Peter T. Dvorak v. Granite Creek GP Flexcap I

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-1892
PETER T. DVORAK,
Plaintiff-Appellant,
v.
GRANITE CREEK GP FLEXCAP I, LLC; MARK A. RADZIK; and
PETER LEHMAN,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 C 9996 — Thomas M. Durkin, Judge.
____________________
ARGUED OCTOBER 29, 2018 — DECIDED NOVEMBER 6, 2018
____________________
Before BAUER, EASTERBROOK, and SCUDDER, Circuit Judges.
EASTERBROOK, Circuit Judge. A plaintiff may dismiss a
federal suit without prejudice to refiling. That privilege may
be used only once. “[I]f the plaintiff previously dismissed
any federal- or state-court action based on or including the
same claim, a notice of dismissal operates as an adjudication
on the merits.” Fed. R. Civ. P. 41(a)(1)(B). Illinois follows the
same rule. 735 ILCS 5/13-217.
2 No. 18-1892
This appeal arises from a federal-state-federal sequence:
the first suit was filed in federal court and dismissed, the
second was filed in Illinois court and dismissed, and the
third is back in federal court. The district judge deemed the
Illinois statute applicable and dismissed the third suit with
prejudice. 2017 U.S. Dist. LEXIS 25211 (N.D. Ill. Feb. 23, 2017).
Rule 41(a)(1)(B) does not by itself require dismissal, be-
cause it ajaches consequences only to the federal court’s
own acts. So if the first suit is filed in state court and dis-
missed, and the second is filed in federal court, then volun-
tary dismissal of the second suit is covered by Rule
41(a)(1)(B) and is with prejudice. But when the second suit is
filed and dismissed in state court, state law determines
whether that act is with or without prejudice. Still, the effect
that Illinois law gives to a second dismissal depends on the
proper characterization of the initial dismissal—and that is
an issue of forum law. Federal law determines the appropri-
ate characterization of what happens in federal court, then
state law determines whether (given that characterization)
the later dismissal of a state suit is with or without prejudice.
Here is the text of 735 ILCS 5/13-217 (emphasis added):
[I]f judgment is entered for the plaintiff but reversed on appeal,
or if there is a verdict in favor of the plaintiff and, upon a motion
in arrest of judgment, the judgment is entered against the plain-
tiff, or the action is voluntarily dismissed by the plaintiff, or the ac-
tion is dismissed for want of prosecution, or the action is dismissed
by a United States District Court for lack of jurisdiction, or the action
is dismissed by a United States District Court for improper ven-
ue, then, whether or not the time limitation for bringing such ac-
tion expires during the pendency of such action, the plaintiff …
may commence a new action within one year or within the re-
maining period of limitation, whichever is greater … .
No. 18-1892 3
Gendek v. Jehangir, 119 Ill. 2d 338 (1988), holds that this law
permits only a single refiling.
All three of Dvorak’s suits contend that one or more of
the defendants mishandled a capital call for a limited part-
nership (Granite Creek Flexcap I LP) in which he had invest-
ed. The errors allegedly caused Dvorak to lose his stake in
the partnership. Dvorak’s first suit, in federal court under
the diversity jurisdiction, named the partnership among the
defendants. His lawyer failed to investigate the citizenship
of other partners and thus did not appreciate that the suit
did not come within federal subject-majer jurisdiction—for
Dvorak and at least one of the other partners are citizens of
Florida, and in a suit under 28 U.S.C. §1332(a) a partnership
has the citizenship of every partner, limited as well as gen-
eral. Carden v. Arkoma Associates, 494 U.S. 185 (1990).
Dvorak had three choices: he could have dismissed the
partnership as a defendant, he could have waited for the
judge to dismiss the case for lack of jurisdiction, or he could
have dismissed the whole suit. Had he elected the second
option, then the dismissal for lack of jurisdiction would have
fit §5/13-217, and the suit would have counted under the
state’s single-refiling statute. Instead he elected the third op-
tion, in which defendants concurred.
Dvorak refiled the suit in state court. A state judge dis-
missed one of his claims on the merits. Rather than wait for
decision on his remaining claims, Dvorak dismissed the state
suit and filed this third action in federal court, omijing both
the partnership and the theory on which he had already lost
in state court. Defendants then moved to dismiss on the
ground that §5/13-217 permits one refiling, not two. Dvo-
rak’s principal response is that the first suit was dismissed
4 No. 18-1892
by agreement of all parties rather than by the plaintiff uni-
laterally and so does not count under Illinois law, which re-
fers to an “action … voluntarily dismissed by the plaintiff”.
The right way to understand what happened in the first
suit depends on the law of the federal forum where it had
been filed, so we reproduce the rule under which the parties
stipulated to the suit’s dismissal:
Rule 41. Dismissal of Actions
(a) VOLUNTARY DISMISSAL.
(1) By the Plaintiff.
(A) Without a Court Order. Subject to Rules 23(e),
23.1(c), 23.2, and 66 and any applicable federal
statute, the plaintiff may dismiss an action without
a court order by filing:
(i) a notice of dismissal before the opposing par-
ty serves either an answer or a motion for sum-
mary judgment; or
(ii) a stipulation of dismissal signed by all par-
ties who have appeared.
(B) Effect. Unless the notice or stipulation states
otherwise, the dismissal is without prejudice. But if
the plaintiff previously dismissed any federal- or
state-court action based on or including the same
claim, a notice of dismissal operates as an adjudica-
tion on the merits.
Dvorak insists that a stipulation of dismissal differs from a
voluntary dismissal by the plaintiff, but Rule 41 tells us oth-
erwise. Dismissal by stipulation is classified in the same
place as unilateral dismissal. Rule 41(a) labels both situations
as voluntary dismissals by the plaintiff.
No. 18-1892 5
Dvorak wants us to ignore the headings in Rule 41, but
we think that they should be given the same effect as the rest
of the Rule. Under the Rules Enabling Act, 28 U.S.C. §§ 2071–
77, headings and text are promulgated together by the Su-
preme Court, on the recommendations of the Judicial Con-
ference, the Standing Commijee on Rules of Practice and
Procedure, and the appropriate advisory commijee. They
are equally authoritative. See Charles Alan Wright & Arthur
R. Miller, 4 Federal Practice & Procedure §1007 (3d ed. 2008).
No majer the right way to treat headings in statutes, which
may be added by codifiers after a law is enacted, the head-
ings, labels, and captions in the federal rules have the same
source, and same authenticity, as the text of the rules.
Suppose we throw out the captions and headings. Noth-
ing changes, because they are accurate. See Wright & Miller,
9 Federal Practice & Procedure §2363. Unilateral dismissal by
the plaintiff is a subset of a dismissal to which all parties
agree. Both reflect the plaintiff’s consent—a consent that is
necessary to the disposition—and so are voluntary dismis-
sals from the plaintiff’s perspective. A dismissal is not less a
voluntary dismissal by the plaintiff just because other parties
agree that the suit should end. And so we thought in Jenkins
v. Maywood, 506 F.3d 622 (7th Cir. 2007). We do not call Jen-
kins a holding on that point because the contested issue was
not how to characterize a stipulated dismissal, but what date
it should receive. Still, the court thought it obvious that a
joint notice of dismissal is a kind of voluntary dismissal, be-
cause the plaintiff’s consent is essential. What was an as-
sumption in Jenkins becomes a holding today.
This brings us back to Illinois law, for the fact that a fed-
eral court calls a stipulated dismissal a voluntary dismissal
6 No. 18-1892
by the plaintiff does not necessarily make it one for the pur-
pose of state law—and state law governs the effect of a state
court’s judgment. See 28 U.S.C. §1738. Whether a stipulated
dismissal counts as a voluntary dismissal by the plaintiff, for
the purpose of §5/13-217, is something that the Supreme
Court of Illinois decided in Gendek. It held that a stipulated
dismissal counts. Dvorak contends that Gendek did not really
hold this, despite its language, because there had been two
motions in that case: one by plaintiff alone and one by stipu-
lation. Yet the Supreme Court of Illinois treated all-party
stipulation as a voluntary dismissal by the plaintiff, and we
read Gendek that way in Evans v. Lederle Laboratories, 167 F.3d
1106 (7th Cir. 1999). No court, state or federal, has under-
stood Gendek any other way. It follows that the dismissal of
Dvorak’s first federal suit counts under §5/13-217, making
the current suit his third. It is barred by §5/13-217.
Two complications require brief ajention.
First, this third suit includes two defendants (Mark
Radzik and Peter Lehman) who were not parties to the first
suit. The district court held that both are entitled to prevail
because the Illinois one-refiling statute applies with respect
to all persons who could have been named in the initial
suits, whether or not they were, provided that the new suit
arises from the same transaction (or, equivalently, the same
core of operative facts). The district court correctly applied
the analysis of this subject in Evans. Accord, Muhammad v.
Oliver, 547 F.3d 874, 877–78 (7th Cir. 2008). The reasoning of
those decisions need not be repeated here.
Second, this suit includes one claim against Radzik that
does not arise from the same transaction as the first two suits
and so is not covered by the one-refiling rule or the doctrine
No. 18-1892 7
of claim preclusion. Radzik was the manager of Granite
Creek GP Flexcap I, LLC, which was the general partner of
the Granite Creek Flexcap I partnership in which Dvorak
had invested. Radzik also was one of Dvorak’s personal
creditors. In mid-2008 Dvorak owed about $750,000 to
Radzik. When the partnership issued a capital call, also for
$750,000, Dvorak told Radzik that he could not satisfy both
obligations and asked him what to do. According to the
complaint, from which the statements in this paragraph
come, Radzik told Dvorak to pay the personal debt ahead of
the partnership debt. Dvorak now contends that this advice
was negligent and led to the loss of his interest in the part-
nership. The district court dismissed this new claim as
barred by the five-year statute of limitations for negligence
claims in Illinois. 2018 U.S. Dist. LEXIS 48810 (N.D. Ill. Mar.
26, 2018). The claim accrued in 2008, the judge held, so Dvo-
rak’s suit in 2016 came years too late.
Dvorak contests this decision on the ground that the
complaint alleges other, later wrongful acts by Radzik. Ac-
cording to Dvorak, when one person commits multiple
wrongs the statute of limitations runs from the last of them.
That is so when multiple wrongs cause a cumulative injury.
See Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199
Ill. 2d 325, 345 (2002). See also, e.g., National Railroad Passen-
ger Corp. v. Morgan, 536 U.S. 101 (2002) (distinguishing dis-
crete wrongs, each of which carries its own period of limita-
tions, from acts that become wrongful only cumulatively).
But Dvorak does not allege that it took multiple steps by
Radzik to add up to one tort or that he suffered cumulative
harm from a series of similar acts. Nor does he contend that
Radzik always acted in the same capacity. Instead he alleges
that in 2008 Radzik preferred his own interests over those of
8 No. 18-1892
both Dvorak and the partnership, and that in later years, in
his capacity as the manager of the partnership’s general
partner, Radzik took different steps that led to other partners
acquiring Dvorak’s stake. These events are discrete, as are
the capacities in which Radzik acted and the harms Dvorak
suffered. The legal theories also are discrete: negligence for
Radzik’s advice in 2008 and breach of fiduciary duty for
those later events in which Radzik was acting on behalf of
the general partner. Illinois does not allow allegations of dis-
tinct new wrongs to extend, indefinitely, the time to sue on
old ones. Belleville Toyota, 199 Ill. 2d at 348–49. The district
court properly dismissed this claim.
AFFIRMED