Semtek Intern. Inc. v. Lockheed Martin
                             Corp.
                          121 S.Ct. 1021
                           U.S.Md.,2001.
                 Decided Feb. 27, 2001.


 Justice SCALIA delivered the opinion of the Court.
 This case presents the question 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.
                                I
 Petitioner filed a complaint against respondent in California state court, alleging
 inducement of breach of contract and various business torts. Respondent removed
 the case to the United States District Court for the Central District of California on
 the basis of diversity of citizenship, see 28 U.S.C. §§ 1332, 1441 (1994 ed. and
 Supp. IV), and successfully moved to dismiss petitioner's claims as barred by
 California's 2-year statute of limitations. In its order of dismissal, the District Court,
 adopting language suggested by respondent, dismissed petitioner's claims "in [their]
 entirety on the merits and with prejudice." App. to Pet. for Cert. 59a. Without
 contesting the District Court's designation of its dismissal as "on the merits,"
 petitioner appealed to the Court of Appeals for the Ninth Circuit, which affirmed
 the District Court's order. 168 F.3d 501 (1999) (table). Petitioner also brought
 suit against respondent in the State Circuit Court for Baltimore City, Maryland,
 alleging the same causes of action, which were not time barred under Maryland's
 3-year statute of limitations. Respondent sought injunctive relief against
 this action from the California federal court under the All Writs Act, 28 U.S.C. §
 1651, and removed the action to the United States District Court for the
 District of Maryland on federal-question grounds (diversity grounds were not
 available because Lockheed "is a Maryland citizen," Semtek Int'l, Inc. v.
 Lockheed Martin Corp., 988 F.Supp. 913, 914 (1997)). The California federal
 court denied the relief requested, and the Maryland federal court remanded the
 case to state court because the federal question arose only by way of defense,
 ibid. Following a hearing, the Maryland state court granted respondent's motion to
 dismiss on the ground of res judicata. Petitioner then returned to the California
 federal court and the Ninth Circuit, unsuccessfully moving both courts to amend
 the former's earlier order so as to indicate that the dismissal was not "on the
 merits." Petitioner also appealed the Maryland trial court's order of dismissal to the
 Maryland Court of Special Appeals. The Court of Special Appeals affirmed,
 holding that, regardless of whether California would have accorded
 claim-preclusive effect to a statute-of-limitations dismissal by one of its own courts,
 the dismissal by the California federal court barred the complaint filed in Maryland,
 since the res judicata effect of federal diversity judgments is prescribed by federal
 law, under which the earlier dismissal was on the merits and claim preclusive. 128
 Md.App. 39, 736 A.2d 1104 (1999). After the Maryland Court of Appeals
 declined to review the case, we granted certiorari. 530 U.S. 1260, 120 S.Ct.
 2715, 147 L.Ed.2d 981 (2000).

                                II

 Petitioner contends that the outcome of this case is controlled by Dupasseur v.
 Rochereau, 21 Wall. 130, 135, 22 L.Ed. 588 (1875), which held that the res
 judicata effect of a federal diversity judgment "is such as would belong to
 judgments of the State courts rendered under similar circumstances," and may not
 be accorded any "higher sanctity or effect." Since, petitioner argues, the dismissal
 of an action on statute-of-limitations grounds by a California state court would not
 be claim preclusive, it follows that the similar dismissal of this diversity action by
 the California federal court cannot be claim preclusive. While we agree that
 this would be the result demanded by Dupasseur, the case is not dispositive
 because it was decided under the Conformity Act of 1872, 17 Stat. 196, which
 required federal courts to apply the procedural law of the forum State in nonequity
 cases. That arguably affected the outcome of the case. See Dupasseur, supra, at
 135. See also Restatement (Second) of Judgments § 87, Comment a, p. 315
 (1980) (hereinafter Restatement) ("Since procedural law largely determines the
 matters that may be adjudicated in an action, state law had to be considered in
 ascertaining the effect of a federal judgment").

 Respondent, for its part, contends that the outcome of this case is controlled by
 Federal Rule of Civil Procedure 41(b), which provides as follows:

 "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."

 Since the dismissal here did not "otherwise specif[y]" (indeed, it specifically stated
 that it was "on the merits"), and did not pertain to the excepted subjects of
 jurisdiction, venue, or joinder, it follows, respondent contends, that the dismissal "is
 entitled to claim preclusive effect." Brief for Respondent 3-4.

Implicit in this reasoning is the unstated minor premise that all judgments
 denominated "on the merits" are entitled to claim-preclusive effect. That premise is
 not necessarily valid. The original connotation of an "on the merits" adjudication is
 one that actually "pass[es] directly on the substance of [a particular] claim"
 before the court. Restatement § 19, Comment a, at 161. That connotation remains
 common to every jurisdiction of which we are aware. See ibid. ("The
 prototyp[ical] [judgment on the merits is] one in which the merits of [a party's]
 claim are in fact adjudicated [for or] against the [party] after trial of the substantive
 issues"). And it is, we think, the meaning intended in those many statements to the
 effect that a judgment "on the merits" triggers the doctrine of res judicata or claim
 preclusion. See, e.g., Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, n. 5,
 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) ("Under the doctrine of res judicata, a
 judgment on the merits in a prior suit bars a second suit involving the same parties
 or their privies based on the same cause of action"); Goddard v. Security Title
 Ins. & Guarantee Co., 14 Cal.2d 47, 51, 92 P.2d 804, 806 (1939) ("[A] final
 judgment, rendered upon the merits by a court having jurisdiction of the cause ... is
 a complete bar to a new suit between [the parties or their privies] on the same
 cause of action" (internal quotation marks and citations omitted)).

 But over the years the meaning of the term "judgment on the merits" "has gradually
 undergone change," R. Marcus, M. Redish, & E. Sherman, Civil Procedure: A
 Modern Approach 1140-1141 (3d ed.2000), and it has come to be applied to
 some judgments (such as the one involved here) that do not pass upon the
 substantive merits of a claim and hence do not (in many jurisdictions) entail
 claim-preclusive effect. Compare, e.g., Western Coal & Mining Co. v. Jones, 27
 Cal.2d 819, 826, 167 P.2d 719, 724 (1946), and Koch v. Rodlin Enterprises,
 Inc., 223 Cal.App.3d 1591, 1596, 273 Cal.Rptr. 438, 441 (1990), with Plaut v.
 Spendthrift Farm, Inc., 514 U.S. 211, 228, 115 S.Ct. 1447, 131 L.Ed.2d 328
 (1995) (statute of limitations); Goddard, supra, at 50-51, 92 P.2d, at 806-807,
 and Allston v. Incorporated Village of Rockville Centre, 25 App.Div.2d 545,
 546, 267 N.Y.S.2d 564, 565-566 (1966), with Federated Department Stores,
 Inc. v. Moitie, 452 U.S. 394, 399, n. 3, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981)
 (demurrer or failure to state a claim). See also Restatement § 19, Comment
 a and Reporter's Note; 18 C. Wright, A. Miller, & E. Cooper, Federal Practice
 and Procedure § 4439, pp. 355-358 (1981) (hereinafter Wright & Miller). That is
 why the Restatement of Judgments has abandoned the use of the term--"because
 of its possibly misleading connotations," Restatement § 19, Comment a, at 161.

 In short, it is no longer true that a judgment "on the merits" is necessarily a
 judgment entitled to claim-preclusive effect; and there are a number of reasons for
 believing that the phrase "adjudication upon the merits" does not bear that meaning
 in Rule 41(b). To begin with, Rule 41(b) sets forth nothing more than a default rule
 for determining the import of a dismissal (a dismissal is "upon the merits," with the
 three stated exceptions, unless the court "otherwise specifies"). This would be a
 highly peculiar context in which to announce a federally prescribed rule on the
 complex question of claim preclusion, saying in effect, "All federal dismissals (with
 three specified exceptions) preclude suit elsewhere, unless the court otherwise
 specifies."

 And even apart from the purely default character of Rule 41(b), it would be
 peculiar to find a rule governing the effect that must be accorded federal judgments
 by other courts ensconced in rules governing the internal procedures of the
 rendering court itself. Indeed, such a rule would arguably violate the jurisdictional
 limitation of the Rules Enabling Act: that the Rules "shall not abridge, enlarge or
 modify any substantive right," 28 U.S.C. § 2072(b). Cf. Ortiz v.
 Fibreboard Corp., 527 U.S. 815, 842, 119 S.Ct. 2295, 144 L.Ed.2d 715
 (1999) (adopting a "limiting construction" of Federal Rule of Civil Procedure
 23(b)(1)(B) in order to "minimiz[e] potential conflict with the Rules Enabling Act,
 and [to] avoi[d] serious constitutional concerns"). In the present case, for example,
 if California law left petitioner free to sue on this claim in Maryland even after the
 California statute of limitations had expired, the federal court's extinguishment of
 that right (through Rule 41(b)'s mandated claim-preclusive effect of its
 judgment) would seem to violate this limitation.

 Moreover, as so interpreted, the Rule would in many cases violate the federalism
 principle of Erie R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 82
 L.Ed. 1188 (1938), by engendering " 'substantial' variations [in outcomes]
 between state and federal litigation" which would "[l]ikely ... influence the choice of
 a forum," Hanna v. Plumer, 380 U.S. 460, 467-468, 85 S.Ct. 1136, 14 L.Ed.2d
 8 (1965). See also Guaranty Trust Co. v. York, 326 U.S. 99, 108-110, 65
 S.Ct. 1464, 89 L.Ed. 2079 (1945). Cf. Walker v. Armco Steel Corp., 446 U.S.
 740, 748-753, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980). With regard to the
 claim-preclusion issue involved in the present case, for example, the traditional rule
 is that expiration of the applicable statute of limitations merely bars the remedy and
 does not extinguish the substantive right, so that dismissal on that ground does not
 have claim-preclusive effect in other jurisdictions with longer, unexpired limitations
 periods. See Restatement (Second) of Conflict of Laws §§ 142(2), 143 (1969);
 Restatement of Judgments § 49, Comment a (1942). Out-of-state defendants
 sued on stale claims in California and in other States adhering to this traditional rule
 would systematically remove state-law suits brought against them to federal
 court--where, unless otherwise specified, a statute-of- limitations dismissal would
 bar suit everywhere.1

 Finally, if Rule 41(b) did mean what respondent suggests, we would surely have
 relied upon it in our cases recognizing the claim-preclusive effect of federal
 judgments in federal-question cases. Yet for over half a century since the
 promulgation of Rule 41(b), we have not once done so. See, e.g., Heck v.
 Humphrey, 512 U.S. 477, 488-489, n. 9, 114 S.Ct. 2364, 129 L.Ed.2d 383
 (1994); Federated Department Stores, Inc. v. Moitie, supra, at 398;
 Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U.S.
 313, 324, n. 12, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971).

We think the key to a more reasonable interpretation of the meaning of
 "operates as an adjudication upon the merits" in Rule 41(b) is to be found in Rule
 41(a), which, in discussing the effect of voluntary dismissal by the plaintiff, makes
 clear that an "adjudication upon the merits" is the opposite of a "dismissal without
 prejudice":

 "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 the
 United States or of any state an action based on or including the same claim."
 See also 18 Wright & Miller § 4435, at 329, n. 4 ("Both parts of Rule 41 ... use
 the phrase 'without prejudice' as a contrast to adjudication on the merits"); 9 id., §
 2373, at 396, n. 4 (" '[W]ith prejudice' is an acceptable form of shorthand for 'an
 adjudication upon the merits' "). See also Goddard, 14 Cal.2d, at 54, 92
 P.2d, at 808 (stating that a dismissal "with prejudice" evinces "[t]he intention of the
 court to make [the dismissal] on the merits"). The primary meaning of "dismissal
 without prejudice," we think, is dismissal without barring the plaintiff from returning
 later, to the same court, with the same underlying claim. That will also ordinarily
 (though not always) have the consequence of not barring the claim from other
 courts, but its primary meaning relates to the dismissing court itself. Thus, Black's
 Law Dictionary (7th ed.1999) defines "dismissed without prejudice" as "removed
 from the court's docket in such a way that the plaintiff may refile the same suit on
 the same claim," id., at 482, 92 P.2d 804, and defines "dismissal without
 prejudice" as "[a] dismissal that does not bar the plaintiff from refiling the
 lawsuit within the applicable limitations period," ibid.

We think, then, that the effect of the "adjudication upon the merits" default
 provision of Rule 41(b)--and, presumably, of the explicit order in the present case
 that used the language of that default provision--is simply that, unlike a dismissal
 "without prejudice," the dismissal in the present case barred refiling of the same
 claim in the United States District Court for the Central District of California. That
 is undoubtedly a necessary condition, but it is not a sufficient one, for
 claim-preclusive effect in other courts.2

                                III
 Having concluded that the claim-preclusive effect, in Maryland, of this California
 federal diversity judgment is dictated neither by Dupasseur v. Rochereau, as
 petitioner contends, nor by Rule 41(b), as respondent contends, we turn to
 consideration of what determines the issue. Neither the Full Faith and Credit
 Clause, U.S. Const., Art. IV, § 1,3 nor the full faith and credit statute, 28
 U.S.C. § 1738,4 addresses the question. By their terms they govern
 the effects to be given only to state-court judgments (and, in the case of the statute,
 to judgments by courts of territories and possessions). And no other federal textual
 provision, neither of the Constitution nor of any statute, addresses the
 claim-preclusive effect of a judgment in a federal diversity action.

It is also true, however, that no federal textual provision addresses
 the claim-preclusive effect of a federal-court judgment in a federal- question case,
 yet we have long held that States cannot give those judgments merely whatever
 effect they would give their own judgments, but must accord them the effect that
 this Court prescribes. See Stoll v. Gottlieb, 305 U.S. 165, 171-172, 59 S.Ct.
 134, 83 L.Ed. 104 (1938); Gunter v. Atlantic Coast Line R. Co., 200 U.S.
 273, 290-291, 26 S.Ct. 252, 50 L.Ed. 477 (1906); Deposit Bank v.
 Frankfort, 191 U.S. 499, 514-515, 24 S.Ct. 154, 48 L.Ed. 276 (1903). The
 reasoning of that line of cases suggests, moreover, that even when States are
 allowed to give federal judgments (notably, judgments in diversity cases) no more
 than the effect accorded to state judgments, that disposition is by direction of this
 Court, which has the last word on the claim-preclusive effect of all federal
 judgments:

 "It is true that for some purposes and within certain limits it is only required that the
 judgments of the courts of the United States shall be given the same force and
 effect as are given the judgments of the courts of the States wherein they are
 rendered; but it is equally true that whether a Federal judgment has been given due
 force and effect in the state court is a Federal question reviewable by this court,
 which will determine for itself whether such judgment has been given due weight or
 otherwise. ...

 "When is the state court obliged to give to Federal judgments only the force and
 effect it gives to state court judgments within its own jurisdiction? Such cases are
 distinctly pointed out in the opinion of Mr. Justice Bradley in Dupasseur v.
 Rochereau [which stated that the case was a diversity case, applying state law
 under state procedure]." Ibid.

 In other words, in Dupasseur the State was allowed (indeed, required) to give a
 federal diversity judgment no more effect than it would accord one of its own
 judgments only because reference to state law was the federal rule that this
 Court deemed appropriate. In short, federal common law governs the claim-
 preclusive effect of a dismissal by a federal court sitting in diversity. See generally
 R. Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler's The Federal Courts and
 the Federal System 1473 (4th ed.1996); Degnan, Federalized Res Judicata, 85
 Yale L.J. 741 (1976).

 It is left to us, then, to determine the appropriate federal rule. And despite
 the sea change that has occurred in the background law since Dupasseur was
 decided--not only repeal of the Conformity Act but also the watershed decision of
 this Court in Erie--we think the result decreed by Dupasseur continues to be
 correct for diversity cases. Since state, rather than federal, substantive law is at
 issue there is no need for a uniform federal rule. And indeed, nationwide uniformity
 in the substance of the matter is better served by having the same claim-preclusive
 rule (the state rule) apply whether the dismissal has been ordered by a state or a
 federal court. This is, it seems to us, a classic case for adopting, as the federally
 prescribed rule of decision, the law that would be applied by state courts in the
 State in which the federal diversity court sits. See Gasperini v. Center for
 Humanities, Inc., 518 U.S. 415, 429-431, 116 S.Ct. 2211, 135 L.Ed.2d 659
 (1996); Walker v. Armco Steel Corp., 446 U.S., at 752-753, 100 S.Ct. 1978;
 Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 202-205, 76 S.Ct.
 273, 100 L.Ed. 199 (1956); Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct.
 477, 87 L.Ed. 645 (1943); Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Cities Service Oil Co. v.
 Dunlap, 308 U.S. 208, 212, 60 S.Ct. 201, 84 L.Ed. 196 (1939). As we have
 alluded to above, any other rule would produce the sort of "forum-shopping ... and
 ... inequitable administration of the laws" that Erie seeks to avoid, Hanna,
 380 U.S., at 468, 85 S.Ct. 1136, since filing in, or removing to, federal court
 would be encouraged by the divergent effects that the litigants would anticipate
 from likely grounds of dismissal. See Guaranty Trust Co. v. York, 326 U.S., at
 109-110, 65 S.Ct. 1464.

 This federal reference to state law will not obtain, of course, in situations in which
 the state law is incompatible with federal interests. If, for example, state law did
 not accord claim-preclusive effect to dismissals for willful violation of
 discovery orders, federal courts' interest in the integrity of their own processes
 might justify a contrary federal rule. No such conflict with potential federal interests
 exists in the present case. Dismissal of this state cause of action was decreed by
 the California federal court only because the California statute of limitations so
 required; and there is no conceivable federal interest in giving that time bar more
 effect in other courts than the California courts themselves would impose.
                              ...
 Because the claim-preclusive effect of the California federal court's
 dismissal "upon the merits" of petitioner's action on statute-of- limitations grounds
 is governed by a federal rule that in turn incorporates California's law of claim
 preclusion (the content of which we do not pass upon today), the Maryland Court
 of Special Appeals erred in holding that the dismissal necessarily precluded the
 bringing of this action in the Maryland courts. The judgment is reversed, and the
 case remanded for further proceedings not inconsistent with this opinion.
 It is so ordered.
 

1. Rule 41(b), interpreted as a preclusion-establishing rule, would
      not have the two effects described in the preceding paragraphs--
      arguable violation of the Rules Enabling Act and incompatibility with
      Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed.
      1188 (1938)--if the court's failure to specify an
      other-than-on-the-merits dismissal were subject to reversal on appeal
      whenever it would alter the rule of claim preclusion applied by the
      State in which the federal court sits. No one suggests that this is the
      rule, and we are aware of no case that applies it.

2. We do not decide whether, in a diversity case, a federal court's
      "dismissal upon the merits" (in the sense we have described), under
      circumstances where a state court would decree only a "dismissal
      without prejudice," abridges a "substantive right" and thus exceeds
      the authorization of the Rules Enabling Act. We think the situation will
      present itself more rarely than would the arguable violation of the Act
      that would ensue from interpreting Rule 41(b) as a rule of claim
      preclusion; and if it is a violation, can be more easily dealt with on
      direct appeal.

3. Article IV, § 1, provides as follows:
      "Full Faith and Credit shall be given in each State to the public Acts,
      Records, and judicial Proceedings of every other State. And the
      Congress may by general Laws prescribe the Manner in which such
      Acts, Records and Proceedings shall be proved, and the Effect
      thereof."

4. Title 28 U.S.C. § 1738 provides in relevant part as follows:
      "The records and judicial proceedings of any court of any ... State,
      Territory or Possession ... shall have the same full faith and credit in
      every court within the United States and its Territories and
      Possessions as they have by law or usage in the courts of such State,
      Territory or Possession from which they are taken."