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What the court held

Case: Wotjas v. Capital Guardian Trust Co., No. 05-4248.

Issue: Can a plaintiff voluntarily dismiss a case in order to re-file in a state with a longer statute of limitations?

Holding: No. Wisconsin law creates a vested right in expiration of statutes of limitations, so dismissal would be prejudicial to the defendant.

You can’t dismiss a federal case in order to re-file it in a state with a friendlier statute of limitations.

Previous case law had suggested it was discretionary with the judge whether such a dismissal was permissible. But, under Wisconsin law, expiration of a limitation period creates an affirmative right, dismissal is prejudicial to the defendant, and can’t be done — period.

In 1999, Bonnie and Richard Wojtas instructed Capital Guardian Trust Company to roll over their IRA account into a new one managed by Insurance Planning & Design, Inc. When the funds were received by Insurance Planning, they were illegally converted by an employee.

More than two years later, the Wojtas sued Capital in Wisconsin state court, alleging breach of fiduciary duty and negligence. Capital removed the case to federal court, and then moved to dismiss, citing the two-year statute of limitations in sec. 893.57.

Although sec. 893.57 on its face only applies to intentional torts “to the person,” the Wisconsin Supreme Court has nevertheless interpreted it to apply to breach of fiduciary duty claims.

The Wotjases did not respond to the statute of limitations argument, and instead moved for voluntary dismissal pursuant to Fed. R.Civ. P. 41(a)(2), asking that the dismissal be without prejudice, so they could re-file in Illinois, where the statute of limitations is five years.

U.S. District Court Judge John C. Shabaz denied the motion for voluntary dismissal, and instead granted judgment on the pleadings in favor of Capital, with prejudice.

The Wotjases appealed, but the Seventh Circuit affirmed in a decision by Judge Diane S. Sykes.

Some case law favoring the Wotjases the court has already repudiated; the rest the court distinguished.

In Bolten v. Gen. Motors Corp., 180 F.2d 379 (7th Cir. 1950), the plaintiff voluntarily dismissed a case pending in Illinois court, in order to re-file in Missouri.

Because statutes of limitations only operate on the remedy, but do not extinguish a right, the court in Bolten concluded the court had no discretion not to grant the motion to dismiss.

A few years later, however, the reasoning in Bolten was repudiated. J.R. Adney v. Miss. Lime Co. of Mo., 241 F.2d 43, 45-46 (7th Cir. 1957); Grivas v. Parmelee Transp. Co., 207 F.2d 334, 336 (7th Cir. 1953).

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In Adney and Grivas, the court held that voluntarily dismissal under rule 41(a)(2) was not a matter of right, but is discretionary with the district court, both as to whether dismissal shall be granted, and the terms and conditions of dismissal.

Neither Adney nor Grivas was help to the Wotjases, however, the court concluded, because Wisconsin law creates a vested right in statutes of limitation that the law of other states does not.

In Colby v. Columbia County, 202 Wis. 2d 342, 350, 550 N.W.2d 124, 128 (1996), the Wisconsin Supreme Court held that the expiration of the limitations period does more than extinguish the cause of action of the plaintiff; it also creates a right enjoyed by the defendant to enforce the bar.

Thus, Capital would be prejudiced by a voluntarily dismissal, and it would be an abuse of discretion to grant it.

Click here for Case Analysis.

David Ziemer can be reached by email.

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