Opinion ID: 6350543
Heading Depth: 2
Heading Rank: 2

Heading: Same Transaction

Text: We also may apply claim preclusion only if BDC’s suit grows out of the same “transaction” as the Suggs’ suit. Grava, 653 N.E.2d at 229. The Ohio Supreme Court takes a fact-based approach to what counts as a “transaction,” defining the word to mean a “common nucleus of operative facts.” Id. (quoting Restatement (Second) of Judgments § 24 cmt. b). Under this definition, suits asserting different legal theories, relying on different evidence, or seeking different remedies can arise from the same “transaction” if they concern the same general fact pattern. See U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 991 (Ohio 2008); Grava, 653 N.E.2d at 229. To decide whether the facts across two cases fall within a single transaction, Ohio courts use a “logical relation” test. Rettig Enters., Inc. v. Koehler, 626 N.E.2d 99, 103 (Ohio 1994). The test asks whether litigating each claim separately “would involve a No. 21-3673 Bus. Dev. Corp. of S.C. v. Rutter & Russin, LLC, et al. Page 11 substantial duplication of effort and time by the parties and the courts.” Id.; cf. Restatement (Second) of Judgments § 24(2). BDC’s case comes with an added wrinkle to this typical “transaction” inquiry. Claim preclusion usually arises when the same plaintiff loses a first suit and seeks to litigate a second one. See Gullotta, 899 N.E.2d at 991; Kirkhart v. Keiper, 805 N.E.2d 1089, 1091 (Ohio 2004); Grava, 653 N.E.2d at 229–30. Here, by contrast, the Suggs were the plaintiffs in the first suit; BDC was a defendant. Despite this wrinkle, courts have applied “defendant preclusion” if a defendant-turned-plaintiff raises a claim in a second suit that arises from the same fact pattern as the first suit. 18 Charles A. Wright et al., Federal Practice and Procedure § 4414, at 345 (3d ed. 2016). When does this type of suit meet Ohio’s “transaction” test? The Ohio Supreme Court has little caselaw on the topic, so we again look to the Restatement. See Bradley, 749 F.3d at 557. It notes that a defendant who fails to assert a claim in a first suit will be “precluded” from maintaining a second suit on the claim in two circumstances. Restatement (Second) of Judgments § 22(2). Circumstance One: Preclusion will apply if the defendant-turned-plaintiff should have filed the second suit’s cause of action as a “counterclaim” in the first suit under a “compulsory counterclaim statute or rule of court[.]” Id. § 22(2)(a). This circumstance does not apply here. Ohio Civil Rule 13(A) requires a defendant to assert a compulsory counterclaim against a plaintiff if, among other things, “it arises out of the transaction or occurrence that is the subject matter” of the plaintiff’s claim. BDC did not bring a “counterclaim” against the Suggs at all, and its claims against State Farm (a codefendant) would qualify as permissive “cross claims.” Ohio Civ. R. 13(G). In addition, when identifying the “transaction” for this compulsory-counterclaim rule, the Ohio Supreme Court has distinguished the facts from which the first suit arises from the parties’ litigating conduct during the suit. See Yaklevich v. Kemp, Schaeffer & Rowe Co., L.P.A., 626 N.E.2d 115, 119 (Ohio 1994). An abuse-of-process claim, for example, requires a party to litigate a suit for an improper purpose. See id. at 118. The court has held that the defendant to the abusive suit generally need not raise an abuse-of-process claim as a compulsory counterclaim. Id. at 118–19. Rather, it may defend against the case and then file a second abuse-of-process suit. Id. at 119. No. 21-3673 Bus. Dev. Corp. of S.C. v. Rutter & Russin, LLC, et al. Page 12 Circumstance Two: Even if no court rule would require a defendant to assert a claim in the first suit, preclusion still applies if the “relationship” between the defendant-turned-plaintiff’s claim in the second suit “and the plaintiff’s claim” in the first “is such that successful prosecution of the second action would nullify the initial judgment or would impair rights established in the initial action.” Restatement (Second) of Judgments § 22(2)(b). The pragmatic “transaction” test thus prevents a defendant-turned-plaintiff from filing a second suit merely to attack the first suit’s judgment. So, for example, a defendant could not file a second suit raising a “restitution” theory to recover the funds that it paid as a result of the first suit’s judgment. Id. § 22 cmt. f; see also 18 Wright, supra, § 4414, at 352; Cadle Co. v. Reiner, Reiner & Bendett, P.C., 307 F. App’x 884, 889–90 (6th Cir. 2009); A.B.C.G. Enters., Inc. v. First Bank Se., N.A., 515 N.W.2d 904, 907–09 (Wis. 1994). Ohio cases comport with this approach. On the one hand, Ohio courts sometimes hold that a second suit involves a different “transaction” when it challenges conduct that occurred during the litigation of the first suit. Critically, however, the relief sought in these cases was consistent with—not contrary to—the first judgment. See Davis v. Wal-Mart Stores, Inc., 756 N.E.2d 657, 659 (Ohio 2001); see also Yaklevich, 626 N.E.2d at 116, 119; Hall v. Tucker, 829 N.E.2d 1259, 1271–72 (Ohio Ct. App. 2005). In Davis, for example, a plaintiff successfully prosecuted a wrongful-death action against Wal-Mart for the death of her husband, a Wal-Mart employee. 756 N.E.2d at 658. During the litigation, the plaintiff determined that Wal-Mart had withheld evidence. Id. She thus filed a second action for spoliation of evidence. Id. The Ohio Supreme Court held that claim preclusion did not apply because Wal-Mart’s conduct in failing to disclose evidence was a distinct “transaction” from its conduct in causing an employee’s death. Id. at 659. But the plaintiff had won that first action; she was not seeking to undermine it. See id. at 658. On the other hand, Ohio courts have held that a party’s second suit falls within the same “transaction” as the first one if the suit seeks relief that “would necessarily vacate or modify” the prior suit’s judgment. Keen v. Keen, 811 N.E.2d 565, 567 (Ohio Ct. App. 2004); see Buckingham, 113 N.E.3d at 1096. In Buckingham, for example, a husband and wife litigated their divorce proceedings to a final judgment. 113 N.E.3d at 1094. The wife later brought No. 21-3673 Bus. Dev. Corp. of S.C. v. Rutter & Russin, LLC, et al. Page 13 another suit alleging fraudulent-concealment and spoliation-of-evidence claims against her husband for hiding assets during the earlier proceedings. Id. The Ohio court reasoned that claim preclusion barred the wife’s suit (and that the trial court lacked jurisdiction over it) because the “damages she [sought] effectively would modify the relief that was granted by the domestic relations division in the divorce decree.” Id. at 1096. Under these rules, BDC’s suit arises from the same transaction. For starters, some of BDC’s claims against State Farm—those for breach of contract and bad-faith denial of coverage—are identical to the claims litigated by the Suggs. These claims are not just “offshoots” of the “same basic controversy”; they are the “same basic controversy[.]” Koehler, 626 N.E.2d at 103. BDC’s remaining claims—whether labeled abuse of process, tortious interference with contract, fraud, or anything else—all challenge the litigating conduct of the parties and attorneys in the Suggs’ suit. These claims are more like those found precluded in Buckingham than those allowed to proceed in Davis. If BDC successfully proved its claims, these claims would “nullify” the judgment from the Suggs’ suit and “impair” the rights “established” by the suit’s outcome. Restatement (Second) of Judgments § 22(2)(b). Both State Farm and the Suggs obtained a binding judgment that BDC was not entitled to any portion of the insurance proceeds. Now, however, BDC seeks the opposite judgment—that it was, in fact, entitled to those proceeds. Thus, BDC cannot win this case without our court holding that the Suggs’ earlier case was wrongly decided. And BDC’s suit would compel State Farm to pay the same claim twice because BDC seeks most of “the amount” that State Farm “paid” to the Suggs “pursuant to the [earlier] judgment[.]” Id. § 22 cmt. f. In short, BDC cannot prove the torts alleged in this suit without obliterating the earlier judgment. Its claims thus involve the same “transaction.” Cf. Berkshire Invs., LLC v. Taylor, 278 P.3d 943, 952–53 (Idaho 2012); Chaara v. Lander, 45 P.3d 895, 898–99 (N.M. Ct. App. 2002).