Title: Raley v. Haider

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT:  All the Justices 
 
THOMAS RALEY 
 
 
 
 
 
 
 
 
     OPINION BY 
v. Record No. 122069 
 
 
  JUSTICE S. BERNARD GOODWYN 
 
 
 
 
                     September 12, 2013 
NAIMEER HAIDER, ET AL. 
 
 
 FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Jan L. Brodie, Judge 
 
In this appeal, we consider whether the circuit court 
erred in sustaining the defendants’ demurrer and dismissing 
plaintiff’s entire case based on res judicata. 
Background 
In 2008 and 2009, Thomas J. Raley, M.D. (Raley) was 
employed by Minimally Invasive Spine Institute, PLLC (MISI), a 
medical practice owned and managed by Naimeer Haider, M.D. 
(Haider).  Raley claimed MISI had failed to pay him all the 
money he earned and filed suit (the original case) in the 
Circuit Court of Fairfax County in 2010.  After amendment of 
the complaint, Raley alleged, in pertinent part, breach of 
contract (Count I) and breach of implied contract (Count III) 
against MISI.  In Count II, Raley sued MISI as well as Haider, 
individually, alleging that Haider wrongfully distributed money 
from MISI to himself, depleting MISI of funds in violation of 
Code § 13.1-1035, which governs distributions made by Virginia 
limited liability companies. 
 
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MISI and Haider filed a demurrer to Count II, arguing that 
Code § 13.1-1035 only allowed the LLC itself or a member of the 
LLC to bring an action pursuant to that statute.  The circuit 
court agreed that Raley, who was not a member of MISI, could 
not bring a cause of action pursuant to Code § 13.1-1035, and 
sustained the demurrer.  It dismissed Raley’s Count II claim 
against MISI and Haider with prejudice.  The case proceeded 
against MISI on the other counts, and Raley was awarded a 
judgment for $395,428.70 plus interest against MISI. 
Raley has been unable to collect the judgment he was 
awarded against MISI and filed a garnishment proceeding on 
March 22, 2012, in the Circuit Court of Fairfax County, naming 
Haider as the garnishee, in essence, asserting the rights of 
MISI for Haider’s alleged violation of Code § 13.1-1035.  
Additionally, on May 24, 2012, Raley filed a complaint in the 
Circuit Court of Fairfax County against Haider, Minimally 
Invasive Pain Institute, PLLC (MIPI) and Wise, LLC (Wise).  In 
Count I of the complaint, Raley sought, as MISI’s judgment 
creditor, to enforce MISI’s rights against Haider regarding 
money Haider wrongfully transferred to himself from MISI.  In 
Counts II through VIII, Raley alleged that Haider ordered 
improper transfers from MISI to MIPI and Wise, as well as to 
himself, essentially “looting” MISI and preventing the payment 
of Raley’s judgment.  Because both claims essentially sought to 
 
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assert rights of MISI for violation of Code § 13.1-1305, the 
parties agreed to a consolidation of the garnishment action 
with Count I of the complaint (the garnishment and complaint 
are collectively referred to as “the consolidated action”). 
Haider, MIPI and Wise filed a demurrer, plea in bar and 
motion for a bill of particulars.  The circuit court sustained 
the defendants’ demurrer as to all counts, ruling that based 
upon the circuit court’s dismissal with prejudice of Count II 
of the original case brought by Raley against MISI and Haider, 
res judicata barred all subsequent claims regarding funds Raley 
alleged to have been improperly transferred by Haider out of 
MISI. 
This Court granted an appeal on the following assignments 
of error: 
 
 
1. 
The circuit court erred in granting the 
demurrer of all defendants to all counts of the 
Complaint, and to the Garnishment Summons that had 
been consolidated into Count I of the Complaint, on 
grounds of res judicata. 
 
2. 
The circuit court erred in granting the 
demurrer of all defendants to plaintiff’s garnishment 
action (which had been consolidated into Count I of 
the Complaint) on grounds of res judicata. 
 
3. 
The circuit court erred in granting the 
demurrer of defendant Haider to the new causes of 
action set forth in Counts II through VIII, inclusive, 
of the Complaint. 
 
4. 
The circuit court erred in granting the 
demurrer of defendants Minimally Invasive Pain 
Institute, PLLC and Wise, LLC to the new causes of 
 
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action set forth in Counts II through VIII, inclusive, 
of the Complaint. 
 
Analysis 
 Raley argues that his consolidated action was not barred 
by res judicata because the circuit court’s dismissal of Count 
II in the original case was based on Raley’s lack of standing 
to sue, a jurisdictional determination, and did not reach the 
merits of Haider’s and MISI’s liability.  Thus, Raley contends 
that the dismissal with prejudice of Count II of the original 
case was not decided on the merits, and therefore cannot be the 
basis for an assertion of res judicata.  Haider, MISI and Wise 
respond that Raley waived this argument pursuant to Rule 5:25 
because he never articulated it to the circuit court. 
We agree with Haider.  A review of the record indicates 
that Raley did not articulate to the circuit court the argument 
that the dismissal with prejudice of Count II of the original 
case was not a final judgment on the merits for res judicata 
purposes.  Because Raley raises this argument for the first 
time on appeal, we will not consider it.  Rule 5:25.  Thus, the 
dismissal with prejudice of Count II in the original case will 
be considered as a final judgment on the merits.  See Trustees 
v. Taylor & Parrish, Inc., 249 Va. 144, 154, 452 S.E.2d 847, 
852 (1995) (Where a party “did not object or assign error to 
[the circuit court’s] ruling, it . . . become[s] the law of the 
 
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case.”) (citation omitted).  Consequently, the circuit court 
properly considered the res judicata effect of the dismissal 
with prejudice in the original case.  Rule 1:6(a); see Virginia 
Concrete Co. v. Board of Supervisors, 197 Va. 821, 825, 91 
S.E.2d 415, 418 (1956) (“[A]s a general proposition[,] a 
judgment of dismissal which expressly provides that it is ‘with 
prejudice’ operates as res judicata and is as conclusive of the 
rights of the parties as if the suit had been prosecuted to a 
final disposition adverse to the plaintiff.”) (citations 
omitted).  Accord Shutler v. Augusta Health Care for Women, 
P.L.C., 272 Va. 87, 92-93, 630 S.E.2d 313, 315 (2006); Reed v. 
Liverman, 250 Va. 97, 100, 458 S.E.2d 446, 447 (1995). 
Alternatively, Raley claims that, in Count I and the 
garnishment proceeding, he asserts a claim belonging to MISI 
against Haider and such a claim would not be barred by res 
judicata because there is no identity of parties.  He also 
asserts that res judicata would not bar any claims against MIPI 
and Wise in that neither entity was involved in the previous 
litigation. 
In the Commonwealth, Rule 1:6 governs the doctrine of res 
judicata. 
A party whose claim for relief arising from 
identified conduct, a transaction, or an occurrence, 
is decided on the merits by a final judgment, shall 
be forever barred from prosecuting any second or 
subsequent civil action against the same opposing 
 
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party or parties on any claim or cause of action that 
arises from that same conduct, transaction or 
occurrence, whether or not the legal theory or rights 
asserted in the second or subsequent action were 
raised in the prior lawsuit . . . . 
Rule 1:6(a).  Furthermore, “[t]he law of privity as heretofore 
articulated in case law in the Commonwealth of Virginia is 
unaffected by this Rule and remains intact.  For purposes of 
this Rule, party or parties shall include all named parties and 
those in privity.”  Rule 1:6(d). 
One of the fundamental prerequisites to the 
application of the doctrine of res judicata is that 
there must be an identity of parties between the 
present suit and the prior litigation asserted as a 
bar.  A party to the present suit, to be barred by 
the doctrine, must have been a party to the prior 
litigation, or represented by another so identified 
in interest with him that he represents the same 
legal right. 
Leeman v. Troutman Builds, Inc., 260 Va. 202, 206, 530 S.E.2d 
909, 911 (2000) (citation omitted). 
A garnishment action “effectively is a proceeding by the 
judgment debtor in the name of the judgment creditor against 
the garnishee.  The judgment creditor stands on no higher 
ground than the judgment debtor and can have no right greater 
than the judgment debtor possesses.”  Hartzell Fan, Inc. v. 
Waco, Inc., 256 Va. 294, 299, 505 S.E.2d 196, 200 (1998) 
(citations omitted).  The garnishment filed by Raley, and Count 
I of the complaint with which it was consolidated, is 
effectively a proceeding by MISI (the judgment debtor) in the 
 
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name of the judgment creditor (Raley) against Haider (the 
garnishee). 
In the garnishment action and Count I of the consolidated 
action, Raley steps into the shoes of MISI.  In effect, MISI is 
suing Haider.  See id.  In the original case, Raley was suing 
Haider.  Thus, the same parties are not in opposition in the 
original case and the consolidated action, and the defense of 
res judicata is not a bar to the garnishment and Count I claims 
against Haider.  See Gunter v. Martin, 281 Va. 642, 646, 708 
S.E.2d 875, 877 (2011) (“[T]he failure to establish any one 
element is fatal to the plea of res judicata.”) (citations 
omitted). 
Portions of Counts II through VIII in the consolidated 
action also allege claims by Raley against Haider, specifically 
that Haider unlawfully conveyed MISI’s assets to himself and 
others.  The “same opposing party or parties” are involved in 
Count II of the original case and Counts II through VIII of the 
consolidated action, to the extent these counts pertain to 
Haider.  See Rule 1:6(a). 
In Count II of the original case, which was dismissed with 
prejudice, Raley alleged that “Haider made distributions to 
himself, [thereby] depleting MISI of funds.”  The current 
Counts II through VIII that pertain to Haider arise from the 
same “conduct, transaction, or occurrence.”   Rule 1:6(a).  Res 
 
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judicata requires that the two actions involve the same 
definable factual transaction.  See Martin-Bangura v. 
Commonwealth Dep’t of Mental Health, 640 F.Supp.2d 729, 739 
(E.D. Va. 2009) (applying Virginia law and stating:  “The 
conduct, occurrence, or transaction complained of in the state 
grievance was plaintiff’s receipt of a . . . written notice and 
his subsequent termination from NVTC.  Likewise, the very same 
transaction, his termination from NVTC, underlies plaintiff’s 
federal Title VII claim at issue here.  As Rule 1:6 makes 
clear, plaintiff is precluded here from asserting any claims he 
had concerning his termination from NVTC.”). 
Thus, as concerns the actions by Raley against Haider 
individually, the same opposing parties involved in the 
original case are involved in Counts II through VIII of the 
consolidated action, and the claims arise from the same 
conduct, transaction, or occurrence.  See Rule 1:6(a).  It is 
the law of the case that Count II in the original case was 
adjudicated on the merits by a final judgment.  Therefore, the 
prerequisites to the application of the doctrine of res 
judicata are satisfied, and res judicata bars the relitigation 
of Counts II through VIII in the consolidated action against 
Haider individually.  The circuit court did not err in finding 
that the claims against Haider in Counts II through VIII were 
barred by res judicata. 
 
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Wise and MIPI were not parties in the original case.  Res 
judicata, therefore, may only apply as a bar to the claims 
against them if Wise and MIPI were in privity with Haider or 
MISI in the original case. 
“The touchstone of privity for purposes of res judicata is 
that a party’s interest is so identical with another that 
representation by one party is representation of the other’s 
legal right.”  State Water Control Bd. v. Smithfield Foods, 
Inc., 261 Va. 209, 214, 542 S.E.2d 766, 769 (2001) (citations 
omitted).  “It is merely a word used to say that the 
relationship between the one who is a party on the record and 
another is close enough to include that other within the res 
judicata.  Thus, privity centers on the closeness of the 
relationship in question.”  Weinberger v. Tucker, 510 F.3d 486, 
492-93 (4th Cir. 2007) (stating that under Fourth Circuit and 
Virginia decisions, the test for privity is the same) (citation 
omitted).  As such, “[t]here is no single fixed definition of 
privity for purposes of res judicata.  Whether privity exists 
is determined on a case by case examination of the relationship 
and interests of the parties.”  Smithfield Foods, 261 Va. at 
214, 542 S.E.2d at 769; see also Columbia Gas Transmission, LLC  
v. David N. Martin Revocable Trust, 833 F.Supp.2d 552, 558 
(E.D. Va. 2011) (“Virginia courts typically find privity when 
the parties share a contractual relationship, owe some kind of 
 
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legal duty to each other, or have another legal relationship 
such as co-ownership.”). 
Although Haider is associated with them, Wise and MIPI are 
separate legal entities from Haider, which indicates that their 
interests may not be the same.  See Code § 13.1-1000 et seq.; 
Gowin v. Granite Depot, LLC, 272 Va. 246, 254, 634 S.E.2d 714, 
719 (2006) (“A limited liability company is an entity that, 
like a corporation, shields its members from personal liability 
based on actions of the entity.”); Cheatle v. Rudd’s Swimming 
Pool Supply Co., 234 Va. 207, 212, 360 S.E.2d 828, 831 (1987) 
(“The proposition is elementary that a corporation is a legal 
entity entirely separate and distinct from the shareholders or 
members who compose it.  This immunity of stockholders is a 
basic provision of statutory and common law and supports a 
vital economic policy underlying the whole corporate concept.”) 
(citation omitted). 
In the present case, MIPI and Wise do not share an 
identity of interest with Haider or MISI.  In the first suit, 
Haider was accused of wrongfully distributing MISI’s assets to 
himself.  Wise and MIPI have no contractual duty or legal 
interest in this accusation.  They only have an interest in the 
assets of MISI that they are alleged to possess.  Moreover, 
neither MISI nor Haider represented Wise’s and MIPI’s interests 
in the first suit.  Whether the circuit court found in MISI’s 
 
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or Haider’s or Raley’s favor, the result was of no consequence 
to Wise and MIPI because no effect of the judgment would reach 
them; none of their rights or concerns were adjudicated. 
Because MISI and Haider did not represent MIPI’s and 
Wise’s interests in the first suit, MIPI and Wise were not in 
privity with MISI or Haider.  See Smithfield Foods, 261 Va. at 
216, 542 S.E.2d at 770.  Without MIPI and Wise being privies of 
MISI and Haider or an opposing party of Raley in the first 
suit, the same opposing parties requirement of Rule 1:6(a) is 
not met.  Res judicata does not bar Raley’s claims against Wise 
and MIPI.  See Gunter, 281 Va. at 646, 708 S.E.2d at 877. 
Conclusion 
The circuit court erred in holding that res judicata bars 
Raley’s claims against MIPI and Wise and Raley’s Count I and 
garnishment claims against Haider.  The circuit court, however, 
did not err in holding that res judicata bars the claims 
brought against Haider in Counts II through VIII of the May 24, 
2012 complaint. 
Accordingly, for the reasons stated above, we will affirm 
the judgment of the circuit court in part, reverse in part, and 
remand this case for further proceedings consistent with this 
opinion. 
Affirmed in part, 
reversed in part, 
and remanded.