Semtek International, Inc. (Semtek) (plaintiff) sued Lockheed Martin Corp. (Lockheed) (defendant) in California state court for inducement of breach of contract and other business torts. Lockheed removed the action to federal court on the basis of diversity of citizenship. Lockheed then moved for dismissal arguing that Semtek’s claims were barred by California’s two-year statute of limitations. The court dismissed the claim under Rule 41(b) of the Federal Rules of Civil Procedure. The court's dismissal order stated that the matter was being dismissed "on the merits and with prejudice." Semtek then filed its action in Maryland state court, where the claims would have been subject to a three-year statute of limitations. The court dismissed Semtek's action on res judicata grounds. The Maryland Court of Special Appeals affirmed, finding that the dismissal of the case on its merits in federal court precluded the claim from being raised in state court. The United States Supreme Court granted certiorari.