A Lesson About Stipulations of Dismissal and Motions for Voluntary Dismissal

Burns v. Hoboken Rent Leveling & Stabilization Bd., 429 N.J. Super. 435 (App. Div. 2013).  This was a prerogative writ case involving rent control.  Plaintiffs were tenants in a building owned by defendant Bloomfield 206 Corporation (“Bloomfield”).  Plaintiffs and Bloomfield fought before the defendant Board as to the proper amount of lawful rent applicable to plaintiffs’ apartments.  After the Board ruled, plaintiffs filed this case against the Board and Bloomfield.  [Disclosure:  My firm, Lite DePalma Greenberg, LLC, represented the Board in this case].  Bloomfield did not appeal the Board’s decision.  Plaintiffs also filed a consumer fraud complaint against Bloomfield only, seeking the return of excess rents paid.  Calculation of plaintiffs’ damages in that case was dependent on the amount of the lawful base rent, the subject of the prerogative writ action. 

After Bloomfield had filed an Answer, plaintiffs and the Board signed a stipulation of dismissal.  Bloomfield was not notified of or made a party to the stipulation.  Bloomfield then moved to vacate the stipulation of dismissal, based on the provision of Rule 4:37-1(a) that allows a voluntary dismissal by stipulation only when that stipulation is “signed by all parties who have appeared in the action.”  Plaintiffs cross-moved for a voluntary dismissal with prejudice.  The Law Division denied Bloomfield’s motion to vacate the dismissal, and granted plaintiffs’ cross-motion.  Bloomfield appealed.  In an opinion by Judge Lihotz, the Appellate Division agreed with Bloomfield that the stipulation was invalid, but affirmed the outcome below because plaintiffs’ motion for voluntary dismissal with prejudice was properly granted.

On the issue of the validity of the stipulation, Judge Lihotz applied the language of Rule 4:37-1(a), and noted that it permits dismissals only unilaterally by the plaintiff “before service by the adverse party of an answer or other responsive pleading … or with consent of all parties who have appeared in the action regarding the claim or claims being dismissed.”  Since Bloomfield had filed an Answer, plaintiffs could not dismiss their case unilaterally.  And since “Bloomfield was an interested party concerning the claims being dismissed,” the stipulation of dismissal required Bloomfield’s consent to be effective.  As a result, the denial of Bloomfield’s motion to vacate the stipulation was error.

But the panel found that error to be harmless because the Law Division had properly granted plaintiffs’ motion for voluntary dismissal with prejudice under Rule 4:37-1(b).  Though there has been “relatively scant judicial treatment of the contours of Rule 4:37-1,” the Appellate Division had repeatedly stated that section (b) of that Rule “was adopted to protect defendants from the duplication of litigation costs” and to prevent “intolerable manipulation of the [c]ourt’s calendar and the defendants’ resources.”  Since plaintiffs here sought and were granted dismissal with prejudice, unlike in the more common case where a plaintiff moves for dismissal without prejudice and then seeks to refile in the same or a different court in order to gain a litigation advantage, there was no risk that Bloomfield could be subject to duplicative future litigation or “manipulation of the court’s calendar.”  Judge Lihotz rejected Bloomfield’s arguments that the dismissal hindered Bloomfield’s defense of the consumer fraud case.