Brereton v. Bountiful City Corp.

F I L E D

United States Court of Appeals

Tenth Circuit

PUBLISH

January 26, 2006

UNITED STATES COURT OF APPEALS Elisabeth A. Shumaker

Clerk of Court

TENTH CIRCUIT

B. L. BRERETON,

Plaintiff-Appellant,

v. No. 05-4067

BOUNTIFUL CITY CORPORATION,

a government entity; BARBARA

HOLT, Bountiful City Councilwoman;

JOHN PITT, Bountiful City

Councilman; RICHARD HIGGINSON,

Bountiful City Councilman; FRED

MOSS, Bountiful City Councilman;

TOM TOLMAN, Bountiful City

Councilman; PAUL RAPP, Bountiful

City Chief of Police; J. C.

YNCHAUSTI, Bountiful City

Prosecutor; JOE JOHNSON, Bountiful

City Mayor,

Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

(D.C. No. 1:04-CV-139-PGC)

Submitted on the briefs: *

*

After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

(continued...)

Brian M. Barnard, James L. Harris, Jr., Utah Legal Clinic, Salt lake City, Utah for

Appellant.

David L. Church, Blaisdell and Church, Salt Lake City Utah; Russell L. Mahan,

Bountiful City Attorney, Bountiful, Utah for Appellees.

Before TYMKOVICH, PORFILIO, and BALDOCK, Circuit Judges.

PORFILIO, Circuit Judge.

B.L. Brereton brought this complaint challenging a Bountiful City, Utah

parking ordinance. The district court concluded that Mr. Brereton lacked standing

to pursue the action. It dismissed Mr. Brereton’s complaint with prejudice,

denied his motion for new trial, and denied him leave to file a second amended

complaint. On appeal, Mr. Brereton challenges the “with prejudice” aspect of the

dismissal. We affirm the district court’s judgment insofar as it dismisses the

action, but remand to the district court to modify the dismissal to be without

prejudice.

FACTS

At the time Mr. Brereton filed his complaint, the challenged ordinance read

in pertinent part as follows:

*

(...continued)

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

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It is unlawful to park in any parking lot or on other property owned

by the City any car, truck, motorcycle, motor home, trailer, boat or

other vehicle of any description for the purpose of advertising or of

selling that vehicle.

It is unlawful to park in any private parking lot or on other private

property any car, truck, motorcycle, motor home, trailer, boat or

other vehicle of any description for the purpose of advertising or of

selling that vehicle, without the consent of the owner.

Bountiful City Code 13-1-103(4)(a), (b).

In his complaint, Mr. Brereton asserted that he was a resident of Salt Lake

City, Utah, who owned a motor vehicle that he desired to sell. He had determined

that an effective manner in which to sell his vehicle would be to place a “For

Sale” sign in the vehicle window containing truthful information about the

vehicle. He had refrained from parking and/or operating the vehicle in Bountiful

City with such a sign in the window, however, even though he wished to do so,

because he feared prosecution under Bountiful City Code 13-1-103. Mr. Brereton

further asserted that although he had driven his vehicle in other Utah cities with

the “For Sale” sign in the window, he had removed the sign when driving and

parking in Bountiful City. 2

His complaint charged that the ordinance violated the

First Amendment and the Utah Constitution.

2

Mr. Brereton later filed an affidavit, in connection with his motion for

preliminary injunction, swearing to essentially the same factual allegations.

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Shortly after Mr. Brereton served his complaint on the defendants, the City

amended the first of the two quoted subsections to read as follows:

It is unlawful to park in any parking lot or on other property ( not

including public streets ) owned by the City any car, truck,

motorcycle, motor home, trailer, boat or other vehicle of any

description for the purpose of advertising or of selling that vehicle.

Bountiful City Code 13-1-103(4)(a) (as amended by Bountiful City Ordinance No.

2004-19, Oct. 12, 2004). Mr. Brereton then filed an amended complaint that set

forth essentially the same facts in his original complaint, adding the fact of the

amendment to the ordinance, which (the amended complaint opined) had not

cured its constitutional infirmities.

The defendants filed a response to the complaint in which they asserted,

among other things, that Mr. Brereton lacked standing to bring the action. In

their response to his motion for preliminary injunction, they again denied that

Mr. Brereton had standing to bring both a facial or an “as applied” challenge to

the ordinance. The district court agreed. Characterizing Mr. Brereton’s challenge

as a “pre-enforcement facial challenge to a regulation of commercial speech,”

Aplt. App. at 87, the district court found that Mr. Brereton had failed to

demonstrate a genuine threat that the allegedly unconstitutional ordinance would

be enforced against him. It dismissed the case in its entirety for lack of

jurisdiction.

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Mr. Brereton moved for a new trial under Fed. R. Civ. P. 52, 59 and 60. He

asserted that the action had been improperly dismissed because “standing was

never briefed by either party.” Aplt. App. at 95-96. He further asserted that the

dismissal should have been without prejudice and that he should have been given

leave to amend his complaint. The district court denied Mr. Brereton’s motion,

and he appealed.

ANALYSIS

We review standing questions de novo. Higganbotham v. Okla. ex rel.

Okla. Transp. Comm’n , 328 F.3d 638, 641 (10th Cir. 2003). To the extent that

Mr. Brereton asserts that the district court did not give him adequate notice

concerning the standing issue, we reject this claim because the facts in the record

show that he did receive adequate notice that standing was at issue.

We turn, then, to the primary issue in this case: whether the dismissal the

district court entered should have been without prejudice. Because this is an

issue that has produced some confusion within the bench and bar, a careful

reiteration of the applicable principles may be helpful.

A longstanding line of cases from this circuit holds that where the district

court dismisses an action for lack of jurisdiction, as it did here, the dismissal must

be without prejudice. See, e.g., Albert v. Smith’s Food & Drug Ctrs., Inc. ,

356 F.3d 1242, 1249 (10th Cir. 2004); Martinez v. Richardson , 472 F.2d 1121,

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1126 (10th Cir. 1973) (“It is fundamental . . . that a dismissal for lack of

jurisdiction is not an adjudication of the merits and therefore . . . must be without

prejudice.”). See also 9 Charles Alan Wright & Arthur R. Miller, Federal

Practice & Procedure § 2373, at 406 (2d ed. 1995). Since standing is a

jurisdictional mandate, a dismissal with prejudice for lack of standing is

inappropriate, and should be corrected to a dismissal without prejudice. County

of Mille Lacs v. Benjamin , 361 F.3d 460, 464-65 (8th Cir.), cert. denied , 125 S.Ct.

408, 454 (2004).

This rule has deep common law roots, and is preserved now in Fed. R. Civ.

P. 41(b). See Costello v. United States , 365 U.S. 265, 285-86 (1961). Rule 41(b)

provides as follows:

(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 party

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

(emphasis added).

Courts have acknowledged two important analytical reasons for requiring

that a dismissal on jurisdictional grounds be without prejudice. First, dismissal

with prejudice is inappropriate because such a dismissal may improperly prevent a

litigant from refiling his complaint in another court that does have jurisdiction.

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Gold v. Local 7 United Food & Comm’l Workers , 159 F.3d 1307, 1311 (10th Cir.

1998). Second, and perhaps more essentially, once a court determines it lacks

jurisdiction over a claim, it perforce lacks jurisdiction to make any determination

of the merits of the underlying claim. Id. (applying Steel Co. v. Citizens for a

Better Env’t , 523 U.S. 83 (1998)); Frederiksen v. City of Lockport , 384 F.3d 437,

438 (7th Cir. 2004). 3

The continuing validity of the first of these principles has recently been

qualified, if not disavowed, by a panel of this court. See Styskal v. Weld County

Bd. of County Comm’rs , 365 F.3d 855 (10th Cir. 2004). Styskal , while not

purporting to overrule our prior authority on this question, nevertheless concludes

that the Supreme Court’s opinion in Semtek International Inc. v. Lockheed Martin

Corp. , 531 U.S. 497 (2001) has effectively undermined the preclusion rationale

that supported the “without prejudice” requirement. Styskal , 365 F.3d at 858

(“The premise underlying these decisions is that a dismissal of a claim with

prejudice necessarily has claim-preclusive effects in other jurisdictions. . . .That

premise, however, was recently rejected by the United States Supreme Court [in

3

We view these rationales as separate and distinct, though on occasion they

have been combined into a single rationale, focusing attention more on the

preclusive effect of such a dismissal. See Steele v. Federal Bureau of Prisons,

355 F.3d 1204, 1215 (10th Cir. 2003) (Hartz, J., concurring) (“The reason for this

practice [of dismissing without prejudice] apparently has been the belief that a

dismissal with prejudice has claim-preclusive effects that cannot be afforded a

decision by a court without jurisdiction.”) (emphasis added).

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Semtek ].”). Because the broad language in Styskal concerning Semtek ’s effect on

jurisdictional dismissals has the potential to create some confusion, we take this

opportunity to clarify our law on this subject.

To begin with, Semtek must be read within its factual and analytical

context. The facts underlying the Supreme Court’s decision in Semtek were these.

The District Court for the Central District of California had entered a dismissal of

an action time-barred under California’s two-year statute of limitations “on the

merits and with prejudice.” Semtek , 531 U.S. at 499. The plaintiff attempted to

re-file the action in Maryland state court, where it was not time-barred under that

state’s more generous three-year limitations statute. The Maryland Court of

Special Appeals found that the California federal court dismissal “on the merits”

barred the complaint from proceeding in state court. The issue before the

Supreme Court was “whether the claim-preclusive effect of a federal judgment

dismissing a diversity action on statute-of-limitations grounds is determined by

the law of the State in which the federal court sits.” Id.

The defendant in Semtek contended that Rule 41(b), which provides the

default rule in federal court for determining when a judgment represents an

“adjudication on the merits,” also governed the issue of the preclusive effect of

the prior federal judgment in state court. The Supreme Court disagreed, for three

reasons. First, the use of a Federal Rule of Civil Procedure to govern the

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preclusive effect of a federal judgment in state court would run afoul of both the

Rules Enabling Act, 28 U.S.C. § 2072(b), and Erie Railroad v. Tompkins ,

304 U.S. 64, 78-80 (1938). See Semtek , 531 U.S. at 503-04. Second, since Rule

41(b) only establishes a default rule from which the district court can depart, its

use of the phrase “adjudication on the merits” does not represent a binding,

“federally prescribed rule on the complex question of claim preclusion.” Id. at

503. Finally, the phrase “adjudication on the merits,” as used in Rule 41(b),

while preventing refiling in the same federal court, should not be read to preclude

the assertion of claims in state court in cases where the federal court has not

passed upon the substantive merits of the claim. Id. at 502-03.

It is Semtek ’s third rationale that forms the basis of the decision in Styskal .

Expanding on the reasoning in Semtek , the Styskal court declined to reverse the

district court’s dismissal with prejudice of state-law claims over which it lacked

jurisdiction. Styskal , 365 F.3d at 859. But in Semtek , the Supreme Court had

dealt only with the effect of a dismissal with prejudice on a non-jurisdictional

ground . See Semtek , 531 U.S. at 501 (noting that district court’s dismissal “did

not pertain to the excepted subjects of jurisdiction, venue, or joinder”). The

Supreme Court did not indicate any intention to do away with the general rule,

reflected in Rule 41(b) and endorsed in its prior decision in Costello , that a

dismissal for lack of jurisdiction should be entered without prejudice.

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It is questionable whether Semtek ’s rationale can be extended as a general

matter to endorse dismissals with prejudice for lack of jurisdiction, since such

dismissals rest on an entirely separate analytical basis than the sort of dismissal

addressed in Semtek . Quite apart from concerns over preclusion consequences,

dismissals for lack of jurisdiction should be without prejudice because the court,

having determined that it lacks jurisdiction over the action, is incapable of

reaching a disposition on the merits of the underlying claims. Fredriksen ,

384 F.3d at 438 (“A suit dismissed for lack of jurisdiction cannot also be

dismissed ‘with prejudice’; that’s a disposition on the merits, which only a court

with jurisdiction may render.”); see Gold , 159 F.3d at 1311 (applying Steel Co. ,

523 U.S. at 94).

Styskal , then, could not have and did not purport to overrule our prior,

long-standing line of cases requiring that a dismissal for lack of jurisdiction be

without prejudice. Rather, we read Styskal only to say that where a federal court

erroneously dismisses “with prejudice” claims over which it lacks jurisdiction, a

state court need not be blinded by this nomenclature into barring a subsequent

action on the same claim that is properly brought within its jurisdiction. Read in

this way, Styskal is entirely consistent with Semtek , and with our prior cases. We

specifically decline to read Styskal as abrogating our duty to correct a district

court disposition erroneously entered “with prejudice” on jurisdictional grounds.

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While leaving such a dismissal with prejudice intact might have no effect on a

plaintiff’s attempt to bring his claim in state court, it is our responsibility to

correct an action by the district court that exceeds its jurisdiction. Gold , 159 F.3d

at 1311. 4

It cannot be gainsaid that even a dismissal without prejudice will have a

preclusive effect on the standing issue in a future action. Kasap v. Folger Nolan

Fleming & Douglas, Inc. , 166 F.3d 1243, 1248 (D.C. Cir. 1999) (stating dismissal

without prejudice on jurisdictional issue precludes relitigation of that issue but

not refiling of complaint). The preclusive effect, however, is one of issue

preclusion (collateral estoppel) rather than claim preclusion (res judicata).

Otherwise stated, the district court’s standing ruling precludes Mr. Brereton from

relitigating the standing issue on the facts presented, but does not preclude his

claim about the validity of the ordinance. See Matosantos Comm’l Corp. v.

Applebee’s Int’l, Inc. , 245 F.3d 1203, 1209-10 (10th Cir. 2001).

We turn, finally, to another aspect of the district court’s decision in this

case that may reflect some confusion about this area of the law. Federal Rule of

4

We note that Styskal, which was concerned with protecting the litigant’s

right to proceed in a subsequent state court action, left open the issue of whether

a dismissal may properly be entered with prejudice where a plaintiff may seek to

return to federal court. Styskal, 365 F.3d at 859. The possibility of such a return

in this case, while presenting serious obstacles for the plaintiff under the doctrine

of issue preclusion, provides another justification for requiring that a

jurisdictional dismissal be without prejudice.

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Civil Procedure Rule 15(a) provides that leave to amend a party’s complaint

“shall be freely given when justice so requires.” Our case law establishes a

limitation to this principle: the district court may dismiss without granting leave

to amend when it would be futile to allow the plaintiff an opportunity to amend

his complaint. Hall v. Bellmon , 935 F.2d 1106, 1110 (10th Cir. 1991). Where a

complaint fails to state a claim, and no amendment could cure the defect, a

dismissal sua sponte may be appropriate. Curley v. Perry , 246 F.3d 1278,

1281-82 (10th Cir. 2001). If such a dismissal operates on the merits of the

complaint, it will also ordinarily be entered with prejudice. See id. at 1282.

The district court apparently concluded, relying on this line of cases, that

dismissal with prejudice was appropriate here because any attempt by

Mr. Brereton to amend his complaint to allege standing would be futile. Aplt.

App. at 107-08. It thus applied the futility concept to convert a dismissal that

should have been without prejudice into one with prejudice. A dismissal with

prejudice is appropriate where a complaint fails to state a claim under Rule

12(b)(6) and granting leave to amend would be futile. Grossman v. Novell, Inc. ,

120 F.3d 1112, 1126 (10th Cir. 1997). It is important to realize, however, that

denial of leave to amend and dismissal with prejudice are two separate concepts.

See generally, N. Assurance Co. of Am. v. Square D Co. , 201 F.3d 84, 88 (2d Cir.

2000) (noting that where denial of leave to amend does not reach underlying

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merits of claim, “the actual decision denying leave to amend is irrelevant to the

claim preclusion analysis.”). A denial of leave to amend to repair a jurisdictional

defect, even on futility grounds, does not call for a dismissal with prejudice. The

two concepts do not overlap in those cases where, although amendment would be

futile, a jurisdictional defect calls for a dismissal without prejudice. See

Hutchinson v. Pfeil , 211 F.3d 515, 519, 523 (10th Cir. 2000) (affirming district

court’s denial of leave to amend to add state law claims on futility grounds, while

also affirming dismissal, apparently without prejudice, of entire action for lack of

standing); Bauchman ex rel. Bauchman v. West High School , 132 F.3d 542,

549-50, 561-62 (10th Cir. 1997) (upholding district court’s denial of leave to

amend complaint under futility analysis, but reversing merits disposition on

pendent state claims and remanding for dismissal without prejudice for lack of

jurisdiction). The district court extended the futility principle too far in this case

by dismissing with prejudice for lack of standing, since it lacked jurisdiction to

make a determination on the merits of the complaint.

Mr. Brereton’s failure to show that his complaint could be amended to

establish standing, while justifying the denial of leave to amend his complaint,

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did not justify the entry of a dismissal with prejudice of the action. Accordingly,

we AFFIRM the district court’s judgment insofar as it dismisses the action, but

REMAND to the district court to modify the dismissal to be without prejudice.

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