Addressing the effect of a stipulated dismissal under Rule 41 of the Federal Rules of Civil Procedure (Fed. R. Civ. P.), the U.S. Court of Appeals for the Federal Circuit revived the plaintiff’s case, ruling that the district court had erred in denying the plaintiff’s motion for relief from a previous court order that dismissed the case with prejudice. Garber v. Chicago Mercantile Exchange, Case Nos. 09-1047, -1384 (Fed. Cir., June 26, 2009) (Lourie, J.).

In 2004, Garber filed a patent infringement complaint against the Chicago Mercantile Exchange and the Chicago Board of Trade (collectively, CME). Unable to obtain adequate representation, Garber and CME entered into an agreement to dismiss the lawsuit without prejudice. To that effect, Garber filed a joint stipulated motion and proposed order. In the order dismissing the case without prejudice (first dismissal order), the district court judge modified the language of the proposed order filed by the parties by providing Garber one month to reinstate the case or have it dismissed without prejudice. Soon after the deadline to reinstate the case passed, the district court judge issued an order dismissing the case with prejudice (second dismissal order). Over three years later, Garber filed a motion for relief from the second dismissal order, arguing that a clerical error occurred and pointing out that the first dismissal order warned that the case “may be dismissed without prejudice,” while the second dismissal order dismissed the case with prejudice. The district court denied the motion and Garber appealed.

The dispute on appeal centered on whether the stipulation for dismissal without prejudice entered into by both parties was filed under Rule 41(a)(1) or under 41(a)(2) of the Fed. R. Civ. P. If the action was dismissed under Rule 41(a)(1), the parties agreed that the district court did not have jurisdiction to enter any subsequent order, including the first and second dismissal orders. Under Rule 41(a)(1), a plaintiff may dismiss an action without a court order by filing a stipulation of dismissal signed by all parties. Under Rule 41(a)(2), an action can be dismissed by the plaintiff without agreement of all parties involved only “on terms the court considers proper.” The Federal Circuit agreed with the Garber and concluded that the action was dismissed under Rule 41(a)(1) and that the district court did not have jurisdiction to enter the first and second dismissal orders.

CME argued that while there is no dispute the stipulation was signed by all parties, the stipulation was filed under Rule 41(a)(2) because court action was required to dismiss the case and the court enjoyed some discretion in doing so. Specifically, CME argued that the inclusion of a proposed order and discretionary language within the proposed order transformed the stipulation into a motion under Rule 41(a)(2), which permitted the court to dismiss the action “on terms the court considers proper.” In rejecting this argument, the Federal Circuit noted that Rule 41(a)(2) is reserved for cases in which the plaintiff requests dismissal of an action without agreement from all parties and that such dismissal is permitted on terms the court considers proper. Finding that the stipulation entered in the current case was agreed to by all parties, the Federal Circuit held that the stipulation was properly brought pursuant to Rule 41(a)(1). In light of that finding, the Court held that the stipulation was effective immediately upon filing and the first and second dismissal orders were therefore void. The district’s court denial of Garber’s motion was therefore reversed.