Tous v. Continental Supplies

Opinion

USCA1 Opinion

September 6, 1994   UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                [NOT FOR PUBLICATION]

                                 ____________________

No. 94-1377 

                             JOSE M. TOUS, INC., ET AL.,

                               Plaintiffs, Appellants,

                                          v.

                         CONTINENTAL SUPPLIES, INC., ET AL.,

                                Defendants, Appellees.
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

[Hon. Juan M. Perez-Gimenez, U.S. District Judge]
                                               ___________________

                                 ____________________

                                        Before

                                Torruella, Chief Judge,
                                           ___________
                           Cyr and Boudin, Circuit Judges.
                                           ______________

                                 ____________________

            Jose M. Tous-Rodriquez on brief pro se.
            ______________________
            Agusto  A.  Cirino  Gerena  on  brief  for  appellees  Continental
            __________________________
        Supplies,  Inc., Efrain  Ortiz, and  his wife  Maria Guzman  and their
        Conjugal Partnership.
            P.  Casto  Amy,   Rafael  F.  Castro  Lang,  and  Alfonso   Rivera
            ______________    ________________________        ________________
        Valdivieso on brief for appellees Cuevas and Family Restaurant, Inc.
        __________

____________________

____________________

Per Curiam.   Appellants,  Jose M. Tous,  Inc., and
                      __________

            Jose M. Tous (referred to as "Tous") appeal from the judgment

            of  the  Puerto Rico  district  court  dismissing the  second

            amended complaint filed  by Tous for  failure to comply  with

            Fed.  R.  Civ.  P. 9(b).    Tous  and  Hermanos Ramon,  Inc.,

            Reynaldo  Luis Ramon,  Iris Delia  Rodriguez Rivera  (Ramon's

            spouse)  and  their  conjugal  partnership  (referred  to  as

            "Ramon") also appeal from  the denial of the motion to file a

            third  amended complaint  and  to add  the  Ramon parties  as

            plaintiffs  to   that  complaint.     Both  pleadings  allege

            violations   of   the   Racketeer   Influenced   and  Corrupt

            Organizations  Act, 18 U.S.C.   1961 et seq. ("RICO").  Named
                                                 __ ____

            as defendants in the second and third amended complaints  are

            (1) Continental  Supplies Corp.;  (2) Efrain Ortiz,  his wife

            and their conjugal partnership; (3) Hector Cuevas Cuevas, his

            wife and their conjugal partnership; (4) Hector Cuevas Ramos,

            his  wife and  their conjugal  partnership; (5)  Miguel Elias

            Boneta,  his wife  and  their conjugal  partnership; and  (6)

            Family Restaurants, Inc.

                              I.  APPELLATE JURISDICTION
                              _   ______________________

                      Before addressing the merits of the appeal, we must

            dispose of  two jurisdictional issues.  The  first, raised by

            Family Restaurants, Cuevas Cuevas and Cuevas  Ramos, concerns

            Fed. R. App. P. 3(c).  Appellees point out that the notice of

            appeal  refers only  to  the judgment  dismissing the  second

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amended complaint.   Rule 3(c) requires  that "[a] notice  of

            appeal  must .  . .  designate the  judgment, order,  or part

            thereof appealed  from . . .  ."  By failing  to specifically

            refer  to the  order  denying the  motion  to add  the  Ramon

            parties  as plaintiffs,  appellees argue,  this  court cannot

            review the order.

                      Appellees are  mistaken.  The general  rule is that

            interlocutory  orders, such  as  the one  to which  appellees

            refer, are subject to appeal once the district court enters a

            final  judgment.  See Mangual v. Gen. Battery Corp., 710 F.2d
                              ___ _______    __________________

            15, 17  n.2 (1st  Cir. 1983) (interlocutory  order dismissing

            complaint as to some, but not all, defendants appealable when

            final  judgment entered); 9 James W. Moore, Bernard J. Ward &

            Jo Desha Lucas, Moore's Federal  Practice   110.08[1], at 47-
                            _________________________

            54  (2d ed. 1994) (interlocutory orders  that leave the cause

            of  action  pending  are  "reviewable on  appeal  from  final

            judgment").  Thus, we have  jurisdiction to review the  order

            denying the  motion to file  the third amended  complaint and

            the request to add parties.1

                        Also  unavailing is appellees'  argument that the

            Ramon  parties cannot  be  appellants because  the notice  of

            appeal  is  defective.    First,  they  argue,  it  does  not

____________________

            1.  This renders moot appellees' further contention  that the
            appeal should be dismissed  because the Ramon appellants were
            not parties  to the second amended  complaint and, therefore,
            had no right to complain about the judgment dismissing it.

                                         -3-

specifically refer  to them as "appellants"  and, second, the

            body of  the notice only states  that "plaintiff above-named"

            is  appealing.    Under Rule  3(c),  a  notice  of appeal  is

            effective  if it names each  appellant in the  caption of the

            notice of appeal.   The Ramon parties are, in fact, listed in

            the caption.   The fact that  the caption  refers to them  as

            "plaintiff" does not invalidate  the propriety of the notice.

            "An appeal will not  be dismissed for informality of  form or

            title of the notice of appeal, or for failure to name a party

            whose intent to appeal  is otherwise clear from  the notice."

            Fed. R. App. P. 3(c).  This is such a case.

                      The second  issue we  raise sua  sponte.   In their
                                                  ___  ______

            answer  to  the  complaint, Continental  Supplies  and  Ortiz

            asserted a  counterclaim for  abuse of  the legal  process by

            Tous  and  for  attorney's  fees.   They  also  cross-claimed

            against Cuevas Cuevas and  Cuevas Ramos for recompense should

            Tous  prevail.  The  district court  never disposed  of these

            claims.    Under  Fed. R.  Civ.  P.  54(b),  an order  "which

            adjudicates  fewer  than all  the  claims or  the  rights and

            liabilities of fewer than all the parties shall not terminate

            the action as to any of the claims or parties . . . ."   Such

            an  order  is  not  generally  appealable.    See  Rule 54(b)
                                                          ___

            (requiring certification  of  such interlocutory  orders  for

            purposes of appeal).

                      There are exceptions  to this rule,  however, which

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we  believe  control  this appeal.    First,  an order  which

            "necessarily  resolve[s]"  an  outstanding   counterclaim  or

            cross-claim is  final despite  the lack  of reference  to the

            claim in the  final judgment.   See Boston Car  Co. v.  Acura
                                            ___ _______________     _____

            Auto.  Div., 971  F.2d 811,  814 (1st  Cir. 1992).   Here the
            ___________

            cross-claim for  recompense was  resolved when  the complaint

            was dismissed.   That  is, once  appellants lost, this  claim

            became moot.

                      The  counterclaim, however, was  not decided by the

            dismissal of the action  and still is pending.   Nonetheless,

            the  nature of this  claim does not  preclude a determination

            that  the judgment appealed from is final.  Under Budinich v.
                                                              ________

            Becton Dickinson  & Co.,  486  U.S. 196  (1988), the  Supreme
            _______________________

            Court  held  that  an   outstanding  request  or  motion  for

            attorney's  fees  does  not  prevent  finality  because  "its

            resolution will not alter  the order [on the merits]  or moot

            or revise decisions embodied in the order."   See id. at 199-
                                                          ___ ___

            200.

                      As for the  claim for abuse  of the legal  process,

            appellees do  not  press it  on  appeal.   In any  event,  it

            necessarily could  not arise  until the action  was concluded

            and the appellants  had lost.   Cf.  In  re Sweet Transfer  &
                                            ___  ________________________

            Storage,  Inc., 896 F.2d 1189, 1191 (9th Cir. 1990) (an order
            ______________

            dismissing an  involuntary bankruptcy petition  is final  and

            appealable despite pending counterclaim by debtor for damages

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for bad faith  in filing  the petition;  "[a]ny actual  claim

            brought  for damages is  premature prior to  dismissal of the

            petition").  Finally, the resolution  of the abuse of process

            claim does not affect the merits of the final judgment.   See
                                                                      ___

            Budinich, 486  U.S. at 199.   We therefore  have jurisdiction
            ________

            over this appeal.

                                   II.  THE MERITS
                                   __   __________

                      A.  The Motion to Amend.
                          ___________________

                      A decision  of the district court  denying leave to

            amend  under Fed. R. Civ.  P. 15(a) is  reviewed for abuse of

            discretion.2   See Colmenares Vivas v. Sun Alliance Ins. Co.,
                           ___ ________________    _____________________

            807  F.2d 1102, 1108 (1st Cir. 1986); Isaac v. Harvard Univ.,
                                                  _____    _____________

            769  F.2d 817,  829 (1st Cir.  1985); Carter  v. Supermarkets
                                                  ______     ____________

            Gen. Corp.,  684 F.2d 187, 192  (1st Cir. 1982).   Rule 15(a)
            __________

            provides  that leave  to  amend "shall  be freely  given when

            justice so requires."  Thus, if a court decides not to permit

            amendment, "it must  do so  for a  valid reason  such as  bad

            faith  by  the  moving  party, unwarranted  delay,  or  undue

            prejudice to the opposing party."  Colmenares Vivas, 807 F.2d
                                               ________________

            at  1108 (citing Foman v.  Davis, 371 U.S.  178, 182 (1962)).
                             _____     _____

            Because there  were essentially two separate  requests in the

____________________

            2.  Appellants mistakenly refer to Rule 15(d) in their brief.
            This  rule, by  its  language, only  applies to  supplemental
            pleadings  which contain  averments  of  "events  which  have
            happened  since  the  date  of  the  pleading  sought  to  be
                      ___________________________________________________
            supplemented."   (emphasis added).  The  new averments in the
            ____________
            third amended complaint refer  to events which occurred prior
                                                                    _____
            to the filing of the complaint.
            __

                                         -6-

motion under review, we will address them separately.

                      1.    Motion  to  add  the  Ramon  parties  as  new
                            _____________________________________________

            plaintiffs.   In 1991, Ramon had filed a separate RICO action
            __________

            in the district court.  However, it was dismissed in 1992 for

            failure to  comply with Fed. R. Civ. P. 9(b).  The court held

            that the  complaint did not  identify any  letters, or  their

            senders, dates or contents.  In support of the request to add

            the  Ramon   parties  as  plaintiffs  in   the  Tous  action,

            appellants  point out  that  the order  dismissing the  Ramon

            complaint  did  not  state whether  it  was  with or  without

            prejudice.   From this, they argue that the dismissal must be

            construed  as  having been  without  prejudice  to amend  the

            complaint's  "facial"  deficiencies.     As  a  result,  they

            conclude  that  the  district  court erred  in  applying  the

            doctrine of res  judicata to  bar the addition  of the  Ramon

            parties to the Tous action.

                      We begin with Fed. R. Civ. P. 41(b):

                             (b)   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

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party  under Rule  19, operates
                           as  an  adjudication  upon  the
                           merits.

            A dismissal  under Rule  41(b) for  a plaintiff's  failure to

            comply with  the rules, unless the  court otherwise provides,

            is  with prejudice  and on  the merits.   See LeBeau  v. Taco
                                                      ___ ______     ____

            Bell,  Inc., 892 F.2d 605, 607 (7th Cir. 1989) (dismissal for
            ___________

            want of prosecution  was on the  merits and "with  prejudice"

            where judgment did not "otherwise state"); Nagle  v. Lee, 807
                                                       _____     ___

            F.2d 435,  442-43 (5th  Cir. 1987)  (where  judgment did  not

            state whether  it was without prejudice,  Rule 41(b) requires

            court to treat dismissal  as being with prejudice and  on the

            merits).

                      In Ramon's  case the  dismissal was for  failure to

            comply with one  of the Rules of Civil Procedure  and not, as

            appellants argue,  for lack of jurisdiction.   Dismissals for

            violations  of other  rules in  similar situations  have been

            treated as being with prejudice and on the merits.  See In re
                                                                ___ _____

            Reed, 861  F.2d 1381, 1382  (5th Cir. 1988)  (dismissal under
            ____

            Fed.  R.  Civ.  P. 37(b)(2)(C)  for  failure  to comply  with

            discovery orders  was with  prejudice and, therefore,  on the

            merits);  Nevijel v. North Coast Life Ins. Co., 651 F.2d 671,
                      _______    _________________________

            673  (9th Cir.  1981) (complaint which  fails to  comply with

            Fed. R. Civ. P. 8(a) and (e) may be  dismissed with prejudice

            under Rule 41(b)).

                      In this  situation, "Rule 41(b) puts  the burden on

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the  plaintiff  to take  action --  to persuade  the district

            court  either   to  specify  that  a   dismissal  is  without

            prejudice,  or  to  vacate  the  dismissal.    Failing  that,

            plaintiff's recourse is to appeal."  LeBeau, 892 F.2d at 608;
                                                 ______

            see also  In re Reed,  861 F.2d  at 1383 (if  a dismissal  is
            ___ ____  __________

            inequitable, recourse  is to appeal  or file  a motion  under

            Fed.  R. Civ. P. 60(b)); 1B James  W. Moore, Jo Desha Lucas &

            Thomas S. Currier, Moore's Federal Practice   0.409[1.-2], at
                               ________________________

            III-137,  III-139  (2d  ed.  1993)  (plaintiff cannot  ignore

            court's dismissal for failure  to comply with Rules  and just

            file a new  action; plaintiff  must make a  timely motion  to

            amend the judgment to state that it is without prejudice).

                      As for the failure  of the Ramon parties to  file a

            motion  to amend  their complaint  or a  Fed. R.  Civ. P.  60

            motion for clarification concerning whether  the judgment, in

            fact, was  with or without prejudice,  appellants assert that

            they chose not to act for "economic and time-saving" reasons.

            That is,  because both complaints concerned  the same pattern

            of racketeering by defendants,  the two cases, they believed,

            should  be  filed  jointly.   This  is  not  a valid  excuse.

            Similarly unavailing is their assertion that the letters upon

            which Ramon's RICO claim was based were not found until after
                                                                    _____

            the dismissal of the complaint.  This statement is conclusory

            in  nature and is not accompanied  by supporting documents or

            affidavits.

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Based  on  the  foregoing,  we  conclude  that  the

            judgment  dismissing the Ramon  complaint was  with prejudice

            and  on the merits.  Under federal law, which governs federal

            actions, res judicata bars a second action if (1) there was a

            final judgment on the merits in the earlier action, (2) there

            exists  sufficient  identity  between the  causes  of  action

            asserted  in each suit, and  (3) there is sufficient identity

            between  the parties in the  two actions.   Gonzalez v. Banco
                                                        ________    _____

            Central Corp., No. 93-2021, slip op. at 6  (1st Cir. June 30,
            _____________

            1994).3

                      Plainly,  the  first requirement  has  been met  as

            discussed, supra.  Second, a comparison between the complaint
                       _____

            filed  in the first action and the third amended complaint in

            the case at  hand reveals that the RICO claims  in both suits

            are  identical.   Indeed,  appellants  do  not dispute  this.

            Finally,  the parties to the  two actions also are identical.

            That is, the plaintiffs in  both actions are Reynaldo  Ramon,

            his wife, their conjugal partnership and Hermanos Ramon, Inc.

            and  the defendants  they  are suing  are Family  Restaurant,

            Cuevas Cuevas,  Cuevas Ramos,  Elias Boneta and  Jose Nazario

____________________

            3.  Appellants  attempt  to  argue  that  collateral estoppel
            rather  than res judicata applies  to their case.   They cite
            Guzowski v.  Hartman, 969  F.2d 211  (6th  Cir. 1992),  cert.
            ________     _______                                    _____
            denied, 113 S. Ct. 978 (1993), in support of this contention.
            ______
            In   Guzowski,  however,  the   order  dismissing  the  first
                 ________
            complaint was without prejudice.  Guzowski, therefore, is not
                          _______ _________   ________
            applicable to this case.  

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(and their spouses and conjugal partnerships).4

                      We  therefore conclude that  the Ramon parties were

            barred  from relitigating  their RICO  claim.   As a  result,

            permitting them to  join as plaintiffs  in the third  amended

            complaint  ultimately would  have  led  to  their  dismissal.

            "Where  an  amendment  would  be  futile  or  would serve  no

            legitimate purpose, the district  court should not needlessly

            prolong matters."  Correa-Martinez v. Arrillaga-Belendez, 903
                               _______________    __________________

            F.2d 49, 59 (1st Cir. 1990).  In such a situation, the denial

            of leave to amend is not an abuse of discretion.  See id.
                                                              ___ ___

                      2.  Motion to file the third amended complaint.  In
                          __________________________________________

            certain  circumstances, undue  delay  in filing  a motion  to

            amend  can provide  a  basis for  the  denial of  a  proposed

            amendment.5  See  Quaker State Oil Refining  Corp. v. Garrity
                         ___  ________________________________    _______

            Oil Co., 884 F.2d 1510, 1517 (1st Cir. 1989) (two-year period
            _______

            elapsed  between filing of counterclaims  and motion to add a

            fifth); Hayes v. New England Millwork Distributors, Inc., 602
                    _____    _______________________________________

____________________

            4.  The  third  amended complaint  also  lists as  defendants
            Continental  Supplies  and Ortiz.    Although  they were  not
            defendants  in the Ramon case, a reading of the third amended
            complaint reveals that the Ramon plaintiffs are not asserting
            a  claim against them.  See Third Amended Complaint,    48-68
                                    ___
            (only  referring to  Fidelity  National Leasing,  Inc., Banco
            National and  Family Restaurants as RICO  "enterprises" whose
            affairs  were  conducted through  a  pattern of  racketeering
            activity).

            5.  The position taken by  Tous on appeal that the  denial of
            leave to file the  third amended complaint was based  on Fed.
            R. Civ. P. 21 (misjoinder of parties) is not supported by the
            record.

                                         -11-

F.2d  15, 19  (1st Cir.  1979) (two  years between  filing of

            complaint  and motion to amend).  In such cases, "courts have

            placed  the burden upon the movant to show some `valid reason

            for  his neglect  and  delay.'"   Hayes,  602 F.2d  at  19-20
                                              _____

            (citing Freeman  v. Continental  Gin Co.,  381 F.2d  459, 469
                    _______     ____________________

            (5th Cir. 1967)); see also Stepanischen v. Merchants Despatch
                              ________ ____________    __________________

            Transp. Corp., 722 F.2d 922, 933 (1st Cir. 1983).
            _____________

                      Here,  Tous does  not provide  any reasons  for his

            delay  in   requesting  leave  to  file   the  third  amended

            complaint.   Indeed, it was  not until some  of the appellees

            filed a motion to dismiss in  August 1992 -- almost two years

            after  the filing of the  initial complaint --  that Tous was

            prompted  to  request  discovery  on  the  Rule  9(b)  issue.

            Further, the motion to amend was  not filed until May 1993 --

            almost  nine months after the motion to dismiss was filed and

            over two years  since Tous  initiated the action.   "We  have

            held  .  . .  that  a  late motion  for  summary  judgment or

            dismissal  may not  in itself  justify an excessive  delay in

            moving to amend."   Andrews v. Bechtel Power Corp.,  780 F.2d
                                _______    ___________________

            124, 139 (1st Cir. 1985), cert. denied, 476 U.S. 1172 (1986).
                                      ____________

            Finally,   although  Tous   proposed   an  interrogatory   to

            Continental and  Ortiz, there is no indication  that the data

            he received from them, if any, could not have been discovered

            earlier.   See First Nat'l  Bank of Lousville  v. Master Auto
                       ___ ______________________________     ___________

            Serv.  Corp., 693  F.2d 308,  314 (4th  Cir.  1982) (district
            ____________

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court's  denial  of motion  to  amend  upheld where  movant's

            amended claim was not premised on new information to which it

            previously had not had  access).  We therefore find  that the

            district court did  not abuse its  discretion in denying  the

            motion to amend.

                      B.  Dismissal of the Second Amended Complaint.
                          _________________________________________

                      As the district court held, Rule 9(b) requires that

            a RICO plaintiff "must go beyond a showing of fraud and state

            the  time, place  and content  of the  alleged mail  and wire

            communications perpetrating  that fraud."   New England  Data
                                                        _________________

            Services,  Inc. v. Becher, 829 F.2d 286, 291 (1st Cir. 1987).
            _______________    ______

            On appeal Tous  only argues that the  third amended complaint

            satisfies  this  standard;  indeed, Tous  concedes  that  the

            second amended  complaint is  defective under Becher.   Thus,
                                                          ______

            for essentially  the reasons  stated in the  district court's

            Opinion and Order, dated February 23, 1994, we agree with its

            decision  that the  second amended  complaint did  not comply

            with Rule 9(b).  

                                   III.  CONCLUSION
                                   ___   __________

                      The judgment of the district court is affirmed.
                                                            ________

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