UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
DEBTOR CASE NO. 89-60564
This matter comes before the Court on the objection of the debtor to the claim of the State of Ohio as Liquidator of American Druggists' Insurance Company which has been submitted for decision. The Court having considered the pleadings and documentary evidence of record in this case, as well as the arguments of counsel, makes the following
FINDINGS OF FACT
On December 7, 1989, George Fabe, Ohio Superintendent of Insurance as Liquidator of American Druggists' Insurance Company filed a claim herein in the amount of $266,479.19, plus attorneys fees. This amount represented losses and expenses incurred by the creditor on reclamation bonds written by American Druggists' Insurance Company. The debtor had executed General Indemnity Agreements wherein she agreed to indemnify American Druggists' Insurance Company from all losses or expenses incurred on these bonds.
Prior to the filing of the debtor's bankruptcy petition the State of Ohio had, on April 6, 1988, commenced Civil Action No. 88-64, George Fabe, Ohio Superintendent of Insurance, as Liquidator of American Druggists' Insurance Company v. Melvin Bolton, et al., in the United States District Court for the Eastern District of Kentucky at London. The Complaint was later amended to add the debtor as an additional defendant. The debtor filed an answer in the action. A judgment was entered as to defendants Bill and Alberta King on August 18, 1989.
A trial of the matter was set for October 12, 1989, but the debtor filed her bankruptcy petition the day before. The District Court entered an Order on April 23, 1990, giving the plaintiff twenty days to show cause why the action should not be dismissed as settled, the parties having represented to the court that it was settled. Apparently there was no response to this Order, and the court dismissed the action as settled on May 16, 1990. The issue with regard to this claim is whether the order dismissing the action as settled is effective against the debtor.
CONCLUSIONS OF LAW
The debtor was a party to the above-referenced United States District Court action when it was dismissed as settled on May 16, 1990. F.R.C.P. 41(b) provides as follows:
Involuntary Dismissal: Effect Thereof. For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits.
Courts have consistently held that the exception to this rule is where a case is voluntary dismissed "without prejudice." In In re Ditter, 205 B.R. 213 (9th Cir.BAP 1996) the court stated:
The Ninth Circuit has held that '[a] voluntary dismissal without prejudice is ordinarily not a final judgment from which the plaintiff may appeal. Nor may a plaintiff appeal from a joint stipulation to voluntary dismissal, entered unconditionally by the court pursuant to a settlement agreement.' Concha v. London, 62 F.3d 1493, 1507 (9th Cir. 1995), cert. dismissed, ___U.S.____, 116 S.Ct. 1710, 134 L.Ed.2d 772 (1996). The court explained that a 'voluntary dismissal without prejudice is not adverse to the plaintiff's interest. The plaintiff is free to seek an adjudication of the same issue at another time in the same or another forum.' Id.
At pp. 215-216.
Therefore, absent a designation that a dismissal is "without prejudice," it operates as an adjudication upon the merits, and is a final and appealable judgment. See In re Jee, 799 F.2d 532 (9th Cir. 1986), in which the court stated:
The judgment of dismissal is silent as to its prejudicial effect, .... However, Rule 41(b) of the Federal Rules of Civil Procedure, which applies in bankruptcy through Bankruptcy Rule 7041, provides that '[u]nless the court in its order for dismissal otherwise specifies, a dsimissal under this subdivision and any dismissal not provided for in this rule ... operates as an adjudication upon the merits.' Thus, the original, unamended dismissal in the present case is considered to be with prejudice.
At page 534, fn. 2.
This Court therefore concludes that the District Court's order of May 16, 1990, was a final and appealable judgment. It has not been appealed, and stands as an adjudication of the State of Ohio's claim herein. The Court will therefore sustain the debtor's objection to that claim. An order in conformity with this opinion will be entered separately.
By the Court -
Charles L. Bluestone, Esq.
J. Randall Reinhardt, Esq.
James R. Westenhoefer, Esq., Trustee