No. 95-537

IN THE SUPREME COURT OF THE STATE OF MONTANA

1996

MARILYN HOLLISTER,

Plaintiff and Appellant,

8::; fj I',' 'I>~"',

v. j"

JOHN FORSYTHE, a public officer,

and ROSEBUD COUNTY a Montana

Political Subdivision,

Defendants and Respondents.

APPEAL FROM: District Court of the Sixteenth Judicial District,

In and for the County of Rosebud,

The Honorable John C. McKeon, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

K.D. Peterson; Peterson & Schofield, Billings,

Montana

For Respondents:

K. Kent Koolen, Nancy Bennett; Moulton, Bellingham,

Longo & Mather, Billings, Montana

Steven J. Lehman; Crowley, Haughey, Hanson, Toole &

Dietrich, Billings, Montana

Submitted on Briefs: March 14, 1996

Filed:

Decided: June 17, 1996
Justice W. William Leaphart delivered the Opinion of the Court

Marilyn Hollister (Hollister) appeals from the Rosebud County,

Sixteenth Judicial District Court's dismissal of her 42 U.S.C. §

1983 claim against Rosebud County and John Forsythe (collectively

"Forsythe") . We affirm.

The sole issue before us is whether the District Court erred

in dismissing Hollister's 42 U.S.C. 5 1983 claim based on res

judicata.

BACKGROUND

The background facts of this case are presented in Hollister

v. Forsythe (1995), 270 Mont. 91, 92-93, 889 P.2d 1205, 1206.

Hollister initially filed a complaint for deprivation of rights in

the United States District Court for Montana. The United States

District Court granted Forsythe's motion for partial summary

judgment and dismissed Hollister's federal claims with prejudice.

She appealed the United States District Court's judgment. The

Ninth Circuit Court of Appeals affirmed in Hollister v. Forsythe

(9th Cir. 1994), 22 F.3d 950. She then filed a complaint for

wrongful discharge and other torts in Montana state district court.

Pursuant to Forsythe's motion to dismiss, the state district court

dismissed her suit based on the statute of limitations. We

reversed in Hollister, 889 P.2d 1205.

In Hollister, we held that Hollister's claims in state court

were not barred by the statute of limitations because:

under Montana's renewal statute, § 27-2-407, MCA, use of

the word "termination" refers to the ultimate termination

which occurs after final appellate action. Accordingly,

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the one-year period begins to run from the date that the

time for appeal expires or, in the event of an appeal,

from the date of the remittitur or judgment of the

appellate court.

Hollister, 889 P.2d at 1208. Because her state court complaint was

filed within one year of the Ninth Circuit's decision on appeal, it

was within the statutory period.

On remand, Montana's Sixteenth Judicial District Court

considered the remaining issues in Forsythe's motion to dismiss.

Under Rule 12(b) (6), M.R.Civ.P., Forsythe moved for dismissal for

failure to state a claim upon which relief can be granted.

Forsythe's motion to dismiss raised the following issues: Whether

Hollister's claims outside the Montana Wrongful Discharge from

Employment Act (WDFEA), §§ 39-2-901 through -915, MCA, were

preempted by WDFEA and, whether her 42 U.S.C. § 1983 claim was

barred by i-es judicata. The court dismissed all claims outside of

WDFEA and ordered the case to proceed only on Hollister's claim of

wrongful discharge under WDFEA. In the present appeal, we are

called upon to review the Sixteenth Judicial District Court's

holding that Hollister's claimunder 42 U.S.C. § 1983 was barred by

the Ninth Circuit's holding that Hollister had no property interest

in her job thus there could be no constitutional violation and no

claim under 42 U.S.C. § 1983. Hollister, 22 F.3d 950.

In the mean time, in federal court, Hollister filed a Rule 60,

Fed.R.Civ.P., Motion for Relief from Judgment based on our decision

in Boreen v. Christensen (1994), 267 Mont. 405, 884 P.2d 761. In

Boreen, we disagreed with the Ninth Circuit's reasoning regarding

Hollister's potential property right in her employment with Rosebud

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County. Boreen, 884 P.2d at 769; see Hollister, 22 F.3d at 953.

The federal district court denied her motion and the matter is

currently pending before the Ninth Circuit Court of Appeals.

STANDARD OF REVIEW

A complaint should not be dismissed for failure to state a

claim unless it appears beyond doubt that the plaintiff can prove

no set of facts in support of her claim which would entitle her to

relief. Lockwood v. W.R. Grace & Co. (1995), 272 Mont. 202, 207,

900 P.2d 314, 317.

A motion to dismiss under Rule 12(b) (6), M.R.Civ.P., has

the effect of admitting all well-pleaded allegations in

the complaint. In considering the motion, the complaint

construed in

cfaintiff

the light most favorable to the

and all allegations of fact contained therein

are taken'as true.

Lockwood, 900 P.2d at 317 (quoting Boreen, 884 P.2d at 762). The

determination that a complaint fails to state a claim upon which

relief can be granted is a conclusion of law. We review a district

court's conclusions of law to determine whether the court's

interpretation of the law is correct. Lockwood, 900 P.2d at 317.

DISCUSSION

Did the District Court err in dismissing Hollister's 42

U.S.C. § 1983 claim based on res judicata?

The doctrine of res judicata prevents a party from relitigating a matter that the party has already had an opportunity

to litigate. Loney v. Milodragovich, Dale & Dye, P.C. (1995), 273

Mont. 506, 510, 905 P.2d 158, 161; Greenwood v. Steve Nelson

Trucking, Inc. (1995), 270 Mont. 216, 219, 890 P.2d 765, 767. Res

judicata is based on the public policy that there must be some end

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to litigation. Lonev, 905 P.2d at 161; Wellman v. Wellman (1983),

205 Mont. 504, 508, 668 P.2d 1060, 1062. The doctrine of res

judicata states that a final judgment on the merits by a court of

competent jurisdiction is conclusive as to causes of action or

issues thereby litigated, as to the parties and their privies, in

all other actions in the same or any other judicial tribunal of

concurrent jurisdiction. State ex rel. Harlem Irrigation Dist. v.

Montana Seventeenth Judicial Dist. Court (1995), 271 Mont. 129,

132, 894 P.2d 943, 944-45; Meagher County Water Dist. v. Walter

(1976), 169 Mont. 358, 361, 547 P.2d 850, 852.

A claim is res judicata when four criteria are met: the

parties or their privies are the same; the subject matter of the

claim is the same; the issues are the same and relate to the same

subject matter; and the capacities of the persons are the same in

reference to the subject matter and the issues. Lonev, 905 P.2d at

161; In re Marriage of Blair (1995), 271 Mont. 196, 203, 894 P.2d

958, 963. The most important of the four criteria for res judicata

is the identity of issues. Marriage of Blair, 894 P.2d at 963; In

re Marriage of Harris (1980), 189 Mont. 509, 513, 616 P.2d 1099,

1101. Additionally, the doctrine of res judicata bars not only

issues which were previously litigated, but also issues which could

have been litigated in the prior proceeding. Lonev, 905 P.2d at

161; SE Harlem, 894 P.2d at 946.

Hollister concedes that the first and fourth criteria of res

judicata are met. However, she argues that the second and third

criteria are not met. She alleges that the issue is not the same

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because the federal courts only addressed the threshold question of

whether Hollister had a property interest in her county employment.

She alleges that in light of our decision in Boreen, 884 P.2d 761,

the federal courts erred in concluding that, under Montana law,

Hollister did not have a property interest in her employment.

Because the court did not proceed beyond that threshold question,

Hollister also argues that her claims have not been judged on their

merits.

Forsythe counters that the issue in Hollister's state court

action is identical to the issue previously raised and decided by

the federal court. We agree. In federal court, Hollister alleged

that Forsythe's termination of her employment violated her

constitutional rights to substantive and procedural due process.

In state court, Hollister realleges the same claim and seeks the

same remedy. Forsythe argues that Boreen does not alter the

fundamental issue in Hollister's state court 5 1983 action, that

is, whether there is a property interest in employment. Boreen,

884 P.2d at 762-63. Moreover, even if the federal court

erroneously determined that there is no property interest in

employment under Montana law, i-es judicata still applies. Mills v.

Lincoln County (1993), 262 Mont. 283, 285, 864 P.2d 1265, 1267;

Brennan v. Jones (1935), 101 Mont. 550, 565, 55 P.2d 697, 701.

Hollister argues that the subject matter presented to the

courts differs because the instant case involves her civil rights,

constitutional rights and tort claims, not whether she has a

property interest in her employment. However, the subject matter

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in both actions is the termination of Hollister's employment as a

secretary for Rosebud County. In Harlem, we held that the same

subject matter that gave rise to the initial complaint was also the

basis for the subsequent causes of action. Harlem, 894 P.2d at

945. The same is true here, the underlying subject matter in both

federal and state forums is Hollister's termination from

employment.

Beyond the criteria of res judicata, Hollister argues that she

has a right to have the merits of her case heard and that in

granting summary judgment to Forsythe, the United States District

Court did not decide the merits of her civil rights, constitutional

rights and tort claims. In federal court, Hollister alleged

federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 42

U.S.C. § 1983. In determining the threshold issue of federal

jurisdiction, the federal court first examined Hollister's 5 1983

claim. The federal court determined that, to bring a § 1983 claim

based on a violation of procedural due process, Hollister had to

first establish that a property interest protected by the

Fourteenth Amendment was affected by Forsythe's termination

decision. The federal court held that Hollister had not

established a property interest in her employment, thus the court

granted summary judgment to Forsythe on the issue of Hollister's

§ 1983 claim. Having found no federal question jurisdiction, the

federal court dismissed Hollister's federal claims with prejudice

and dismissed her pendant state claims without prejudice stating

"the parties may simply resubmit the remaining issues to the

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appropriate state court." Hollister contends that because the

federal court found, at the threshold, that she could not establish

a property interest in her employment, her claims have not been

decided on their merits.

In Smith v. Schweigert (1990), 241Mont. 54, 59, 785 P.2d 195,

198, we held that summary judgment is a decision on the merits

because it is a conclusive determination of a legal issue presented

by the facts of a case. See Harlem, 894 P.2d at 945. In Mills, we

reaffirmed this proposition that summary judgment is, indeed, a

final judgment on the merits and that the res judicata bar is,

therefore, applicable. 864 P.2d at 1267.

In Mills, the United States District Court granted Lincoln

County's motion for summary judgment based on immunity under § 2-9-

111, MCA. Soon thereafter, the legislature significantly amended

§ 2-9-111, MCA, such that the county's immunity defense would be

negated. Mills did not file a motion for reconsideration in

federal court, instead she filed a complaint against the county in

state district court. The case came to trial and the jury found

that the county was not negligent. Sua sponte, the district court

ordered a new trial. On appeal, we held that Mills' state court

action was barred by res judicata.

The point to be noted is that, right or wrong, the

federal court entered summary judgment against Mills;

that judgment became final by Mills' failure to pursue

the available remedy in federal court; and she is now

bound by that judgment.

Mills, 864 P.2d at 1267 (emphasis added).

Throughout her appeal, Hollister argues that the federal

a
court's holding that she has no property interest in employment is

wrong. She bases her contention on our decision in Boreen, 884

P.2d 761. In Boreen, we discussed Hollister, 22 F.3d 950, in which

the Ninth Circuit concluded that Montana's Wrongful Discharge from

Employment Act does not create, in at-will employees, a property

interest in their jobs. Hollister, 22 F.3d at 953. We stated "we

simply do not agree with the court's application of our prior case

law to the facts in Hollister." Boreen, 884 P.2d at 769. Despite

our disagreement with the Ninth Circuit's conclusion regarding

Hollister's potential property interest in her employment, we are

in no position to change the Ninth Circuit's decision. As

previously stated in Mills, Hollister is bound by the judgment,

right or wrong, of the federal court in which she brought her

claim. Mills, 864 P.2d at 1267. If parties are allowed to

commence new lawsuits on litigated claims and issues every time a

subsequent change in the law might, arguably, alter the result of

the first litigation, it is safe to say that there will be few

"final judgments" ever entered. Mills , 864 P.2d at 1267-68.

Hollister, in federal district court, litigated the question

of whether she had a property interest sufficient to sustain a

§ 1983 claim. The federal district court ruled that she did not,

and that decision was affirmed by~the Ninth Circuit. Hollister, 22

F.3d 950. Although, in Boreen, we subsequently disagreed with the

conclusions reached by the federal courts, the doctrine of res

judicata bars us from considering this litigated claim. Mills, 864

P.2d at 1267. As is her right, Hollister has sought Rule 60,

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Fed.R.Civ.P., relief in federal court in light of our decision in

Boreen. That matter is pending appeal to the Ninth Circuit. The

outcome of that appeal, however, will not affect the application of

the x-es judicata principles which we now find controlling of the

state court claim under 5 1983.

In the instant case, as in Mills, we hold that the federal

court summary judgment was a final judgment on the merits and that

x-es judicata bars Hollister's state court action under § 1983.

Affirmed.

We concur:

c

Justices

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Justice Terry N. Trieweiler dissenting.

I dissent from the majority opinion based on my conclusion

that the interests of fundamental fairness preclude the application

of the judicially-created doctrine of res judicata under the

circumstances in this case.

This case is distinguishable from Millsv.LincolnCounty (1993), 262

Mont. 283, 864 P.2d 1265, which is the principle authority relied

on by the majority. In Mills, the Federal District Court dismissed

the plaintiff's complaint by summary judgment based on this Court's

decisions regarding the liability of local governments. After that

dismissal, the Legislature clarified its intent and in effect

changed the law. We held that a subsequent change in the law did

not preclude the application of resjudicata to a later action filed in

state district court. Mills, 262 Mont. at 286, 864 P.2d at 1267.

In this case, there was no change in the law subsequent to the

Federal District Court's dismissal of Marilyn Hollister's claim

made pursuant to 42 U.S.C. 5 1983. The Federal District Court and

the Ninth Circuit Court of Appeals simply misapplied Montana law

and arrived at an incorrect conclusion about the merits of her

claim. SeeBoreenv.Christensen (19941, 267 Mont. 405, 419, 884 P.2d 761,

769. Hollister's civil complaint was dismissed by those courts

based on the conclusion that she had no property interest in her

employment with the County. Whether she had a property interest

was properly an issue of state law. However, that issue was not

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certified to this Court for determination. Instead, those courts

misapplied our prior decisions and simply arrived at an incorrect

conclusion.

Under these circumstances, absent reconsideration of its

decision by the Ninth Circuit Court of Appeals, Hollister will

never have an opportunity to present the true merits of her civil

rights claim. To avoid such a substantial injustice by blind

adherence to technical principles, I would follow the rationale of

the Federal District Court in Boucherv. Dramstad (D. Mont. 1981), 522

F. Supp. 604. In that case, that court held that:

[Rlesjudicata is a principle of public policy to be applied

so as to render rather than deny justice. The rule is

intended to serve the aims of fairness and efficient

judicial administration and need not be applied

mechanically where those ends would not be served.

Therefore, application of the rule must be rejected when

the application would result in manifest unfairness.

This Circuit has acknowledged that the doctrine must give

way to the overriding concern of simple justice.

. . .

. . . The decision by the Montana Supreme Court

regarding the unique question of law with which it was

presented resulted in the plaintiff not having an

opportunity to present at trial the merits of his action.

To deny the plaintiff the opportunity to present his

constitutional claims in the present § 1983 action would

result in the plaintiff never having had the opportunity

to have the events which transpired at the time of his

injury evaluated by a court of law. This court concludes

that the interests of justice mandate that the plaintiff

be given that opportunity. . In the interests of

fundamental fairness and simple justice this court

concludes that the judicially created doctrine of yes

judicata should not be mechanically applied to the present

situation but must be prudently applied so as not to

12
defeat those same principles upon which the doctrine is

founded.

Boucher , 522 F. Supp. at 607, 608 (footnotes omitted).

Based on the cited rationale, the Federal District Court

allowed Ronald S. Boucher to proceed in Federal District Court with

a claim based on 42 U.S.C. § 1983, even though it was based on

facts identical to those involved in a previously dismissed state

negligence action. The Federal District Court arrived at that

result because the state court dismissal involved a procedural

issue of first impression which the plaintiff could not have

anticipated and thereby avoided. Boucher , 522 F. Supp. at 608.

In Siate ex rel. Harlem Irrigation District v. District Court ( 19 9 5 ) , 2 7 1 Mont .

129, 133, 894 P.2d 943, 945, we declined to apply the manifest

unfairness principle from Boucher to the facts in that case.

However, we did not reject the concept under all circumstances.

I conclude that the circumstances in this case call for

application of the "manifest unfairness" principle and on that

basis decline to apply judicially-created principles of resjudicata to

bar Hollister's claim.

In this case, Hollister is out of court, through no fault of

her own, based on a misapplication of the law in federal court. To

deny her the opportunity to present her claim would mean that the

facts she alleged would never be examined by a court of law in the

context of her constitutional claims. Under these circumstances,

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the majority decision does not "serve the aims of fairness and

efficient judicial administrationg' but instead "mechanically"

applies an inappropriate judicial formula. Boucher, 522 F. Supp.

at 607.

For these reasons I dissent from the majority opinion.

Judice

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