The Illinois Supreme Court has twice held that a plaintiff who has one or more claims dismissed with prejudice risks application of res judicata if the party then takes a voluntary dismissal on the remaining claims. (Rein v. David A. Noyes & Co.; Hudson v. City of Chicago).

So does the same rule apply if the interlocutory dismissal is without prejudice? That’s the question the Illinois Supreme Court agreed to decide in the closing days of its September term in Richter v. Prairie Farms Dairy, Inc., a case from the Fourth District.

Richter arises from a 1980 agreement by which the plaintiffs and other farmers agreed to form an agricultural cooperative for the purpose of marketing their milk. The plaintiffs purchased common stock issued by the cooperative. In a 2005 letter, the defendant terminated both the Agreement and the plaintiffs’ membership in the cooperative.

The plaintiffs filed a three-count complaint against the cooperative, seeking shareholder remedies as well as damages for statutory and common-law fraud. The trial court granted defendant’s motion to dismiss the fraud claims, but denied the motion with respect to the shareholder claims. The court’s order granted the plaintiffs leave to replead the fraud claims, although the plaintiffs never did so, choosing to proceed on their shareholder claims. The lawsuit continued for five additional years, but when the trial court denied the plaintiff’s request for a continuance, the plaintiffs opted to take a voluntary dismissal without prejudice. The plaintiffs refiled their action a year later, restating the shareholder claims and the fraud claims. The defendants moved to dismiss based on res judicata, and the trial court granted the motion.

The Appellate Court reversed. The plaintiff argued that res judicata was improper because the order of dismissal had not been with prejudice, citing to established law that an order of dismissal without prejudice doesn’t become final and appealable until the case is finally dismissed. The defendant insisted that even if the order hadn’t been final initially, it became final and appealable – and preclusive – when the plaintiff allowed the court-imposed deadline to expire without an amended complaint. The Appellate Court disagreed, noting that even though the trial court had imposed a deadline for filing of an amended complaint, the court obviously had the discretion to further extend that deadline, even by order entered after the deadline had expired. Therefore, merely allowing the deadline to pass couldn’t operate to make the dismissal without prejudice into a final order. Rein and Hudson, the Court held, were not to the contrary, given that both had involved interlocutory orders of dismissal with prejudice. Nor did the trial court’s order granting the motion for voluntary dismissal make the preceding orders final, given that the earlier orders had dismissed without prejudice.

The Court then turned to the defendant’s alternative argument that the plaintiff’s renewed complaint was barred by the five-year statute of limitations (735 ILCS 5/13-205). The plaintiffs responded by pointing to 735 ILCS 5/13-217, which allows plaintiffs a one-time right to refile within one year of a voluntary dismissal. The defendants argued that the savings statute couldn’t apply to claims that had been voluntarily dismissed, but the Appellate Court disagreed so long as the dismissal was without prejudice. Nor was there any reason that the plaintiffs couldn’t raise new claims in the renewed lawsuit, the Appellate Court held, given that the defendants were on notice of the facts and circumstances underlying the claims.

We expect a decision from the Court in six to eight months.

Image courtesy of Flickr by Stevep2008 (no changes).