On March 10, 2016, in S.B. v. KinderCare Learning Center, LLC, the US Court of Appeals for the Third Circuit adopted the legal prejudice exception to the final judgment rule. The court concluded that the exception did not apply in that case, however, because the district court did not impose unreasonably burdensome conditions on the plaintiffs' ability to refile their complaint. ( (3d Cir. Mar. 10, 2016).)

Plaintiffs commenced an action in the Court of Common Pleas of Philadelphia County, alleging that the defendant negligently operated a daycare center. After the defendant removed the action to the US District Court for the Eastern District of Pennsylvania, plaintiffs' counsel moved for voluntary dismissal without prejudice under FRCP 41. Plaintiffs explained that the lawsuit was premature because plaintiff S.B., a four-year-old, was too young to articulate details about the alleged incident.

The district court granted the motion in part, dismissed the case without prejudice, and imposed two conditions on plaintiffs' ability to refile, requiring that they:

Plaintiffs appealed, challenging these conditions on their ability to refile the dismissed action, and the Third Circuit dismissed the appeal for lack of jurisdiction.

The Third Circuit first noted that appellate courts are generally limited in jurisdiction to the review of "final decisions" of district courts. Dismissals without prejudice, the court explained, are typically not final decisions, because the plaintiff may refile the action. The Third Circuit further noted, however, that some courts apply an exception to the final judgment rule, when a district court dismisses a case without prejudice but imposes unreasonably burdensome conditions on the plaintiff's right to refile.

The court joined the US Courts of Appeal for the Fifth, Sixth, Eighth, and Eleventh Circuits in adopting the legal prejudice exception, noting that the exception is consistent with its case law holding that a dismissal without prejudice could be appealed if the plaintiff's ability to refile is foreclosed.

The court further concluded that the exception did not apply to the facts of this case, because the conditions to refiling did not "severely circumscribe" or render "uncertain" the plaintiffs' ability to refile.

First, the requirement that the plaintiffs pay legal fees before refiling their case is common, and would not cause legal prejudice unless the fees were so high as to be objectively unreasonable. And in this case, the amount of fees remained undetermined.

Second, the deadline for plaintiffs to refile their case did not amount to legal prejudice, because it would not result in uncertainty as to whether plaintiffs will be permitted to refile their action. The deadline instead addresses the defendant's concern that defending against a refiled lawsuit would become more difficult with the passage of time. The district court stated that the deadline could be extended for good cause, including factors such as S.B.'s cognitive ability and readiness to proceed.

Therefore, although the Third Circuit clarified that it may consider appeals from dismissals without prejudice if they meet the legal prejudice exception, the exception was not met in this case.