Commercial Litigation and Arbitration

Plaintiff May Not Voluntarily Dismiss Petition to Compel Arbitration — Rule 41(a)(1)(A)(i) Does Not Apply — It Is “Rare Case” in which District Judge’s Refusal to Recuse Is Reversed

ISC Holding AG v.- Nobel Biocare Finance AG, 2012 U.S. App. LEXIS 15402 (2d Cir. July 25, 2012):

Petitioner-Appellant ISC Holding AG ("ISC") appeals from a November 23, 2010 order of the United States District Court for the Southern District of New York (Stanton, J.) vacating its voluntary notice of dismissal and from a judgment, entered [*2] on January 20, 2011, dismissing with prejudice its petition to compel arbitration. The matter presents two issues. First, ISC contends that the district court abused its discretion in denying its motion for recusal. Second, ISC argues that the court erred in vacating its notice of voluntary dismissal, filed pursuant to Fed. R. Civ. P. 41(a)(1)(A)(i).

ISC based its recusal motion on the district court's receipt of supposedly prejudicial information from a putatively "extrajudicial" source. Said source was ISC's own lawyer, who spoke briefly with the district judge, in camera and ex parte, after moving to withdraw prior to a scheduled evidentiary hearing and after indicating that he believed his withdrawal was mandatory, but that he was not comfortable discussing the details in the presence of counsel for Respondent-Appellee Nobel Biocare Finance AG ("Nobel"). Even assuming that the information conveyed by ISC's counsel was extrajudicial -- at best a dubious proposition -- we conclude that the district court's denial of the motion to recuse was not an abuse of discretion.

The vacatur issue is less straightforward. The district court vacated the notice of voluntary dismissal, filed by new counsel one business day before the evidentiary hearing was to commence, on the authority of Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105 (2d Cir. 1953). In resolving the issue, we reach the same result as the district court, but by a different route. As previously noted, ISC purported voluntarily to dismiss its petition to compel arbitration (filed pursuant to 9 U.S.C. § 4) on the authority of Fed. R. Civ. P. 41(a)(1)(A)(i). We conclude, however, based on the interaction of Rule 41(a)(1)(A)(i) and Fed. R. Civ. P. 81(a)(6) with 9 U.S.C. §§ 4 and 6, that ISC's purported voluntary dismissal was improper because Rule 41(a)(1)(A)(i) does not apply in the context of petitions to compel arbitration. We thus agree with the district court that vacatur was appropriate and therefore Affirm its judgment, without reaching the question whether Harvey Aluminum remains good law. ***

I. Recusal

*** Recusal here is governed by 28 U.S.C. § 455(a), which states that "[a]ny . . . judge . . . of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned."17 This provision is to "be evaluated on an objective basis, so that what matters is not the reality of bias or prejudice but its appearance." United States v. Liteky, 510 U.S. 540, 548, 114 S. Ct. 1147, 127 L. Ed. 2d 474 (1994). The question, as we have put it, is whether "an objective, disinterested observer fully informed of the underlying facts, [would] entertain significant doubt that justice would be done absent recusal." Carlton, 534 F.3d at 100 (alteration in original) (internal quotation omitted). "[I]t is a rare case," as this Court has said, "when a district judge's denial of a motion to recuse is disturbed by an appellate court . . . ." In re IBM, 45 F.3d 641, 642 (2d Cir. 1995). In applying § 455(a)'s standard, the Supreme Court has noted that "opinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings, do not constitute a basis for a bias or partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible." Liteky, 510 U.S. at 555. However, where these opinions are not "properly and necessarily acquired in the course of the proceedings," id. at 551, but rather "derive[ ] from a source outside judicial proceedings," id. at 554, this requirement of deep-seated antagonism does not apply.

Here, ISC does not contend that Judge Stanton has shown a deep-seated favoritism toward Nobel or antagonism toward ISC. Rather, ISC argues that in his 10-minute conversation with Matetsky, Judge Stanton became privy to prejudicial information that would substantially bias him against ISC; this information, ISC says, was privileged and conveyed without ISC's consent in an unrecorded ex parte conversation to the trier of fact, and therefore constituted an "extrajudicial source of bias" in the Liteky framework.

We are doubtful. Any information the district court acquired was obtained in the normal course of adjudicating a withdrawal motion by counsel of record and, it seems to us, could not qualify as "extrajudicial." But even assuming arguendo that Matetsky could count as an extrajudicial source, Liteky teaches that the fact that a judge's opinion derives from a source outside judicial proceedings is not, by itself, a sufficient basis for a bias or prejudice recusal: "The fact that an opinion held by a judge derives from a source outside judicial proceedings . . . is [not] a sufficient condition for 'bias or prejudice' recusal, since some opinions acquired outside the context of judicial proceedings (for example, the judge's view of the law acquired in scholarly reading) will not suffice." Id. at 554. In the circumstances here, we easily conclude that ISC has failed to show that the extrajudicial acquisition of information in this case requires recusal. ***

II. Vacatur

ISC next contends that the district court erred in vacating its Fed. R. Civ. P. 41(a)(1)(A)(i) notice of dismissal. The district court vacated the notice of dismissal pursuant to Nobel's motion to set a new trial date, which it construed as in substance making out a request for relief from judgment under Fed. R. Civ. P. 60(b)(6). We review district court rulings on Rule 60(b) motions for abuse of discretion. Encoder Commc'ns, Inc. v. Telegen, Inc., 654 F.2d 198, 203 (2d Cir. 1981). Whether voluntary dismissal was available to ISC pursuant to Rule 41(a)(1)(A)(i) is a legal question which we review de novo. See Somoza v. N.Y.C. Dep't of Educ., 538 F.3d 106, 112 (2d Cir. 2008).

Footnote 18. Rule 41(a) provides as follows:

Rule 41. Dismissal of Actions

(a) Voluntary Dismissal.

(1) By the Plaintiff.

(A) Without a Court Order. Subject to Rules 23(e), 23.1(c), 23.2, and 66 and any applicable federal statute, the plaintiff may dismiss an action without a court order by filing:

(i) a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment; or

(ii) a stipulation of dismissal signed by all parties who have appeared.

(B) Effect. Unless the notice or stipulation states otherwise, the dismissal is without prejudice. But if the plaintiff previously dismissed any federal- or state-court action based on or including the same claim, a notice of dismissal operates as an adjudication on the merits.

(2) By Court Order; Effect. Except as provided in Rule 41(a)(1), an action may be dismissed at the plaintiff's request only by court order, [*26] on terms that the court considers proper. If a defendant has pleaded a counterclaim before being served with the plaintiff's motion to dismiss, the action may be dismissed over the defendant's objection only if the counterclaim can remain pending for independent adjudication. Unless the order states otherwise, a dismissal under this paragraph (2) is without prejudice.


As relevant here, Rule 41(a)(1)(A)(i) states that "the plaintiff may dismiss an action without a court order by filing a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment." In arbitration proceedings under the Federal Arbitration Act ("FAA"), including petitions to compel arbitration pursuant to 9 U.S.C. § 4, Fed. R. Civ. P. 81(a)(6) states that the Federal Rules of Civil Procedure govern, "except as [9 U.S.C.] provide[s] other procedures." Title 9 does not"provide other procedures" expressly to govern the voluntary dismissal of petitions to compel arbitration in particular. But 9 U.S.C. § 6 does instruct more generally that "[a]ny application to the court hereunder [including petitions to compel under § 4] shall be made and heard in the manner provided by law for the making and hearing of motions."

1. "Actions" vs. "Motions"

Nobel contends, at the start, that since ISC's petition to compel arbitration is to be treated as a motion, and Rule 41(a)(1) provides a procedure only for the dismissal of "an action," a Rule 41(a)(1) voluntary dismissal was not available to ISC. This argument is unpersuasive.

At minimum, it is inconsistent with Nobel's own conduct in this litigation. Nobel obtained the dismissal with prejudice of ISC's petition pursuant to Rule 41(b). The text of Rule 41(b), however, also refers only to the dismissal of an "action," rather than a motion. Similarly, to demonstrate ISC's putative discovery misconduct, Nobel obtained third-party deposition testimony via a subpoena pursuant to Fed. R. Civ. P. 45; Nobel has also intimated that it intends to move for discovery sanctions, presumably under Fed. R. Civ. P. 37. Both these rules presume that subpoenas and sanctions are being sought in a pending "action," rather than in another type of proceeding.

Footnote 21. Rule 41(b) also allows a defendant to move to dismiss "any claim against [defendant]." For Rule 41(b) purposes, however, claim generally refers to a component part of a suit against a defendant, as distinct from the entire proceeding with respect to that defendant. See 8 J. Moore et al., Moore's Federal Practice § 41.21[1], pp. 41-29-41-31 (3d ed. 2008). Here, Nobel obtained a dismissal of the entire proceeding.

Footnote 22. See Fed. R. Civ. P. 37(a)(2) ("A motion for an order [compelling discovery] to a party must be made in the court where the action is pending."); 37(b)(5) ("If a party . . . fails to obey an order to provide or permit discovery . . . the court where the action is pending may issue further just orders. They may include the following: (i) directing that the matters embraced in the order . . . be taken as established for purposes of the action . . . ."); 45(a)(1)(A)(ii) ("Every subpoena must state the title of the action, the court in which it is pending, and its civil-action number. . . .").

Nobel's proffered approach is also inconsistent with prior decisions of this Court. In Farr & Co. v. Cia. Intercontinental de Navegacion de Cuba, S.A., 243 F.2d 342 (2d Cir. 1957), considering a petition to compel arbitration,we declined to read a state-law distinction between "actions" and "special proceedings" (such as petitions to compel arbitration) into the requirements of Fed. R. Civ. P. 4(d) for effecting service. Id. at 347 (citing Stathatos v. Arnold Bernstein S.S. Corp., 202 F.2d 525, 527 n.1 (2d Cir. 1953)).23 In so declining, we observed that recognizing such a distinction "would unreasonably limit the definition of 'action' in Rule 2, Fed.R.Civ.P., which is broad enough to include an arbitration proceeding." Id.

Similarly, in Government of United Kingdom of Great Britain and Northern Ireland v. Boeing Co., 998 F.2d 68, 73-74 (2d Cir. 1993), overruled on other grounds by Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S. Ct. 2402, 156 L. Ed. 2d 414 (2003), this Court stated that "a district judge considering related petitions to compel arbitration can have all of the petitions heard at once pursuant to Rule 42(a). . . ." But Rule 42(a), which deals with consolidating proceedings, expressly concerns "actions . . . involv[ing] a common question of law or fact." Fed. R. Civ. P. 42(a) (emphasis added). Granted, in the circumstances of Boeing, this Court's statement was dicta. But it is relevant and informative here nonetheless. See also Solé Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d 100, 102-103 (2d Cir. 2006) (describing a petition to vacate an arbitration award, brought under 9 U.S.C. §§ 10 and 203, as an "action").

In sum, we are unpersuaded by Nobel's argument that Rule 41(a)(1) is inapplicable to petitions to compel arbitration for the reason that Rule 41(a)(1) deals with actions, and not motions. Indeed, even brief consideration of the implications of any holding to such effect for other contexts in which the civil rules are commonly employed in the adjudication of petitions to compel counsels strongly against Nobel's position. At the same time, however, we conclude that there are compelling other reasons, grounded in the text and operation of subparagraph 41(a)(1)(A)(i), for holding that this subsection is inapplicable in the context of petitions to compel. We turn now to consideration of those reasons.

2. The Inapplicability of Rule 41(a)(1)(A)(i)

Rule 41(a)(1)(A) is the only form of dismissal requiring no court action to be effective. See Thorp, 599 F.2d at 1175 n.8. Plaintiffs invoking Rule 41(a)(1)(A)(i), specifically, have an "unfettered right voluntarily and unilaterally to dismiss an action," but the rule itself, by requiring them to do so before the opposing party has served an answer or a motion for summary judgment, confines this right to "an early stage of the proceedings" and thus ensures against the sharp practice that could otherwise ensue. Id. at 1175. Thus the rule, by its terms, presupposes that a given litigation proceeds in two stages — one before the service of an answer or motion for summary judgment, one after — and thus also presupposes that the opposing party can file both such papers in the first place.

Here, Nobel served neither an answer nor a motion for summary judgment before ISC filed its notice of voluntary dismissal almost two years into hotly contested proceedings. But, importantly, Nobel unquestionably could not have filed an answer in this case consistent with both 9 U.S.C. § 6 and the Federal Rules of Civil Procedure, and perhaps could not have filed a motion for summary judgment either.

Pursuant to 9 U.S.C. § 6, petitions to compel are "made and heard in the manner provided by law for the making and hearing of motions." And while an expansive interpretation is given to "action" in the civil rules — an interpretation that is broad enough to encompass arbitration proceedings — those rules draw a clear and consistent distinction between pleadings and motions. Compare Fed. R. Civ. P. 7(a), with Fed. R. Civ. P. 7(b)(1)-(2); see also Fed. R. Civ. P. 11(a)-(b), 12(b). This distinction simply precludes treating the one as the other.

It was for this reason that this Court held in Productos Mercantiles e Industriales, S.A. v. Faberge USA, Inc., 23 F.3d 41 (2d Cir. 1994), that Rule 12(b)'s pleading requirements did not apply to a petition to modify and then confirm an arbitration award. Rule 7(a) exhaustively enumerates the different "pleadings" available under the civil rules; motions, not appearing in that enumeration, are discussed in Rule 7(b). Because the petition at issue could only be "made and heard in the manner provided by law for the making and hearing of motions," 9 U.S.C. § 6, Rule 12(b)'s pleading requirements were deemed inapplicable. Productos Mercantiles, 23 F.3d at 46; see also O.R. Sec., Inc. v. Prof'l Planning Assocs. Inc., 857 F.2d 742, 745-746, 748 (11th Cir. 1988) (holding that Rule 8's notice pleading requirements do not apply in a proceeding to vacate an arbitration award because relief must be sought in the form of a motion).

A similar analysis holds here. An answer is a responsive pleading, not a motion, Fed. R. Civ. P. 7(a), 12(a), that may in turn only be filed in response to certain enumerated pleadings, and not to motions, Fed. R. Civ. P. 7(a). Since filings in the present proceeding can only be "made and heard in the manner provided by law for the making and hearing of motions," 9 U.S.C. § 6 (emphasis added), Nobel could not have filed an answer here, any more than ISC could have filed a complaint.

Although we do not find it necessary to resolve the question, there is also a plausible argument that Nobel could not have filed a motion for summary judgment pursuant to Fed. R. Civ. P. 56. Rule 81(a)(6) says that the civil rules apply, "except as [the Federal Arbitration Act] provide[s] other procedures." Section 4 of the Act, 9 U.S.C. § 4, in turn, sets out a simple, flexible framework for deciding whether a petition to compel arbitration must proceed to trial, consistent with "the simplicity, informality, and expedition of arbitration," Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985), but in contrast to the intricate requirements of Rule 56. And for decades this Court's § 4 jurisprudence has stood as a self-contained body of precedents that do not draw on our case law construing Rule 56, see, e.g., Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 129-130 (2d Cir. 1997) (collecting cases), even though to be sure the substantive standards of § 4 and Rule 56 are in the end quite similar, see Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003); Distajo, 107 F.3d at 129-130. Regardless, though, even if summary judgment motions are available in this context, that answers are not available convinces us that Rule 41(a)(1)(A)(i) does not apply to § 4 petitions to compel.

As a textual matter, Rule 41(a)(1)(A)(i) cannot and does not apply to such petitions. Rule 41(a)(1)(A)(i), drafted to preserve only a "narrow slice" of the expansive power that plaintiffs had at common law to dismiss unilaterally, Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 397, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990), allows such dismissals only "before the opposing party serves either an answer or a motion for summary judgment," Fed. R. Civ. P. 41(a)(1)(A)(i) (emphasis added). This rule, by its terms, thus gives an opposing party not simply the ability to preclude unilateral dismissals, but the flexibility to choose between two means of doing so depending on the circumstances. If Rule 41(a)(1)(A)(i) applies to petitions to compel, however, that flexibility vanishes because — at best — only one of the means given under the rule is available.


The terms of Rule 81(a)(6) also support our conclusion that Rule 41(a)(1)(A)(i) is inapplicable in § 4 proceedings. To repeat, Rule 81(a)(6) states in relevant part that the civil rules apply except insofar as the Federal Arbitration Act provides other procedures. Thus, at minimum, where the FAA's procedures are in conflict with those of the civil rules, the former controls.

Here, given the interaction of 9 U.S.C. §§ 4 and 6, if a party initiates a Title 9 proceeding via petition to compel arbitration, an opposing party may respond--and thereby potentially put "the making of the agreement for arbitration . . . in issue," 9 U.S.C. § 4--only by motion, and is precluded from filing an answer. But, as just discussed, Rule 41(a)(1)(A)(i) presumes that an opposing party may cut off the right of unilateral dismissal by filing and serving an answer.*** Rule 81(a)(6) is thus implicated here because §§ 4 and 6 of the FAA, providing for the filing and adjudication of petitions to compel, constitute "other procedures" that prevent Rule 41(a)(1)(A)(i) from operating according to its terms.

Nor is this conflict merely an abstract point--on the theory that even if a respondent cannot file an answer as contemplated by Rule 41(a)(1)(A)(i), a motion for summary judgment may be available. Consider cases in which the "making of the agreement for arbitration" is "in issue" such that it is clear at the outset that summary judgment will not (and should not) be granted, because an evidentiary hearing is necessary to resolve disputed facts. If Rule 41(a)(1)(A)(i) is applicable to 9 U.S.C. § 4, an opposing party in such a case must either allow the petitioner the right of unilateral dismissal at any time, or such a party must file and serve a motion for summary judgment that the party knows to be likely futile, or even frivolous. Imposing such an unpalatable choice on those opposing petitions to compel arbitration would disregard Rule 41(a)(1)(A)(i)'s careful balance between the interests of the parties, and would create opportunities for sharp practice that are inconsistent with the notion that petitions to compel are to be decided with dispatch. Cf. D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 107-109 (2d Cir. 2006) (holding Fed. R. Civ. P. 55, related to default judgments, inapplicable to a proceeding under Title 9 to confirm an arbitration award, noting that Rule 55 "does not operate well in the context of a motion to confirm or vacate an arbitration award," such that granting a default judgment in a "confirmation/vacatur proceeding[]" would be "generally inappropriate").

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