In ASARCO LLC v. Montana Resources, Inc., a case involving the interplay of a business’s bankruptcy with a later lawsuit for breach of contract by that business, the Fifth Circuit observed:
- “[A] declaratory claim on its own typically will not preclude future claims involving the same circumstances (as noted, issue preclusion may still apply to any declaration the court issues). But in a case involving both declaratory claims and ones seeking coercive relief, the former will not serve as an antidote that undoes the preclusive force that traditional claims would ordinarily have.” (applying the “seminal case” on the point, Kaspar Wire Works, Inc. v. Leco Engineering & Machine, Inc., 575 F.2d 530 (5th Cir. 1978))
- As to the damages claim, “ASARCO’s claim for failure to reinstate did not accrue until MRI rejected the tender in 2011. . . . ASARCO may or may not have attempted to cure, and MRI may or may not have denied ASARCO’s reinstatement. Because the present breach of contract claim was contingent on future events, ASARCO could not have brought it during the adversary proceeding.”
- For the same reasons, the plaintiff was not judicially estopped by allegedly inadequate disclosures during the earlier bankruptcy: “MRI cites no case requiring a party to disclose a potential claim for breach of contract when the contract had not yet been breached. This makes sense, because MRI’s position would require a debtor to scour its contracts looking for hypothetical claims that another party could maybe breach in the future.”
No. 16-40682 (June 2, 2017).
In Wills v. Arizon Structures, the parties disputed whether a Missouri judgment about arbitrability precluded a later motion to compel arbitration. The petitioners had been involved in the Missouri proceedings but obtained dismissal for lack of personal jurisdiction. The Fifth Circuit found that the judgment entered in Missouri against the business that employed them did not create a collateral estoppel bar. Privity, for purposes of claim or issue preclusion, does not ordinarily arise “based solely on an employment or corporate relationship.” And “[a] shared interest in compelling arbitration, by itself, does not warrant the conclusion that the parties are in privity such that the judgment denying [Employer’s] motion to compel arbitration binds Employees.” No. 15-41166 (May 27, 2016).
The Houston Professional Towing Association, a persistent if unsuccessful litigant, brought its third challenge to the City of Houston’s “SafeClear” freeway towing program. It argued that recent changes to those ordinances had changed the facts enough to remove a res judicata bar from a previous lawsuit. The Fifth Circuit disagreed, concluding that the purpose of the law remained the same (“to promote safety by expeditiously clearing stalled and wrecked vehicles”), and statistics about collisions after the program began were either indeterminate or showed that it enhanced safety. Houston Professional Towing Association v. City of Houston, No. 15-20117 (Feb. 3, 2016).
Building on momentum after winning a challenge to the MERS business model, MERS succeeded in arguing that an earlier suit against Bank of America created a res judicata bar to a later suit against MERS because MERS and the bank were in privity. Warren v. MERS, No. 14-11102 (July 2, 2015, unpublished).
Several labor unions arbitrated disputes with American Airlines about pilot seniority. Mackenzie v. Air Lines Pilots Association, No. 11-11098 (Dec. 23, 2014, unpublished). Two pilots sought to bring a class action to challenge the arbitration award. The Fifth Circuit dismissed for lack of standing: “[W]hen a CBA formed pursuant to the RLA establishes a mandatory, binding grievance procedure and vests the union with the exclusive right to pursue claims on behalf of aggrieved employees, an aggrieved employee whose employment is governed by the CBA lacks standing to attack the results of the grievance process in court—the sole exception being the authorization of an aggrieved employee to bring an unfair representation claim.” (citing Mitchell v. Continental Airlines, 481 F.3d 225 (5th Cir. 2007)). The Court’s analysis of this issue resembles discussion about the broader topic of claim preclusion, arising from a privity relationship, based on another party’s litigation activity.
The Fifth Circuit and the district court agreed that the plaintiffs/appellants in Mboho USA, Inc. v. Okon had served “abusively excessive, repetitious, and burdensome discovery requests.” No. 13-20449 (Oct. 10, 2014, unpublished). But, the Fifth Circuit found that the district court had acted too hastily in dismissing the case entirely, noting:
(1) the plaintiff, a foreign entity, was not foreclosed from suing in Texas simply because it is not registered to do business there;
(2) one of the appellants had legitimate documents from the Nigerian government authorizing him to bring suit in the US or Canada;
(3) an earlier dismissal in state court for lack of subject matter jurisdiction was not preclusive as to another court with jurisdiction; and
(4) as to one of the claims, plaintiffs were entitled to an opportunity to respond before it was dismissed sua sponte.
Boxcars Properties, the operator of an apartment complex, sued its neighboring landowners West Hills Park and Home Depot in Texas state court, complaining about development activity that led to a “lack of lateral support” and made the complex uninhabitable. Williams v. Home Depot, Inc. (Sept. 22, 2014, unpublished). Boxcars settled with Home Depot and obtained a $2.4 million verdict against West Hills, which then filed for bankruptcy.
West Hills sought indemnity from Home Depot, and the district court and Fifth Circuit rejected its request. The indemnity provision contained an exclusion for “the tortious acts of . . . other parties” — such as West Hills. Noting that “[t]he express negligence doctrine alone may be sufficient to deny [debtor’s] claim,” the Court decided on the basis of issue preclusion, agreeing with the district court that “the negligence finding was essential to the judgment because only that finding allowed for the damages for improvements to land included in the state court verdict.”
The Swareks and the Derrs disputed the ownership of a large farm in Issaquena County, Mississippi (at 1400 residents, the least populous county in that state, but also the home of its largest captured alligator). Their litigation unfolded as follows:
- In 2005, Swareks sued Derrs in Issaquena County;
- In March 2009, the Derrs sued Swareks in the — somewhat unlikely — venue of the German Regional Court in Düsseldorf, Germany (population 600,000, and capital of the state of North Rhine-Westphalia);
- In November 2009, the Swareks voluntarily dismissed their claims in Mississippi;
- In 2010, the Derrs lost in Germany when that court recognized the dismissal of the Mississippi claims; but then,
- The Derrs ultimately won on appeal in Germany before the Higher Regional Court of Düsseldorf, obtaining judgment for $300,000 in costs.
The Derrs sought to domesticate the judgment in Mississippi, and the district court rejected their request, citing res judicata and characterizing the German action as an end run around the Mississippi state court. On appeal, the Fifth Circuit affirmed with these three observations:
- “Filing a mirror-image lawsuit in a foreign court while domestic litigation is pending is not sufficient, on its own, to preclude recognition of a foreign judgment, and the district court erred in denying comity on this ground.”
- While dismissal for want of jurisdiction may not have preclusive effect, a voluntary dismissal does: “If the plaintiff chooses to extinguish his rights forever he is entitled to do so, and the defendant will reap the benefit of a res judicata bar to any attempt by the plaintiff
- As to the German appellate holding: “The German Higher Regional Court’s decision to sidestep the comity determination and re-adjudicate claims that had already been settled in the Chancery Court violated the Mississippi public policy of res judicata and the Swareks’ right to permanently terminate their claims. Comity must be a two-way street.”
A dissent characterized the interplay between the Mississippi and German holdings differently, and thus would affirm.
In Grimes v. BNSF Railway, the district court applied collateral estoppel to a Federal Railway Safety Act (“FRSA”) suit, based on a fact finding made by a type of arbitral panel called a Public Law Board (“PLB”) after an investigation and hearing by railroad personnel. No. 13-60382 (Feb. 17, 2014). The Fifth Circuit reversed, noting: (1) the hearing was conducted by the railroad; (2) the plaintiff was represented by the union rather than an attorney; (3) the termination decision was made by a railroad employee, not by “an impartial fact finder such as a judge or jury”; (4) the rules of evidence did not appear to have controlled in the arbitral proceedings; and (5) “most crucially,” the PLB’s affirmance was based solely on the record developed at the hearing administered by the railroad. The Court noted authority that rejects res judicata in this context, but also noted that “estoppel may apply in federal-court litigation to facts found in arbitral proceedings as long as the court considers the ‘federal interests warranting protection.’”
A zealous borrower filed successive lawsuits against U.S. Bank, its attorneys, and MERS arising from a foreclosure. Maxwell v. U.S. Bank, N.A.,13-20113 (Oct. 30, 2013, unpublished). While MERS was not a party to the first two cases, it asserted res judicata, based on their dismissal, arguing that it was in privity with the defendants. The Fifth Circuit cited Taylor v. Sturgell, 553 U.S. 880 (2008), which described how res judicata reaches “a variety of pre-existing substantive legal relationships between the person to be bound and a party to the judgment,” including “preceeding and succeeding owners of property, bailee and bailor, and assignee and assignor” as well as other relationships described as “privity.” Here, the mortgage documents identified MERS as “nominee for” U.S. Bank, which satisfied Taylor.
The plaintiff in Bradberry v. Jefferson County, Texas alleged that he was terminated from his job as a county corrections officer, in violation of federal law, because he was called to service in the Army Reserve during Hurricane Ike. No. 12-41040 (Oct. 17, 2013). A key issue was whether a county administrative proceeding about his termination had collateral estoppel effect on his later federal lawsuit. The Fifth Circuit, noting that administrative proceedings can create collateral estoppel if state law would allow it, held that the questions were different and no estoppel arose: “We conclude that a finding that Bradberry was discharged due to a disagreement about military service is not the equivalent of a finding that the County was motivated by his military status to discharge him.” While analogical reasoning from this fact-specific holding may pose challenges, it still provides a clearly-stated example of when issues become “identical” for purposes of issue preclusion.
In Meyers v. Textron Inc., the Fifth Circuit affirmed the Rule 12 dismissal of a complaint on res judicata grounds. No.13-10023 (Oct. 2, 2013, unpublished). .Noting that res judicata is ordinarily an affirmative defense, the Court reminded: “When all relevant facts are shown by the court’s own records, of which the court takes notice, the defense [of res
judicata] may be upheld on a Rule 12(b)(6) motion without requiring an answer.” On the merits, the Court found no dispute that the plaintiffs in two cases were in privity given the control one had over the other.
Plaintiff voluntarily dismissed a Texas suit under Rule 41, refiled in New York, and then voluntarily dismissed that action as well. Because the second dismissal was with prejudice under the Federal Rules, Plaintiff sought relief under Rule 60(b) to allow reinstatement of the original case. Yesh Music v. Lakewood Church, No. 12-20520 (August 14, 2013). Defendant argued that a voluntary dismissal is not a “final proceeding” for Rule 60 purposes. The Fifth Circuit affirmed the grant of 60(b) relief. The Court acknowledged Harvey Specialty & Supply, Inc. v. Anson Flowline Equipment, Inc., 434 F.3d 320 (5th Cir. 2005), which found no preclusive effect for a Rule 41 voluntary dismissal, but concluded that one was still a “final . . . proceeding” within Rule 60 because of its practical effect. The Court noted that the weight of authority from other Circuits agreed with this conclusion.
In Escamilla v. M2 Technology, the individual owner of a business sued to enforce the “M2” trademark owned by his business. No. 12-41183 (July 16, 2013, unpublished). The Fifth Circuit affirmed the dismissal of the claim for failure to join a necessary party, as the individual did not join his company as a party plaintiff, thus exposing the defendant to potential repetitive future litigation. (This decision appears to have been rooted in avoiding the cost of having counsel appear for the company.) The Court rejected the individual’s argument that a future suit would be barred by claim preclusion, noting the clear separation in Delaware corporate law between a business entity and its shareholders.
The parties arbitrated whether certain offshore oil dealings violated RICO. Grynberg v. BP, PLC, No. 12-20291 (June 7, 2013, unpublished). The arbitrator found that the claimant did not establish damage and dismissed that claim, noting that he lacked authority to determine whether any criminal violation of RICO occurred. The Fifth Circuit affirmed the dismissal of a subsequent RICO lawsuit on the grounds of res judicata, finding that the arbitrator’s ruling was on the merits and not jurisdictional.
The original lawsuit in Comer v. Murphy Oil alleged tort claims against several oil companies about the effect of global warming on Hurricane Katrina. The district court dismissed the claims in that original suit on standing and political question grounds; then, after a Fifth Circuit panel initially reversed in part; the appeal was dismissed after recusals made en banc review impossible after a vote to grant review by the full Court. In this new case, the plaintiffs refiled, the district court dismissed on the grounds of res judicata since its original ruling was not affected by the appeal, and the Fifth Circuit affirmed. No. 12-60291 (May 14, 2013). The Court reviewed the policies behind the doctrine of res judicata and declined to create an equitable exception to the doctrine for this case.
The case of Turner v. Pleasant presented a rare attack on a judgment by an “independent action in equity.” The underlying dispute involved a personal injury case implicated by the misconduct surrounding disgraced former judge Thomas Porteous. Op. at 2-5. After a clearly-written summary of the pleading requirements of Twombly and Iqbal, op. at 6-7, the Court considered whether the action could proceed, even though similar allegations were made and rejected in an earlier request for relief. The Court reversed the dismissal of the claim and remanded, concluding that the plaintiffs had sufficiently alleged: (1) a prior judgment which ‘in equity and good conscience’ should not be enforced, (2) a meritorious claim in the underlying case, (3) fraud, accident, or mistake which prevented the party from obtaining the benefit of that claim, (4) lack of fault or negligence by the party, and (5) absence of an adequate remedy at law. Op. at 5-10 (citing and contrasting Addington v. Farmer’s Elevator Mutual, 650 F.3d 663 (5th Cir. 1981)).
The case of Weaver v. Texas Capital Bank first presented a jurisdictional question under the Rooker-Feldman doctrine. Texas Capital Bank had obtained a state court default judgment against a guarantor, and contended that the guarantor’s later adversary proceeding attacking the basis for that liability was an impermissible federal attack on a final state court judgment. The Court disagreed, finding that Rooker-Feldman was not implicated. Op. at 5-7. The Court went on to reverse, however, finding that the guarantor’s arguments to the bankruptcy court were defenses to the earlier state court action and thus barred by claim preclusion. Op. at 8-11. The opinion thoroughly reviews Texas claim preclusion law and its “transactional” approach to the application of the compulsory counterclaim rule.