In In Re: Chi-Chi’s, Inc., et al., a complaint was brought before the United States Bankruptcy Court for the District of Delaware by Sysco Corporation and the SYGMA Network (collectively, “Sysco”) seeking to enjoin the Debtor Chi-Chi’s, Inc. (“Chi-Chi’s”) from initiating, continuing, and/or participating in any additional actions, including arbitration, against them in connection with certain hepatitis claims. The Court ruled against Sysco, holding that Sysco had not met its burden of showing that Rule 41(a)(1) should be applied to bar Chi-Chi’s arbitration claim, since this case involved separate real parties in interest, represented by separate counsel, prosecuting distinct causes of action.
According to Sysco, Chi-Chi’s had already dismissed two actions, in violation of Rule 41(a)(1), commonly known as the two dismissal rule. Under this rule, a “notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of the United States or of any state an action based on or including the same claim.” On November 12, 2004, Chi-Chi’s voluntarily dismissed its action against Sysco (the “Chi-Chi’s Action”). On December 7, 2004, Empire Indemnity Insurance Company (“Empire”), a liability insurer of Chi-Chi’s, voluntarily dismissed its action against Sysco (the “Empire Action”).
The pertinent issue before the Court therefore was whether each of these dismissals was brought by the same real party in interest. The Court ruled that Empire and Chi-Chi’s were separate real parties, and that therefore the two dismissal rule did not apply. The Court held that simply because both actions were captioned with Chi-Chi’s named as the plaintiff was not sufficient, alone, to invoke the two dismissal rule. Moreover, the Court held that Empire, as a subrogee of Chi-Chi’s, sought in the Empire Action to assert its own rights, given that where there is partial subgrogation, both the insured and the insurer are real parties in interest. As well, there had been no allegation that Empire was in privity with Chi-Chi’s, or that Chi-Chi’s assigned its rights to Empire. Therefore, the Court rendered judgment in favor of Debtor-Defendant Chi-Chi’s, and Sysco’s complaint was dismissed. The case is on appeal.