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Marques, Santiago v. v. Fed'l Reserve Bank

Court of Appeals for the Seventh Circuit
286 F. 3d 1014, 52 Fed. R. Serv. 3d 1327, 2002 U.S. App. LEXIS 6879 (2002)
ELI5:

Rule of Law:

A judgment on the merits is void if entered after a plaintiff files a proper notice of voluntary dismissal under Federal Rule of Civil Procedure 41(a)(1), and a district court's refusal to vacate such a void judgment under Rule 60(b)(4) is an abuse of discretion.


Facts:

  • The plaintiffs claimed to be agents for the owners of $25 billion in bearer bonds allegedly issued by the Federal Reserve Bank of Chicago in 1934 in exchange for 1665 metric tons of gold.
  • The plaintiffs demanded that the bank redeem the bonds for face value plus interest, totaling nearly $100 billion.
  • The claimed bond issuance was historically implausible, as the entire U.S. national debt in 1934 was only $28 billion and the government's entire gold stock was valued at only $9 billion.
  • The U.S. Treasury had established a website warning the public about this specific type of fraud, known as "Morgenthaus."
  • The lead plaintiff, Portman, had previously submitted a similar demand for $125 billion to the Federal Reserve Bank of Cleveland based on similar fictitious bonds.

Procedural Posture:

  • The plaintiffs filed suit against the Federal Reserve Bank of Chicago in U.S. District Court.
  • On the same day, the plaintiffs filed a notice of voluntary dismissal under Fed. R. Civ. P. 41(a)(1) and the bank served a motion to dismiss under Rule 12(b)(6) with attached materials.
  • The district court converted the bank's motion into one for summary judgment and granted it, entering a judgment on the merits for the bank.
  • The plaintiffs did not appeal the summary judgment but instead filed a motion under Fed. R. Civ. P. 60(b) to vacate the judgment as void.
  • The district court denied the plaintiffs' Rule 60(b) motion.
  • The plaintiffs, as appellants, appealed the district court's denial of their Rule 60(b) motion to the U.S. Court of Appeals for the Seventh Circuit; the bank is the appellee.

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Issue:

Does a district court abuse its discretion by refusing to vacate a judgment as void under Federal Rule of Civil Procedure 60(b)(4) when that judgment was entered on the merits after the plaintiff filed a proper notice of voluntary dismissal under Rule 41(a)(1)?


Opinions:

Majority - Posner, Circuit Judge

Yes. A judgment entered on the merits after a plaintiff has filed a proper notice of voluntary dismissal under Rule 41(a)(1) is void, and the court's refusal to vacate it is an abuse of discretion. A plaintiff's right to voluntarily dismiss a suit is absolute until the defendant serves an answer or a motion for summary judgment. A defendant's motion to dismiss under Rule 12(b)(6) that includes extraneous materials does not become a motion for summary judgment until the court affirmatively decides to consider those materials. Here, the plaintiffs filed their notice of dismissal before the court converted the defendant's motion, meaning the dismissal was effective immediately and deprived the court of jurisdiction to enter a judgment on the merits. Although a Rule 60(b) motion cannot typically be used to correct a simple legal error, Rule 60(b)(4) specifically provides for relief from a void judgment. The district court's judgment was void because it was entered after the case had been properly dismissed, and therefore the court abused its discretion by denying the motion to vacate.



Analysis:

This decision reinforces the absolute nature of a plaintiff's right to voluntary dismissal under Rule 41(a)(1) before a defendant files an answer or motion for summary judgment. It clarifies that a judgment entered in violation of this right is not merely erroneous but fundamentally void, making it subject to collateral attack via a Rule 60(b)(4) motion. The ruling illustrates that procedural rules must be strictly followed, even when the underlying substantive claim is transparently fraudulent, emphasizing procedure over merits to ensure predictable and fair application of the rules in all cases.

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