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 Warren v. MERS, No. 14-11102 (July 2, 2015, unpublished).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 Mackenzie v. Air Lines Pilots Association, No. 11-11098 (Dec. 23, 2014, unpublished).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.