ADVANTEDGE BUSINESS GROUP, LLC v. Thomas E. Mestmaker & Assoc.

FILED United States Court of Appeals Tenth Circuit

January 22, 2009 PUBLISH Elisabeth A. Shumaker Clerk of Court UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

ADVANTEDGE BUSINESS GROUP, L.L.C., a Colorado limited liability company,

Plaintiff-Appellant,

v. No. 07-1209

THOMAS E. MESTMAKER & ASSOCIATES, INC., a California corporation; THOMAS E. MESTMAKER, individually; RICK D. HYMAN, individually; JEFFREY WOODY, individually and doing business as American Family Insurance; DAVID WILLIAMS, individually; AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation,

Defendants and Cross- Defendants-Appellees,

and

AMERICAN EMPLOYMENT GROUP, INC.,

Defendant and Cross-Claimant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. NO. 02-CV-901-WDM-CBS) Submitted on the briefs: *

Frederick J. Baumann and Stephen E. Csajaghy, Rothgerber Johnson & Lyons LLP, Denver, Colorado, for Plaintiff-Appellant.

Ellis J. Mayer, Nathan, Bremer, Dumm & Myers, P.C., Denver, Colorado, for Defendants-Appellees Thomas E. Mestmaker & Associates, Inc., Thomas E. Mestmaker, and Rick D. Hyman.

Brent Anderson and Jessica E. Yates, Snell & Wilmer L.L.P., Denver, Colorado, for Defendants-Appellees American Family Mutual Insurance Company and Jeffrey Woody.

Before MURPHY, McKAY, and BRORBY, Circuit Judges.

MURPHY, Circuit Judge.

Plaintiff AdvantEdge Business Group, L.L.C. (AdvantEdge) appeals the

district court’s order dismissing its case without prejudice for lack of prosecution.

The order of dismissal closed the case, and this court has jurisdiction. See

28 U.S.C. § 1291; Rogers v. Andrus Transp. Servs., 502 F.3d 1147, 1151

(10th Cir. 2007) (stating order dismissing complaint without prejudice was

appealable because it closed the case). Although AdvantEdge also challenges the

* After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument.

-2- district court’s earlier order granting partial summary judgment, this court

declines to review that order. The order of dismissal is affirmed.

BACKGROUND

The underlying litigation concerned a health-insurance plan AdvantEdge

purchased in November 2001. 1 AdvantEdge, a professional employer

organization providing payroll and health insurance services, purchased the plan

to cover its clients and employees. AdvantEdge alleged that defendants falsely

stated the plan was ERISA-compliant and was fully-funded, including reinsurance

or stop-loss insurance, by an “A-rated” insurance carrier. After discovering the

alleged misrepresentations, AdvantEdge filed suit in May 2002 stating numerous

causes of action. In late March 2006, the district court granted summary

judgment to certain defendants on some, but not all, of AdvantEdge’s claims.

The litigation proceeded until March 2007, when AdvantEdge’s attorney

filed a motion to withdraw asserting his client had failed to communicate with

him and he could not continue to represent it. On March 13, 2007, the district

court ordered AdvantEdge to show cause why the case should not be dismissed,

giving it until April 6, 2007, to respond. The district court also postponed a

pretrial hearing scheduled for March 15, 2007, over the objection of the

1 AdvantEdge sued various participants in the insurance-policy sale. AdvantEdge dismissed its claims against some defendants in the district court. The alleged roles of the defendants are not relevant to this appeal. Defendant Williams is dismissed from this appeal.

-3- defendants, who argued they should not have to incur additional expenses to

prepare for the hearing at a later date.

AdvantEdge failed to respond to the show-cause order. Consequently, the

district court granted counsel’s motion to withdraw and dismissed the case

without prejudice for failure to prosecute. The court also awarded costs to the

respective defendants. During the thirty-day period for filing a notice of appeal,

AdvantEdge retained new counsel and filed a timely notice of appeal from the

order of dismissal. See Fed. R. App. P. 4(a)(1)(A) (notice of appeal in civil case

must be filed within thirty days after judgment). Ten days later, after the filing

deadline for a notice of appeal had passed, AdvantEdge filed an amended notice,

indicating that it was also appealing the interlocutory order granting partial

summary judgment.

On appeal, AdvantEdge challenges the interlocutory order and the order

dismissing the case for lack of prosecution. Defendants contend appellate

jurisdiction is lacking over the interlocutory order granting partial summary

judgment because the amended notice of appeal was filed beyond the thirty-day

deadline in Rule 4(a)(1)(A) and, in any event, the interlocutory partial summary

judgment does not merge into the final judgment of dismissal under these

circumstances. They also argue that the case was properly dismissed for failure

to prosecute.

-4-  DISMISSAL FOR FAILURE TO PROSECUTE

We review for an abuse of discretion an order dismissing an action for

failure to prosecute. Nasious v. Two Unknown B.I.C.E. Agents, 492 F.3d 1158,

1161 (10th Cir. 2007). “A district court undoubtedly has discretion to sanction a

party for failing to prosecute or defend a case, or for failing to comply with local

or federal procedural rules.” Reed v. Bennett, 312 F.3d 1190, 1195 (10th Cir.

2002). When dismissing a case without prejudice, “a district court may, without

abusing its discretion, enter such an order without attention to any particular

procedures.” Nasious, 492 F.3d at 1162. A dismissal with prejudice, on the other

hand, is a harsh remedy, and the district court should ordinarily first consider

certain criteria. 2 Id.

Here, the district court dismissed AdvantEdge’s case without prejudice, so

it was not required to consider the criteria applicable to a dismissal with

prejudice. AdvantEdge argues that the dismissal had the practical effect of a

dismissal with prejudice because “the applicable statutes of limitation may bar

some of all of AdvantEdge’s claims if it is forced to refile its Complaint.” Aplt.

2 The non-exhaustive list of factors is: “(1) the degree of actual prejudice to the other party; (2) the amount of interference with the judicial process; (3) the litigant’s culpability; (4) whether the court warned the party in advance that dismissal would be a likely sanction for noncompliance; and (5) the efficacy of lesser sanctions.” Ecclesiastes 9:10-11-12, Inc. v. LMC Holding Co., 497 F.3d 1135, 1143-44 (10th Cir. 2007) (citing Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir. 1992)).

-5- Opening Br. at 10 n.2; Aplt. Reply Br. at 1. This court has recognized that a

dismissal without prejudice can have the practical effect of a dismissal with

prejudice if the statute of limitations has expired. Gocolay v. N.M. Fed. Sav. &

Loan Ass’n, 968 F.2d 1017, 1021 (10th Cir. 1992). But AdvantEdge cannot

demonstrate this effect because it has failed to sufficiently address on appeal the

possible running of a statute of limitations; indeed, it has failed even to identify

the applicable limitation periods. Consequently, AdvantEdge has waived this

argument. See Pignanelli v. Pueblo Sch. Dist. No. 60, 540 F.3d 1213, 1217

(10th Cir. 2008) (holding appellant waived argument by failing to cite to any

legal authority or record evidence in support); Becker v. Kroll, 494 F.3d 904, 913

n.6 (10th Cir. 2007) (“An issue or argument insufficiently raised in the opening

brief is deemed waived.”). Therefore, we hold that the district court did not abuse

its discretion in dismissing the case without prejudice.

ORDER GRANTING PARTIAL SUMMARY JUDGMENT

Defendants first contend this court lacks jurisdiction to review the district

court’s grant of summary judgment in their favor because the first, timely notice

of appeal failed to reference the summary judgment and the amended notice

correcting this deficiency was untimely. Under this circuit’s precedent, a notice

of appeal designating the final judgment necessarily confers jurisdiction over

earlier interlocutory orders that merge into the final judgment. Fields v. Okla.

State Penitentiary, 511 F.3d 1109, 1111 (10th Cir. 2007). The question then

-6- becomes whether the district court’s grant of partial summary judgment in favor

of defendants merged into the district court’s order dismissing the case without

prejudice.

Defendants contend that earlier interlocutory orders are not merged into a

final judgment of dismissal for failure to prosecute. There is authority for this

contention. See, e.g., Shannon v. Gen. Elec. Co., 186 F.3d 186, 193 (2nd Cir.

1999); John’s Insulation, Inc. v. L. Addison & Assocs., Inc., 156 F.3d 101, 105-07

(1st Cir. 1998) (collecting cases); 20 James Wm. Moore, et al., Moore’s Federal

Practice, 303.21 ^[3][c] (3rd ed. 2008). The cases adopting this exception to the

merger rule appear to use it merely as a convenient vehicle to effectuate the

unremarkable principle that a party who fails or refuses to proceed with its

remaining claims should not be allowed to thereby accomplish immediate review

of an otherwise unappealable, interlocutory order. Shannon, 186 F.3d at 193;

John’s Insulation, 156 F.3d at 105-07. Some of the jurisdictions that have

adopted this exception to the merger rule have on other occasions issued opinions

that do not apply the exception. Compare Allied Air Freight, Inc. v. Pan Am.

World Airways, Inc., 393 F.2d 441, 445 (2d Cir. 1968) (reviewing interlocutory

stay order), with Shannon, 186 F.3d at 193 (holding no jurisdiction over

interlocutory order entered before case dismissed for failure to prosecute);

compare Bethel v. McAllister Bros., 81 F.3d 376, 378-79, 383 (3d Cir. 1996)

(reviewing merits of new-trial order after plaintiff refused to proceed with second

-7- trial), with Spain v. Gallegos, 26 F.3d 439, 454 (3d Cir. 1994) (“A party

disappointed with a court’s ruling may not refuse to proceed and then expect to

obtain relief on appeal from an order of dismissal or default.”); compare Hefti v.

Comm’r, 899 F.2d 709, 711 (8th Cir. 1990) (reviewing interlocutory order

deciding a controlling question of law in a single-issue tax appeal), and Drake v.

Southwestern Bell Tel. Co., 553 F.2d 1185, 1186-87 (8th Cir. 1977) (reviewing

interlocutory order depriving plaintiff “of any meaningful relief”), with DuBose v.

Minnesota, 893 F.2d 169, 171 (8th Cir. 1990) (holding no appellate review

available for interlocutory order when final judgment was dismissed for failure to

prosecute).

There is no statute, rule, or precedent 3 requiring an exception to the merger

rule when the final judgment is a dismissal for failure to prosecute and this court

sees no reason to adopt such a rule. Rather, the better approach is a prudential

rule allowing the appellate court to review an interlocutory order preceding a

dismissal for failure to prosecute in that rare case when it makes sense to do so.

Such a rule avoids the need to carve an exception from the celebrated merger

doctrine; avoids the necessity of exceptions to the exception and concomitant

3 The suggestion to the contrary is dicta in McBride v. CITGO Petroleum Corp., 281 F.3d 1099, 1104 (10th Cir. 2002) (holding interlocutory order merged into final judgment). Bowe v. First of Denver Mortgage Investors, 613 F.2d 798 (10th Cir. 1980), does not articulate a generally applicable rule nor an exception to the merger rule; in the context of class actions, it appears sui generis.

-8- apparent inconsistencies; clarifies the opportunity for review of interlocutory

orders when the judgment of dismissal is reversed; and yet preserves for the

unexceptional case the salutary principle of prohibiting manipulation of the

district court processes to effect the premature review of an otherwise

unappealable interlocutory order.

Applying the prudential rule, this court declines to review the interlocutory,

partial summary judgment. This is an unremarkable case in which AdvantEdge

failed to proceed on the merits with its remaining claims and yet seeks appellate

review of an otherwise interlocutory grant of summary judgment. In doing so, it

precluded the district court from reconsidering the summary judgment sua sponte

or by means of a motion filed under Rule 59(e) of the Federal Rules of Civil

Procedure. Even after entry of final judgment, plaintiff chose not to invoke

Rule 59(e) or 60(b) to revisit the summary judgment or to preserve its

appealability in the ordinary course. The record discloses no reason to allow

appellate review of that order. As a consequence, AdvantEdge is the

unexceptional plaintiff to whom the following homily should apply:

If a litigant could refuse to proceed whenever a trial judge ruled against him, wait for the court to enter a dismissal for failure to prosecute, and then obtain review of the judge’s interlocutory decision, the policy against piecemeal litigation and review would be severely weakened. This procedural technique would in effect provide a means to avoid the finality rule embodied in 28 [U.S.C.] § 1291. To review the [interlocutory order] is to invite the inundation of appellate dockets with requests for review of

-9-  interlocutory orders and to undermine the ability of trial judges to achieve the orderly and expeditious disposition of cases.

Marshall v. Sielaff, 492 F.2d 917, 919 (3d Cir. 1974).

Accordingly, the court declines to review the order granting partial

summary judgment.

CONCLUSION

The motion to dismiss defendant David Williams from this appeal is

GRANTED. Defendants’ motions to dismiss the appeal in part are DENIED as

moot, in light of the disposition of this appeal. The judgment of dismissal is

AFFIRMED.

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