The Massachusetts Appeals Court recently addressed whether the voluntary dismissal of a preceding action automatically bars a plaintiff from re-filing the litigation in Superior Court under the Massachusetts Savings Statute. In Cannonball Fund, Ltd. v. Dutchess Capital Management., LLC, 84 Mass. App. Ct. 75 (2013), the Appeals Court held that plaintiffs who voluntarily dismiss a preceding litigation are not per se barred from re-filing that litigation within one year of the dismissal date, thereby maintaining protection of the suit from the applicable statute of limitations that would otherwise bar the case. Under the Appeals Court’s ruling, voluntary dismissals are not per se excluded from the protection of the Savings Statute, but rather the Superior Court must undertake a fact-based analysis to determine whether the voluntary dismissal itself was “for any matter of form.” (G.L. c. 260, § 32.)
In Cannonball Fund, the plaintiffs filed suit on April 13, 2010, in the Delaware Court of Chancery (“the Delaware action”). The plaintiffs were investors in two “feeder” hedge funds that were subsidiaries of Dutchess Capital Management, LLC (“Dutchess Capital”). The plaintiffs alleged multiple claims of fraud, negligent misrepresentation, and breach of contract against Dutchess Capital and two of the cofounders and a high-level officer of Dutchess Capital. Of these defendants, Dutchess Capital was a Connecticut limited liability company, two of the individual defendants were citizens of Massachusetts and the third was a citizen of New York. The plaintiffs also brought derivative claims against Dutchess Capital, its cofounders, and the other corporate officer for breach of fiduciary duties and unjust enrichment, as well as a derivative professional malpractice claim against Dutchess Capital Management’s auditor, Sullivan Bille, a Massachusetts corporation. Other defendants included Dundee Leeds, a Cayman Islands corporation that served as the fund administrator for the two feeder funds at issue.
The claims filed in the Delaware action were all timely asserted according to both parties. Shortly after the action was filed, multiple defendants – including Sullivan Bille -- moved to dismiss the case for lack of personal jurisdiction. Neither Dutchess Capital nor the individual defendants raised jurisdictional defenses. The Court of Chancery entered an order on October 21, 2010, appearing to deny the plaintiffs’ motion for jurisdictional discovery. On November 4, 2010, the plaintiffs filed a proposed order of voluntary dismissal of all claims without prejudice, pursuant to Delaware Court of Chancery Rule 41(a)(1). The proposed order was approved by the court on November 5, 2010, although no reason was given for the dismissal.
The plaintiffs then filed suit in the Massachusetts Superior Court on June 21, 2011 (“the Massachusetts action”). The Massachusetts action raised substantially similar claims to those in the Delaware suit. The parties agreed for the purposes of the Massachusetts action, all claims accrued no later than April, 2008, which was more than three years before the filing of the Massachusetts complaint. While the plaintiffs conceded the statute of limitations would otherwise bar them from proceeding, as the statute of limitations in both Massachusetts and Delaware was three years for most of the claims, the plaintiffs argued their claims were “saved” by the Massachusetts Savings Statute because (1) they were filed within one year of the dismissal of the Delaware action; (2) the dismissal of the Delaware action was for a “matter of form” i.e. lack of personal jurisdiction over some the defendants; and (3) the claims were timely when first asserted in the Delaware action.
In ruling on a Motion to Dismiss, the Massachusetts Superior Court judge held the voluntary dismissal of the Delaware action did not fall within the scope of the Massachusetts Savings Statute. As a result, all of the claims subject to a three-year statute of limitations were time-barred in Massachusetts. The judge also dismissed some of the derivative claims against a Dutchess Capital subsidiary for lack of standing, and the claims against Dundee Leeds (the Cayman Islands entity) for lack of personal jurisdiction.
On appeal, the Appeals Court reversed the Superior Court judge finding a voluntary dismissal by a party does not per se constitute a dismissal for “matter of form”. In reaching its finding, the Appeals Court undertook a historical analysis of the phrase “matter of form” within G. L. c. 260, § 32. The Court determined historical precedent required the phrase be interpreted liberally, so as to ensure matters are determined on the merits.
The Court then rejected the defendants’ argument that the Savings Statute applied only to prior suits involuntarily dismissed by a court, not those where a voluntary dismissal had entered. In rejecting this strict interpretation proffered by the defendants, the Court relied on the fact that the Massachusetts Savings Statute did not explicitly include or exclude voluntary dismissals like some other state statutes. Rather than the Savings Statute applying only where a court involuntarily dismissed the first action, the Appeals Court stated that courts must instead look to the facts and circumstances surrounding the termination of the first suit before determining whether the plaintiffs may enjoy the benefit extended by the Savings Statute. According to the Court, a plaintiff may enjoy the benefits of the statute where the plaintiff’s initial suit was “defeated by some matter not affecting the merits, some defect or informality, which he can remedy or avoid by a new process.” This interpretation, the Court allowed, would give plaintiffs who acknowledge some defect in their suit and voluntarily dismiss it, the benefit of an additional year to refile their suit.
In applying the interpretation of the Savings Statute to the facts here, the Appeals Court determined that involuntary dismissal of an action for lack of personal jurisdiction is a dismissal “for a matter of form” as contemplated by the Statute. A plaintiff’s acknowledgment that an action he or she filed would be dismissed for the lack of personal jurisdiction, and a plaintiff’s subsequent voluntary dismissal as a result of this acknowledgment, should be sufficient to allow the plaintiffs the added benefit of tolling the statute of limitations an additional year. In doing so, the Court acknowledged that lower courts must undertake a factual analysis of the circumstances surrounding a voluntary dismissal by a plaintiff – if one exists – and whether the dismissal satisfied the “matter of form” test created by the Savings Statute. Here, after conducting the required “factual analysis”, the Appeals Court determined the claims against the parties who challenged personal jurisdiction in the Delaware action were entitled to the added tolling of the statute of limitations and were therefore not dismissed as untimely. The claims against the parties who did not challenge personal jurisdiction in the Delaware action, however, were time-barred because there was no explanation as to why those claims were dismissed. Thus, it is important for parties, wanting to take advantage of the Savings Statute to explain the basis for a voluntary dismissal in their moving papers.