in only the most
extreme cases, where it is clear that counsel
must have expected his actions (or inaction) to
be answered with dismissal." In re Bluestein &
Co., 68 F.3d 1022, 1026 (7th Cir. 1995).
Although we do not excuse the Commission’s
conduct--indeed, we are puzzled that the
Commission put itself in this position at all--it
is hard to see how the recitation of the local
rules in the April order would have highlighted
the possibility of sanctions far beyond those
authorized by the rules themselves. Under Ball,
the district court’s actions in this case amount
to abuse of discretion.
B.
Nevertheless, despite our conclusion that the
district court abused its discretion in
dismissing the first action with prejudice, that
decision itself is not so squarely before us.
Presumably because the Commission’s counsel did
not realize that the dismissal was on the merits
until after the time limit for doing so expired,
the Commission did not bring a direct appeal.
Rather, it brought a second suit, and now asks us
to review the district court’s dismissal of that
suit as barred by the first one, as well as the
district court’s refusal to vacate the first
judgment under Rule 60. None of these avenues
provides relief in this case.
The Commission first relies on two subdivisions
of Rule 60(b), which enables the district court
to "relieve a party or a party’s legal
representative from a final judgment, order or
proceeding." Fed.R.Civ.P. 60(b). The Commission
argues that the district court should have
vacated the first dismissal judgment under Rule
60(b)(4), which applies to void judgments, or
alternatively under Rule 60(b)(1), which applies
to adverse judgments stemming from excusable
neglect. The district court denied the
Commission’s Rule 60 motion, finding the
Commission’s pleas meritless.
The Commission argues that it was entitled to
relief under Rule 60(b)(4) because the dismissal
of the first action is void. A judgment is void
within the meaning of Rule 60(b)(4) where it is
entered by the court without jurisdiction or in
contravention of due process, Wesco Products Co.
v. Alloy Automotive Co., 880 F.2d 981, 984 (7th
Cir. 1989), and we review denials of 60(b)(4)
motions de novo to the extent they turn on errors
of law. Grun v. Pneumo Abex Corp., 163 F.3d 411,
423 (7th Cir. 1998). The Commission contends that
the dismissal violated due process because the
court failed to give it adequate notice that the
court was contemplating dismissal of the
Commission’s action. However, Link made it clear
that failure to notify a party of the possibility
of dismissal does not necessarily render an
involuntary dismissal void. 370 U.S. at 632.
While we believe the district court’s failure to
warn of the impending dismissal constituted abuse
of discretion, under the facts of this case it
cannot be said that the district court’s
discretionary abuse rose to the level of due
process deprivation. Although a warning would
have been appropriate, this case was not
dismissed entirely out of the blue, over an issue
that the Commission was never apprized of. See,
e.g., Grun, 163 F.3d at 423-24 (holding that the
plaintiff was denied due process when his case
was dismissed for failure to appear at trial,
when he did not receive notice of the trial
date). To the contrary, the district court made
clear its intention to enforce the local rules
strictly in its orders, which at every turn the
Commission chose to read in the light affording
it the most flexibility. We agree that the
dismissal should not have been vacated under Rule
60(b)(4) as void. See Link, 370 U.S. at 633("[W]hen circumstances make such an action
appropriate, a District Court may dismiss a
complaint for failure to prosecute even without
affording notice of its intention to do so or
providing an adversary hearing before acting.
Whether such an order can stand on appeal depends
not on power but on whether it was within the
permissible range of the court’s discretion.").
The Commission also contends that the district
court’s July order dismissing the action should
have been vacated pursuant to Rule 60(b)(1).
Under this subsection, a court may vacate a final
judgment based on mistake, inadvertence,
surprise, or excusable neglect. Fed.R.Civ.P.
60(b)(1). Unlike the Rule 60(b)(4) inquiry, this
one focuses not on the dismissal itself but on
the conduct that gave rise to it. The Supreme
Court explained in Pioneer Investment Services
Co. v. Brunswick Associates, 507 U.S. 380 (1993),
that attorney carelessness can constitute
excusable neglect, but 60(b)(1) relief remains a
discretionary safety valve, and our review under
Rule 60(b)(1) is extremely deferential. United
States v. Golden Elevator, Inc., 27 F.3d 301, 303
(7th Cir. 1994). Our review of the district
court’s denial of the Rule 60(b) motion convinces
us that the district court adequately considered
the Commission’s explanations for its delays in
complying with court orders as well as delays
resulting from the court clerk’s own errors.
Although the circumstances of this case might
arguably constitute excusable neglect permitting
relief, they certainly do not compel that
conclusion. See id. (stating that a Rule 60(b)(1)
motion stands "unless no reasonable person could
have acted as the judge did"). Accordingly, we
affirm the district court’s denial of the
Commission’s Rule 60(b) motion.
In addition to appealing the Rule 60 motion
pertaining to the first action, the Commission
appeals the district court’s judgment in the
second action, which dismissed the case as barred
under res judicata by the first dismissal, and
the Commission also appeals the district court’s
denial of the Commission’s Rule 59(e) motion to
alter or amend that second judgment. This
challenge rests on the assumption that the first
judgment was not on the merits, for it is
undisputed that a decision on the merits would
bar relitigation of the same claim by the
Commission. See People Who Care v. Rockford Bd.
of Educ., 68 F.3d 172, 177 (7th Cir. 1995).
However, we have already found that the first
action was dismissed with prejudice, and that the
sua sponte dismissal in that case (though an
abuse of discretion) therefore operated as
adjudication on the merits. Faced with the
dismissal of its first suit, the Commission could
have taken the customary paths of seeking
reinstatement of its first suit, moving for
amendment of that judgment under Rule 59(e), or
directly appealing. By filing the second action,
and now appealing the dismissal of that action as
barred by res judicata, the Commission is
pursuing what amounts to an impermissible
collateral attack on the first judgment. See
Hudson v. Hedge, 27 F.3d 274, 276 (7th Cir. 1994)
(holding that a plaintiff "cannot use a new suit
to contend that the disposition of the first was
mistaken"). The Commission cannot use review of
the dismissal of the second action to revisit
decisions in the first action that it should have
challenged directly. Accordingly, we find no
error in the district court’s disposition of the
second action.
Conclusion
For the reasons stated herein, we AFFIRM the
rulings of the district court