Litigating and Settling Cases Without Screwing Up the Voluntary Dismissal and Broad Release

By Rachel Scott Decker

I. Voluntary Dismissals and Summary Judgment

Rule 41 of the North Carolina Rules of Civil Procedure governs when a plaintiff may take, without leave of court, a voluntary dismissal without prejudice. Specifically, the rule provides:

Subject to the provisions of Rule 23(c) and of any statute of this State, an action or any claim therein may be dismissed by the plaintiff without order of the court (i) by filing a notice of dismissal at any time before the plaintiff rests his case, or (ii) by filing a stipulation of dismissal signed by all parties who have appeared in the action.

N.C.R. Civ. P. 41(a)(1).

In practical terms, the question often arises as to exactly when the plaintiff has rested his or her case. The issue is particularly troublesome in the context of summary judgment motions. Generally speaking, the plaintiff rests his case when he or she has presented evidence and argued at the hearing on the motion for summary judgment or has been given an opportunity to do so. Troy v. Tucker, 126 N.C. App. 213, 484 S.E.2d 98 (1997); Maurice v. Hatterasman Motel Corp., 38 N.C. App. 588, 248 S.E.2d 430 (1978). Once the matter has been submitted to the court for consideration, the plaintiff has rested his or her case. Id.; Wesley v. Bland, 92 N.C App. 513, 374 S.E.2d 475 (1988).

In Troy, the court of appeals held that plaintiff had improperly filed a notice of dismissal, and the appellate court remanded the case to the trial court to either rule on the defendant’s motion for summary judgment or dismiss plaintiff’s case, either with or without prejudice pursuant to Rule 41(a)(2). There, the defendant filed a motion for summary judgment. Plaintiff appeared and argued at the hearing on the motion. After the hearing, but before the trial court had issued its decision, the plaintiff took a voluntary dismissal. The court of appeals held that the plaintiff had rested her case at the hearing and therefore could not file a voluntary dismissal under Rule 41(a)(1). Compare Schnitzlein v. Hardee’s Food Sys., Inc., 134 N.C. App. 153, 516 S.E.2d 891, rev. denied, 351 S.E.2d 109, 540 S.E.2d 365 (1999).

Troy is clear because the plaintiff actually participated in oral argument. Wesley addresses the situation when the hearing gets under way, but the plaintiff does not participate in argument. There, the court of appeals held that the trial court erred in granting defendants’ motion for summary judgment. Prior to the hearing, plaintiff had served affidavits in opposition to the motion for summary judgment. At the hearing, defendant engaged in argument. When it was plaintiff’s turn to argue, plaintiff took a dismissal, without arguing or offering additional evidence. In finding that the plaintiff had not rested his case, the court of appeals recognized that summary judgment proceedings are informal. The court of appeals concentrated on the fact that the plaintiff had not been given an opportunity by the trial court to present additional evidence or make argument before he took the dismissal. The court of appeals further noted that the order granting summary judgment clearly stated that only the defendants’ counsel had argued. In light of the forgoing, summary judgment was improper, as plaintiff had effectively taken a dismissal.

Often, plaintiffs attempt to circumvent motions for summary judgment by seeking additional time to engage in discovery, at the same hearing in which defendant’s motion for summary judgment is pending. Rule 41 allows the plaintiff to argue his or her motion for the extension of the discovery period, but the plaintiff must not address the summary judgment motion, if the plaintiff intends to file the dismissal. See Alston v. Duke Univ., 133 N.C. App. 57, 514 S.E.2d 298 (1999). As a practical tip, the plaintiff should have the hearing transcribed so that the appellate court can measure the level of plaintiff’s arguments at the hearing, which is the very thing that saved the Alston

In Alston, the court of appeals reversed the trial court’s granting of summary judgment for the defendants, holding that plaintiff had effectively taken a voluntary dismissal of the action before the plaintiff had rested her case. There, defendants moved for summary judgment, alleging that the plaintiff’s expert was not qualified to testify in the malpractice action and that plaintiff had been contributory negligent as a matter of law. In response to that motion, plaintiff filed a motion to amend the discovery scheduling order to extend the time to designate plaintiff’s experts. On the day of the hearing, plaintiff’s counsel was clear that plaintiff wanted a ruling on the motion to amend the discovery scheduling order before plaintiff would address the summary judgment motion. When the trial court finally denied the plaintiff’s motion to amend, the plaintiff immediately gave notice of dismissal. The defendants argued that plaintiff had responded to the motion for summary judgment by answering a direct question of the trial court regarding the contributory negligence issue. Disagreeing, the court of appeals indicated that plaintiff again requested that the court rule on plaintiff’s motion to amend and that the plaintiff told the court that if her motion were denied, she had a host of responses to the summary judgment motion. The court of appeals held that plaintiff was quite clear that she was not arguing the motion for summary judgment. Since she did not present her case on the motion for summary judgment, the plaintiff did not rest her case, and her taking of the voluntary dismissal was effective.

If the plaintiff intends to take a dismissal, it is imperative that he or she not participate in any kind of argument at the trial court level. A transcript of the proceedings should be taken so that the appellate court can review whether or not plaintiff presented his or her case, because as noted in Wesley, whether plaintiff participated must be in the record in one form or another for the appellate courts to afford relief. If a transcript is not taken, the plaintiff would have to rely on the defendant, who has just won his or her summary judgment motion, to include appropriate language in the order indicating that plaintiff did not argue the motion.

Plaintiff. II. Voluntary Dismissals and Resting Your Case

As noted in the preceding section, Rule 41 provides that a plaintiff may dismiss his or her case at any time before he or she rests. When the plaintiff rests is a complicated issue, and the answer to that question requires looking at trials and motion hearings separately.

At trial, as the rule states, as long as plaintiff has not rested, plaintiff may dismiss one or all of his or her claims against any or all of the defendants. The appellate courts will enforce the rule as written, regardless of the defendant’s views on the matter. Roberts v. Young, 120 N.C. App. 720, 464 S.E.2d 78 (1995). There, the court of appeals affirmed the trial court’s allowing the plaintiffs to dismiss their punitive damages claims against the defendants. The plaintiffs had brought compensatory and punitive damages claims and presented evidence to the jury on both claims before taking a dismissal of the punitive damages claim. The jury ultimately returned a verdict awarding $450,000.00 in compensatory damages. In affirming, the court of appeals noted that the rule vests the plaintiff with an absolute right to take the dismissal, as long as he or she has not rested.

Counsel must be careful in what he or she says at trial because loose language will effect the availability of the plaintiff to take a dismissal. In Pardue v. Darnell, ___ N.C. ___, 557 S.E.2d 172 (2001), the court of appeals affirmed the trial court’s grant of defendant’s motion for summary judgment. There, plaintiffs refiled an action after taking a voluntary dismissal. The defendant argued successfully that the matter should be dismissed since plaintiffs had rested their case when they took the voluntary dismissal in the first matter. In the first matter, plaintiffs presented evidence at trial and then announced that the plaintiffs “rested”. Subsequently, the defendant made various motions out of the presence of the jury. Then, the plaintiffs took a dismissal. The court of appeals concentrated on the fact that the plaintiffs had announced that they had rested. Under the circumstances of plaintiffs having rested, plaintiffs could not then take a dismissal.

In a motion hearing, more leeway is allowed, depending on the type of motion being argued. Where the plaintiff engages in arguments that relate to the motion and not to plaintiff’s case in chief, plaintiff has not rested his or her case, even if he or she participates in the argument. Schnitzlein v. Hardee’s Food Sys., Inc., 134 N.C. App. 153, 516 S.E.2d 891, rev. denied, 351 N.C. 109, 540 S.E.2d 365 (1999); Lowe v. Bryant, 55 N.C. App. 608, 286 S.E.2d 652 (1982).

In Schnitzlein, the court of appeals reversed the trial court’s granting of defendant’s motion to dismiss for failure to state a claim upon which relief can be granted. The plaintiff brought a breach of contract action against defendant, alleging defendant failed to pay severance benefits under an employment contract. Defendant argued that the matter was an ERISA matter and plaintiff had not made appropriate claims. Plaintiff moved to amend the complaint to contain ERISA claims. At hearing, the plaintiff argued that the matter was simply a breach of contract claim, but if the court found that it was an ERISA matter, the court should grant plaintiff’s motion to amend the complaint. The trial court announced its intention to grant defendant’s motion, but before the order could be entered, plaintiff took a dismissal. The court of appeals found that the plaintiff’s dismissal was effective because at the hearing, plaintiff had argued the merits of defendant’s motion, those being the ERISA preemption issues, and not the merits of the plaintiff’s case. Because plaintiff had not argued the merits of his case, he had not rested. Thus, he could take the dismissal.

Likewise, in Lowe, plaintiffs’ participation in a hearing on a motion to dismiss did not constitute resting their case, because the motion did not deal with the merits of plaintiffs’ claims. In that case, plaintiffs had failed to post bonds that the trial court order they post. Defendants moved to dismiss for plaintiffs’ failure to pay the bonds. The trial court conducted a hearing on the matter, but before the trial court ruled, the plaintiffs voluntarily dismissed their claims. The court of appeals held that the plaintiffs could do so because the hearing on the motion to dismiss dealt with the plaintiffs’ failure to pay the bond, not with the merits of plaintiffs’ case.

The consequences of filing a dismissal when there is no right to do so are harsh; the dismissal is with prejudice. In Pardue, the plaintiffs had rested when they took their dismissal. Defendant remained silent about whether plaintiffs had a right to dismiss the case. When plaintiffs refiled, defendant moved for summary judgment, arguing that the original dismissal was with prejudice. The court of appeals agreed. See also Moore v. Pate, 112 N.C. App. 833, 437 S.E.2d 1 (1993), rev. denied, 336 N.C. 73, 445 S.E.2d 35 (1994).

I. Orders of Dismissal By the Court—Saving Your Voluntary Dismissal

Rule 41 of the North Carolina Rules of Civil Procedure allows a judge to grant a motion to dismiss a case without prejudice. Where a judge grants the motion to dismiss without prejudice, the dismissal does not count as a dismissal that the plaintiff has filed, for purposes of the two-limit filing. Specifically, the rule provides:

(a)(1) By Plaintiff; by Stipulation.–Subject to the provisions of Rule 23(c) and of any statute of this State, an action or any claim therein may be dismissed by the plaintiff without order of the court (i) by filing a notice of dismissal at any time before the plaintiff rests his case, or (ii) by filing a stipulation of dismissal signed by all parties who have appeared in the action. Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice, except that a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of this State or any other state or of the United States, an action based on or including the same claim .

(2) By order of Judge—Except as provided in subsection (a) of this section, an action or any claim therein shall not be dismissed at the plaintiff’s instance save upon order of the judge and upon such terms and conditions as justice requires. Unless otherwise specified in the order, a dismissal under this subsection is without prejudice.

N.C.R. Civ. P. 41(a). Whether to allow a Rule 41(a)(2) dismissal without prejudice rests in the trial court’s sound discretion. West v. G.D. Reddick, Inc., 38 N.C. App. 370, 248 S.E.2d 112 (1978); Lewis v. Piggott, 16 N.C. App. 395, 192 S.E.2d 128 (1972).

The advantage of having the case dismissed by the court rather than simply taking a dismissal under Rule 41(a)(1) is that the “two dismissal rule” does not apply. North Carolina R.R. Co. v. Ferguson Blders Sup., Inc., 103 N.C. App. 768, 407 S.E.2d 296 (1991). There, the court of appeals reversed the trial court’s grant of summary judgment for defendant. Plaintiff filed suit and took a dismissal. The plaintiff then refiled suit and the court granted plaintiff’s motion for dismissal without prejudice under Rule 41(a)(2). The plaintiff then refiled the matter a third time, and the court of appeals held that the plaintiff should be permitted to go forward because under the rule, the dismissal acts as an adjudication only after the plaintiff dismisses the action more than one time. Because the plaintiff dismissed it in one instance and the court in the other, the two dismissal rule did not apply, and the third action could go forward.

Similarly, in Parrish v. Uzzell, 41 N.C. App. 479, 255 S.E.2d 219 (1979), the court of appeals found that the trial court erred in granting the defendant’s motion to dismiss, which motion was predicated on the two dismissal rule. Plaintiff had previously filed two suits, which alleged the same facts and claims as were alleged in the third suit. However, each of the two prior suits was ordered dismissed without prejudice by the trial court. Because the prior cases were ordered dismissed, the two dismissal rule did not apply.

Additionally, defendant’s consent is not required for the trial court to enter an order of dismissal without prejudice. Smith v. Williams, 82 N.C. App. 672, 347 S.E.2d 842 (1986) (where the court of appeals reversed the trial court’s grant of summary judgment for the defendants, holding that the order of dismissal in the earlier case need not have been with the consent of the defendants).

Further, generally speaking, there is no time limit as to when the dismissal can be ordered; thus, the court can order dismissal without prejudice after plaintiff has rested his or her case. West v. G.D. Reddick, Inc., 38 N.C. App. 370, 248 S.E.2d 112 (1978). However, once an appeal from the trial court’s order has been taken and the trial court is divested of jurisdiction, the trial court cannot provide relief by granting a motion to dismiss without prejudice. Bowen v. Hodge Motor Co., 292 N.C. 633, 234 S.E.2d 748 (1977) (where the supreme court held that the trial court could not grant plaintiff’s motion for dismissal without prejudice because plaintiff had appealed the trial court’s granting of defendant’s motion for directed verdict and the term of court had expired, divesting the trial court of jurisdiction to act).

If a defendant appeals the trial court’s granting of a motion to dismiss without prejudice under this rule, plaintiff has a year after the appeal has resolved to refile his or her claim, not a year from the date the motion was granted. West v. G.D. Reddick, Inc., 302 N.C. 201, 274 S.E.2d 221 (1981).

II. Administrative Closing of A Case to Permit Arbitration Without Burning A Voluntary Dismissal

Once a lawsuit has been filed, there is no reason to take a voluntary dismissal to pursue arbitration pursuant to a contract or provisions contained in an uninsured/underinsured motorist policy. North Carolina’s Uniform Arbitration Act provides for the staying of such proceedings, not their dismissal. Specifically, the Act provides:

Any action or proceeding involving an issue subject to arbitration shall be stayed if an order for arbitration or an application therefor has been made under this section or, if the issue is severable, the stay may be with respect thereto only. When application is made in such action or proceeding, the order for arbitration shall include such stay.

N.C.G.S. § 1-567.3(d).

The case law supports that the proper procedure is to stay proceedings pending the arbitration. See Servomation Corp. v. Hickory Constr. Co., 316 N.C. 543, 342 S.E.2d 853 (1986); Adams v. Nelsen, 313 N.C. 442, 329 S.E.2d 322 (1985); Burke v. Wilkins, 131 N.C. App. 687, 507 S.E.2d 913 (1998).

In Adams, the supreme court held that the trial court erred in dismissing plaintiff’s complaint because an arbitration clause existed in the parties’ contract requiring arbitration of disputes. The supreme court first noted that the proper manner in which to have presented the arbitration issue was not through a motion to dismiss, but through a motion compelling arbitration pursuant to N.C.G.S. § 1-567.3. That court further opined that the trial court did not lack jurisdiction of the issue, simply because an arbitration clause was present. Rather, the court could refer the matter to arbitration and retain jurisdiction of issues as outlined in the Uniform Arbitration Act. See also Smith v. Young Moving & Storage, Inc., 141 N.C. App. 469, 540 S.E.2d 383 (2000), aff’d, 353 N.C. 521, 546 S.E.2d 87 (2001) (where the court of appeals reiterated that the trial court is not ousted of jurisdiction simply because a valid and enforceable arbitration clause is present); Henderson v. Herman, 104 N.C. App. 482, 409 S.E.2d 739 (1991), rev. denied, 330 N.C. 851, 413 S.E.2d 551 (1992) (where the court of appeals indicated that the trial court retained jurisdiction over the matter).

Attached to this paper are a motion and order to compel arbitration and to stay litigation pending arbitration, as well as the court’s later order placing the case on the inactive docket, pending resolution of the arbitration. Once an award is made, a motion to confirm the award as a judgment in the litigation can be made, and such a motion and order are also attached.

III. Releases—Broad Releases and What To Do About Them

[Note: This paper does not address the covenant not to enforce judgment that should be signed in underinsured motorist cases.]

1. It does not discharge any of the other tort-feasors from liability for the injury or wrongful death unless its terms so provide; but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of consideration paid for it, whichever is the greater.

N.C.G.S. § 1B-4. In releasing one of several tortfeasors, it is important to craft the release to ensure that only the tortfeasor intended to be released is in fact released.

A broad release that releases all other persons or entities is valid in North Carolina. Best v. Ford, ___ N.C. App. ___, 557 S.E.2d 163 (2001); Sykes v. Keiltex Indus., Inc., 123 N.C. App. 482, 473 S.E.2d 341 (1996); Battle v. Clanton, 27 N.C. App. 616, 220 S.E.2d 97 (1975), rev. denied, 289 N.C. 613, 223 S.E.2d 391 (1976). In Best, plaintiff made claims against the driver of a car that negligently struck her vehicle, as well as against the manufacturers and distributors of an airbag. Plaintiff signed a release allowing the driver of the other car out of the case, as well as all other persons, except Ford and the driver’s employer. Plaintiff subsequently settled with the driver’s employer and released the employer as well as all other persons. The court of appeals affirmed the trial court’s grant of summary judgment for the remaining defendants based on the release. The court of appeals acknowledged that the plaintiff could have simply released the settling defendant, but instead, the plaintiff released all persons. As such, the release was effective as to all persons, even though some defendants gave no consideration for the release.

The moral of the story is then to read the release. Release only those persons who you are intending to release. If the release is too encompassing, write defense counsel or the insurer, indicate that the release cannot be signed as is, and send a modification. Usually, the release will be changed. If it is not, ask that the matter be resolved through an offer of judgment in the amount of the proposed settlement. When the offer is made, accept the offer. No release is then necessary.

Sometimes, the doctrine of mutual mistake can be used to undo a broad release that was executed by a plaintiff, by accident. However, Best curtailed this avenue. There, the court of appeals held that for mutual mistake to apply, the mistake must be common to all parties. In Best, plaintiff presented an affidavit of herself as well as the insurance adjuster involved in the release stating that the parties did not intend to release all persons. She did not present an affidavit of the named party actually released. As such, plaintiff had not presented evidence of mistake as to all parties and the broad release was given effect. See also Sykes v. Keiltex Indus., Inc., 123 N.C. App. 482, 473 S.E.2d 341 (1996); but see Peede v. General Motors Corp., 53 N.C. App. 10, 279 S.E.2d 913, rev. denied, 304 N.C. 196, 285 S.E.2d 100 (1981) (where the court of appeals reversed the trial court’s granting of summary judgment based on a general release issued in favor of defendant Peede, plaintiff’s brother, when the affidavit of defendant Peede, a party to the release, was not offered into evidence).

Additionally, a party may seek to avoid a release if the release were procured through fraud. Cunningham v. Brown, 51 N.C. App. 264, 276 S.E.2d 718 (1981). There, plaintiff executed a general release in favor of her husband. She then sought additional recovery from the defendant in this action, who raised the husband’s release as a defense. The plaintiff presented an affidavit alleging that the insurance adjuster for her husband’s company told her that the release would not effect her rights to pursue the other party. The court of appeals held that the trial court erred in granting defendant’s motion for summary judgment based on the release because the plaintiff had presented evidence that the release was obtained through fraud.

Again, the safest course is to read and revise all releases that attempt to release more than the single tortfeasor. Generally, the defense counsel or insurance company is amenable to this. If they are not, there are other avenues to effectuate the settlement without executing a general release.

By statute, a plaintiff may release one or more tortfeasors that caused injury and at the same time preserve claims against the other tortfeasors. The statute specifically addressing this issue provides as follows:

When a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death.