S. Freedman and Company, Inc v. Marvin Raab

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-4835
S. FREEDMAN AND COMPANY, INC.,
Appellant
v.
MARVIN RAAB; RAAB ENTERPRISES, INC.,
formerly known as PHILADELPHIA FOODS , INC.
v.
SUSAN FREEDMAN
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 06-cv-03723)
District Judge: Honorable Robert B. Kugler
Submitted Under Third Circuit LAR 34.1(a)
November 18, 2009
Before: RENDELL, BARRY and CHAGARES, Circuit Judges
(Opinion Filed: November 23, 2009 )
OPINION

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Following some procedural events not germane to this appeal, the District Court1
ultimately denied Freedco’s motion for reconsideration.
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BARRY, Circuit Judge
S. Freedman & Co., Inc. (“Freedco”) appeals from the June 18, 2007 order of the
District Court granting summary judgment to Marvin Raab and Raab Enterprises
(formerly known as Philadelphia Foods, Inc.) (collectively “Raab”). For the reasons that
follow, we will reverse.
I.
Because we write solely for the parties’ benefit, we set forth only the facts
necessary to our analysis.
In March 2004, Freedco filed a complaint in federal court against Raab alleging
causes of action sounding in contract. Raab answered and asserted contract and tort
counterclaims against Freedco and third-party claims against Susan Freedman. In
November 2004, the District Court noted that Freedco’s complaint failed to properly
allege diversity jurisdiction. Specifically, although the complaint alleged where the
corporate entities maintained a principal place of business, it “fail[ed] to allege the
principle [sic] place of business” of the corporate entities. (App. 68.) The Court
provided Freedco with seven days to cure the jurisdictional defect, but when Freedco
failed to do so, the Court dismissed the complaint on December 10, 2004.1
We reviewed that order and affirmed. In so doing, we exercised appellate

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jurisdiction under 28 U.S.C. § 1291.
Thereafter, Freedco filed a complaint in the Superior Court of New Jersey against
Raab alleging the same causes of action. Raab removed the matter to federal court
conceding diversity jurisdiction because Freedco pled that Freedco maintained “its”
principal place of business in Pennsylvania and that Raab maintained “its” principal place
of business in New Jersey. Raab answered and, again, asserted substantially identical
counterclaims and third-party claims. Raab then moved for summary judgment, and the
District Court granted the motion on June 18, 2007.
In granting summary judgment, the District Court noted that the order of
December 10 – the first dismissal – dismissed the case without prejudice but concluded
that our adjudication of the appeal necessarily transformed that order into one with
prejudice. The District Court then stated: “While [the first dismissal] did not technically
address the merits of [Freedco’s] claims, the Third Circuit’s implicit finding that the
dismissal is with prejudice leads to the conclusion that this Court’s prior dismissal is
nonetheless to be treated as having been based on the prior action’s substantive merits.”
(App. 322.) The District Court also dismissed without prejudice Raab’s counterclaims
and cross claims.
Freedco attempted to appeal the District Court’s order of June 18. After that
notice of appeal was filed, Raab reinstated its counterclaims and third-party claims in
federal court. We, therefore, dismissed the appeal for lack of appellate jurisdiction

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Until such time as the status conference took place, it was unclear to the parties and,2
likely, to the Court whether any matters remained for disposition. The Court marked the
case closed following the conference, and notice of appeal was timely filed thereafter.
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because the June 18 order “contemplated the possibility of future proceedings, which
have in fact commenced” (i.e., Raab’s reinstated counterclaims and third-party claims).
(App. 329.)
On October 17, 2008, Raab voluntarily dismissed without prejudice its
counterclaims and third-party claims pursuant to Federal Rule of Civil Procedure 41(a)(1)
& (c). A status conference was called for by the District Court and was held on October
30, 2008. As a result of that conference, the Court determined that nothing remained for
decision and, on November 14, 2008, entered the final order in this case. Freedco timely
appealed.2
We have jurisdiction pursuant to 28 U.S.C. § 1291.
II.
This appeal raises the following question: whether our exercise of appellate
jurisdiction pursuant to 28 U.S.C. § 1291 over a jurisdictional dismissal of a case without
prejudice converts the dismissal to one on the merits, thereby permitting application of
res judicata. Neither the District Court nor Raab has cited any case that even suggests
that the answer to this question of law is “Yes.” Our review is plenary. See Turner v.
Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir. 1990).
“Res judicata requires a showing that there has been (1) a final judgment on the

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The quoted excerpt is from the version of Rule 41(b) in effect at the time of the June3
18 order. The quoted language has since been amended, but the substance remains
unchanged.
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merits in a prior suit involving (2) the same claim and (3) the same parties or their
privies.” United States v. 5 Unlabeled Boxes, 572 F.3d 169, 173 (3d Cir. 2009) (emphasis
added) (quotation omitted). Thus, a final judgment on the merits is a necessary
prerequisite to application of the doctrine.
It is well established that where a federal court dismisses a matter for lack of
subject matter jurisdiction, “it cannot decide the case on its merits. It has no authority to
do so.” In re Orthopedic “Bone Screw” Prods. Liab. Litig., 132 F.3d 152, 155 (3d Cir.
1997). Therefore, the first dismissal did not address the merits of this dispute, and the
fact that we affirmed that dismissal did not convert the dismissal into something it was
not.
Raab also contends that Federal Rule of Civil Procedure 41(b) mandates that the
dismissal in the First Litigation be treated as one “upon the merits.” That reading is
misguided. Federal Rule of Civil Procedure 41(b) provides that unless a court states
otherwise, “a dismissal under this subdivision and any dismissal not provided for in this
rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to
join a party under Rule 19, operates as an adjudication upon the merits.” (emphasis3
added). The foregoing italicized language expressly exempts dismissals for lack of
jurisdiction from Rule 41(b)’s purview, and that rule has no application here.

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Therefore, because the merits of this matter were never addressed by the District
Court prior to – or in – the first dismissal, the preclusive effects of res judicata did not
and, indeed, cannot attach to this dispute.
Our refusal to apply res judicata here comports with Compagnie Des Bauxites De
Guinee v. L’Un Ion Atlantique S.A. D’Assurances, 723 F.2d 357 (3d Cir. 1983). There,
Compagnie des Bauxites de Guinee (“CBG”) filed a lawsuit in the district court against,
among others, various foreign excess insurers. Although the district court found that it
had personal jurisdiction over the excess insurers, we, on interlocutory appeal, disagreed
and dismissed the excess insurers from the case. Thereafter, CBG filed a new action
against the excess insurers “based on the same facts and alleging the same cause of
action” as in the prior lawsuit. Id. at 360. The district court dismissed the action on res
judicata grounds, finding that CBG could not relitigate the jurisdictional issue. We
disagreed, finding that res judicata did not prevent the suit from being brought because
the first dismissal was “not a judgment on the merits.” Id.
Although Compagnie Des Bauxites De Guinee involved interlocutory review of a
district court’s initial order with respect to personal jurisdiction, those distinctions are of
no moment. Compagnie, an older case, to be sure, demonstrates that a jurisdictional
dismissal – a dismissal not on the merits – may not serve as a res judicata bar to future
litigation.
III.

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For the reasons stated above, we will reverse the order of the District Court.

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