UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

KRISTINA DRAKE, JOSEPH BORUCKI,

JOSHUA LEISNER, and AUSTIN LYSY 

Individually, and on Behalf of All Others

Similarly Situated,

 Plaintiffs, Case No. 20 C 1574

 

 v. Magistrate Judge Sunil R. Harjani

CHOP HOSPITALITY LLC d/b/a 

CHICAGO CHOP HOUSE, MATTHEW 

McCAHILL, PHILIP MARTIN, PETER 

HODO, ADAM WILL, and JAMES

LAWRENCE,

 Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs, current or former tipped employees who work or worked as servers and 

bartenders at the Chicago Chop House restaurant during some or all of November 2017 through 

the present, allege that the restaurant utilizes an invalid tip pool to pay servers and bartenders at

an improperly low regular rate of pay. The parties have consented to this Court’s jurisdiction, and 

currently pending before the Court is Defendants’ Rule 12(b)(6) Motion to Dismiss Plaintiffs’ 

Amended Complaint [34] on res judicata grounds. For the reasons set forth below, the motion is 

denied.

BACKGROUND

In reviewing the sufficiency of a complaint for purposes of a motion to dismiss, the Court 

“construe[s] it in the light most favorable to the nonmoving party, accept[s] well-pleaded facts as 

true, and draw[s] all inferences in [the nonmoving party’s] favor.” Bell v. City of Chicago, 835 

F.3d 736, 738 (7th Cir 2016) (quoting Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th

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Cir. 2010)). It is also proper for the Court to “consider, in addition to the allegations set forth in 

the complaint itself, documents that are attached to the complaint, documents that are central to 

the complaint and are referred to in it, and information that is properly subject to judicial notice.” 

Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). The Court takes judicial notice of the 

documents from a previous lawsuit filed in this district because they form the basis for Defendants’ 

motion to dismiss: Leisner, et al. v. Chop Hospitality, LLC, et al., Case No. 18-cv-4612 (N.D. Ill.) 

(hereinafter the “Leisner Action”). See Fed. R. Evid. 201(b); Daniel v. Cook Cty., 833 F.3d 728, 

742 (7th Cir. 2016) (“Courts routinely take judicial notice of the actions of other courts or the 

contents of filings in other courts.”); Fletcher v. Menard Corr. Ctr., 623 F.3d 1172, 1173 (7th Cir. 

2010) (courts may “take judicial notice of prior proceedings in a case involving the same litigant.”).

A. The Current Drake Action

The instant action was filed on March 3, 2020. Named Plaintiffs Kristina Drake, Joseph 

Borucki, Joshua Leisner, and Austin Lysy seek compensation for themselves and a class of current 

and former servers and bartenders based on allegations that Defendants Chop Hospitality LLC

(“Hospitality”), Matthew McCahill, Philip Martin, Peter Hodo, Adam Will, and James Lawrence 

operated a mandatory tip pool that does not comply with the tip credit provisions of the Fair Labor 

Standards Act, 29 U.S.C. § 201, et seq. (“FLSA”), the Illinois Minimum Wage Law, 820 ILCS 

105/1, et seq. (“IMWL”), the Illinois Wage Payment and Collection Act, (“IWPCA”), 820 ILCS 

115/1, et seq., and the Chicago Minimum Wage and Paid Sick Leave Ordinance, Chicago, Illinois, 

Municipal Code § 1-24-010, et seq. (“Chicago Wage Ordinance”) (hereinafter the “Drake

Action”). In particular, Plaintiffs allege that Defendants kept money from the tip pool for 

themselves while claiming the money was going to food runners for one or two pay periods and 

then, for the next seven or eight months, illegally used tip pool money to pay a general manager.

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Additionally, Defendants are accused of illegally deducting more money from Plaintiffs’ tips than 

was necessary to pay their credit card fees. Defendant Hospitality purchased the Chicago Chop 

House restaurant in mid-November 2017 and McCahill, Martin, Hodo, Will, and Lawrence (the 

“McCahill Group”) are the owners of Hospitality.

B. The Prior Leisner Action

Prior to this suit, on June 14, 2018, Named Plaintiffs Joshua Leisner, Georgia Euring III, 

and Christina Callahan filed a one-count collective action complaint in the Northern District of 

Illinois against Chicago Chop House, Inc. (“CCHI”), Doris Siemen, Charles Patel, and 

Bharathbhai Patel as well as Hospitality and McCahill on behalf of servers and bartenders at the 

Chicago Chop House restaurant alleging a violation of the FLSA related to the restaurant’s tip 

pool. Leisner Action, Doc. 1.

1 Specifically, the claims in the Leisner Action accused Chicago 

Chop House Inc. and the Patels of keeping money from the tip pool for themselves while claiming 

the money was going to food runners. Subsequently, the Leisner plaintiffs amended their pleading 

on July 24, 2018 and August 30, 2018, adding Manuel Rivas, a busser, as a Named Plaintiff and 

adding additional claims under the IMWL, the IWPCA, and the Chicago Wage Ordinance. Id., 

Docs. 11, 31. Charles Patel and Bharathbhai Patel (the “Patels”) owned CCHI, which operated 

the Chicago Chop House restaurant until mid-November 2017, when the restaurant was sold to 

Hospitality. Siemen was the General Manager of the restaurant pre and post-sale for a period of 

time. 

On September 11, 2018, Defendants Hospitality, McCahill, and Siemen filed a motion to 

compel arbitration. Leisner Action, Doc. 38. On December 6, 2018, District Judge Bucklo granted 

 1 The Leisner Action was originally assigned to District Judge Elaine E. Bucklo and Magistrate Judge 

Daniel G. Martin. Thereafter, Magistrate Judge Martin passed away on October 11, 2018, and when Judge 

Bucklo referred the matter to a magistrate judge for a settlement conference on March 27, 2019, the 

undersigned magistrate judge took over the case.

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the motion to compel arbitration as to all claims brought by or on behalf of plaintiffs who signed 

the arbitration agreements and denied the motion as to all claims brought by or on behalf of 

plaintiffs who did not sign that agreement.2 Id., Docs. 68, 69. Thereafter, Hospitality and McCahill 

did not participate in the Leisner Action. Id., Doc. 131 at 3, ¶ 12. Siemen remained in the case 

only for any liability she may have had for events prior to the sale of the restaurant in midNovember 2017. Id., Doc. 120 at 3. 

On December 13, 2018, the Judge Bucklo granted Plaintiffs’ motion to conditionally 

certify a collective action and facilitate notice pursuant to 29 U.S.C. § 216(b). Leisner Action, Doc. 

72. Twenty-four individuals opted in, creating a total class of 27 plaintiffs. Plaintiffs did not move 

to certify a class under the IMWL, the IWPCA, or the Chicago Wage Ordinance. On March 27, 

2019, Judge Bucklo referred the case to the undersigned magistrate judge to conduct a settlement 

conference. Id., Docs. 90, 92.3

At a settlement conference before this Court on December 16, 2019, Named Plaintiffs 

Euring, Callahan and Rivas and Defendants CCHI, Charles Patel, Bharathbhai Patel, and Doris 

Siemen agreed to settle all claims accruing from the start of the relevant statutes of limitations 

periods through sale of the restaurant in mid-November 2017. Leisner Action, Docs. 127, 130, 131 

at 3, ¶ 10. Two days later in a minute entry, this Court noted that that the parties at the settlement 

 2 Plaintiffs point out that they did not object to the motion to compel arbitration to the extent it 

covered claims that accrued after the sale of the restaurant. The order compelling arbitration found that “all 

claims against Hospitality brought by or on behalf of plaintiffs who signed arbitration agreements with 

Hospitality are subject to arbitration. This is true even of these plaintiffs’ claims that accrued prior to 

Hospitality’s acquisition of the restaurant.” Leisner Action, Doc. 69 at 3. Judge Bucklo also held that claims 

brought by or on behalf of putative plaintiffs who did not sign the arbitration agreement could proceed in 

the Leisner Action, including claims accruing after Hospitality’s acquisition of the restaurant. Id. at 4.

3 On September 16, 2019, the Leisner Action was reassigned to District Judge Steven C. Seeger. 

Leisner Action, Doc. 116. 

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conference had represented that Defendants Hospitality and McCahill were no longer defendants 

in the case because Judge Bucklo’s December 6, 2018 Order compelled them to arbitrate but there 

was no separate dismissal order as to these defendants. Id., Doc. 130. Accordingly, the Court 

directed the parties to file a motion to dismiss Hospitality and McCahill without prejudice with the 

district court.4 Id.

On December 27, 2019, counsel for all parties, including counsel for Hospitality and 

McCahill, filed an Agreed Motion for Voluntary Dismissal of Hospitality and McCahill.5 Leisner 

Action, Doc. 131. In the motion, the parties all agreed that the dismissal should be without 

prejudice and that the settlement agreement covered “claims accruing from the start of the relevant 

statutes of limitations periods through the sale of the restaurant in mid-November 2017.” Id., Doc. 

131 at 3, ¶10. The parties further agreed that after the December 6, 2018 Order compelling 

arbitration, “Plaintiff Leisner ceased his involvement in this case as did Defendants Chop 

Hospitality LLC and Matthew McCahill.” Id., Doc. 131 at 3, ¶12. The parties requested an order 

dismissing Hospitality and McCahill from the Leisner Action “without prejudice so the remaining 

parties can proceed with their agreed upon settlement.” Id. at 3. On December 30, 2019, District 

Judge Seeger dismissed Hospitality and McCahill as defendants without prejudice. Id., Doc. 133.

That same day, following the dismissal of Hospitality and McCahill, the Leisner Action 

was reassigned to this Court by consent of the remaining parties. Leisner Action, Docs. 128, 134. 

On January 31, 2020, a settlement agreement was fully executed between Named Plaintiffs 

Euring, Callahan, and Rivas and 24 opt-in Plaintiffs, CCHI, Charles Patel, and Bharathbhai Patel. 

 4 The Court further noted that after Hospitality and McCahill were properly terminated, the 

remaining defendants desire to consent to the jurisdiction of the magistrate judge could be addressed.

Leisner Action, Doc. 130.

5 Counsel for Hospitality and McCahill remained involved in the case due to her representation of 

Siemen on the pre-sale claims.

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Siemen was not a party to the settlement and Plaintiffs moved to dismiss Siemen without prejudice 

from the Leisner Action on February 7, 2020. Id., Doc. 136. This Court granted Plaintiffs’ 

Unopposed Motion to Voluntarily Dismiss Defendant Doris Siemen on February 11, 2020. Id.,

Doc. 138.

On April 6, 2020, after consideration of the parties’ Joint Motion for Approval of FLSA 

Settlement, this Court dismissed the Leisner “action, and all claims asserted or that could have 

been asserted therein . . in its and their entirety with prejudice as to all Plaintiffs” (the “Leisner

Final Judgment”). Leisner Action, Doc. 149. The Settlement and General Release Agreement (the 

“Leisner Settlement Agreement”) is attached to the Joint Motion for Approval of FLSA 

Settlement. Id., Doc. 139-1.

In the meantime, on January 6, 2020, Plaintiff Leisner filed a Demand for Arbitration 

against Hospitality and McCahill. Hospitality and McCahill refused to participate in arbitration, 

and on February 26, 2020, the American Arbitration Association (“AAA”), stated that it would not 

administer any future employment matters involving Hospitality. Drake Action, Doc. 21 at 3, ¶ 8; 

doc. 42, Exh. D.

DISCUSSION

Defendants now argue in their motion to dismiss that Plaintiffs’ claims in this case are 

barred by the doctrine of res judicata. They move to dismiss Plaintiffs’ Amended Complaint 

pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court initially notes that “res judicata

is an affirmative defense, pursuant to which dismissal under Rule 12(b)(6) is generally not 

appropriate.” Clark & Leland Condominium, L.L.C. v. Northside Community Bank, 110 F.Supp.3d 

866, 868 (N.D. Ill. 2015); U.S. v. Rogers Cartage Co., 794 F.3d 854, 860 (7th Cir. 2015) (since an 

affirmative defense is “external to the complaint,” motions for dismissal on the basis of an 

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affirmative defense should be made under Rule 12(c)). That said, Defendants use of Rule 12(b)(6) 

here “is of no consequence” because the uncontested history of the Leisner Action is “everything 

that the . . . court need[s] to know to rule on the defense.” Stelmokas v. Bank of America, N.A., 819 

F. App’x 441, 443 (7th Cir. 2020), reh’g denied (Oct. 21, 2020). Moreover, Plaintiffs do not 

object to proceeding based on the current briefing.

A Rule 12(b)(6) motion challenges the “sufficiency of the complaint.” Gibson v. City of 

Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a motion to dismiss, the complaint must 

“contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 

face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 

554, 570 (2007)). Dismissal for failure to state a claim under Rule 12(b)(6) is proper “when the 

allegations in a complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 

550 U.S. at 558. Thus, “‘[w]hen a defendant raises res judicata as a defense and it is clear from 

the complaint’s face, and matters of which the district court may take judicial notice[,] that the 

plaintiff’s claims are barred as a matter of law, dismissal under Rule 12(b)(6) is proper.’” Clark & 

Leland Condominium, LLC, 110 F.Supp.3d at 868-69 (quoting Arthur Anderson LLP v. Fed. Ins. 

Co., 2007 WL 844632, at *7 (N.D. Ill. 2007)).

The test for res judicata in the Seventh Circuit has three elements: “(1) an identity of the 

causes of action; (2) an identity of the parties or their privies; and (3) a final judgment on the 

merits.” Bell v. Taylor, 827 F.3d 699, 706 (7th Cir. 2016). When these three requirements are met,

res judicata “bars any claims that were litigated or could have been litigated in a previous action” 

Id. Because res judicata is an affirmative defense, Defendants bear the burden of showing that the 

preclusive doctrine applies. Allahar v. Zahora, 59 F.3d 693, 696 (7th Cir. 1995).

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Defendants contend that the doctrine of res judicata bars all claims in the Amended 

Complaint because the causes of action in both lawsuits are the same; there is an identity of parties 

or their privies; and the April 6, 2020 order was a final judgment on the merits. Plaintiffs dispute 

the applicability of all three res judicata elements because Defendants Hospitality and McCahill 

were not part of the Leisner Action for more than a year before that case settled, having been 

dismissed without prejudice after filing a motion to compel arbitration. As explained below, the 

Court finds that res judicata does not bar the present action because: (1) Plaintiffs’ arbitrable claims 

were not and could not have been asserted in the Leisner Action; (2) Hospitality and McCahill 

were not parties when this Court entered final judgment in the Leisner Action; and (3) the terms 

of the approved Leisner Settlement Agreement upon which the final judgment was based excluded

claims that arose against Hospitality or McCahill after the sale of the restaurant.

A. Identity of Causes of Action

Regarding the first requirement necessary to establish res judicata, courts generally 

consider whether the claims in the two cases “arise out of the same set of operative facts or the 

same transaction.” Kilburn-Winnie v. Town of Fortville, 891 F.3d 330, 333 (7th Cir. 2018). 

Plaintiffs argue that while the claims against the two sets of defendant owners of the restaurant 

were based on some of the same laws, the facts underlying the claims and the way the defendants 

broke the law were different. 

There can be no question that some of the plaintiffs’ claims raised in the Leisner Action

are identical to some of the claims raised the Amended Complaint in this case, and Plaintiffs do 

not argue otherwise. However, because Hospitality’s arbitration agreement subjected those 

identical claims brought under the FLSA and other wage statutes to mandatory arbitration, the

district court granted Hospitality and McCahill’s motion to compel arbitration as to all claims 

brought by or on behalf of plaintiffs who signed the arbitration agreements. Thus, the wage claims 

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raised by Plaintiffs who signed arbitration agreements with Hospitality could not have been raised 

in the Leisner Action, because the district court under the Federal Arbitration Act and Hospitality’s 

arbitration agreement was unable to entertain those other theories of relief in the same action. 

Valentine v. WideOpen West Finance, LLC, 288 F.R.D. 407, 416 (N.D. Ill. 2012) (finding res 

judicata “simply inapplicable” where plaintiffs’ “non-ECPA claims could not have been litigated 

in the present proceeding because of [defendant’s] arbitration agreement.”). Indeed, in their reply 

brief in support of the motion to compel arbitration, Hospital and McCahill wrote that “all 

applicable parties agreed that all claims against McCahill and Chop Hospitality should be 

dismissed because Plaintiffs’ only remedy for these claims must be pursued through private 

arbitration.” Leisner Action, Doc. 53 at 2 (emphasis added).

6

Moreover, the terms of the Leisner Settlement Agreement dictate the limits of claim 

preclusion. “Where a final judgment was based upon a settlement agreement, however, ‘the 

express terms of a settlement agreement, not merely the terms of the judgment, determine the 

bounds of preclusion after a settlement.’” Daniels v. Rivers, 2014 WL 6910492, at *7 (N.D. Ill. 

Dec. 9, 2014) (St. Eve, J.) (quoting Toscano v. Commercial General Life Ins. Co., 288 F. App’x 

36, 38 (3rd Cir. 2008)). “In determining the res judicata effect of an order of dismissal based upon 

a settlement agreement, courts attempt to effectuate the parties’ intent. The best evidence of the 

parties’ intent is the settlement agreement itself.” Norfolk Southern Corp. v. Chevron, U.S.A., Inc., 

371 F.3d 1285, 1289 (11th Cir. 2004); Arrow Gear Co. v. Downers Grove Sanitary Dist., 629 F.3d 

 6 The same logic applies to Defendants’ argument that Plaintiffs have impermissibly split their 

claims among duplicative lawsuits. “Under the rule against claim-splitting, a plaintiff must allege in one 

proceeding all claims for relief arising out of a single nucleus of operative facts, or be precluded from 

raising those claims in the future.” Valentine, 288 F.R.D. at 415. The rule against impermissible claimsplitting does not apply to Plaintiffs who signed the arbitration agreement because those wage claims were 

originally brought in the Leisner Action, but the district court granted Hospitality and McCahill’s motion 

to compel arbitration of those claims. Id.

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633, 639 (7th Cir. 2010) (subject to a qualification about institutional concerns, “[l]itigants who 

want to split a claim among different suits can do so”). Consequently, the scope of the preclusive 

effect of the Leisner Final Judgment “should not be determined by the claims specified in the 

original complaint, but instead by the terms of the Settlement Agreement, as interpreted according 

to traditional principles of contract law.” Id; see also Ruple v. Hartford Life & Acc. Ins. Co., 340 

F. App'x 604, 610 (11th Cir. 2009) (a court should “look to the agreement itself to determine what 

claims the parties intended to be finally and forever barred by the dismissal.”).

Under the express terms of the settlement documents in the Leisner Action, which are 

completely overlooked by Defendants, the parties intended and agreed that the settlement 

agreement excluded claims that arose against Hospitality and the McCahill Group after the sale of 

the restaurant. The Leisner Settlement Agreement plainly stated that it was between named 

Plaintiffs Euring, Callahan, and Rivas, on behalf of themselves and the 24 opt-in plaintiffs, and 

“defendants Chicago Chop House, Inc., Charles Patel, Doris Siemen, and Bharathbhai Patel 

(collectively referred to as ‘Defendants’).” Leisner Action, Doc. 139-1 at 2; see also id., Jt. Motion 

for Approval of FLSA Settlement, Doc. 139 at 3 (confirming that “Defendants Chop Hospitality 

LLC, Matthew McCahill and Dories Siemen have been voluntarily dismissed from this case and 

are not a party to the Settlement Agreement.”). The language of the Leisner Settlement Agreement 

clearly shows that those twenty-seven plaintiffs agreed to “forever discharge Defendants, and all 

managers and employees of CCHI (including but not limited to Doris Siemen), and Defendants’ 

attorneys” from all claims there were or could have been made in the Leisner Action. Id., Doc. 

139-1 at 8. Consistent with that language, the final judgment dismissed the Leisner “action, and 

all claims asserted or that could have been asserted” “in its and their entirety with prejudice as to 

all Plaintiffs.” Id., Doc. 149. Additionally, the Leisner Settlement Agreement unambiguously 

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stated that the “release does not include claims that arose against Doris Siemen, Chop Hospitality 

LLC, or Matt McCahill after Defendants sold the Chicago Chop House restaurant on or around 

November 13, 2018.” Id., Doc. 139-1 at 8.

After the district court compelled arbitration, the Leisner Action concerned only claims 

that arose before the sale of the restaurant. In this context, it is obvious that claims that accrued 

after the sale of the restaurant were not and could not have been brought during the Leisner Action. 

By its plain and unambiguous terms, the Leisner Settlement Agreement and therefore the Leisner

Final Judgment explicitly excluded from the settlement and the release, claims that arose against 

Hospitality and McCahill after the sale of the restaurant and cannot reasonably be read to bar

Plaintiffs’ present suit. Norfolk Southern Corp., 371 F.3d at 1291 (“to preclude a wider range of 

matters than those specified in the Agreement would frustrate the parties’ expressed intent and 

bestow upon [the defendant] a windfall of immunity from litigation.”). Thus, no identity of action 

exists between the two actions, and the Leisner Settlement Agreement did not preclude employee

claims that accrued after the sale of the restaurant in a future suit against Hospitality and the 

McCahill Group.

It is true that Plaintiffs filed this lawsuit a little more than one month before the final 

judgment was entered in the Leisner Action, and so, Defendants argue, Plaintiffs could have sought 

to reinstate their claims against Hospitality and McCahill in that action which would have 

permitted the Leisner court to revisit Plaintiffs’ claims which were dismissed without prejudice 

before entering the final judgment. While Defendants may be correct that Plaintiff might have 

been able to reinstate their claims in the Leisner Action even though all the remaining claims had 

been settled by that point, Defendants do not identify any case indicating that their failure to move 

to do so should act to bar Plaintiffs from bringing their current claims. There is no legal duty to 

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reinstate rather than bring a separate suit, especially where Plaintiffs’ claims were dismissed 

without prejudice rather than stayed pending arbitration. Tarau v. Coltea, 2017 WL 3521410, at 

*4 (N.D. Ill. 2010) (“A dismissal without prejudice does not operate as an adjudication on the 

merits, so [plaintiff] could sue [defendant] again here or in another court.”).

The only authority Defendants cite in support of their position that Plaintiffs’ failure to 

seek reinstatement of their claims against Hospitality and McCahill in the Leisner Action is “fatal” 

to their current claims is Czarniecki v. City of Chicago, 633 F.3d 545, 550-51 (7th Cir. 2011), 

which is completely off point. Czarniecki is an employment discrimination case holding that the 

requirement to exhaust administrative remedies is no excuse for claim-splitting because a 

“discrimination claimant who is waiting for a right-to-sue letter on new claims that that are 

factually linked to an earlier suit . . . can easily ask the district court to stay the first case until the 

EEOC letter arrives.” Barr v. Bd. of Trustees of Western Illinois University, 796 F.3d 837, 840 

(7th Cir. 2015); Czarniecki, 633 F.3d at 551. Here, Plaintiffs did not impermissibly split claims 

their claims. Some of the plaintiffs originally brought their claims against Hospitality and 

McCahill in a single proceeding, the Leisner Action. Czarniecki says nothing about whether 

voluntarily dismissed claims should be reinstated in a prior case or filed in a new suit. Certainly, 

it does not hold that Plaintiffs were required to seek to reinstate their claims which were sent to 

arbitration in the Leisner Action rather than be allowed to file a new suit to avoid res judicata. 

Because the Leisner Settlement Agreement and Final Judgment based on the settlement agreement 

expressly excluded claims that accrued against Hospitality and McCahill after the sale of the 

restaurant, Plaintiffs were not required to seek reinstatement of their claims against Hospitality 

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and McCahill in the Leisner Action before entry of the final judgment to preserve their right to 

assert those claims.

7

 

B. Identity of Parties

The second element, the identity of parties or their privies, is also not met here. Although 

there is some overlap of opt-in plaintiffs in both suits, the defendants are not the same or in privity. 

The only common defendants between the two actions are Hospitality and McCahill, but they were 

not defendants at the time final judgment was entered in the Leisner Action. In other words, 

Hospitality and McCahill were not “parties” to the Leisner Action after they were dismissed 

without prejudice. Thus, there were no common defendants between the two actions at the time 

the Leisner Final Judgment was entered. Further, Hospitality and McCahill do not contend that 

they were in privity with any of the remaining defendants who settled the Leisner Action. 

Defendants admit in their memorandum in support of their motion to dismiss that the prior owners 

of the restaurant are not affiliated with Hospitality or McCahill. Drake Action, Doc. 35 at 2. 

Hospitality and McCahill were not parties or in privity with a party to the Leisner Action at the 

time the final judgment was entered, and so there is no “identity of parties.”

Furthermore, “[a]s a general rule, one is not bound by a judgment in an action in which he 

is not a party.” Exelon Generation Co., LLC v. Local 15, Intern. Broth. of Elec. Workers, AFLCIO, 540 F.3d 640, 649 (7th Cir. 2008); Taylor v. Sturgell, 553 U.S. 880, 884 (2008) (“It is a 

principle of general application in Anglo-American jurisprudence that one is not bound by a 

 7 Another problem with Defendants’ res judicata defense, as Plaintiff point out, is that the Leisner

Action settled in December 2019 and the settlement was intended to include all matters arising up to the 

date of the settlement. Leisner Action, Doc. 139-1 at 8-9. Defendants do not address how claims in the

Drake Action based on acts which occurred after the settlement of the Leisner Action could have been 

raised in the Leisner Action. Accordingly, Plaintiffs are not barred by res judicata from litigating wage 

claims based on acts which occurred after the settlement of the Leisner Action.

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judgment in personam in a litigation in which he is not designated as a party . . . .”). “As a 

consequence, ‘[a] judgment or decree among parties to a lawsuit resolves issues as among them, 

but it does not conclude the rights of strangers to those proceedings.’” Richards v. Jefferson 

County, 517 U.S. 793, 798 (1996) (quoting Martin v. Wilks, 490 U.S. 755, 762 (1989)). Because 

non-parties are not bound by earlier judgments, it follows that a non-party is not entitled to the 

benefits of the rules of res judicata in a subsequent action, unless the non-party was in privity with 

a party to the first action. At the time this Court entered its judgment in the Leisner Action, CCHI 

and the Patels were the only defendants remaining in the suit. Hospitality and McCahill were not 

then parties to the case and were not in privity with any party who is bound by the final judgment 

in the Leisner Action, and the final judgment cannot be given preclusive effect so as to bar the 

current claims against them. Thus, the “identical parties” requirement is not satisfied and 

Hospitality and McCahill cannot assert the defense res judicata in this action.

Defendants nevertheless argue that, although Hospitality and McCahill were not part of the 

settlement and were not parties at the time the Leisner Final Judgment was entered, they should 

still be bound by it because of “the effect of the final judgment.” Drake Action, Doc. 47 at 10. 

According to Defendants, the final judgment in the Leisner Action “did not create or set forth an 

exception for any claims nor did it preserve any of Plaintiffs’ claims against any Defendant(s), 

such as Chop Hospitality and/or McCahill.” Id., Doc. 35 at 4. Defendants’ argument is misplaced. 

The Court recognizes, as Defendants point out, that the Leisnerfinal judgment itself did not contain 

language concerning the claims that arose against Hospitality and McCahill after the sale of the 

restaurant. But it did not need to do so to preserve those claims because the Leisner Settlement 

Agreement explicitly does not apply to claims that arose against Hospitality and McCahill after 

the sale of the restaurant. Again, where the final judgment was based upon a settlement agreement, 

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“the express terms of [the] settlement agreement, not merely the terms of the judgment, determine 

the bounds of preclusion after a settlement.” Daniels, 2014 WL 6910492, at *7.

As the Court has already described, the express terms of the Leisner Settlement Agreement 

stated that it was intended to “fully and finally resolve” all cases, claims and disputes “against the 

Defendants” that “were or could have been raised” in the Leisner Action. Leisner Action, Doc. 

139-1 at 3, ¶ 5. The Leisner Settlement Agreement defined “Defendants” as “Chicago Chop 

House, Inc., Charles Patel, Doris Siemen, and Bharathbhai Patel.” Id. at 2. The Leisner Settlement 

Agreement did not involve Hospitality and McCahill and does not purport to resolve any claims 

that arose against Hospitality or McCahill after the sale of the restaurant. There was no agreement 

to bar future litigation against Hospitality and McCahill concerning wage issues that arose after 

the sale of the restaurant. Specifically, the Leisner Settlement Agreement released CCHI, the 

Patels, all managers and employees of CCHI, and Defendants’ attorneys from all claims that were 

made or could have been made in the Leisner Action. More significantly, the parties explicitly 

agreed that the release did not include claims that arose against Hospitality or McCahill after the 

sale of the restaurant in mid-November 2017. Id. at 8, ¶ 4.3. Likewise, the final judgment entered 

by the Court does not foreclose claims that accrued after the sale of the restaurant from being raised 

in a separate suit. Nothing in the final judgment changed the prior dismissal order or extinguished 

the ability of employees whose claims arose after the sale of the restaurant from filing a new action 

against Hospitality and McCahill.

C. Final Judgment on the Merits in the First Suit

Addressing the third element of res judicata, the Leisner Action was disposed of by an 

order and final judgment dismissing the case with prejudice pursuant to a settlement agreement 

and approval by this Court. Ordinarily, dismissal of an action with prejudice pursuant to a 

settlement agreement amounts to a final judgment on the merits. Bohn v. Boiron, Inc., 2013 WL 

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3975126, at *8 (N.D. Ill. Aug. 1, 2013) (“the district court approved the Gallucci settlement and 

dismissed the case with prejudice—there is a final judgment on the merits.”); Retired Chicago 

Police Ass’n v. City of Chicago, 7 F.3d 584, 593 (7th Cir. 1993) (finding final judgment on the 

merits was reached when court entered order approving the settlement and dismissing all claims 

with prejudice). However, the Seventh Circuit has held that “a decision is not final for purposes 

of appellate jurisdiction if the court rendering it has dismissed one or more of the plaintiff’s claims 

or one or more of the defendants, with leave to refile.” Arrow Gear Co., 629 F.3d at 636. The 

Approval Order and Final Judgment entered in the Leisner Action dismissed the twenty-seven 

plaintiffs’ claims against CCHI and the Patels on the merits but the arbitrable claims against 

Hospitality and McCahill were dismissed without prejudice on the parties’ Rule 41(a) motion for 

voluntary dismissal.

Even if the Leisner action was disposed of by a final judgment on the merits, the res judicata 

effect of that final judgment is controlled by the parties’ settlement agreement and it does not have 

preclusive effect on the claims asserted here. Norfolk Southern Corp., 371 F.3d at 1288. Again, 

in this case, the terms of the Leisner Settlement Agreement and Final Judgment based thereon 

expressly preserved Plaintiffs’ right to pursue claims that arose against Hospitality and McCahill 

after the sale of the restaurant in a separate action. Central States, Se. & SW. Areas Pension Fund 

v. Hunt Truck Lines, Inc., 296 F.3d 624, 629 (7th Cir. 2002) (citation omitted) (“[i]f a court reserves 

for later resolution an issue that might otherwise have been adjudicated in the initial proceeding, 

res judicata will not operate to bar the subsequent suit.”). Thus, the Leisner Action did not end in 

a final judgment on the merits of claims that arose against Hospitality and McCahill after the sale 

of the restaurant. To bar Plaintiffs’ claims against Hospitality and McCahill would be contrary to 

the Leisner Settlement Agreement.

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Notwithstanding the language of the Leisner Settlement Agreement and Final Judgment,

Defendants argue that Hospitality and McCahill were dismissed without prejudice “because 

Plaintiffs might have a basis to rescind the order granting the motion to compel arbitration” and 

that “possibility vanished when the judge entered a final judgment on April 6, 2020, at which point 

the dismissal without prejudice relating to Chop Hospitality and McCahill ripened into a final 

judgment.” Drake Action, Doc.35 at 5. Hospitality and McCahill were dismissed without 

prejudice so the parties could resolve their dispute through arbitration and return to court, if 

necessary, following the arbitration or in the event that arbitration was not appropriate for some 

other reason (i.e., Hospitality and McCahill’s refusal to participate in arbitration). The legal effect 

of the plaintiffs’ voluntary dismissal of their claims without prejudice against Hospitality and 

McCahill was to leave those claims as if they “had never been filed.” Beck v. Caterpillar Inc., 50 

F.3d 405, 407 (7th Cir. 1995); Robinson v. Willow Glen Academy, 895 F.2d 1168, 1169 (7th Cir. 

1990) (voluntarily dismissed claim is “treated as if it had never been filed.”); U.S. v. Mt. Vernon 

Memorial Estates, Inc., 734 F.2d 1230, 1236 (7th Cir. 1984) (voluntary dismissal under Rule 

41(a)(2) without prejudice “turns back the clock; it is as if the plaintiff’s lawsuit had never been 

brought.”). Moreover, generally, “[d]ismissals without prejudice do not bar future suits.” Sroga 

v. Wasielewski, 2019 WL 3410082, at *2 (N.D. Ill. July 29, 2019); Robinson v. Sherrod, 631 F.3d 

839, 843 (7th Cir. 2011) (“Because the dismissal of the present suit was without prejudice, res 

judicata (claim preclusion) will not bar a future suit based on identical grounds.”). Thus, the 

voluntary dismissal without prejudice did not bar Plaintiffs from refiling the same claims that were 

dismissed without prejudice in a future suit. That possibility did not “vanish” when this Court 

entered the final judgment based on a settlement agreement which expressly excluded claims that 

arose against Hospitality and McCahill after the sale of the restaurant.

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To support their argument, Defendants cite Parvati Corp. v. City of Oak Forest, 630 F.3d 

512, 517 n.8 (7th Cir. 2010) and Muhammad v. Oliver, 547 F.3d 874, 876 (7th Cir. 2008) for the 

proposition that a dismissal without prejudice sometimes can support a finding of claim preclusion. 

Neither Parvati Corp. nor Muhammad support a preclusion finding in this case. The Muhammad

court stated: “when a suit is abandoned after an adverse ruling against the plaintiff, the judgment 

ending the suit, whether or not it is with prejudice, will generally bar bringing a new suit that arises 

from the same facts as the old one.” Muhammad, 547 F.3d at 876. Unlike the plaintiffs in Pavarti

and Muhammad, Plaintiffs did not “abandon” their claims that accrued after the sale of the 

restaurant after an “adverse” ruling. The only rulings that proceeded the voluntary dismissal of 

Hospitality and McCahill were not adverse to plaintiffs on the merits, and the settlement agreement 

on which the final judgment was based expressly excluded claims that arose after the restaurant 

was sold in mid-November 2017.

8

 Moreover, counsel for all parties, including Hospitality and 

McCahill, agreed that Hospitality and McCahill should be dismissed without prejudice so the 

remaining parties could proceed with their agreed upon settlement. Leisner Action, Doc. 131 at 3; 

see Muhammad, 547 F.3d at 877 (noting that if “‘the parties have agreed in terms or in effect that 

plaintiff may split his claim,’ . . . the bar of res judicata is lifted.”). Accordingly, the Court rejects 

Defendants’ argument that the final judgment in the Leisner Action converted the dismissal of 

Hospitality and McCahill without prejudice into a dismissal with prejudice as to claims that arose 

against them after the restaurant was sold.

 8 There were three substantive rulings in the Leisner case. On December 6, 2018, the district court 

granted Defendants Hospitality, McCahill, and Siemen's motion to compel arbitration in part. Leisner

Action, Doc. 69. In that same Order, the district court denied Defendants CCHI and the Patels’ Rule 

12(b)(6) motion to dismiss Count IV of Plaintiffs' Second Amended Collective and Class Action Complaint 

and to strike References to IWPCA. Id. On January 25, 2019, the Court denied a motion brought by 

Defendants CCHI and the Patels for partial reconsideration of the Court’s order of December 6, 2018. Id., 

Docs 76, 77.

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Defendants are correct that “the proper course of action when a party seeks to invoke an 

arbitration clause is to stay the proceedings rather than to dismiss outright,” and Hospitality and 

McCahill asked for a stay in the Leisner Action pending arbitration. See Halim v. Great Gatsby’s 

Auction Gallery, Inc., 516 F.3 557, 561 (7th Cir. 2008); Leisner Action, Doc. 38 at 1, 2, 6. 

However, the defendant in Halim sought to dismiss the entire complaint on the basis of a binding 

arbitration clause and the Seventh Circuit treats the issue of “whether to stay the entire case as 

discretionary in cases involving both arbitrable and nonarbitrable issue.” Volkswagen of American, 

Inc. v. Sud’s of Peoria, Inc., 474 F.3d 966, 971 (7th Cir. 2007). “[T]he decision to stay the 

litigation of non-arbitrable claims or issues is a matter largely within the district court’s discretion 

to control its docket.” Id. (quoting American Recovery Corp. v Computerized Thermal Imaging, 

Inc., 96 F.3d 88, 97 (4th Cir. 1996)). The Volkswagen decision recognized an exception to this 

rule “when staying arbitrable issues, while allowing nonarbitrable issue to proceed in the district 

court, risks ‘inconsistent rulings’ because the pending arbitration is ‘likely to resolve issues 

material to [the] lawsuit.’” Id. at 972. In making this determination, the court must consider the 

risk of inconsistent rulings, the extent to which the parties will be bound by the arbitrators’ 

decision, and the prejudice that may result from delays. Id.

In the Leisner Action, the district court’s decision to compel arbitration as to all claims 

brought or on behalf of plaintiffs who signed the arbitration agreements did not stay the remaining 

proceedings during the pendency of the arbitrations. Instead, the remainder of Leisner Action 

proceeded on the merits ending in a settlement. It is not surprising that the district court did not 

stay the nonarbitrable claims because the briefing on the motion to compel arbitration did not 

discuss the factors the court must apply and did not provide any reason why the claims that were 

not covered by the arbitration agreement could not proceed.

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In sum, and after careful consideration of the parties’ arguments, the Court finds that the 

final judgment in the Leisner Action does not preclude Plaintiffs from advancing their wage claims

that arose after the sale of the restaurant in this case. In the Leisner Settlement Agreement and 

Final Judgment based upon the approval of the settlement, the parties and the Court expressly 

reserved the right of employees to bring claims that arose against Hospitality and McCahill after 

the sale of the restaurant in a second lawsuit. Therefore, the Leisner Final Judgment cannot shield 

Hospitality and McCahill and operate as a bar to Plaintiffs’ present action against them.

Finally, the policies underlying the doctrine of res judicata would not be served by applying

the doctrine in this case. “The principle underlying res judicata—or claim preclusion—is to 

minimize ‘the expense and vexation attending multiple lawsuits, conserve[ ] judicial resources, 

and foster[ ] reliance on judicial action by minimizing the possibility of inconsistent decisions.’”

Matrix IV, Inc. v. Am. Nat. Bank & Tr. Co. of Chicago, 649 F.3d 539, 547 (7th Cir. 2011) (quoting 

Montana v. United States, 440 U.S. 147, 153–54 (1979)).

First, Plaintiffs tried to prevent the expense and abuse of judicial resources that can result 

from multiple lawsuits. Some of the plaintiffs who signed arbitration agreements asserted their 

wage claims against Hospitality and McCahill in the Leisner Action in the first instance. But the 

district court, pursuant to Hospitality and McCahill’s motion, determined those claims were 

subject to arbitration and dismissed Hospitality and McCahill without prejudice, freeing Plaintiffs 

to bring those claims in a future suit. After dismissal of Hospitality and McCahill, the Leisner

action concerned only claims that arose prior to the sale of the restaurant.

Second, Plaintiffs provide a good reason why they needed to return to court to pursue their 

claims against the current owners of the restaurant: Hospitality and McCahill refused to participate 

in the arbitration they compelled. Barring Plaintiffs from litigating their claims here would mean 

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that they would never have had the opportunity to litigate their wage claims against Hospitality 

and McCahill. Czarniecki, 633 F.3d at 548 (“The doctrine of [res judicata or] claim preclusion is 

premised on the idea that, when a claim has been fully litigated and come to judgment on the 

merits, finality trumps.”) (quoting In re Ingersoll, Inc., 562 F.3d 856, 861 (7th Cir. 2009)). When 

the Leisner Action settled in December 2019, the arbitration matter was still proceeding. So filing 

a separate suit made sense when two months later, on February 26, 2020, the AAA closed the 

arbitration and declined to administer any future employment matter involving Hospitality.

Third, allowing this action to proceed will not unduly burden the Court or Defendants. The 

judicial burden and Defendants’ burden would be the same whether Plaintiffs’ wage claims had 

been reinstated in the Leisner Action before the final judgment as Defendants suggest or they 

proceed in this case. 

Fourth, the final judgment upon which Hospitality and McCahill seek to rely was based on 

a settlement which they were not a part of and did not contribute to. They now seek to take 

advantage of the settlement of that suit to bar claims against them. However, allowing Hospitality 

and McCahill to use the final judgment created by the settlement is not necessary to free them from 

multiple and vexatious litigation of the same cause of action because they did not participate in the 

Leisner Action after their early motion to compel arbitration was granted and thus, will not have 

to defend multiple rounds of litigation.

Fifth, allowing this suit to proceed will not result in inconsistent judgments. The Leisner

Action was dismissed with prejudice based upon the settlement agreement of claims against CCHI

and the Patels and without a finding on the merits of those claims. Leisner Action, Doc. 139, at 4, 

¶7 and 7, ¶ 3; doc. 147, Thus, this suit could not result in an inconsistent decision. 

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CONCLUSION

For these reasons, the Court denies Defendants’ motion to dismiss [34] on res judicata

grounds. This case remains set for status on April 8, 2021 at 9:15 a.m. by telephone.

SO ORDERED.

Dated: March 22, 2021 ______________________________

Sunil R. Harjani

United States Magistrate Judge

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