Federal Rule of Civil Procedure 41(a) allows a plaintiff to voluntarily dismiss its claims, either before a responsive pleading has been filed, or with the court’s permission. But Rule 41 also allows the trial court to impose conditions on an order dismissing a case. So what happens if a plaintiff decides a case isn’t worth pressing but can’t get a dismissal order without meeting an unexpected—and expensive—condition first?

Paysys International, a payment software company, sued Atos IT Services for breaching a licensing agreement’s territorial restrictions. Three years later, Paysys had lost on twelve of its thirteen claims. Paysys decided the last claim wasn’t worth the price of litigation and moved for a voluntary dismissal without prejudice under Rule 41(a). Atos told the trial court it would agree to the motion but only if the court awarded Atos attorneys’ fees under the licensing agreement.

The trial court granted Paysys’s motion, ordered Paysys to pay attorneys’ fees—and denied Paysys’s request to allow the company to withdraw the motion instead of paying. Paysys appealed and the Second Circuit reversed.

The Second Circuit held that a plaintiff has the right to withdraw a motion for voluntary dismissal if the trial court grants the motion but imposes conditions. The Court of Appeals noted that “Rule 41(a) permits voluntary dismissals of cases, regardless of whether they might otherwise have sufficient merit to be litigated to trial.” That’s because the point of the Rule is cost-efficient litigation. So the Rule allows a plaintiff to dismiss a claim when it decides the costs of litigating the case outweigh the likely benefit. “[I]t is efficient to incentivize that party to dismiss its case (on terms that will not prejudice the defendant), rather than remain in court, wasting our resources and those of the opposing party.”

If the trial court’s order changes that cost-benefit analysis, the plaintiff should be allowed to change its mind. Here the trial court’s order allowed Paysys to dismiss its last claim but only at a price that Paysys hadn’t counted on. The Second Circuit reversed the trial court’s order and remanded the case to give Paysys “a reasonable period of time in which to make [the] decision” whether to withdraw its motion.

Read the Second Circuit’s decision here.

Title 28 United States Code Section 1291 gives U.S. Courts of Appeal “jurisdiction of appeals from all final decisions of the district courts of the United States . . . .” But as we saw a few weeks ago, this means that Courts of Appeal review judgments, not the logical steps leading to those judgments. So a challenge to a subsidiary finding is almost certainly a bad challenge. Now the First Circuit has issued an opinion neatly showing what happens when an appellant challenges the district court’s dicta.

A Ugandan civil-rights group sued Scott Lively under the Alien Tort Statute, pressing common-law claims for negligence and civil conspiracy. Lively moved for summary judgment, which the district court granted. But then Lively appealed to the First Circuit, objecting to what the Court of Appeals described as “a series of unflattering statements in [the district court’s] dispositive opinion.” The First Circuit affirmed.

Because Lively’s appeal simply grumbled at the district court’s dicta, the First Circuit did not have jurisdiction. The First Circuit began by noting that “[n]one of [the district court’s] statements . . . have any bearing on the analytical foundation of the dispositive order or impact the result. The statements are, therefore, dicta and, as such, they lack any binding or preclusive effect.” Courts of Appeals “review ‘judgments, not statements in opinions.’” “A necessary corollary of this proposition is that ‘a winner cannot appeal a judgment merely because there are passages in the court’s opinion that displease him.’”

“[F]ederal courts of appeals have no roving writ to review . . . a district court’s word choices . . . .” Here, Lively had gotten the judgment he asked for. Lively just didn’t like some of things the district court wrote in the opinion explaining the judgment. But  “Lively’s embarrassment in the face of the district court’s unflattering comments, without more, cannot suffice to manufacture appellate jurisdiction where none exists.”

Read the First Circuit’s opinion here.

Federal Courts can only hear cases based on federal law or when the parties are from different states. But when a federal-law claim is based on the same facts as a state-law claim a District Court has supplemental jurisdiction to hear the state-law claim. The Second Circuit recently considered a noteworthy case where the District Court refused to exercise this supplemental jurisdiction over state-law claims after dismissing federal-law claims—without hearing from the parties.

A group of laundromat workers sued their employers for allegedly breaking the federal Fair Labor Standards Act and New York state labor law. After two years of discovery and summary judgment proceedings the case was set to go to a three-day trial. But shortly before the final pretrial conference the workers filed a letter noting that they would only pursue their state law claims.

The district court, without briefing, announced it would not exercise supplemental jurisdiction over the state-law claims, cancelled the trial, and dismissed the workers’ claims. The workers appealed, and the Second Circuit reversed.

The Second Circuit began with the fact that the District Court had dismissed the case without giving either party the opportunity to be heard. “An opportunity to be heard prior to dismissing a case is not a mere formality . . . ‘No principle is more fundamental to our system of judicial administration than that a person is entitled to notice before adverse judicial action is taken against him.’” “Sua sponte dismissals without notice and an opportunity to be heard ‘deviate from the traditions of the adversarial system’. . . .”

If the District Court had ordered briefing, it might have learned why the workers had decided to focus on their state-law claims: While the case was going through discovery and briefing the Second Circuit held that a plaintiff can’t recover liquidated damages under both the Fair Labor Standards Act and New York state labor law. Without briefing, “[t]he plaintiffs could have explained whether they were trying to streamline the issues for the jury” by focusing on the state law claims. Since the District Court heard no briefing from the parties, the District Court’s grounds for dismissing the claims was “inherently speculative.” That was an abuse of discretion.

The Second Circuit finished its opinion by writing: “Litigants come to court to have their problems solved. . . . After all, as the very first Rule of Civil Procedure provides, procedure in the district courts is meant ‘to secure the just, speedy, and inexpensive determination of every action and proceeding.’”

Read the Second Circuit’s opinion here.

Federal Rule of Appellate Procedure 3(c)(1) commands that a notice of appeal “designate the judgment, order, or part thereof being appealed . . . .” That list conspicuously does not include “opinion.” The Fifth Circuit recently dismissed a cross-appeal that illustrates what can—and cannot—be appealed.

Nautilus, Inc., sued ICON Health & Fitness, Inc., for payments under a patent licensing agreement. The district court granted summary judgment for Nautilus and ICON appealed. But Nautilus also filed a notice of appeal “to the extent the [c]ourt determined that it must conduct an infringement analysis under Chinese Patent Law . . . .” ICON moved to dismiss Nautilus’s cross-appeal and the Fifth Circuit granted ICON’s motion.

The Fifth Circuit’s analysis starts by noting that “[a]ppellate courts review judgments, not opinions.” So a cross-appeal like Nautilus’s is the proper way to “seek modification of a judgment.” But “a cross-appeal is generally ‘not proper to challenge a subsidiary finding or conclusion when the ultimate judgment is favorable to the party cross-appealing.”

Nautilus had filed a notice of appeal that did not challenge the judgment in Nautilus’s favor. “Rather, Nautilus opposes the portion of the district court’s reasoning . .  that its analysis of whether Nautilus was due any royalties under the patent licensing agreement had to be conducted under Chinese Patent Law.” So, the Fifth Circuit concluded, Nautilus’s cross-appeal “is improper since Nautilus seeks to challenge in it only a ‘subsidiary finding or conclusion.’” Nautilus, of course, was still free to defend against ICON’s appeal on “any alternative ground in support of the district court’s judgment in its favor.”

Read the Fifth Circuit’s opinion here.