Voluntary Dismissal Without Prejudice of Remaining Claims Defeats § 1291 Finality (Even for Appellee Counterclaims)

1. Introduction

This appeal arose from a breakdown in a distribution relationship between Air-Con, Inc. (a Puerto Rico distributor) and Daikin Applied Latin America, LLC (a Miami-based Daikin subsidiary). Air-Con sued under Puerto Rico’s Dealer’s Act, Law 75, alleging impairment of its distribution rights. Daikin counterclaimed for over $235,000 in unpaid invoices and also sought a declaratory judgment of “just cause” under Law 75.

The district court entered summary judgment against Air-Con on its Law 75 claim, dismissed Daikin’s declaratory-judgment counterclaim without prejudice as unripe, but left Daikin’s damages counterclaim for trial. Air-Con attempted to obtain immediate appellate review, first by seeking partial final judgment (treated as a Rule 54(b) request) and then by an unusual Rule 5 petition—both unsuccessful. Daikin then moved to voluntarily dismiss its remaining damages counterclaim without prejudice so that “the Court can enter judgment and this case can conclude.” The district court granted that motion and entered what it labeled a “final judgment.”

The First Circuit held that the judgment was not truly final because the voluntarily dismissed counterclaim could be revived in the same district court after appeal—creating only the appearance of finality. The key issue was appellate jurisdiction: whether this procedural maneuver created a “final decision” within the meaning of 28 U.S.C. § 1291.

2. Summary of the Opinion

The First Circuit dismissed the appeal for lack of appellate jurisdiction. It announced and applied a general rule:

The court grounded this rule in pragmatic finality principles, the anti-piecemeal purposes of § 1291, and Supreme Court guidance rejecting “inventive litigation ploys” that would circumvent carefully calibrated interlocutory-appeal mechanisms.

3. Analysis

3.1 Precedents Cited

Foundations of § 1291 finality and anti-piecemeal review

• Catlin v. United States, 324 U.S. 229 (1945): Provides the canonical definition of a “final decision” as one that ends litigation on the merits and leaves nothing for the court to do but execute judgment. The First Circuit used Catlin as a starting point but emphasized the Supreme Court’s repeated instruction that finality is practical, not merely technical.
• Cobbledick v. United States, 309 U.S. 323 (1940): Quoted for the “historic characteristic” of finality and the systemic reasons for preventing piecemeal appeals. The opinion uses Cobbledick to frame finality as a tool for “a healthy legal system.”
• Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368 (1981): Supports the policy rationales for the final-judgment rule—deference to trial courts, avoiding fragmentation, and preventing harassment and costs of successive appeals.
• Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), and Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949): Cited for the principle that finality should be construed practically and that no verbal formula perfectly predicts finality outcomes.
• Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100 (2009): Invoked to caution against expanding routes to interlocutory appeal beyond those allowed by Congress and the Rules.

Supreme Court rejection of manufactured finality

• Microsoft Corp. v. Baker, 582 U.S. 23 (2017): The centerpiece. Baker condemned voluntary-dismissal tactics that “subvert the final-judgment rule” and bypass rule-based controls over interlocutory review (there, Rule 23(f)). The First Circuit treated Baker’s reasoning as extending beyond the class-action context: the concern is not merely what remains “physically” on the docket, but whether the maneuver lets parties seize control over appeal timing.
• Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978): Supplies the historical backdrop—rejecting “death knell” appeals and reinforcing that interlocutory review is not a party-controlled entitlement.

Rule 54(b), the “dispatcher” role, and treatment of counterclaims

• Sears, Roebuck & Co. v. Mackey, 351 U.S. 427 (1956): Explains that Rule 54(b) mitigates harshness of the “judicial unit” theory but keeps courts—not parties—as the gatekeepers (“dispatcher”) of immediate appeal.
• Cold Metal Process Co. v. United Engineering & Foundry Co., 351 U.S. 445 (1956): Stands for the proposition that counterclaims are “like other multiple claims” for Rule 54(b) purposes. The First Circuit used this symmetry to reject any special finality rule merely because the dismissed claim was a counterclaim.

First Circuit case law: issue recognized but not previously resolved

• Donahue v. Federal National Mortgage Ass'n, 980 F.3d 204 (1st Cir. 2020): Raised a related issue (voluntary dismissal and finality) but assumed jurisdiction because the merits were clear; it did not decide the rule adopted here.
• Shea v. Millett, 36 F.4th 1 (1st Cir. 2022): Similar posture (counterclaims dismissed without prejudice), yet the court again assumed jurisdiction; the 2026 opinion declines to repeat that approach.
• Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998): Cited to reject “hypothetical jurisdiction” and to caution that “drive-by” jurisdictional rulings are not precedential.
• Triangle Cayman Asset Co. v. LG & AC, Corp., 52 F.4th 24 (1st Cir. 2022); Galvin v. U.S. Bank, N.A., 852 F.3d 146 (1st Cir. 2017); Maine Medical Center v. Burwell, 841 F.3d 10 (1st Cir. 2016); Boston Property Exchange Transfer Co. v. Iantosca, 720 F.3d 1 (1st Cir. 2013): Reiterate that final decisions dispose of all claims against all parties—yet do not answer what “dispose” means when a claim can be revived.
• North Carolina National Bank v. Montilla, 600 F.2d 333 (1st Cir. 1979): Treated dismissal without prejudice of a counterclaim as nonfinal where the counterclaim could be raised again “during the course of the pending proceedings.”
• Pratt v. United States, 129 F.3d 54 (1st Cir. 1997), and Mirpuri v. ACT Manufacturing, Inc., 212 F.3d 624 (1st Cir. 2000): Used to distinguish dismissals without prejudice that are practically final (no pending aspects in district court) from those that are not.
• AVX Corp. v. Cabot Corp., 424 F.3d 28 (1st Cir. 2005): Noted for claim-preclusion/“final judgment” parallels and skepticism toward “without prejudice” stipulations as producing finality for preclusion purposes.
• Commonwealth School, Inc. v. Commonwealth Academy Holdings LLC, 994 F.3d 77 (1st Cir. 2021): Cited for the merger doctrine (interlocutory rulings merge into final judgment on appeal) and for the duty to police appellate jurisdiction.

Rule 60(b) and reopening voluntary dismissals

• Waetzig v. Halliburton Energy Services, Inc., 604 U.S. 305 (2025): Critical to the court’s response to concerns about “finality traps.” Waetzig holds that a voluntary dismissal without prejudice is a “final proceeding” for Rule 60(b) purposes, enabling reopening and thus providing a mechanism to prevent one party from holding another’s appellate rights hostage.

Persuasive authority: the circuit landscape

The court surveyed other circuits and aligned with the “clear majority rule” that voluntary dismissals without prejudice generally defeat finality, citing (among others) Scottsdale Insurance Co. v. McGrath, S.B. v. KinderCare Learning Centers, LLC, Metz v. McCarthy, Williams v. Taylor Seidenbach, Inc., Rowland v. Southern Health Partners, Inc., West v. Louisville Gas & Electric Co., In re Municipal Stormwater Pond Coordinated Litig., Eastom v. City of Tulsa, and Blue v. District of Columbia Public Schools.

The opinion acknowledged minority approaches, including the Ninth Circuit’s more intent-focused analysis (e.g., Galaza v. Wolf) and the Eleventh Circuit’s rule that voluntary dismissals create finality regardless of prejudice (e.g., Corley v. Long-Lewis, Inc.). The First Circuit rejected those approaches for its own jurisprudence in favor of a revivability-focused, system-protective standard.

3.2 Legal Reasoning

(a) The court’s operative jurisdictional test: revivability in the same district court

The First Circuit’s decisive move was to define nonfinality in functional terms: if a dismissed claim can return to the same district court, then the “final judgment” is illusory. This directly tracks the Supreme Court’s description in Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001), that the primary meaning of “dismissal without prejudice” is the ability to return later to the same court with the same claim.

(b) Harmonizing § 1291 with the designed, court-controlled interlocutory review mechanisms

The opinion treats the final-judgment rule as a structural safeguard. It specifically ties its result to preserving the “gatekeeping” calibration of:

• Rule 54(b) (partial final judgments only when the district court acts as “dispatcher” and finds no just reason for delay), and
• § 1292(b) and other limited routes to interlocutory appeal (court-permitted and statute/rule-defined).

Allowing dismissal-without-prejudice tactics would let parties create de facto interlocutory appeals whenever they dislike trying remaining claims—precisely the “piecemeal” dynamic § 1291 aims to prevent and that Microsoft Corp. v. Baker condemned.

(c) Rejecting party-identity distinctions (appellant vs. appellee dismissal)

The opinion squarely rejects the notion that finality should turn on whether the dismissed, revivable claim belongs to the would-be appellant or the appellee. The core harms—fragmentation, manipulation of appeal timing, and undermining Rule 54(b)’s gatekeeping—exist either way. The court also relies on Cold Metal Process Co. v. United Engineering & Foundry Co. to reinforce that counterclaims do not deserve special treatment in the finality calculus.

(d) Addressing fairness concerns: “hostage-taking” and the “finality trap”

The court acknowledged the worry that an appellee could manipulate dismissals without prejudice to frustrate the other side’s appellate rights. It responded in two ways:

• District court management tools: a district court can require the claimant to choose between litigating the claim to judgment or dismissing it with prejudice; a dismissal for failure to prosecute under Rule 41(b) may be available in appropriate cases.
• Rule 60(b) relief after Waetzig: Because Waetzig v. Halliburton Energy Services, Inc. treats a voluntary dismissal without prejudice as a “final proceeding” for Rule 60(b), a party can seek equitable relief to reopen and force completion of the case for appellate purposes, including potentially under Rule 60(b)(6)’s “grand reservoir of equitable power.”

Notably, the court did not decide the precise contours of such Rule 60(b) relief in this posture; it identified it as the principal safety valve preventing indefinite procedural limbo.

3.3 Impact

Immediate doctrinal impact in the First Circuit

• Clear jurisdictional rule: A voluntarily dismissed claim without prejudice that may be revived in the same district court prevents § 1291 finality—even if the dismissed claim is a counterclaim held by the prevailing party.
• Reduced “manufactured finality” appeals: Parties in the First Circuit can no longer rely on a “drop-and-appeal” strategy that preserves the ability to relitigate remaining claims after an appeal.
• Greater discipline around Rule 54(b) and § 1292(b): Litigants must seek (and satisfy) the established mechanisms for early appeal or accept that interlocutory rulings are reviewed after true final judgment.

Practical litigation consequences

• Settlement pressure and strategic clarity: If a party wants immediate appeal, it must typically accept the cost of foreclosing remaining claims (dismissal with prejudice, settlement with binding release, or litigating them to judgment).
• Counterclaim strategy changes: Defendants considering voluntary dismissal of counterclaims to facilitate appeal must decide whether they are willing to dismiss with prejudice or face the likelihood of a jurisdictional dismissal.
• District court role strengthened: The decision reinforces the district court’s “dispatcher” role by preventing parties from unilaterally creating appellate posture.

Interaction with Law 75 litigation

Although the case originates in a Law 75 dispute, the holding is procedural and trans-substantive. Still, it matters for Law 75 practice: distributor/manufacturer cases often involve overlapping affirmative claims and invoice/accounting counterclaims. The opinion warns that parties cannot sever that overlap for immediate appeal by temporarily shelving money claims.

4. Complex Concepts Simplified

• “Final decision” (28 U.S.C. § 1291): Usually means the district court is finished with the case—nothing left to decide except carrying out the judgment. If something important can return to the district court, the “finality” may be only apparent.
• Rule 41 voluntary dismissal “without prejudice”: The claim is dismissed now, but the claimant generally may bring the same claim again later in the same court. That “reusable” feature is what defeats finality here.
• Rule 54(b) partial final judgment: In multi-claim cases, the district court may allow immediate appeal of some resolved claims, but only if it expressly finds “no just reason for delay.” The court, not the parties, controls this.
• Merger doctrine: A party does not lose the ability to challenge earlier interlocutory rulings (like summary judgment on one claim) just because it waits; those rulings can be reviewed when a truly final judgment arrives.
• “Finality trap”: The fear that if an appeal is dismissed as nonfinal, the case may be stuck. The opinion points to Rule 60(b), especially after Waetzig, as a mechanism to reopen a voluntary dismissal and move the case to a posture that allows appeal.

5. Conclusion

Air-Con, Inc. v. Daikin Applied Latin America, LLC establishes a firm First Circuit rule against manufactured appellate jurisdiction: when a remaining claim is voluntarily dismissed without prejudice and can be revived in the same district court, there is no “final decision” under § 1291—regardless of whether that claim belongs to the would-be appellant or appellee. The decision aligns First Circuit practice with the pragmatic, system-protective finality principles emphasized in Microsoft Corp. v. Baker, reinforces the gatekeeping functions of Rule 54(b) and § 1292(b), and identifies Rule 60(b) (as clarified by Waetzig) as a key safety valve against procedural limbo.