Source: https://supreme.justia.com/cases/federal/us/452/394/
Timestamp: 2019-04-26 16:07:55+00:00

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There is no equitable exception or allowance made for exceptional circumstances when a party fails to appeal a final judgment within the proper time, even if its position in closely related to those of appealing parties.
The federal government sued Federated Department Stores, Inc. for violating Section 1 of the Sherman Antitrust Act. The complaint alleged that the department stores had fixed the retail price of women's clothing in their northern California locations. Private individuals brought related class actions on behalf of the stores' customers, seeking treble damages. Moitie I was a state-court action, and Brown I was a federal-court action, each of which closely paralleled the claims brought by the federal government, even though Moitie I was based exclusively on state law and Section 4 of the Clayton Act. The Moitie case, like the others, was dismissed because the plaintiff had not alleged an injury to business or property, as required by that law. While most of the class action plaintiffs appealed to the Ninth Circuit, the lawyer representing Moitie and Brown brought new actions in state court instead of using the appeals process.
Moitie II and Brown II raised claims similar to those in the earlier cases, even though they asserted that they were brought exclusively under state law. They were removed to federal court, at which point they were dismissed by the trial court judge because they arose from the same parties, the same conduct, and the same time period as Moitie I and Brown I. This meant that res judicata applied, in the view of the trial court, but the court of appeals ruled that Moitie and Brown could proceed with their cases because their fate was so closely connected to those of the appealing parties. It held that they could benefit from a reversal of the judgments in the other actions on appeal, even though they had not appealed on their own account.
Direct appellate review rather than a new cause of action is the appropriate way to challenge a judgment that is based on a faulty understanding of the law. The judgment may be voidable, but a collateral challenge through the appeals of other parties is not the way to correct it. The equitable exception applied by the appeals court does not have any basis in pre-existing doctrine, and the interests of finality urge against creating such an exception. Once a dispute has been resolved, all parties to it must be bound and prevented from restarting litigation. Res judicata thus applies to block the new cases.
While it is possible that equities and public policy concerns will curtail the application of res judicata in some cases, this is not a situation in which an exception to the doctrine would arise. The parties are not as interdependent on each other as the claim suggests.
Principles of federal court jurisdiction permit a claim to be relitigated under state law after a federal antitrust case on the same subject matter in is dismissed on the merits. This decision actually diverges from long-standing principles by abandoning that rule. Parties may see this decision as an incentive to bring federal and state causes of action separately so that they can obtain a separate review for each.
This outcome unfolded in part because the Court was reluctant to give the individuals a windfall because of a reversal that was obtained by independent parties with no interest in their case. It also appeared that they had made the decision in an effort to avoid the appellate process.
Seven private antitrust actions (including separate actions by each of the respondents) were brought by plaintiffs seeking to represent classes of retail purchasers against petitioners, owners of various department stores, for alleged price fixing. The actions were consolidated in Federal District Court, which dismissed them for failure to allege an "injury" to the plaintiffs' "business or property" within the meaning of the Clayton Act. Plaintiffs in five of the actions appealed, but respondents chose instead to refile their two actions in state court, making allegations similar to those made in the prior complaints. Petitioners removed these new actions to the District Court, which dismissed them under the doctrine of res judicata, and respondents appealed. Because of this Court's intervening decision in Reiter v. Sonotone Corp., 442 U. S. 330, the Court of Appeals thereafter reversed and remanded the five cases which had been initially decided with respondents' first actions, and later reversed the District Court's dismissal of respondents' subsequent actions. The Court of Appeals held that, because respondents' position was "closely interwoven" with that of the successfully appealing parties, the doctrine of res judicata must give way to "public policy" and "simple justice."
Held: Res judicata bars relitigation of the unappealed adverse judgments against respondents as to their federal law claims. The res judicata consequences of a final, unappealed judgment on the merits are not altered by the fact that the judgment may have been wrong or rested on a legal principle subsequently overruled in another case. There is no general equitable doctrine which countenances an exception to the finality of a party's failure to appeal merely because his rights are "closely interwoven" with those of another party who successfully appeals. Cf. Reed v. Allen, 286 U. S. 191. Nor is there any principle of law or equity which sanctions rejection of the salutary principle of res judicata on the basis of "simple justice" or "public policy."
and enforced by the courts. . . ."
Hart Steel Co. v. Railroad Supply Co., 244 U. S. 294, 244 U. S. 299. Pp. 452 U. S. 398-402.
611 F.2d 1267, reversed and remanded.
REHNQUIST, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, POWELL, and STEVENS, JJ., joined. BLACKMUN, J., filed an opinion concurring in the judgment, in which MARSHALL, J., joined, post, p. 452 U. S. 402. BRENNAN, J., filed a dissenting opinion, post, p. 452 U. S. 404.
The only question presented in this case is whether the Court of Appeals for the Ninth Circuit validly created an exception to the doctrine of res judicata. The court held that res judicata does not bar relitigation of an unappealed adverse judgment where, as here, other plaintiffs in similar actions against common defendants successfully appeal the judgments against them. We disagree with the view taken by the Court of Appeals for the Ninth Circuit, and reverse.
States District Court for the Northern District of California. Each of these complaints tracked almost verbatim the allegations of the Government's complaint, though the Moitie I complaint referred solely to state law. All of the actions originally filed in the District Court were assigned to a single federal judge, and the Moitie I case was removed there on the basis of diversity of citizenship and federal question jurisdiction. The District Court dismissed all of the actions "in their entirety" on the ground that plaintiffs had not alleged an "injury" to their "business or property" within the meaning of § 4 of the Clayton Act, 15 U.S.C. § 15. Weinberg v. Federated Department Stores, 426 F.Supp. 880 (1977).
required that they be dismissed. This time, Moitie and Brown appealed.
Pending that appeal, this Court, on June 11, 1979, decided Reiter v. Sonotone Corp., 442 U. S. 330, holding that retail purchasers can suffer an "injury" to their "business or property" as those terms are used in § 4 of the Clayton Act. On June 25, 1979, the Court of Appeals for the Ninth Circuit reversed and remanded the five cases which had been decided with Moitie I and Brown I, the cases that had been appealed, for further proceedings in light of Reiter.
appealed the decision against them. It then asserted that "nonappealing parties may benefit from a reversal when their position is closely interwoven with that of appealing parties," ibid., and concluded that, "[b]ecause the instant dismissal rested on a case that has been effectively overruled," the doctrine of res judicata must give way to "public policy" and "simple justice." Id. at 1269-1270. We granted certiorari, 449 U.S. 991 (1980), to consider the validity of the Court of Appeals' novel exception to the doctrine of res judicata.
"erroneous conclusion' reached by the court in the first suit does not deprive the defendants in the second action 'of their right to rely upon the plea of res judicata. . . . A judgment merely voidable because based upon an erroneous view of the law is not open to collateral attack, but can be corrected only by a direct review, and not by bringing another action upon the same cause [of action]."
consequences which it was the very purpose of the doctrine of res judicata to avert."
Reed v. Allen, 286 U. S. 191, 286 U. S. 201 (1932).
"The judgment in the ejectment action was final, and not open to assault collaterally, but subject to impeachment only through some form of direct attack. The appellate court was limited to a review of the interpleader decree, and it is hardly necessary to say that jurisdiction to review one judgment gives an appellate court no power to reverse or modify another and independent judgment. If respondent, in addition to appealing from the [interpleader] decree, had appealed from the [ejectment] judgment, the appellate court, having both cases before it, might have afforded a remedy. . . . But this course respondent neglected to follow."
Id. at 286 U. S. 198.
calculated choice to forgo their appeals. See also Ackermann v. United States, 340 U. S. 193, 340 U. S. 198 (1950) (holding that petitioners were not entitled to relief under Federal Rule of Civil Procedure 60(b) when they made a "free, calculated, deliberate choic[e]" not to appeal).
"[p]ublic policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties."
"[the] doctrine of res judicata is not a mere matter of practice or procedure inherited from a more technical time than ours. It is a rule of fundamental and substantial justice, 'of public policy and of private peace,' which should be cordially regarded and enforced by the courts. . . ."
maxim that the interest of the state requires that there be an end to litigation -- a maxim which comports with common sense as well as public policy. And the mischief which would follow the establishment of precedent for so disregarding this salutary doctrine against prolonging strife would be greater than the benefit which would result from relieving some case of individual hardship."
Reed v. Allen, 286 U.S. at 286 U. S. 198-199.
"the district court's dismissal on grounds of res judicata should be reversed, and the district court directed to grant respondent's motion to remand to the California state court."
Ibid. In their view, Brown I cannot be considered res judicata as to their state law claims, since Brown I raised only federal law claims, and Brown II raised additional state law claims not decided in Brown I, such as unfair competition, fraud, and restitution.
It is unnecessary for this Court to reach that issue. It is enough for our decision here that Brown I is res judicata as to respondents' federal law claims. Accordingly, the judgment of the Court of Appeals is reversed, and the cause is remanded for proceedings consistent with this opinion.
Petitioners have filed a supplemental memorandum with the Court indicating that Moitie II has been voluntarily dismissed, leaving Brown II as the subject of the petition.
will not permit plaintiff to use artful pleading to close off defendant's right to federal forum . . . , [and] occasionally the removal court will seek to determine whether the real nature of the claim is federal, regardless of plaintiff's characterization.
14 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3722, pp. 564-566 (1976) (citing cases) (footnote omitted). The District Court applied that settled principle to the facts of this case. After "an extensive review and analysis of the origins and substance of" the two Brown complaints, it found, and the Court of Appeals expressly agreed, that respondents had attempted to avoid removal jurisdiction by "artful[ly]" casting their "essentially federal law claims" as state law claims. We will not question here that factual finding. See Prospect Dairy, Inc. v. Dellwood Dairy Co., 237 F.Supp. 176 (NDNY 1964); In re Wiring Device Antitrust Litigation, 498 F.Supp. 79 (EDNY 1980); Three J Farms, Inc. v. Alton Box Board Co., 1979-1 Trade Cases ¦ 62,423 (SC 1978), rev'd on other grounds, 609 F.2d 112 (CA4 1979), cert. denied, 445 U.S. 911 (1980).
The dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is a "judgment on the merits." See Angel v. Bullington, 330 U. S. 183, 330 U. S. 190 (1947); Bell v. Hood, 327 U. S. 678 (1946).
The decision below also conflicts with those of other Courts of Appeals holding that an adverse judgment from which no appeal has been taken is res judicata and bars any future action on the same claim, even if an authoritative contrary judicial decision on the legal issues involved is subsequently rendered in another case. E.g., National Association of Broadcasters v. FCC, 180 U.S.App.D.C. 259, 265, 554 F.2d 1118, 1124 (1976) ("It is the generally accepted rule in civil cases that, where less than all of the several co-parties appeal from an adverse judgment, a reversal as to the parties appealing does not necessitate or justify a reversal as to the parties not appealing"); Clouatre v. Houston Fire & Cas. Co., 229 F.2d 596, 597-598 (CA5 1956); Appleton Toy & Furniture Co. v. Lehman Co., 165 F.2d 801, 802 (CA7 1948); Ripperger v. A. C. Allyn & Co., 113 F.2d 332, 333 (CA2), cert. denied, 311 U.S. 695 (1940).
While I agree with the result reached in this case, I write separately to state my views on two points.
"Just as res judicata is occasionally qualified by an overriding, competing principle of public policy, so occasionally it needs an equitable tempering."
"where the rights of appealing and nonappealing parties are so interwoven or dependent on each other as to require a reversal of the whole judgment when a part thereof is reversed."
Second, and in contrast, I would flatly hold that Brown I is res judicata as to respondents' state law claims. Like the District Court, the Court of Appeals found that those state law claims were simply disguised federal claims; since respondents have not cross-petitioned from that judgment, their argument that this case should be remanded to state court should be itself barred by res judicata. More important, even if the state and federal claims are distinct, respondents' failure to allege the state claims in Brown I manifestly bars their allegation in Brown II. The dismissal of Brown I is res judicata not only as to all claims respondents actually raised, but also as to all claims that could have been raised. See Commissioner v. Sunnen, 333 U. S. 591, 333 U. S. 597 (1948); Restatement (Second) of Judgments § 61.1 (Tent. Draft No. 5, Mar. 10, 1978). Since there is no reason to believe that it was clear at the outset of this litigation that the District Court would have declined to exercise pendent jurisdiction over state claims, respondents were obligated to plead those claims if they wished to preserve them. See id. § 61.1, Comment e. Because they did not do so, I would hold the claims barred.
* The Court of Appeals' reliance, 611 F.2d 1267, 1269 (CA9 1980), on Uresti; Kvenild v. Taylor, 594 P.2d 972 (Wyo.1979); and In re Estate of McDill, 14 Cal.3d 831, 537 P.2d 874 (1975), appears to me to be clearly misplaced. Unlike those cases, this is not one in which the appealing and nonappealing parties made competing claims to a single piece of property, see McDill, or in which reversal only as to the appealing party would have unjustly left the nonappealing party liable, see Kvenild, or without recourse on his cross-claim, see Uresti.
In its eagerness to correct the decision of the Court of Appeals for the Ninth Circuit, the Court today disregards statutory restrictions on federal court jurisdiction, and, in the process, confuses, rather than clarifies, long-established principles of res judicata. I therefore respectfully dissent.
stated four state law causes of action: (1) fraud and deceit, (2) unfair business practices, (3) civil conspiracy and (4) restitution. Plaintiffs' Complaint ¦¦ 11-14, App. 99-101. It alleged "not less than $600" damages per class member, and in addition sought "appropriate multiple damages," exemplary and punitive damages, interest from date of injury, attorney's fees and costs, and other relief. Id. at 101-102. All four of the causes of action rested wholly on California statutory or common law; none rested in any fashion on federal law.
Nonetheless, petitioners removed the suit to the United States District Court for the Northern District of California, where respondent Brown filed a motion to remand on the ground that his action raised no federal question within the meaning of 28 U.S.C. § 1441(b). Respondent's motion was denied by the District Court, which stated that "[f]rom start to finish, plaintiffs have essentially alleged violations by defendants of federal antitrust laws." App.192. The court reasoned that "[a]rtful pleading" by plaintiffs cannot "convert their essentially federal law claims into state law claims," and held that respondent's complaint was properly removed "because [it] concerned federal questions which could have been originally brought in Federal District Court without satisfying any minimum amount in controversy." Ibid. The court then dismissed the action, holding that, under the doctrine of res judicata, Brown II was barred by the adverse decision in an earlier suit in federal court (Brown I) involving "the same parties, the same alleged offenses, and the same time periods." Ibid.
The Court of Appeals affirmed the District Court's decision not to remand, stating that "[t]he court below correctly held that the claims presented were federal in nature." 611 F.2d 1267, 1268 (CA9 1980) (memorandum on denial of reconsideration). However, the Court of Appeals reversed the District Court's order of dismissal, and remanded for trial.
"right or immunity created by the Constitution or laws of the United States [constitutes] an element, and an essential one, of the plaintiff's cause of action."
Gully v. First National Bank in Meridian, 299 U. S. 109, 299 U. S. 112 (1936). An action arising under state law may not be removed solely because a federal right or immunity is raised as a defense. Tennessee v. Union & Planters' Bank, 152 U. S. 454 (1894).
"the party who brings a suit is master to decide what law he will rely upon, and therefore does determine whether he will bring a 'suit arising under' the . . . laws of the United States"
"The power reserved to the states under the Constitution to provide for the determination of controversies in their courts may be restricted only by the action of Congress in conformity to the Judiciary Articles of the Constitution."
"Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined."
The general rule that a plaintiff basing his claim solely on state law thereby avoids removal applies only where state substantive law has not been preempted by federal law.
federal law or under state law as an independent source of that right, the federal court on removal proceedings may not generally look beyond the face of the initial pleading in the state action to determine whether a federal question is presented. In certain areas, however, this either-or option is no longer available, for Congress has deemed that federal substantive law should altogether preempt and supplant state law. In such a case, where Congress has explicitly said that the exclusive source of a plaintiff's right to relief is to be federal law, it would be unacceptable to permit that very plaintiff, by the artful manipulation of the terms of a complaint, to defeat a clearly enunciated congressional objective."
This lawsuit concerns the area of antitrust in which federal laws have not displaced state law. See generally Mosk, State Antitrust Enforcement and Coordination with Federal Enforcement, 21 A.B.A. Antitrust Section 358, 361-368 (1962). Thus, respondent Brown had the option of proceeding under state or federal law, or both. So far as is apparent from the complaint, which was carefully limited to four California state law causes of action, this case arises wholly without reference to federal law. Under settled principles of federal jurisdiction, therefore, respondent's lawsuit should not have been removed to federal court. See Gully v. First National Bank in Meridian, 299 U.S. at 299 U. S. 113.
The Court today nonetheless sustains removal of this action on the ground that "at least some of the claims had a sufficient federal character to support removal." Ante at 397 U. S. 397, n. 2. I do not understand what the Court means by this. Which of the claims are federal in character? Why are the claims federal in character? In my view, they are all predicated solely on California law. [Footnote 2/4] Certainly, none of them purports to state a claim under the federal antitrust laws, and the mere fact that plaintiffs might have chosen to proceed under the Clayton Act surely does not suffice to transmute their state claims into federal claims.
Even assuming that this Court and the lower federal courts have jurisdiction to decide this case, however, I dissent from the Court's disposition of the res judicata issue. Having reached out to assume jurisdiction, the Court inexplicably recoils from deciding the case. The Court finds it "unnecessary" to reach the question of the res judicata effect of Brown I on respondents' "state law claims." Ante at 452 U. S. 402 (emphasis in original). "It is enough for our decision here," the Court says, "that Brown I is res judicata as to respondents' federal law claims." Ibid. But respondents raised only state law claims; respondents did not raise any federal law claims.
Thus, if the Court fails to decide the disposition of respondents' state law claims, it decides nothing. And in doing so, the Court introduces the possibility -- heretofore foreclosed by our decisions [Footnote 2/7] -- that unarticulated theories of recovery may survive an unconditional dismissal of the lawsuit.
Like JUSTICE BLACKMUN, I would hold that the dismissal of Brown I is res judicata not only as to every matter that was actually litigated, but also as to every ground or theory of recovery that might also have been presented. See ante p. 452 U. S. 402 (opinion concurring in judgment); 1B J. Moore & T. Currier, Moore's Federal Practice ¦ 0.410, p. 1163 (1980). An unqualified dismissal on the merits of a substantial federal antitrust claim precludes relitigation of the same claim on a state law theory. Woods Exploration & Producing Co. v. Aluminum Co. of America, 438 F.2d 1286, 1312-1315 (CA5 1971), cert. denied, 404 U.S. 1047 (1972); Ford Motor Co. v. Superior Court, 35 Cal.App.3d 676, 680, 110 Cal.Rptr. 59, 61-62 (1973); see Restatement (Second) of Judgments § 61.1, Reporter's Note to Illustration 10, Comment e, pp. 178-179 (Tent. Draft No. 5, Mar. 10, 1978). The Court's failure to acknowledge this basic principle can only create doubts and confusion where none were before, and may encourage litigants to split their causes of action, state from federal, in the hope that they might win a second day in court.
I therefore respectfully dissent, and would vacate the judgment of the Court of Appeals with instructions to remand to the District Court with instructions to remand to state court.
Since the action by respondent Moitie has been voluntarily dismissed, the only remaining issues concern the claims of respondent Brown.
As the District Court acknowledged, Brown II could not be removed on the basis of diversity of citizenship, because the amount in controversy did not exceed $10,000. App.190. The court correctly noted, however, that the action could have been removed without regard to the amount in controversy if it could have been brought as an original action in federal court without meeting any minimum amount in controversy. Ibid. Actions under the Clayton Act, 15 U.S.C. § 15, may be brought in federal court without regard to amount in controversy. See also Pub. L. 96-486, §§ 2(a), 4, 94 Stat. 2369-2370, 28 U.S.C. § 1331 (1976 ed., Supp. IV), and note following § 1331 (repeal of minimum amount in controversy for federal question cases pending as of date of enactment).
In this context, it is often said that a plaintiff may not "fraudulently" defeat removal by manipulation of the complaint. See, e.g., Sheeran v. General Electric Co., 593 F.2d at 96; Jones v. General Tire & Rubber Co., 541 F.2d 660, 664-665 (CA7 1976); see also Great Northern R. Co. v. Alexander, 246 U. S. 276, 246 U. S. 281, 282 (1918). Where, however, both state and federal laws would support a claim, it makes little sense to suggest that the plaintiff acts "fraudulently" if he chooses to proceed under state law in state court, rather than under federal law in federal court. See Romick v. Bekins Van & Storage Co., 197 F.2d 369, 371 (CA5 1952).
Indeed, the Court admits that the additional claims in Brown II, not included in Brown I, such as unfair competition, fraud, and restitution, are "state law claims." Ante at 452 U. S. 402.
The District Court did not consider this conclusion a "factual finding." It was included in a section of the District Court opinion devoted to legal analysis, not in the section entitled "Facts." Compare App. 187-190 with id. at 190-192. In any event, a court's conclusion concerning the legal character of a complaint can hardly be considered a "factual finding."
The decisions cited by the Court in support of its approach, all from District Courts, are inapplicable. In re Wiring Device Antitrust Litigation, 498 F.Supp. 79 (EDNY 1980), and Three J Farms, Inc. v. Alton Box Board Co., 1979-1 Trade Cases ¦ 62,423, p. 76,550 (SC 1978), rev'd on other grounds, 609 F.2d 112 (CA4 1979), cert. denied, 445 U.S. 911 (1980), were cases in which the State itself had confined application of the state antitrust laws to purely intrastate commerce, thus leaving federal law the sole basis for suit. Similarly, Prospect Dairy, Inc. v. Dellwood Dairy Co., 237 F.Supp. 176 (NDNY 1964), concerned a claim of an unfair labor practice, which is governed exclusively by federal law. See 29 U.S.C. § 187; Teamsters v. Morton, 377 U. S. 252 (1964).
Admittedly, some courts have not strictly observed the restrictions on removal jurisdiction. See, e.g., In re Carter, 618 F.2d 1093, 1101 (CA5 1980), cert. denied sub nom. Sheet Metal Workers v. Carter, 450 U. S. 949 (1981). 14 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3722, pp. 564-566 (1976), reports that "occasionally the removal court will seek to determine whether the real nature of the claim is federal, regardless of plaintiff's characterization." (Footnote omitted.) Perusal of the cited decisions, however, reveals that most of them correctly confine this practice to areas of the law preempted by federal substantive law.
See Brown v. Felsen, 442 U. S. 127, 442 U. S. 131 (1979); United States v. Munsingwear, Inc., 340 U. S. 36, 340 U. S. 38 (1950); Commissioner v. Sunnen, 333 U. S. 591, 333 U. S. 597 (1948); Chicot County Drainage District v. Baxter State Bank, 308 U. S. 371, 308 U. S. 378 (1940); Cromwell v. County of Sac, 94 U. S. 351, 94 U. S. 352-353 (1877).

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