2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 9-8-2005 

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v. RO BERT W I NTER ; RO BERT K . THO M PS ON ; DA VI D M . GA VI N; RO NA LD CA VANAU GH; CH E RY L F UL M E R; HAR OL D F OX; T HOMAS M CD ONAL D;

JO N D O E , (b e in g a f

ictitio u slyn a m e d in d iv id u a l) APP EAL F ROM THE UNI TE D ST ATE S DI S TRI CT C OURT

FOR TH E DI STRI CT O F NEW J ERSEY D . C . C i vi l N o. 03- cv- 01226 D istri ct Ju d g e: T h e H o n o rab le F aith S . H o ch b erg Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

J ul y1, 2005 B efor e: R O T H , R E N D E L L , and B A R R Y , C i r cui tJ udges

( O pi ni on Fi l ed: Sept ember8, 2005 )

OP I NI ON

B A R R Y , C i r cui tJ udge T h is is a n a p p e a l f

ro m th e D istric t C o u rt’s o rd e r d e n y in g H a m b u rg M u sic2

C om pany ’ s ( “H M C ”) m ot i on t o r ei ns t at e i t s compl ai nt . H M C t i m el yappea l ed. Fort he f o l l o wi n g r e a s o n s , we wi l l a f f i r m. I. W e w ill d isc u ss th e f

a c tu a l b a c k g ro u n d a n d p ro c e d u ra l h isto ryin so m e d e tail b e c a u s e th e yd ir e c tly re la te to o u r d is p o s itio n o f th is a p p e a l. T hi s l i t i gat i on s t ems fr om H M C ’ s fai l ur e t o payN ew J er s eys t at e t axes . O n J ul y6, 1995, the St at e of N ew J er s eyD i vi s i on of Taxat i on ( “D i vi s i on”) s entH M C a “N ot i ce a nd D emand” forpaym entof out s t andi ng t axes i n the amountof $87, 867. 64. T he not i ce s ta te d th a t H M C ’s f

a ilu re to p a yth e s e ta x e s c o u ld re s u lt in , a m o n g o th e r t h in g s , a

“ c e rt if ic a te o f d e b t . . . f

o r u n p a id ta x , p e n a lty, in te re s t, a n d c o s t o f c o lle c tio n [ .]” A 7 6 . I n addi t i on, the not i ce w arned H M C thata “f ai l ur e t o exer ci s e anyhear i ng and appe al rig h ts” o r to p a yth e o u tsta n d in g tax w o u ld f o rc e th e D iv isio n to “ lev yu p o n a n d se ll [H M C ’ s ] r eal and/ orper s onal pr operty ” for“paym entof the t ax” ow ed. I d. H M C di d notform al l ycont es tthe not i ce, and the St at e neve rr ece i ved ful l paym ent of the unpai d t axes . C ons equent l y , on N ovember2, 1995, a “Cer t i fi cat e of D ebt ” and a “J udgm ent ” w er e ent er ed i n t he Super i orC our tof N ew J er s eyagai ns tH M C . A 86. T he fol l ow i ng day , the D i vi s i on s entH M C a not i ce w arni ng H M C that“s ai d J udgm ent , i f not s a tis f ie d , m a yb e e x e c u te d u p o n w ith o u t f u rt h e r n o tic e to th e d e f

e n d a n t.” A 8 8 . O verthr ee y ear s l at er , on J anuary22, 1998, the D i vi s i on s entH M C a l ett ers t at i ng th a t ith a d se ize d H M C ’s liq u o r lice n se , an d th a t itw o u ld se ll th e lice n se a t a p u b licPr i ort o fi l i ng a compl ai nti n t he Tax C our t , H M C r eques t ed a he ar i ng r egar di ng t he 1 s ei zur e and s al e of i t s l i quorl i cens e. B eca us e the pr ot es tw as unt i m el y , the D i vi s i on d e n ie d th e re q u e s t. A 1 0 0 . 3 auct i on and appl ythe pr ocee ds t o H M C ’ s t ax l i abi l i tyunl es s the D i vi s i on r ece i ved “paym enti n ful l [w i th i nt er es tand cos t s ] . . . t ot al l i ng $141, 323. 50. ” A 90. H M C di d not pay , and the l i quorl i cens e w as s ubs equent l ys ol d atauct i on. H M C fi l ed a c om pl ai nti n t he Tax C our tof N ew J er s ey( “Tax C our t ”) agai ns tt he D ire c to r o f

th e D iv isio n (“ D ire c to r” ). H M C re q u e ste d a n o rd e r v o id in g th e sa le o f its 1 liq u o r lice n se o r, alte rn a tiv e ly , co m p e n sa to ryd a m a g e s f o r th e “ u n law f

u l d e p riv a tio n o f

its pr opertyw i thoutpr opernot i ce i n vi ol at i on” of s t at e l aw and “w i thoutdue pr oces s of l aw a s re q u ir e d b y. . . [ th e ] U n ite d S ta te s C o n s titu tio n .” A 1 0 3 . H M C s ubs equent l ym oved t o amend i t s compl ai ntt o i ncl ude an a ddi t i onal count pur s uantt o 42 U . S. C . § 1983, al l egi ng that“the exe cut i on and s al e [of the l i quorl i cens e] d e p ri v e d p la in tif

f o f d u e p ro c e s s .” A 1 1 4 . T h e T a x C o u rt d e n ie d th e m o tio n to a m e n d . Shor t l yther eaf

t er , the Tax C our tgr ant ed the D i r ect or ’ s m ot i on t o di s m i s s the compl ai nt w ith p re ju d ic e , c o n c lu d in g th a t H M C ’s c o m p la in t w a s u n tim e ly. H M C then appe al ed t o t he A ppel l at e D i vi s i on of the Super i orC our t , w hi ch aff i r m ed the di s m i s s al . Si gni fi cant l y , the A ppel l at e D i vi s i on not ed thatther e w as “no fac tual foundat i on forpl ai nt i ff’ s ar gum entthatthe pr ocedur es fol l ow ed bythe D i vi s i on o f T a x a tio n in th is m a tte r v io la te d its ri g h t to p ro c e d u ra l d u e p ro c e s s .” A 1 5 5 . A ft erfai l i ng t o per s uade the s t at e court s thati t s pr ocedur al due pr oces s r i ght s had4

b ee n v iolated b ythe D ivisi o n , H M C fil ed a c o m p lai n t i n the U n it ed S tat es D istri ct C o u rt forthe D i s tr i ctof N ew J er s eyagai ns tR obertW i nt er , R obertT hom ps on, D avi d G avi n, R onal d C avana ugh, C hery l Ful m er , H ar ol d Fox, T hom as M cD onal d, and J ohn D oe ( “D efe ndant s ”) , al l of w hom w er e, atthe t i m e the compl ai ntw as fi l ed, empl oy ees of the D i vi s i on. H M C agai n al l eged i t s pr ocedur al due pr oces s r i ght s w er e vi ol at ed – now , by thes e def endant s – bythe s ei zur e and s al e of i t s l i quorl i cens e atauct i on w i thoutadvanc e n o tice . H M C d id , h o w e v e r, ad d so m e n e w tw ists, a v e rrin g , fo r e x a m p le, th a t it s f a ilu re to tim e ly f ile a p ro te s t w a s c a u s e d b yd e f e n d a n ts ’ m is c o n d u c t a n d m is re p re s e n ta tio n s . A 6 . H M C s oughtdamages , att orney s fee s , cos t s of s ui t , and i nt er es tforthe al l eged vi ol at i ons of it s const i tuti on al ri gh t s. H M C , how ever , di d notpr oper l ys erve def endant s . T hi s l ed the D i s tr i ctC our t , on O c to b e r 3 0 , 2 0 0 3 , to is su e a “ N o tice o f C a ll fo r D ism iss a l” p u rsu a n t to L o c a l R u le 41. 1( a) forfai l ur e t o pr os ecut e. A 15. T he not i ce i nform ed the part i es thata hea r i ng w o u ld b e h e ld to d e ter m in e if H M C ’s f

a ilu re to p ro se c u te w a rra n ted d ism iss a l o f its c o m p l a i n t . P r i o rt o th e h e a r i n g , H M C s e r v e d d e f e n d a n t s p r o p e r l y b u t , r e m a r k a b l y, H M C ’ s couns el fai l ed t o appea ratthe hea r i ng. T hus , on J anuary14, 2004, the D i s tr i ct C o u rt d is m is s e d H M C ’s c o m p la in t f o r f a ilu re to p ro s e c u te . O n F eb rua ry1 8 , 2 0 0 4 , H M C fil ed a m o ti o n to v ac ate the d ism issal “an d restore th is m a tter to th e a c tiv e trial list.” A 1 7 . T h e D istric t C o u rt h e a rd a rg u m e n t as to “w hetherther e’ s s uffi ci entexcus abl e bas es upon w hi ch t o r ei ns t at e the compl ai nt . ”5

A 245. T he C our t , i n an or al opi ni on, concl uded that“no l egi t i m at e exc us e [w as ] offe r ed fornotbegi nni ng the pr oces s of s ervi ng the compl ai ntunt i l s even mont hs aft erthe fi l i ng o f th e c o m p lain t.” A 2 4 4 -2 4 5 . It th e n tu rn e d its a tten tio n to w h e th e r H M C ’s c o m p lain t, even i f i tw as r ei ns t at ed, w oul d be di s m i s s ed on the bas i s of re s ju d ica ta orqual i fi ed i m m uni ty . T he C our tdet erm i ned thatH M C ’ s compl ai ntw oul d be di s m i s s ed, and s o, by or derof M ay13, 2004, deni ed the mot i on t o r ei ns t at e. II. T he D i s tr i ctC our thad j ur i s di ct i on overH M C ’ s cl ai m s under28 U . S. C . § 1331 a n d w e h a v e ju ri s d ic tio n to re v ie w th e f in a l o rd e r o f

th e D is tr ic t C o u rt u n d e r 2 8 U .S .C . § 1 2 9 1 . See Hi l lv. C i t

y of Scr ant on , 411 F. 3d 118, 124- 25 ( 3d C i r . 2005) . W e r evi ew t he D is tr ic t C o u rt ’s d e n ia l o f H M C ’s m o tio n to re in s ta te f o r a b u s e o f

d is c re tio n . See L orenzo v . G riffith , 1 2 F . 3 d 2 3 , 2 6 (3d C ir . 1 9 9 3 ). III . H M C raises three arg u m en ts on ap p ea l. F ir st, itarg u es th at th e D istri ct C o u rt err ed bys ua s pont e conve r t i ng H M C ’ s m ot i on t o vaca t e the di s m i s s al and r ei ns t at e the compl ai nti nt o a mot i on t o di s m i s s forfai l ur e t o s t at e a c l ai m . Second, i tcont ends that the doctr i ne of re s ju d ica ta d o e s n o t ap p lyu n d e r th e c irc u m sta n c e s o f th is c a se . T h ird , it m ai nt ai ns thatthe D i s tr i ctC our terr ed i n fi ndi ng thatdefe ndant s w er e ent i t l ed t o qual i fi ed im m u n ityb ec au se th e c o m p lai n t al lege d fa cts th at ev iden ce d v iolati o n s o f H M C ’s c o n s titu tio n a l r ig h ts b yd e f e n d a n ts .6

A . Mo tio n to R e in sta te Af t e rth e Di s tr i c tCo u r td i s mi s s e d HM C’ s c o mp l a i n tf o rf a i l u r e t o p r o s e c u t e , HM C m oved t o r ei ns t at e the compl ai nt , cl ai m i ng thati t“s t at es a cl ai m fordepr i vat i on of pr ocedur al due pr oces s and i s notbarr ed bythe def ens es of ei therabs ol ut e orqual i fi ed i m m uni ty . ” A 29. T hi s m ot i on w as oppos ed bydefe ndant s , and both s i des s ubm i t t ed br i efs . B eca us e the br i efs di s cus s ed l egal i s s ues as i f the compl ai nthad, i n fac t , al r eady been r ei ns t at ed, the D i s tr i ctC our ttr eat ed the br i efs as “aki n t o a mot i on t o di s m i s s . ” A 158. A f

te r h e a ri n g o ra l a rg u m e n t, th e D is tr ic t C o u rt d e n ie d H M C ’s m o tio n to re in s ta te . H M C a rg u e s th a t th e C o u rt im p e rm is s ib ly co n v e rt e d its m o tio n in to a m o tio n to d is m is s . W e d isa g re e . W h a t th e C o u rt d id d o w a s to d e c id e , p rio r to d e n y in g th e m o tio n to r ei ns t at e, thati tw oul d i nves t i gat e w hetherthe ca s e w oul d r equi r e di s m i s s al dow n the roa d b ec au se o f e ith er re s ju d ica ta o r q u a lifie d im m u n ity . A n d , the C o u rt e x p lain e d , it w ant ed “t o ens ur e that[H M C w oul d notbe] pr ej udi ced byan att orney ’ s negl ectand that there is no m iscarri ag e o f ju sti ce ” a n d thu s d ec ided to “lo o k [] d ee p er into th e m att er[ . ]” A 2 5 0 . T he D i s tr i ctC our tul t i m at el yconcl uded that“i tw oul d be fut i l e t o r ei ns t at e the c o m p l a i n tb e c a u s e i tw o u l d th e r e a f t e ri m m e d i a t e l yb e s u b

j e c tt o d i s m i s s a l [ . ] ” A 2 5 4 . We cannotconcl ude that , i n s o doi ng, the C our tabus ed i t s di s cr et i on.7

B . R e s J

u dica ta H M C ’s s e c o n d a rg u m e n t is th a t th e D istric t C o u rt e rre d b yf in d in g th a t r es ju d ica ta w o u ld b a r th e c o m p lain t. O u r a n a ly sis o f th is a rg u m e n t is stra ig h tf o rw a rd . “It is now s ett l ed thata fe der al courtm us tgi ve t o a s t at e- courtj udgm entthe s ame pr ecl us i ve eff ectas w oul d be gi ven thatj udgm entunderthe l aw of the St at e i n w hi ch the j udgm ent w as r ender ed. ” Migr a v. W ar r en C i t y Sch. D is t . B d. of

E duc. , 4 6 5 U .S . 7 5 , 8 1 (1 9 8 4 ). U n d e r N e w J e rs e yla w , re s ju d ica ta w i l l pr ohi bi tthe r el i t i gat i on of cl ai m s i f: ( 1) the fi nal j udgm enti n t he pr i oract i on w as val i d, fi nal , and on the mer i t s ; ( 2) the part i es i n the l at er act i on ar e the s ame, orar e i n pr i vi tyw i th thos e i n the pr i oract i on; and ( 3) the cl ai m i n t he la te r a c tio n g re w o u t o f th e s a m e o c c u rr e n c e a s th e c la im in th e e a rl ie r o n e . See M cN ei lv. L eg isla ti ve Ap

p o rti o n m en t C o m m ’n , 8 2 8 A .2 d 8 4 0 , 8 5 9 (N .J. 2 0 0 3 ). T h e se re q u ire m e n ts a re e a s ily sa tis f

ie d h e re . Fi r s t , i ti s undi s put ed thatther e has been a “val i d, fi nal , and on the mer i t s ” pr i or s t at e ac t i on. Second, al though t he def endant s i n the s t at e and f eder al act i ons ar e di ffe r ent , t hey ar e i n pr i vi tyw i th one another . I n N ew J er s ey , pr i vi tyi s “mer el ya w or d us ed t o s ayt hat the r el at i ons hi p betw een the one w ho i s a partyon the r ecor d and anotheri s cl os e enough t o i ncl ude thatot herw i thi n t he re s ju d ica ta . ” Z ir g e rv . G e n e r a l A c c id e n t I n s . C o ., 676 A . 2d 1065, 1071 ( N . J . 1996) ( quot at i on and ci t at i on om i t t ed) . M or eover , N ew J er s ey c o u rts a re m o re w ill in g to f in d th a t p a rties a re in p riv ityif th e p lain tiff

h a d a f u ll an d f a ir8

o p p o rt u n ity to litig a te its c la im s in th e f ir s t a c tio n . Id . T he def endanti n t he s t at e ac t i on w as the D i r ect orof the D i vi s i on, w her eas the d e f e n d a n t s i n th e f

e d e r a l a c t i o n we r e o th e re mp l o y e e s o f th e Di v i s i o n . Al th o u g h HM C o n lyn a m e d th e D ire c to r in th e sta te a c tio n , itw a s in e f f e c t ch a llen g in g , at le a st in p a rt, the ac t s of the i ndi vi dual defe ndant s l at ernamed i n the fe der al act i on. C ons equent l y , as the D i s tr i ctC our tfound, havi ng di ffe r entnamed defenda nt s i n the s t at e and f eder al act i on s i n the con t ext of this dis pu t e i s “a di st i ncti on w i tho ut a di fference. ” A 25 2. T hu s, the r el at i ons hi p betw een the def endant s i n both act i ons i s “cl os e enough” t o s at i s fyN ew J er s ey ’ s t es tforpr i vi ty . I n addi t i on, H M C had a f ul l oppor tuni tyt o l i t i gat e i t s due p ro c e s s c la im s b ye x te n s iv e ly litig a tin g b e f o re th e T a x C o u rt a n d th e A p p e lla te D iv is io n . Fi nal l y , the fe der al act i on “gr ew outof the s ame occurr ence as the cl ai m i n the ear l i erone. ” B oth act i ons s t emm ed di r ect l yfr om the pr ocedur es empl oy ed bythe D i vi s i on and the conduc tof the def endant s w hen theys ei zed a nd s ol d H M C ’ s l i quor l i cens e. I n s um , H M C ar gued bef or e the Tax C our tand the A ppel l at e D i vi s i on thatthe s t atut e of l i m i t at i ons s houl d have be en t ol l ed bec aus e i t s due pr oces s r i ght s w er e vi ol at ed w hen the D i vi s i on fai l ed t o gi ve i tpr opernot i ce of the pot ent i al s ei zur e and s al e of H M C ’ s l i quorl i cens e. I n i t s fede r al act i on, H M C es s ent i al l yr epac kages the s ame factual an d lega l argu m en ts r aised an d rejected b ythe N ew Jerse yco u rt s. A s the D istri ct C o u rt foundB e c a u se w e a g re e w ith th e D istric t C o u rt th a t re s ju d ica ta wo u l d b a rth i s a c t i o n , we 2 n e e d n o t a d d re s s its q u a lif ie d im m u n ity a n a lysis .

9 “D ur i ng or al ar gum entpl ai nt i ff’ s couns el conce ded atvar i ous t i m es thatthe s ame ar gum ent s had bee n ur ged i n the s t at e court , butthathe had l os tand that this co u rtsh o u ld rev isi t th o se issu es a n d ruli n g s. . . . T h e a rgu m en ts are es s ent i al l ythe s ame, and the ar gum ent s al l w er e orcoul d have be en r ai s ed i n s t at e court . ” A 252. W e a g re e w ith th e D istric t C o u rt. A s s u c h , this c a se c o u ld h a v e a n d , p re su m a b ly , w o u ld have be en di s m i s s ed on the bas i s of re s ju d ica ta h a d H M C ’s c o m p la in t b e e n re in s ta te d . A ft eral l , “[f

] eder al l i t i gat i on i s nota r epec hage r ound forl os er s of ea r l i ercont es t s , orfor thos e w ho over s l eptand mi s s ed the s t art er s ’ gun. ” R i verP ark, I nc. v. C i t y of Highland P ark , 2 3 F . 3 d 1 6 4 , 1 6 7 (7th C ir . 1 9 9 4 ). 2 I V. Forthe for egoi ng r eas ons , w e w i l l aff i r m the M ay13, 2004 or derof the D i s tr i ct C o u rt d e n y in g H M C ’s m o tio n to re in s ta te its c o m p la in t.