PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ORCA YACHTS, L.L.C. 

Plaintiff-Appellant,

v.  No. 99-1878

MOLLICAM, INCORPORATED,

Defendant-Appellee. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Norfolk.

Henry C. Morgan, Jr., District Judge.

(CA-99-465-2)

Argued: April 5, 2000

Decided: April 22, 2002

Before WIDENER and TRAXLER, Circuit Judges, and

Joseph R. GOODWIN, United States District Judge for the

Southern District of West Virginia, sitting by designation.

Appeal dismissed by published opinion. Judge Widener wrote the

opinion, in which Judge Traxler and Judge Goodwin concurred. 

COUNSEL

ARGUED: Lawrence Hoyt Glanzer, MARCUS, SANTORO,

KOZAK & MELVIN, Portsmouth, Virginia, for Appellant. Eric Wagner Schwartz, MAYS & VALENTINE, L.L.P., Norfolk, Virginia, for

Appellee. ON BRIEF: Richard S. Sperbeck, HUFF, POOLE &

MAHONEY, P.C., Virginia Beach, Virginia, for Appellant. George
H. Bowles, MAYS & VALENTINE, L.L.P., Norfolk, Virginia, for

Appellee.

OPINION

WIDENER, Circuit Judge: 

Plaintiff Orca Yachts is a North Carolina corporation, qualified to

do business in the Commonwealth of Virginia with its principal place

of business in Chesapeake, Virginia. Orca manufactures long range

offshore sportfishing boats. Defendant Mollicam, Inc. is a Florida corporation with its principal place of business in Merritt Island, Florida.

Mollicam manufactures plugs for fiberglass items, including hull and

deck plugs for boats. 

I.

In April 1998, Orca contracted with Mollicam to purchase hull and

deck plugs for Orca’s 31-foot model boat and a hull plug for its 37-

foot model boat. Orca claimed shipment of defective plugs, and on

April 1, 1999, Orca filed a suit on a breach of contract claim against

Mollicam in the United States District Court for the Eastern District

of Virginia. The complaint alleged that Mollicam breached its contract with Orca by shipping defective products to Orca in Virginia and

by failing to timely deliver conforming products to Orca. 

On May 13, 1999, Mollicam filed a Fed. R. Civ. P. 12(b)(2) motion

to dismiss for lack of personal jurisdiction contending that Orca could

not establish that Mollicam had sufficient minimum contacts with

Virginia to assert personal jurisdiction. Orca’s response contended

that Mollicam intentionally engaged in business transactions with

Orca in Chesapeake, Virginia and thus established requisite contacts

for personal jurisdiction. 

On June 9, 1999, after a hearing on Mollicam’s motion to dismiss,

the district court concluded that Orca established that Mollicam had

contracted with Orca to provide services or things in Virginia under

Virginia’s long-arm statute, Va. Code. Ann. § 8.01-328.1. However,

2 ORCA YACHTS v. MOLLICAM, INC.
the district court decided that personal jurisdiction was lacking

because Orca failed to establish that Mollicam purposefully directed

its activities at Virginia and maintenance of the suit would offend traditional due process notions of fair play and substantial justice. As a

result, the district court dismissed Orca’s complaint without prejudice.

Orca appealed this decision on June 28, 1999. We dismiss this appeal.

Following the June 9, 1999 hearing in the Virginia federal district

court, Mollicam, on June 15, 1999, sued Orca in the Brevard County

Florida court to collect sums due from Orca. Orca removed that case

to the United States District Court for the Middle District of Florida,

Orlando Division. Mollicam, Inc. v. Orca Yachts, L.L.C., Civil Action

No.: 99-1020-CIV-ORL-22C. Orca also filed a counterclaim in the

Florida action for the same relief it sought in the suit it had filed in

the Virginia federal district court. 

On January 7, 2000, a Florida magistrate judge entered an order

directing Orca to show cause, in writing, by January 18, 2000, why

the court should not strike Orca’s answer and enter default against it

for its failure to prepare and file a case management report as required

by that court’s Local Rule 3.05(c)(2)(B). Orca failed to respond to

this order, and on January 20, 2000, the Florida district court found

Orca in default and entered an order striking Orca’s answer and affirmative defense and counterclaim. On February 17, 2000, that same

court granted judgment for Mollicam and entered judgment on February 18, 2000. 

Prior to oral argument, Mollicam filed a motion to dismiss the present appeal on the grounds that the underlying claim is barred by the

doctrine of res judicata and therefore moot following the action by

the Florida district court. Counsel for both parties briefed the merits

of this motion and argued its merits orally before presenting oral

argument on the underlying appeal. 

II.

Under res judicata principles, a prior judgment between the same

parties can preclude subsequent litigation on those matters actually

and necessarily resolved in the first adjudication. See In re Varat

Enters., Inc., 81 F.3d 1310, 1315 (4th Cir. 1996). The doctrine of res

ORCA YACHTS v. MOLLICAM, INC. 3
judicata encompasses two concepts: 1) claim preclusion and 2) issue

preclusion, or collateral estoppel. Varat, 81 F.3d at 1315 (citing Allen

v. McCurry, 449 U.S. 90, 94 (1980)). The rules of claim preclusion

provide that if the later litigation arises from the same cause of action

as the first, then the judgment in the prior action bars litigation "not

only of every matter actually adjudicated in the earlier case, but also

of every claim that might have been presented." Varat, 81 F.3d at

1315 (citing Nevada v. United States, 463 U.S. 110, 129-30 (1983)).

However, issue preclusion is more narrowly drawn and applies when

the later litigation arises from a different cause of action between the

same parties. Varat, 81 F.3d at 1315. Issue preclusion operates to bar

subsequent litigation of those legal and factual issues common to both

actions that were "actually and necessarily determined by a court of

competent jurisdiction in the first litigation." Varat, 81 F.3d at 1315

(quoting Montana v. United States, 440 U.S. 147, 153 (1979)). Thus,

while issue preclusion applies only when an issue has been actually

litigated, claim preclusion requires only a valid and final judgment.

Compare Restatement (Second) of Judgments § 27 (1980) (when issue

of fact or law is actually litigated the determination is conclusive in

subsequent action between the same parties) with § 17 of the same

Restatement (a valid final judgment is conclusive between the parties

and bars subsequent action on the claim). 

In this case, Orca argues that because its counterclaim was merely

stricken and not specifically dismissed under Fed. R. Civ. P. 41, the

counterclaim was not considered by the Florida district court, and

thus the default judgment cannot have a preclusive effect upon the

current appeal. Orca further argues that since its claims against Mollicam were not actually litigated in the Florida action, the default judgment does not bar the instant appeal on res judicata grounds and the

motion to dismiss should be denied. 

We do not agree. Even though the judgment in Florida was a

default judgment, the doctrine of res judicata remains applicable. See

Morris v. Jones, 329 U.S. 545, 550-51 (1947) ("‘A judgment of a

court having jurisdiction of the parties and of the subject matter operates as res judicata, in the absence of fraud or collusion, even if

obtained upon default.’" (quoting Riehle v. Margolies, 279 U.S. 218,

225 (1929))). 

4 ORCA YACHTS v. MOLLICAM, INC.
With respect to Orca’s counterclaim in the Florida action, we are

of opinion that the doctrine of res judicata operates as a bar to Orca’s

appeal before this court. We are not persuaded by Orca’s argument

that its counterclaim remained viable despite being stricken with

judgment entered for the plaintiff. Although Rule 41 Fed. R. Civ. P.

was not mentioned in the order, this was plainly an involuntary dismissal for violation of the rules or an order of the district court under

Fed. R. Civ. P. 41(b) and, as such, is an adjudication on the merits.

The striking of a plea or a counterclaim is generally an "unessential

prelude or accoutrement to a dismissal or default judgment" and a

default judgment has claim preclusion effect as to all claims or counterclaims in the proceeding. Wood v. Several Unknown Metrop.

Police Officers, 835 F.2d 340, 343-44 n.9 (D.C. Cir. 1987).* Thus,

the Florida court’s decision to strike Orca’s counterclaim and entry of

judgment in favor of Mollicam was effective to dismiss Orca’s counterclaim for purposes of Fed. R. Civ. P. 41. 

Under Fed. R. Civ. P. 41(b), unless otherwise specified by the

court, a dismissal other than one for lack of jurisdiction, for improper

venue, or for failure to join a party operates as an adjudication upon

the merits. See 18 Charles Alan Wright et al., Federal Practice and

Procedure § 4440, at 362 (1981). More specifically, Rule 41(c) states

that the "provisions of this rule apply to the dismissal of any counterclaim." Fed. R. Civ. P. 41(c). By striking the counterclaim, the Florida district court dismissed Orca’s counterclaim, and Orca’s failure to

appeal this judgment rendered the Florida district court’s action final.

As such, Orca can no longer maintain this appeal founded upon identical grounds as those in its Florida counterclaim because such an

action is barred by the doctrine of res judicata. See Restatement (Second) of Judgments § 23 (1980) (Where a defendant interposes a claim

as a counterclaim and a valid and final judgment is rendered against

him on the counterclaim, he cannot thereafter maintain an action on

the claim stated in the counterclaim). 

*We agree with the court’s statement in Wood that a default judgment

such as this has claim preclusive effect to all claims or counterclaims and

we too "decline to attribute significance to the phrasing of the order as

one striking the answers and counterclaims rather than striking the

answers and dismissing the counterclaims or simply entering a default

judgment straight away." Wood, 835 F.2d at 343-44 n.9. 

ORCA YACHTS v. MOLLICAM, INC. 5
Finally, the fact that Orca’s counterclaim was not actually litigated

in Florida does not affect our decision to grant Mollicam’s motion to

dismiss. As initially explained, while issue preclusion applies only

when an issue has been actually litigated, claim preclusion requires

only a valid and final judgment. In this case, the Florida court’s dismissal of Orca’s counterclaim was a final judgment. Accordingly, the

rules of claim preclusion preclude Orca from appealing the same

cause of action before this court. 

III.

Because the default judgment in Florida was a final adjudication of

both the claim for sums due brought by Mollicam, as well as Orca’s

counterclaim, Orca is barred by the doctrine of res judicata from proceeding with the current appeal. 

We express no opinion as to the correctness of the order of the Virginia federal district court appealed from in this case. 

Mollicam’s motion to dismiss this appeal as moot is accordingly

granted. See Southern Pac. Terminal Co. v. Interstate Commerce

Comm’n., 219 U.S. 498, 514 (1911).

APPEAL DISMISSED

6 ORCA YACHTS v. MOLLICAM, INC.