Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-19-02146/USCOURTS-ca7-19-02146-0/pdf.json

Parties Involved:
Rembrandt Enterprises, Inc.
Appellee
Rexing Quality Eggs
Appellant

Document Text:

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 19-2146 

REXING QUALITY EGGS, 

Plaintiff-Appellant, 

v.

REMBRANDT ENTERPRISES, INC., 

Defendant-Appellee. 

____________________ 

Appeal from the United States District Court for the 

Southern District of Indiana, Evansville Division. 

No. 3:19-cv-00031 — Jane Magnus-Stinson, Chief Judge. 

____________________ 

ARGUED DECEMBER 3, 2019 — DECIDED MARCH 26, 2020 

____________________ 

Before WOOD, Chief Judge, and HAMILTON and SCUDDER,

Circuit Judges. 

WOOD, Chief Judge. This case is the second to arise out of 

an ill-fated relationship between Rexing Quality Eggs and 

Rembrandt Enterprises, Inc. The first case addressed various 

claims arising under a contract that the two parties formed at 

the outset of their business dealings. Although this case arises 

out of the same transaction, this time Rexing, the plaintiff, has 

raised tort claims. The question on appeal is whether its effort 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
2 No. 19-2146 

to bring a new action is consistent with Indiana’s prohibition 

on claim splitting, under which a plaintiff is forbidden to 

bring a case presenting claims that arise out of the same transaction or events that underlie claims brought in another lawsuit. We hold that the claim-splitting ban applies here, and so 

we affirm the district court’s judgment. 

I 

Rexing and Rembrandt entered into a contract under 

which Rembrandt, a producer of eggs, promised to supply 

Rexing, a distributor, with 3,240,000 cage-free eggs every 

week for a year. Eight months after the agreement took effect, 

Rexing repudiated it, claiming that Rembrandt had breached 

its obligations by failing to provide eggs that met the quality 

standards specified in the agreement. Rexing refused to accept any more loads of eggs. In the aftermath, Rexing sued 

Rembrandt, seeking a declaration that it was excused from accepting any more eggs, as well as incidental and consequential damages for alleged breaches of warranty in the purchase 

agreement. Rexing Quality Eggs v. Rembrandt Enterprises, Inc., 

360 F. Supp. 3d 817 (S.D. Ind. 2018) (Rexing I). Rexing sought 

$67,261.50 in general damages, $60,204.84 in lost profits, and 

$997,650 in start-up costs. 

Rembrandt counterclaimed, seeking damages for breach 

of contract. After discovery, both parties moved for summary 

judgment. The trial court determined that Rexing had unilaterally terminated the contract and that the breach was not excused. At the same time, it ruled that Rembrandt was not entitled to summary judgment on the question whether it was 

entitled to damages, and it allowed the case to move forward 

to trial on that issue. The district court held a trial in November 2019; it resulted in a jury verdict in Rembrandt’s favor and 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
No. 19-2146 3

an award of $1,522,302.61 in damages against Rexing. Rexing 

filed a timely notice of appeal, but on January 2, 2020, it voluntarily dismissed the appeal pursuant to Federal Rule of Appellate Procedure 42(b). It appears that some post-verdict 

wrangling over attorney’s fees and costs is still ongoing. 

After its partial loss on summary judgment but before the 

trial in Rexing I, Rexing brought this action (Rexing II) in state 

court, one month after the district court ordered summary 

judgment in the first case. This time, Rexing sued Rembrandt 

for the torts of conversion and deception. Rexing claimed that 

Rembrandt had refused to return reusable shipping materials, 

including plastic flats, dividers, and pallets, collectively called 

the “EggsCargoSystem.” Rexing had provided the EggsCargoSystem to Rembrandt to use in loading eggs for Rexing to 

pick up. The original contract called for Rexing to provide 

Rembrandt with the materials, but it did not require Rembrandt to return the EggsCargoSystem at the termination of 

the agreement. Nonetheless, Rexing made three demands that 

Rembrandt return the EggsCargoSystem. Rembrandt returned some, but not all, of the materials in November 2018. 

In Rexing I, Rexing had sought the value of the EggsCargoSystem as part of the start-up costs that it alleged it incurred in 

reliance on the original agreement with Rembrandt. Now, in 

Rexing II, Rexing seeks damages for the unreturned materials, 

as well as for the loss of the use of the EggsCargoSystem during the time that Rembrandt allegedly unlawfully possessed 

it. 

Taking advantage of the fact that the parties were of diverse citizenship (Rembrandt is an Iowa corporation with its 

principal place of business in that state, and Rexing is an Indiana partnership whose only two partners are both citizens 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
4 No. 19-2146 

of Indiana), and the amount in controversy easily exceeded 

$75,000, Rembrandt removed Rexing II to federal court and 

moved to dismiss the action. 28 U.S.C. §§ 1332(a)(1) & (c), 

1441(b). It argued that the claims in Rexing II were barred by 

the claim-preclusion branch of res judicata in light of the district court’s grant of partial summary judgment in Rexing I, 

and it contended that Rexing had improperly split its claims 

between the two cases. 

The district court granted Rembrandt’s motion to dismiss, 

ruling that, while the new case was not barred by claim preclusion, Rexing had impermissibly split its claims. Under Indiana’s doctrine prohibiting claim splitting, a plaintiff cannot 

bring a new lawsuit based upon the same transaction or occurrence that underlies claims brought in another lawsuit. Because Rexing I and Rexing II both centered around the same 

controversy, the district court determined that Rexing had impermissibly split its claim and dismissed the case. Rexing appeals. 

II 

Rexing offers three arguments why the rule against claim 

splitting should not apply to this case. First, it argues that the 

district court applied the wrong test under Indiana law for establishing claim splitting, and that it would have prevailed 

under the proper test. Second, it argues that claim splitting 

cannot prevent litigation of facts that were unknown at the 

time the original case was filed. Finally, it argues that the rule 

against claim splitting does not apply to continuing torts, and 

that conversion is a continuing tort under Indiana law. Each 

of these arguments fails, as discussed below. 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
No. 19-2146 5

A 

Before addressing Rembrandt’s arguments, we need to 

say a word about the law that applies to them. Rexing’s position is a bit hard to follow, but it appears to argue that Indiana 

law applies because this is a substantive matter and that the 

district court deviated from Indiana’s rules; it then expends 

considerable time arguing that the district court erroneously 

relied on Telamon Corp. v. Charter Oak First Ins. Co., 2016 WL 

67297 (S.D. Ind. 2016), aff’d, 850 F.3d 866 (7th Cir. 2017), when 

it resolved this issue. Rembrandt responds first that there is 

no material difference between Indiana law and federal law, 

and that it wins either way. 

In fact, the district court approached this issue in the 

appropriate way. It first recognized that the law on claimsplitting is part of the law of res judicata. See Palka v. City of 

Chicago, 662 F.3d 428, 437 (7th Cir. 2011); Alvear-Velez v. 

Mukasey, 540 F.3d 672, 678 (7th Cir. 2008). It then noted that 

when a federal court is considering the effect of an earlier 

ruling in a case within its diversity jurisdiction, as Rexing I 

was, for purposes of claim preclusion “federal common law 

governs the ... effect of a dismissal by a federal court sitting 

in diversity.” Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 

497, 508 (2001). Nonetheless, the Supreme Court continued, 

the content of the federally prescribed rule should be taken 

from “the law that would be applied by state courts in the 

State in which the federal diversity court sits.” Id. Like the 

district court, we see no reason why this approach should not 

apply with equal force to the problem of claim-splitting. We 

therefore hold that the content of the law governing the effect 

of Rexing I comes from Indiana law, which is incorporated as 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
6 No. 19-2146 

the applicable federal common law. Our references below to 

Indiana law should be understood in this light. 

The rule against claim splitting prohibits a plaintiff from 

bringing a new case raising issues arising out of the same 

transaction or occurrence as an earlier case, when those issues 

could have been raised in the first litigation. Indiana law has 

long recognized this prohibition. See MicroVote Gen. Corp. v. 

Indiana Election Comm’n, 924 N.E.2d 184, 192 (Ind. Ct. App. 

2010) (“[A] party is not allowed to split a cause of action, pursuing it in a piecemeal fashion and subjecting a defendant to 

needless multiple suits.”); Quimby v. Becovic Mgmt. Grp., Inc., 

946 N.E.2d 30, 34 n.4 (Ind. Ct. App. 2011) (“[M]ultiple legal 

theories supporting relief on account of one transaction must 

be litigated at one go.”) (quoting Wabash Valley Power Ass’n, 

Inc. v. Rural Electrification Admin., 903 F.2d 445, 455 (7th Cir. 

1990)). 

The district court here applied a two-part test drawn from 

Telamon. In that case, another judge from the same district 

summarized the governing law as follows: a court should find 

that a plaintiff split her claims when “(1) the second claim is 

based on the same transaction or occurrence as the first claim 

and there is (2) an identity of parties or their privies.” 2016 

WL 67297, at *2. (Although it was not clear from the district 

court’s citations whether it was looking to federal law or Indiana law, on appeal we explicitly recognized that the Semtek 

approach governs. See Telamon, 850 F.3d at 872–73.) The court 

in Rexing II determined that Rexing had merely repackaged 

its failed attempt to sue Rembrandt for breach of contract as a 

tort case, and that the rule against claim splitting barred the 

second action.

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
No. 19-2146 7

Though acknowledging that Indiana law prohibits claim 

splitting, Rexing argues that the district court applied the 

wrong test for establishing whether claim splitting had occurred. Rexing points to Indiana cases that have held that “the 

test for making [the claim-splitting] determination is whether 

identical evidence will support the issues involved in both actions.” MicroVote, 924 N.E.2d at 192. Referring to this approach as the “identical evidence test,” Rexing argues that in 

Indiana, the rule against claim splitting applies only when 

there is no difference between the evidence needed to support 

the claims in each of the two actions. Because the elements of 

a claim for breach of contract and a claim for deception or conversion are supported by different facts, Rexing reasons, different evidence is required to substantiate each claim and thus 

it did not split its claims across the two cases. 

Although Indiana courts do sometimes use the term 

“identical evidence,” Rexing overstates the significance of 

those words. The rule against claim splitting does not apply 

exclusively to cases in which the second claim can be supported only by exactly the same evidence that supported the 

first. The Indiana cases on point show that the “identical evidence” test requires only that “the same general evidence 

would be used to adjudicate all of [the] claims.” Hilliard v. Jacobs, 957 N.E.2d 1043, 1047 (Ind. Ct. App. 2011). 

There is no meaningful difference between the “identical 

evidence” test, so understood, and the test that the district 

court applied. We have held as much in earlier cases applying 

Indiana’s identical-evidence test. Wabash Valley, 903 F.2d at 

456 (observing that identical evidence is “another way of asking whether the two suits deal with a common occurrence”); 

Atkins v. Hancock Cnty. Sheriff’s Merit Bd., 910 F.2d 403, 405 (7th 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
8 No. 19-2146 

Cir. 1990) (“Understood literally, [the identical-evidence] approach would confine a plea of res judicata to cases in which 

the claim in plaintiff’s second suit was identical to the claim 

in his first, and would invite piecemeal litigation with a 

vengeance. We have not thought that Indiana intended to confine res judicata so narrowly[.]”). Although the Indiana Supreme Court has not ruled on this issue directly, it has favorably cited our cases applying the identical-evidence rule. See, 

e.g., Erie Ins. Co. v. George, 681 N.E.2d 183, 190 (Ind. 1997) (citing Wabash Valley, 903 F.2d at 455). Thus, the district court 

properly applied Indiana’s law concerning claim splitting, 

and Rexing’s argument to the contrary fails. 

B 

Rexing also urges that the bar on claim splitting does not 

apply to this case because the claim in Rexing II arises from 

events that occurred after it filed Rexing I. Because Rexing was 

unaware that Rembrandt would not return the EggsCargoSystem at the time it filed Rexing I, it argues, the rule against 

claim splitting does not apply. 

As the district court held, Rexing has not shown that material unknown facts were later revealed. Before initiating 

Rexing I, Rexing had already formally demanded the return 

of the EggsCargoSystem. It again demanded that Rembrandt 

return the System the day after filing Rexing I. Additionally, 

in its complaint in Rexing I, Rexing sought the recovery of the 

cost of the EggsCargoSystem. The conclusion is irresistible 

that Rexing knew at the time it filed the first case that the custody or ownership of the EggsCargoSystem was part of the 

dispute between the parties; it thus should have raised anything it had to say about that claim at the time. No material 

facts that were unknown at the time Rexing filed Rexing I later 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
No. 19-2146 9

came to light. Rexing cannot evade the application of the rule 

against claim splitting by arguing that it could not have raised 

its arguments about the System at the time it filed Rexing I 

because the claim was not ripe or the facts were unknown. 

C 

Finally, Rexing argues that an exception to the rule against 

claim splitting should apply to cases of conversion. Pointing 

to the American Law Institute’s Restatement (Second) of 

Judgments, it argues that “continuing or concurrent 

wrong[s]” are exempt and that the tort of conversion is such 

a wrong. RESTATEMENT (SECOND) OF JUDGMENTS § 26(1)(e) (ALI 

1982); see also Van Bibber v. Norris, 404 N.E.2d 1365, 1380 (Ind. 

Ct. App. 1980) (“Conversion is a continuing tort, lasting as 

long as the person entitled to the use and possession of his 

property is deprived of it.”). We are also unpersuaded by this 

argument. 

Rexing has not directed our attention to any case law 

showing that Indiana has adopted Section 26 of the Restatement. But even if we were to overlook this serious deficit, it 

would not help Rexing. Section 26(1)(e) applies only to situations in which a harm cannot be remedied at one go. The Restatement gives nuisance as an example of such a continuing 

tort. There, a defendant’s activity on her own land causes ongoing harm to the plaintiff in the use of her land. In such cases, 

the plaintiff may be able to sue repeatedly to remedy the continuing harm as it accrues. Even in such a case, however, “the 

plaintiff, to avoid splitting, must claim all damages suffered 

[up] to the time of the suit.” RESTATEMENT (SECOND) OF 

JUDGMENTS § 26 cmt. h. 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10
10 No. 19-2146 

Conversion is not a continuing tort within the meaning of 

Section 26(1)(e). Even viewing the facts in the light most favorable to Rexing, Rembrandt unlawfully appropriated the 

EggsCargoSystem only one time. Rexing knew that Rembrandt remained in possession of the System at the time it 

filed Rexing I; indeed, it had already demanded that the System be returned to it. The fact that Rembrandt continued to 

refuse to return the System does not render the conversion a 

“continuous” tort in the sense intended by the Restatement 

(or in any other sense we normally see). Indiana courts have 

dismissed conversion claims on claim-splitting grounds, 

demonstrating that Indiana law does not recognize the rule 

that Rexing advocates. Hilliard, 957 N.E.2d at 1048. There is no 

continuing tort exception to the rule against claim splitting in 

cases of conversion. 

III 

Despite Rexing’s best efforts to paint these proceedings in 

a different light, we agree with the district court that they 

were logically part of Rexing I and that the attempt to rehash 

them in Rexing II was an impermissible effort at claim splitting. We therefore AFFIRM the judgment of the district court. 

Case: 19-2146 Document: 31 Filed: 03/26/2020 Pages: 10