                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


11-6-2006

DIRECTV Inc v. Leto
Precedential or Non-Precedential: Precedential

Docket No. 05-3908




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"DIRECTV Inc v. Leto" (2006). 2006 Decisions. Paper 148.
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                                          PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT


                     No. 05-3908


                 DIRECTV, INC., a
                California Corporation,

                                      Appellant

                           v.

                    BENNIE LETO



      Appeal from the United States District Court
       for the Western District of Pennsylvania
         (D.C. Civil Action No. 04-cv-00020)
      District Judge: Honorable Gary L. Lancaster


                Argued October 4, 2006

Before: McKEE, AMBRO, and NYGAARD, Circuit Judges

           (Opinion filed November 6, 2006)
Howard R. Rubin, Esquire
William E. Copley, III (Argued)
Sonnenschein, Nath & Rosenthal
1301 K Street, N.W.
Suite 600, East Tower
Washington, DC 20005

      Counsel for Appellant

John W. Gibson, Esquire (Argued)
1035 Fifth Avenue
Pittsburgh, PA 15219-6201

      Counsel for Appellee


                OPINION OF THE COURT


AMBRO, Circuit Judge

       DirecTV, a satellite cable company, caught persons
pirating (that is, intercepting without payment) its television
transmissions. Its policy is to sue, and it did so here. Eight
defendants, including Bennie Leto, were joined in one suit
brought in the United States District Court for the Western
District of Pennsylvania. The claims against the defendants
were timely brought.




                              2
      The District Court, responding to a motion by the
defendants under Federal Rule of Civil Procedure 21, entered in
December 2003 what appeared to be an order severing
DirecTV’s claims against each defendant. The order reads:

             It is hereby ORDERED that the
             case shall proceed under the
             caption of DIRECTV v. Garry
             Bloch, No. 03-0752, as to
             defendant Garry Bloch. As to each
             of the other defendants, the case
             shall proceed as a separate action
             under a separate civil action
             number upon payment by plaintiff
             of the requisite filing fee as to each
             defendant.

             It is FURTHER ORDERED that all
             separate actions arising from this
             order shall be deemed RELATED
             and shall be assigned to the docket
             of the undersigned in anticipation
             of consolidation for the purposes of
             pretrial discovery.

       Within days of the order, DirecTV paid a separate filing
fee and filed a separate complaint against Leto. He responded
by moving to dismiss on the ground that the later-filed


                               3
complaint was outside the statute of limitations. This made
sense only if the 2003 order dismissed DirecTV’s complaint
rather than severed one suit into eight separate suits.
Counterintuitively, the District Court agreed with Leto that it
had dismissed the initial DirecTV suit, and dismissed it with
prejudice.

        Feeling blindsided, DirecTV appeals. While we normally
give great deference to a court’s interpretation of its own orders,
we cannot do so here, as the order is too clear to permit any
interpretation but a severance. Even were that not the case,
while district judges have discretion to remedy misjoinders
either by severing claims or dismissing them without prejudice,
that discretion, while accorded a wide fairway, ventures into
unplayable rough when it prejudices substantial rights. Here
DirecTV, initially having filed a timely complaint that misjoined
defendants, is substantially prejudiced if that suit is deemed
dismissed and not severed. We thus reverse and remand.1


  1
        The District Court had subject matter jurisdiction under
28 U.S.C. § 1331 because DirecTV’s causes of action arise
under federal law. We have jurisdiction under 28 U.S.C. § 1291
because this is an appeal from a final order.
        We exercise plenary review of a District Court’s grant of
a Rule 12(b)(6) motion (the means by which Leto moved to
dismiss here). In re Merck & Co. Sec. Litig., 432 F.3d 261, 266
(3d Cir. 2005). In so doing, “we apply the same test as the
district court,” accepting as true “all facts alleged in the
complaint and view[ing] them in the light most favorable to

                                4
        Federal Rule of Civil Procedure 20(a) permits
“joinder”—the joining together of more than one party—if the
plaintiff’s claim “aris[es] out of the same transaction . . . and if
any question of law or fact common to all defendants will arise
in the action.” Misjoinder, on the other hand, occurs when there
is no common question of law or fact or when, as here, the
events that give rise to the plaintiff’s claims against defendants
do not stem from the same transaction.

       Misjoinder is governed by Rule 21, which reads:

               Misjoinder of parties is not ground
               for dismissal of an action. Parties
               may be dropped or added by order
               of the court on motion of any party
               or of its own initiative at any stage
               of the action and on such terms as
               are just. Any claim against a party
               may be severed and proceeded with


[DirecTV].” Id. (internal quotation marks omitted). We review
the District Court’s decision to drop parties under Rule 21 for an
abuse of discretion. See, e.g., Letherer v. Alger Group, L.L.C.,
328 F.3d 262, 266 (6th Cir. 2003); Coughlin v. Rogers, 130 F.3d
1348, 1351 (9th Cir. 1997). Under this standard, we must affirm
the District Court’s ruling unless we are “left with a definite and
firm conviction that the trial court committed a clear error of
judgment.” Letherer, 328 F.3d at 266 (internal quotation marks
omitted).

                                 5
              separately.

To remedy misjoinder, then, a court may not simply dismiss a
suit altogether. Instead, the court has two remedial options: (1)
misjoined parties may be dropped “on such terms as are just”; or
(2) any claims against misjoined parties “may be severed and
proceeded with separately.” Fed. R. Civ. P. 21.

        The effect of each option is quite different. When a court
“drops” a defendant under Rule 21, that defendant is dismissed
from the case without prejudice. Publicker Indus., Inc. v.
Roman Ceramics Corp., 603 F.2d 1065, 1068 (3d Cir. 1979);
see also Elmore v. Henderson, 227 F.3d 1009, 1011–12 (7th Cir.
2000) (Posner, J.). When that occurs, the “statute of limitations
is not tolled” because we treat the initial complaint “as if it
never existed.” Brennan v. Kulick, 407 F.3d 603, 606 (3d Cir.
2005) (internal quotation marks omitted).2 But when a court
“severs” a claim against a defendant under Rule 21, the suit
simply continues against the severed defendant in another guise.
White v. ABCO Eng’g Corp., 199 F.3d 140, 145 n.6 (3d Cir.
1999); Elmore, 227 F.3d at 1012. The statute of limitations is
held in abeyance, and the severed suit can proceed so long as it
initially was filed within the limitations period. Id.



  2
   See also Elmore, 227 F.3d at 1011–12 (noting that, although
“[w]e cannot find a case on the point,” this “seems to us clear as
a matter of first principles”).

                                6
        Because a district court’s decision to remedy misjoinder
by dropping and dismissing a party, rather than severing the
relevant claim, may have important and potentially adverse
statute-of-limitations consequences, the discretion delegated to
the trial judge to dismiss under Rule 21 is restricted to what is
“just.” In this context, we turn to the DirecTV/Leto case.

        While we normally “give particular deference to [a]
district court’s interpretation of its own order,”3 we cannot do so
where the plain language of the order is completely contrary to
the Court’s interpretation. The District Court’s initial 2003
order on its face was a severance, rather than a dismissal, of
DirecTV’s claim against Leto. That order specifically stated
that the case against Leto “shall proceed as a separate action . . .
upon payment by plaintiff of the requisite filing fee” (emphasis
added). Taking this clear cue, within ten days DirecTV paid the
filing fee and filed a separate complaint against Leto. Yet in a
surprising response to Leto’s subsequent motion to dismiss, the
District Court interpreted its prior order as a drop and dismissal
rather than a severance. It read “shall proceed” out of its 2003
order. To do so trades concise clarity for confusion.




  3
   In re Fine Paper Antitrust Litig., 695 F.2d 494, 498 (3d Cir.
1982). Accord WRS, Inc. v. Plaza Entm’t, Inc., 402 F.3d 424,
428 (3d Cir. 2005); Pittsburgh Terminal Corp. v. Balt. & Ohio
R.R. Co., 824 F.2d 249, 254 (3d Cir. 1987) (quoting In re Fine
Paper).

                                 7
       In its 2003 order, the District Court made no reference to
dropping—or even dismissing—any defendants. To repeat, it
said that each case (other than against the first defendant) “shall
proceed as a separate action under a separate civil action
number.” This language follows the language in Rule 21: “Any
claim against a party may be severed and proceeded with
separately.” In addition, this language also reflects our Court’s
description of severance: “[I]f claims are severed pursuant to
Rule 21 they become independent actions with separate
judgments entered in each.” White, 199 F.3d at 145 n.6 (internal
quotation marks omitted).

        Moreover, if the District Court had intended to drop the
misjoined defendants, it should not have said that their “case[s]
shall proceed.” Dismissed cases do not proceed at all. In
addition, the Court itself expected all, now separate, suits to
continue, as it further ordered that “all separate actions arising
from this order shall be deemed RELATED and shall be
assigned to [the Judge’s docket] in anticipation of consolidation
for the purposes of pretrial discovery.”

       For these reasons, the District Court’s 2003 order was no
doubt a severance. In light of the precise wording of the order,
it cannot subsequently be deemed a dismissal.

      Even if the language of the District Court’s 2003 order
had not clearly severed DirecTV’s claim against Leto, it
nonetheless would have been improper for the Court to choose


                                8
dismissal instead, as this misjoinder remedy would have
imposed adverse statute-of-limitations consequences on
DirecTV. Although a district court has discretion to choose
either severance or dismissal in remedying misjoinder, it is
permitted under Rule 21 to opt for the latter only if “just”—that
is, if doing so “will not prejudice any substantial right.” See
Sabolsky v. Budzanoski, 457 F.2d 1245, 1249 (3d Cir. 1972)
(emphasis added).         Hence, a court must analyze the
consequences of a dismissal on a claimant’s ability to meet the
statute of limitations prior to choosing dismissal over severance.

        This principle was recognized by the Court of Appeals
for the Seventh Circuit in Elmore v. Henderson. That case, like
the one at hand, involved a district court judge’s decision to
drop and dismiss—rather than sever—a claim under Rule 21 to
remedy misjoinder. The judge subsequently dismissed the
plaintiff’s separately filed complaint as untimely because it was
filed outside of the statute-of-limitations period. The Seventh
Circuit held that the district court’s decision was almost
certainly erroneous because, “in formulating a remedy for a
misjoinder[,] the judge is required to avoid gratuitous harm to
the parties,” and is therefore “duty-bound” to prevent a
dismissal that would have adverse “statute[-]of[-]limitations
consequences.” Elmore, 227 F.3d at 1012. The district court
instead should have severed the claim and allowed it “to
continue as a separate suit so that it would not be time-barred”
rather than dropping and dismissing the claim. Id.



                                9
       We follow suit and hold that the discretion to drop and
dismiss claims against misjoined defendants under Rule 21 is
abated when it “prejudic[es] any substantial right” of plaintiffs,4
see Sabolsky, 457 F.2d at 1249, which includes loss of otherwise
timely claims if new suits are blocked by statutes of limitations.



    4
       Several district courts, both in and outside the Seventh
Circuit, have followed this principle. See, e.g., DIRECTV, Inc.
v. Adrian, No. 03-C-6366, 2004 WL 1146122, at *4 (N.D. Ill.
May 18, 2004) (“We are duty-bound to sever claims rather than
dismiss defendants if a dismissal would bring statute of
limitations consequences.”); Direct TV, Inc. v. Delaney, No. 03-
C-3444, 2003 WL 24232530, at *5 (N.D. Ill Nov. 20, 2003)
(same); Berry v. Ill. Dep’t of Human Servs., No. 00-C-5538,
2001 WL 111035, at *18 (N.D. Ill. Feb. 2, 2001) (avoiding “a
dismissal prejudicing a substantial right” by severing claims and
tolling the statute of limitations for complaints refiled “within a
reasonable period of time”); Franconia Assocs. v. United States,
61 Fed. Cl. 335, 337 (Fed. Cl. 2004) (“[I]t is important to
determine whether there is a statute of limitations problem—if
the filing of new suits is barred by the statute, severance is really
the only appropriate option, as the original filing date carries
over to the new cases.”). Contra DIRECTV Inc. v. Hudson, No.
2:03-cv-457, at 3–4, 6–8 (S.D. Ohio July 1, 2004) (order)
(remedying a misjoinder issue by dismissing, rather than
severing, misjoined defendants and stating that DirecTV
presumably, “as a part of its litigation strategy, chose to take that
risk rather than file separate actions and incur substantial
litigation costs in the process”).

                                 10
        With this backdrop of cabined discretion, the outcome
here writes itself. Even had the District Court been correct in
interpreting its 2003 order as a dismissal and not a severance,
this still would have affected adversely DirecTV’s right to
recover from Leto: the new suit, lacking a link back to the
timely initial action, would be out of time. Because a dismissal
improperly would have imposed adverse statute-of-limitations
consequences on DirecTV, we hold that the District Court
would have abused its discretion in choosing dismissal as a
misjoinder remedy.

                         * * * * *

       The plain language of the District Court’s 2003 order
requires the conclusion that it severed, rather than dismissed,
DirecTV’s suit against Leto. That order was so direct and clear-
crafted that no contrary conclusion was later conceivable. Once
a District Court speaks with such clarity, any deference to its
discretion falls away. In addition, even if the language of the
District Court’s 2003 order did not clearly constitute a severance
but instead a dismissal, Rule 21 requires that, in remedying
misjoinder, the Court must analyze the consequences of
choosing dismissal over severance, and is obliged to avoid
prejudicing any substantial right in exercising its discretion.
Under this principle, dropping and dismissing DirecTV’s claim
against Leto, rather than severing the claim and allowing it to
continue as a separate suit so that it would not be time-barred,



                               11
would have been an abuse of discretion.5

       We therefore reverse the District Court’s grant of
dismissal in favor of Leto and remand this case to the Court for
further proceedings consistent with this opinion.




  5
    Because of our holdings, we need not reach DirecTV’s plea
for equitable tolling. However, it is worth noting that equitable
tolling would not fit here, as DirecTV does not allege that it was
prevented from filing a complaint within the limitations period.
Instead, it contends that its initial suit, which was filed within
the limitations period, was improperly dismissed. As noted by
the Seventh Circuit in Elmore, “equitable tolling is not a remedy
for an erroneous judgment” by the District Court; instead,
appeal of the erroneous judgment is the proper course. Elmore,
227 F.3d at 1013.

                               12
