Commercial Litigation and Arbitration

Ninth Circuit Abandons Rule Requiring That Dismissed Claims Be Realleged in Amended Complaint or Forfeited — Ends Both Sanctions Exposure and Circuit Split

Lacey v. Maricopa Cnty., 2012 U.S. App. LEXIS 18320 (9th Cir. Aug. 29, 2012):

Before we consider his claim to immunity, we must address whether the claims against Maricopa County Attorney Andrew Thomas are properly before us, as our circuit law appears to require that we consider the claims against Thomas to be waived. Thomas was named as a defendant in the original complaint, but the district court dismissed him from the case in its October 2008 order after finding that he was entitled to absolute prosecutorial immunity. Although the court granted leave to amend claims against other parties, it did not grant Lacey leave to amend the claims against Thomas. Lacey filed his First Amended Complaint, he mentioned Thomas throughout the facts, but he removed all reference to Thomas as a defendant.

We have long proclaimed that "[i]t is the law of this circuit that a plaintiff waives all claims alleged in a dismissed complaint which are not realleged in an amended complaint." Forsyth v. Humana, Inc., 114 F.3d 1467, 1474 (9th Cir. 1997); see N.Y. City Emps.' Ret. Sys. v. Jobs, 593 F.3d 1018, 1025 (9th Cir. 2010); King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987); London, 644 F.2d at 814; Sacramento Coca-Cola Bottling Co. v. Chauffeurs, Etc., Local 150, 440 F.2d 1096 (9th Cir. 1971); Loux v. Rhay, 375 F.2d 55, 57 (9th Cir. 1967); Bullen v. De Bretteville, 239 F.2d 824, 833 (9th Cir. 1956). (For convenience, we will refer to the rule as the "Forsyth rule.") The Forsyth rule is "premised on the notion that the 'amended complaint supersedes the original, the latter being treated thereafter as non-existent.' If a plaintiff fails to include dismissed claims in an amended complaint, the plaintiff is deemed to have waived any error in the ruling dismissing the prior complaint." Forsyth, 114 F.3d at 1474 (citation omitted) (quoting Loux, 375 F.2d at 57). We have indeed considered this rule to be "hornbook law," Bullen, 239 F.2d at 833, even as we have recognized that it is "somewhat harsh," Marx v. Loral Corp., 87 F.3d 1049, 1056 (9th Cir. 1996). This rule would appear to preclude Lacey from asserting claims against Thomas in this appeal.

Several of our recent decisions, however, have struggled to dampen the harshness of the Forsyth rule and have left our law somewhat unsettled. In USS-POSCO Industries v. Contra Costa County Building & Construction Trades Council, we held that the rule "only applies to amended complaints that follow upon dismissal with leave to amend, and not to those that follow summary judgment." 31 F.3d 800, 812 (9th Cir. 1994). As we explained, "[c]ounsel were not required to risk forfeiting their client's right to appeal in order to avoid sanctions." Id.

In Parrino v. FHP, Inc., we further narrowed the rule when we declined to apply it "to claims dismissed without leave to amend." 146 F.3d 699, 704 (9th Cir. 1998), superseded by statute on other grounds as stated in Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 681-82 (9th Cir. 2006). Recently, in Sechrest v. Ignacio, we held that the cases establishing the Forsyth rule, including London and Loux, dealt only with "voluntary iiiiii waiver"; because the petitioner was barred from reasserting certain claims in his habeas petition on pain of its dismissal if he included them, the panel concluded that his challenge to those claims he was unable to reassert was not waived. 549 F.3d 789, 804 (9th Cir. 2008).

We are unconvinced that the distinctions we noted in Parrino and Sechrest are consistent with our prior cases. In Marx, for example, we applied the rule where the district court dismissed a claim because it was preempted by ERISA. Following dismissal,

[t]he court allowed the plaintiffs to file an amended complaint only on the narrow ground of equitable estoppel sounding in fraud. Thus, the plaintiffs did not include their independent contract theory in the amended complaint. Although it seems somewhat harsh to preclude them from raising the argument now, Ninth Circuit caselaw requires just such a result.

87 F.3d at 1056. We did not recognize any exception because the claims were dismissed involuntarily, but see Sechrest, 549 F.3d at 804, or because the district court refused to grant leave to amend the dismissed claim, but see Parrino, 146 F.3d at 704. Rather, we laid out a stark choice for the plaintiff: "'If appellant desired to rely upon the original complaint, it should have refused to plead further.'" Marx, 87 F.3d at 1055 (quoting Studio Carpenters Local Union No. 946 v. Loew's, Inc., 182 F.2d 168, 170 (9th Cir. 1950)). While harsh, the rule has some logic behind it.

Furthermore, we acknowledged in Marx that other courts and legal scholars have criticized the Forsyth rule precisely because it is without exception. For instance, we noted that the Tenth Circuit criticized our rule and characterized it as "formalistic." Id. at 1056 (quoting Davis v. TXO Prod. Corp., 929 F.2d 1515, 1517-18 & n.1 (10th Cir. 1991)). *** It is difficult to escape the conclusion that we have always meant what we had said.

Although criticized, our current rule makes some sense in context. We have adopted a generous standard for granting leave to amend from a dismissal for failure to state a claim, such that "a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) (quoting Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990)). Furthermore, because we had held that under the old version of Federal Rule of Civil Procedure 15 "a motion to dismiss is not a 'responsive pleading,'" and thus a party had leave to amend as of right upon dismissal absent the filing of an responsive pleading, id. at 497 (quoting Schreiber Distrib. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)) (internal quotation mark omitted), in many cases any failure to replead a claim in an amended complaint would have been voluntary. (Under the current version of Rule 15 adopted in 2009, parties have 21 days from both responsive pleadings and motions to dismiss to amend as of right, see Fed. R. Civ. P. 15(a)(1) (2009), so the situation has changed.) The Forsyth rule is also consonant with our general practice of considering a dismissal to be of the claims and not a final judgment on the complaint, see WMX Techs., Inc. v. Miller, 104 F.3d 1133, 1135 (9th Cir. 1997) (en banc), with the purpose of reducing the number of appeals to this court.

Despite its provenance, on reflection, we do not believe that the Forsyth rule is prudent or sufficiently justified, and we agree that it is formalistic and harsh. We also recognize that we are an outlier among the circuits. Although the general rule is that an amended complaint supercedes the original complaint and renders it without legal effect, most courts have concluded that "the plaintiff does not forfeit the right to challenge the dismissal on appeal simply by filing an amended complaint that does not re-allege the dismissed claim." Young v. City of Mount Ranier, 238 F.3d 567, 572-73 (4th Cir. 2001) (footnote omitted); see In re Atlas Van Lines, Inc., 209 F.3d 1064, 1067 (8th Cir. 2000); Badger Pharm., Inc. v. Colgate-Palmolive Co., 1 F.3d 621, 625 (7th Cir. 1993); Davis, 929 F.2d at 1517 (10th Cir.); Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. & Canada, 674 F.2d 1365, 1370 (11th Cir. 1982); Wilson v. First Houston Inv. Corp., 566 F.2d 1235, 1238 (5th Cir. 1978), vacated on other grounds, 444 U.S. 959, 100 S. Ct. 442, 62 L. Ed. 2d 371 (1979); 3 Moore's Federal Practice ¶ 15.08(7) (1974). The Fourth Circuit has described this rule as "an exception to the general rule of waiver." Young, 238 F.3d at 573. We find the reasoning in some of those cases and in some of our own criticizing our rule to be persuasive.

First, our current rule is unfair to litigants. For the plaintiff whose complaint has been dismissed, the rule is not merely overly "mechanical," see 6 Wright & Miller, supra, § 1476; it creates a "Hobson's choice[,] . . . a patently coercive predicament" between amending the complaint—thereby forgoing the chance to appeal the dismissal of some claims—and appealing the dismissal of the claims in the original complaint—thereby forgoing the chance to add or replead claims that the plaintiff would otherwise be allowed to add. In re Van Atlas Lines, 209 F.3d at 1067; see Davis, 929 F.2d at 1518 ("[A] rule requiring plaintiffs who file amended complaints to replead claims previously dismissed on their merits in order to preserve those claims merely sets a trap for unsuspecting plaintiffs with no concomitant benefit to the opposing party.") (footnote omitted). In practice, however, the choice for counsel is between failing to preserve issues for appeal and risking sanctions by realleging dismissed claims. See Parrino, 146 F.3d at 704. The risk of sanctions is not merely hypothetical. See, e.g., Destfino v. Reiswig, 630 F.3d 952, 959 (9th Cir. 2011) (affirming district court's inherent power to control its docket by dismissing entire complaint for failure to follow instructions given with leave to amend); Johnson ex rel. Wilson v. Dowd, 345 F. App'x 26, 30 (5th Cir. 2009) (approving Rule 11 sanctions for counsel who realleged claims against judicial defendants who had already been dismissed on the grounds of absolute immunity). The rule is also unfair to the defendants to whom dismissal was granted insofar as it encourages the plaintiff to reallege claims against defendants who have already been dismissed and may feel they must return to court to answer the same claims again.

Second, the rule is unfair to district courts. We see no benefit in requiring plaintiffs to reallege claims that the district courts have already dealt with on the merits and dismissed with prejudice. Even where the district court recognizes that plaintiffs are just following the Forsyth rule and preserving their options on appeal, the court will still be wasting resources in parsing old claims and reiterating its prior rulings, and "there is no reason to make the court dismiss them a second time." Young, 238 F.3d at 573. Our stewardship requires better use of our limited judicial resources.

Third, we do not believe there is any countervailing reason for keeping the current rule. While in theory it may limit the number of complaints, and perhaps the number of orders, that we must consider on appeal, in practical terms we think there is little benefit to the orderly administration of justice. It should make little difference whether the claims on appeal are presented in one document or are sections in several complaints; we already consider in a single appeal all interlocutory rulings. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S. Ct. 1221, 93 L. Ed. 1528 (1949) ("The purpose [of the final judgment rule] is to combine in one review all stages of the proceeding that effectively may be reviewed and corrected if and when final judgment results."). Conversely, the current rule may actually multiply litigation. The Forsyth rule may well encourage parties to challenge the district court's discretion with respect to granting leave to amend the complaint and imposing sanctions for the plaintiff's attempt to reallege his claims in order to preserve them for appeal. We think our time, and the resources of the district courts, are better spent addressing the merits of the claims than sidebar arguments over whether a particular claim can or cannot be amended.

We therefore join our sister circuits and overrule in part the rule found in Forsyth and other cases "that a plaintiff waives all claims alleged in a dismissed complaint which are not realleged in an amended complaint." Forsyth, 114 F.3d at 1474. For claims dismissed with prejudice and without leave to amend, we will not require that they be repled in a subsequent amended complaint to preserve them for appeal. But for any claims voluntarily dismissed, we will consider those claims to be waived if not repled.

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