HPL GP, LLC, et al v. Continental Holdings, Inc.

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 24-10145
Non-Argument Calendar
____________________
CITY OF JACKSONVILLE, NEIGHBORHOOD CODE
ENFORCEMENT DIVISION,
a State of Florida municipal corporation,
Plaintiff-Counter Defendant,
HPL GP, LLC,
HOUSTON PIPE LINE COMPANY, L.P.,
Plaintiffs-Third Party Defendants-Counter Claimants-Appellees,
versus
JACKSONVILLE HOSPITALITY HOLDINGS L.P.,
a Delaware Limited Partnership, et al.,
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2 Opinion of the Court 24-10145
Defendants,
CONTINENTAL HOLDINGS, INC.,
a Wyoming Corporation,
Defendant-Third Party Plaintiff-Counter Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 3:12-cv-00850-HES-MCR
____________________
Before WILSON, NEWSOM , and ANDERSON, Circuit Judges.
PER CURIAM:
Less than a year ago, we dismissed this appeal for lack of ju-
risdiction. See City of Jacksonville v. Jacksonville Hosp. Holdings, L.P.,
82 F.4th 1031, 1039 (11th Cir. 2023). After review of a record span-
ning eight years of litigation and ten different parties, we concluded
that various stipulated dismissals failed to abide by Federal Rule of
Civil Procedure 41(a)(1)(A)(ii)’s signature requirements. Id. at
1034. Faced with upwards of seven ineffective stipulations, we
lacked jurisdiction to consider the merits. Id. at 1035. Conse-
quently, the parties returned to the district court and Continental
Holdings, Inc. (Continental), among others, moved to dismiss
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24-10145 Opinion of the Court 3
these pending claims pursuant to Federal Rules of Civil Procedure
41(a)(2) and (b). Doc. 415. The district court granted the motion.
Doc. 416.
With the jurisdictional issues resolved, this appeal followed.
The merits claims mirror those brought before us in the original
litigation: Continental once again challenges the district court’s de-
nial of its November 2015 motion to voluntarily dismiss Houston
Pipe Line Company, L.P. and HPL GP, LLC (collectively, Hou-
ston) from the case. See Fed. R. Civ. P. 41(a)(2); Jacksonville Hosp.,
82 F.4th at 1034–35. Continental urges us to reverse the district
court’s Rule 41(a)(2) denial and vacate all subsequent orders re-
garding its litigation with Houston.
After review of the record and parties’ briefing, we conclude
that the district court abused its discretion in its Rule 41(a)(2) deci-
sion. We vacate and remand with instructions to reinstate the case
for proceedings consistent with this opinion.
I. Background
This case concerns liability for environmental contamina-
tion near a gas plant in the City of Jacksonville (the City).1 The City
filed suit against several parties, including Continental, under the
Comprehensive Environmental Response, Compensation, and Li-
ability Act of 1980, 42 U.S.C. §§ 9607(a), 9613(g)(2), and Florida
1 Our last opinion on this matter outlines the broader history of this litigation.
See Jacksonville Hosp., 82 F.4th at 1034–35. Here, we focus on the history most
salient to our present appeal.
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4 Opinion of the Court 24-10145
Statute § 376.313. Relevant here, there were questions surround-
ing the gas plant’s successorship. The City’s suit alleged the follow-
ing: the gas plant’s ownership and operations originated with Jack-
sonville Gas Company in the early twentieth century; after various
mergers and a name change, Jacksonville Gas Company became
the Florida Gas Company (FGC); Continental is the successor of
FGC; therefore, Continental is liable for the contamination.
In April 2015, Continental filed an amended third-party com-
plaint against numerous third-party defendants, including Hou-
ston. Continental alleged that Houston was the true successor to
FGC and liable for any contamination. In June, Houston answered
and brought counterclaims in return. Then, that November, Con-
tinental moved to voluntarily dismiss its third-party complaint
against Houston without prejudice pursuant to Rule 41(a)(2). Hou-
ston opposed, and a hearing was held on the matter.
The parties disputed the propriety of dismissal. Continental
argued, among other things, that it reasonably relied on corporate
history documents in bringing its third-party complaint; yet, at that
point in litigation, Continental lacked the requisite evidence to sat-
isfy its burden; and Houston incurred minimal costs over the pre-
ceding months. Accordingly, Continental claimed it wanted to fo-
cus on its case with the City and needed more time to collect evi-
dence against Houston. Houston countered that its dismissal
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24-10145 Opinion of the Court 5
would substantially prejudice its legal interests.2 Houston further
alleged that Continental unreasonably delayed its discovery re-
sponses and merely sought to avoid an adverse ruling. Ultimately,
the district court denied Continental’s motion:
As to Continental’s Motion to Dismiss the claims
against [Houston], Houston objects based upon its
position that it would be prejudiced if a successor lia-
bility determination was made during the pendency
of this litigation without its active participation. The
Court agrees that Houston has important interests at
stake and will not dismiss the claims against it at this
time.
Doc. 204 at 2–3.
In early September 2016, Houston moved for summary
judgment against Continental and served it with a motion for sanc-
tions, demanding Continental dismiss it from suit with prejudice.
Houston based its motion on discovery evidence that Continental
historically represented itself as a successor to FGC and collected
millions of dollars in insurance payments. According to Houston,
the evidence proved the suit’s frivolity, which Continental at-
tempted to conceal via bad faith motions practice. Later that
month, Continental again moved to dismiss Houston without
2 These interests included participating contemporaneously in discovery, filing
an upcoming motion for summary judgment, and resolving the corporate suc-
cessorship issue.
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6 Opinion of the Court 24-10145
prejudice. Houston objected again, and filed its sanctions motion
with the court under 28 U.S.C. § 1927 and the court’s inherent au-
thority.
The following year, the court denied Continental’s second
motion to dismiss and granted Houston’s motion for sanctions.
Approximately four years later and after a hearing on the sanctions
motion, the court entered an order granting Houston approxi-
mately $1.5 million in attorneys’ fees and costs. The court found
that “not [only] was [Continental’s complaint] frivolous, this was
indeed an exceptional case.” Doc. 401 at 11. Pointing to the origi-
nal sanctions order, the court reiterated that Continental had not
only “engaged in some bad faith conduct while prosecuting a legiti-
mate complaint,” but that the “complaint . . . was brought in bad
faith.” Id. at 10. Finally, the court awarded fees under Florida Stat-
ute § 376.313(6) in the public interest.
II. Law and Analysis
A. Standard of Review
We review a district court’s decision to allow or deny a vol-
untary dismissal under Rule 41(a)(2) for an abuse of discretion.
Arias v. Cameron, 776 F.3d 1262, 1268 (11th Cir. 2015). We similarly
review the court’s sanctions order for an abuse of discretion,
whether under § 1927 or its inherent powers. Amlong & Amlong,
P.A. v. Denny’s, Inc., 500 F.3d 1230, 1237–38 (11th Cir. 2007).
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24-10145 Opinion of the Court 7
B. Rule 41(a)(2) Voluntary Dismissal
After an opposing party serves its answer, “an action may be
dismissed at the plaintiff’s request only by court order, on terms
that the court considers proper.” Fed. R. Civ. P. 41(a)(2). The dis-
trict court “enjoys broad discretion in determining whether to al-
low a voluntary dismissal under Rule 41(a)(2).” Arias, 776 F.3d at
1268. Our precedent walks a line by which we favor granting dis-
missals while protecting defendants’ rights. In general, we aim to
protect defendants’ substantial rights—not their preferences.
By Rule 41(a)(2)’s permissive language, voluntary dismissals
are not a matter of right. When deciding whether to permit dis-
missal, courts “should keep in mind the interests of the defendant,
for Rule 41(a)(2) exists chiefly for protection of defendants.” Fisher
v P.R. Marine Mgmt., Inc., 940 F.2d 1502, 1502–03 (11th Cir. 1991)
(per curiam). Indeed, “[t]he purpose of the rule is primarily to pre-
vent voluntary dismissals which unfairly affect the other side, and
to permit the imposition of curative conditions.” McCants v. Ford
Motor Co., 781 F.2d 855, 856 (11th Cir. 1986) (quotation marks omit-
ted). Nonetheless, we generally find that “a motion for voluntary
dismissal should be granted unless the defendant will suffer clear
legal prejudice other than the mere prospect of a second lawsuit.”
Arias, 776 F.3d at 1268. “The crucial question to be determined is,
[w]ould the defendant lose any substantial right by the dismissal.”
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8 Opinion of the Court 24-10145
Durham v. Fla. E. Coast Ry. Co., 385 F.2d 366, 368 (5th Cir. 1967).3
And “[w]hile the district court should keep in mind the interests of
the defendant . . . the court should also weigh the relevant equities
and do justice between the parties in each case, imposing such costs
and attaching such conditions to the dismissal as are deemed ap-
propriate.” Arias, 776 F.3d at 1269 (internal citation and quotation
marks omitted).
Our precedent provides circumstances which tip the equities
in either direction. For plaintiffs, we rejected arguments that de-
fendants would be prejudiced where “plaintiff may obtain some
tactical advantage over the defendant in future litigation.” Id. at
1272 (quotation marks omitted). Further, an attempt to avoid an
adverse ruling, in and of itself, is insufficient. See Potenberg v. Bos.
Sci. Corp., 252 F.3d 1253, 1258 (11th Cir. 2001). We have found that
the inconvenience to lawyers who proceeded up to the point of
trial, without more, does not justify denial of a voluntary dismissal
motion. See Durham, 385 F.2d at 367. And a court does not abuse
its discretion dismissing an action without prejudice where “the
‘practical prejudice’ of expenses incurred in defending the action
can be alleviated by the imposition of costs or other conditions.”
Potenberg, 252 F.3d at 1260 (internal quotation marks omitted). For
defendants, courts generally focus upon bad faith on part of the
plaintiff. See Arias, 776 F.3d at 1272. We also find that dismissal is
3 Decisions of the former Fifth Circuit rendered before October 1, 1981, are
binding on our court. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir.
1981) (en banc).
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24-10145 Opinion of the Court 9
ordinarily denied when defendants incur considerable expense—
unless it is accompanied with orders for some amount of reim-
bursement. See McCants, 781 F.2d at 860.
With this law in mind, we find that the district court abused
its discretion in denying Continental’s first Rule 41(a)(2) motion.
As a preliminary matter, we note that we review the court’s first
Rule 41(a)(2) denial, which was decided before Continental’s osten-
sibly bad faith conduct was revealed in discovery. Upon review of
the decision at that earlier point in time, our reading of the court’s
concerns for “a successor liability determination” in the litigation
“without [Houston’s] active participation” reveals that its decision
hinged on Houston’s fears of an “empty-chair” litigation strategy.
The hearing’s transcript similarly demonstrates an overt emphasis
upon fears of future litigation.
Yet these concerns fail to justify denial of a motion to volun-
tarily dismiss. First, as Houston’s counsel admitted (and the district
court pointed out), the doctrine of collateral estoppel4 prevents
Continental or any other party from using the litigation’s determi-
nation of successor liability against Houston in future litigation.
Any development of evidence against Houston during the present
litigation would be a mere “tactical advantage” in a second lawsuit,
4 The doctrine only applies in subsequent litigation where “the parties are the
same or in privity with each other and the party against whom the earlier de-
cision is asserted had a full and fair opportunity to litigate the issue in the ear-
lier proceeding.” Grayson v. Warden, Comm’r, Ala. Dep’t of Corr., 869 F.3d 1204,
1223 (11th Cir. 2017). Houston’s dismissal would preclude either finding.
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10 Opinion of the Court 24-10145
rather than a sufficient objection to voluntary dismissal. Arias, 776
F.3d at 1272. And the prospect of another suit down the road is an
insufficient reason to deny a motion for voluntary dismissal. See id.
at 1268. Although Continental’s decision to hail Houston into
court cost Houston money, the court may impose conditions for
dismissal, including costs up to that point in litigation, see McCants,
781 F.2d at 857, and costs if, or when, Continental later refiles, see
Potenberg, 252 F.3d at 1260. As a result, our review of the record
reveals a lack of “clear legal prejudice” against Houston. Arias, 776
F.3d at 1268. Due to the court’s reliance upon Houston’s concerns
regarding the litigation’s fact determinations, coupled with the cu-
rative conditions available upon Rule 41(a)(2) dismissals, we find
that the district court abused its discretion in its denial of Continen-
tal’s November 2015 motion to dismiss.
C. Subsequent Orders
“A voluntary dismissal without prejudice renders the pro-
ceedings a nullity and leaves the parties as if the action had never
been brought.” United States v. $760,670.00 in U.S. Currency, 929
F.3d 1293, 1303 (11th Cir. 2019) (quotation marks omitted). Upon
reversal, we may “remand with instructions that the case be rein-
stated” where “the complaint may be dismissed without prejudice
upon such terms and conditions as the court deems proper.”
Durham, 385 F.2d at 369.
After an action is voluntarily dismissed pursuant to Rule
41(a), a district court is ordinarily stripped of jurisdiction. See Abso-
lute Activist Value Master Fund Ltd. v. Devine, 998 F.3d 1258, 1265
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24-10145 Opinion of the Court 11
(11th Cir. 2021). However, the court retains jurisdiction to con-
sider “a limited set of issues,” including the imposition of costs, at-
torneys’ fees, and sanctions. Id.
The Supreme Court has explained that because a “violation
of Rule 11 is complete when the paper is filed, a voluntary dismissal
does not expunge the Rule 11 violation.” Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384, 395 (1990) (internal citation and quotations
omitted). A court may continue to entertain a Rule 11 motion after
terminating a case because federal courts “may consider collateral
issues after an action is no longer pending,” and sanctions determi-
nations are “a collateral issue: whether the attorney has abused the
judicial process, and, if so, what sanction would be appropriate.”
Id. at 395–96.
We extended Cooter & Gell’s holding in Hyde v. Irish, 962 F.3d
1306 (11th Cir. 2020). The parties there moved for sanctions at a
point in the case that the district court ultimately found it lacked
subject matter jurisdiction. Id. at 1308. Upon review, we explained
that: (1) ruling on collateral issues does not implicate constitutional
concerns; and (2) “the interest in having rules of procedure obeyed
outlives the merits of the case.” Id. at 1309–10 (internal quotation
marks omitted and alteration adopted). We concluded that, as con-
sistent with at least five other circuits, “a district court may address
a sanctions motion based on its inherent powers or § 1927 even if
it lacks jurisdiction over the underlying case.” Id. at 1310.
In the present case, the orders subsequent to the district
court’s initial Rule 41(a)(2) denial require mixed treatment. First,
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12 Opinion of the Court 24-10145
the summary judgment order should be vacated.5 Doing so places
the parties in a position as if the action had never been brought. See
U.S. Currency, 929 F.3d at 1303. And because summary judgment
motions go to the merits of the case, the court would not have had
jurisdiction over the motion had Houston been dismissed. Contra
Hyde, 962 F.3d at 1310.
However, the sanctions and fees orders should be vacated
and remanded for reconsideration. Both motions dealt with issues
collateral to the underlying merits, which are properly considered
even after dismissal. See Cooter & Gell, 496 U.S. at 396–98. This is
permissible even where the motions come after a party is voluntar-
ily dismissed, and the court no longer has jurisdiction of the under-
lying merit determinations. See Hyde, 962 F.3d at 1308–10. Allow-
ing reconsideration on remand supports the fundamental under-
pinnings of Rule 11 as well. First, a remand aligns with the Su-
preme Court’s admonishment that a Rule 11 violation vests the
moment a frivolous complaint is filed, and the harm to the judici-
ary occurs even if the careless plaintiff quickly dismisses the action.
See Cooter & Gell, 496 U.S. at 395, 398. Second, permitting recon-
sideration furthers the “central purpose of Rule 11,” which “is to
deter baseless filings.” Id. at 393. Because the sanctions and fees
orders rest on conduct that occurred after Continental filed its
5 Continental waived any argument that we should reverse the sanctions and
summary judgment orders on the ground that issues of fact remained. This
argument occurs in a footnote at the end of its initial brief and lacks any ac-
companying case law. These arguments are insufficient and constitute waiver.
See Robinson v. Sauls, 46 F.4th 1332, 1341 n.6 (11th Cir. 2022).
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24-10145 Opinion of the Court 13
November 2015 Rule 41(a)(2) motion, the court should reconsider
its judgment by focusing its inquiry on any bad faith conduct up
until the point where Houston would have been dismissed from
the case.
III. Conclusion
We hold that the district court abused its discretion in its de-
nial of Continental’s November 2015 Rule 41(a)(2) motion to vol-
untarily dismiss. We therefore VACATE and REMAND the dis-
trict court’s first Rule 41(a)(2) order with instructions to reinstate
the case. We further VACATE the summary judgment order, and
VACATE and REMAND the court’s sanctions and fees orders.
Continental shall file a new motion to voluntarily dismiss. The
court should reconsider the sanctions and fees motions based upon
bad faith conduct up and until Continental’s filing of its first motion
to voluntarily dismiss. Upon Continental’s filing of the new mo-
tion, the court should condition Houston’s dismissal on any addi-
tional terms and conditions as it deems proper.
VACATED and REMANDED.
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