On March 3, 2015, in Rush v. Sport Chalet, Inc., the US Court of Appeals for the Ninth Circuit held that district courts that dismiss rather than sever claims against misjoined defendants must first evaluate the prejudice of such a dismissal to the plaintiff, including the loss of otherwise timely claims if new suits are blocked by statutes of limitations (No. 12-57253, (9th Cir. Mar. 3, 2015)).

The plaintiff, Rush, was a "physically disabled" person under federal and California law. She alleged that she encountered barriers that interfered with access to Petsmart, Sport Chalet and Babies "R" Us, all of which leased retail space from the Foothill Ranch Mall. After settling her claims against Babies "R" Us, Rush filed a notice of dismissal as to that defendant only. Shortly afterwards, the district court sua sponte issued an order holding that the remaining defendants had been improperly joined and severed and dismissed Rush's claims against Petsmart, Sport Chalet and Foothill Ranch without prejudice, under FRCP 21. The district court denied Rush's motion for reconsideration, and Rush appealed.

The Ninth Circuit reversed the district court's dismissal of claims against the landlord, Foothill Ranch, holding that it was properly joined under FRCP 20. The panel explained that the landlord-tenant relationship between Foothill Ranch and Babies "R" Us satisfied the common transaction or occurrence requirement of FRCP 20(a)(2).

The court also remanded Rush's claims against Sport Chalet and Petsmart to the district court, instructing it to conduct a prejudice analysis. The Ninth Circuit ruled that the district court abused its discretion in dismissing, rather than only severing, Rush's claims against these two defendants. While acknowledging that Sport Chalet and Petsmart may have been misjoined, the Ninth Circuit joined several other circuits in adopting the requirement that district courts choosing to dismiss rather than sever claims in these circumstances must first assess the prejudice of the dismissal to the plaintiff, including the potential loss of claims if new suits are blocked by statutes of limitation.

Practitioners in the Ninth Circuit should be mindful that district courts wishing to dismiss, rather than sever, claims against misjoined defendants can do so only after conducting a prejudice analysis.