Opinion ID: 168501
Heading Depth: 1
Heading Rank: 2

Heading: Law of claim preclusion

Text: 10 Before discussing the specific elements of Utah and federal law of claim preclusion, we narrow our focus to the key issue in this case. Although plaintiffs attack the district court's claim preclusion analysis on a number of points, we perceive the key issue to be whether plaintiffs' current complaint represents an impermissible attempt to split their claims. Stone v. Dep't of Aviation, 453 F.3d 1271, 1278 (10th Cir. 2006) (A plaintiff's obligation to bring all related claims together in the same action arises under the common law rule of claim preclusion prohibiting the splitting of actions.). 11 The Restatement (Second) of Judgments § 24 (1982) enunciates the general rule concerning claim splitting: 12 (1) When a valid and final judgment rendered in an action extinguishes the plaintiff's claim pursuant to the rules of merger or bar . . . the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose. 13 (2) What factual grouping constitutes a transaction, and what groupings constitute a series, are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage. 14 (emphasis added). 15 The question for us, then, is whether the facts that form the basis of plaintiffs' current claims (the 2002 amended complaint) are part of the same transaction they asserted in the previous actions. This question is determined by the manner in which the facts constituting the transaction are grouped. As will be demonstrated, the district court grouped all facts arising prior to the final judgments in the previous actions as a single transaction.
16 In the case of a state court judgment, the state law where the judgment was entered (here, Utah) applies. See 28 U.S.C. § 1738 (full faith & credit statute); Fox v. Maulding, 112 F.3d 453, 456 (10th Cir.1997) (We must, therefore, ascertain what preclusive effect [Utah] would give its own decision before we may know what effect it should be given in the federal court.) (quotation omitted). In the case of the § 1983 suit, federal law of preclusion applies. Yapp v. Excel Corp., 186 F.3d 1222, 1226 (10th Cir.1999).
Under Utah law: 17 In order for claim preclusion to bar a subsequent cause of action, a plaintiff must satisfy three requirements: 18 First, both cases must involve the same parties or their privies. Second, the claim that is alleged to be barred must have been presented in the first suit or must be one that could and should have been raised in the first action. Third, the first suit must have resulted in a final judgment on the merits.... All three elements must be present for claim preclusion to apply. 19 Macris & Assocs., Inc. v. Neways, Inc., 16 P.3d 1214, 1219 (Utah 2000).
20 It is uncontested that both plaintiffs were parties to the 1999 Utah action. This element of claim preclusion analysis is therefore satisfied. 21
22 Plaintiffs advance three reasons why their claims in this action either could not or should not have been raised in the earlier, state court action. First, the suits are not the same cause of action. Second, the action for judicial review they pursued in state court does not provide for damages or the relief contemplated under § 1983; and does not provide for the other claims asserted, such as procedural due process and the right to a meaningful hearing under federal law. Aplt. Opening Br. at 41. Third, they were not obligated to raise claims that arose after the filing of their complaint in the earlier action. 23 Only plaintiffs' first and third arguments have merit and therefore limit the application of claim preclusion to their claims. 24
25 [F]or the doctrine of res judicata to preclude a subsequent cause of action . . . the cause of action in the present suit must be identical to the one brought in the prior suit. Macris, 16 P.3d at 1221. Identity does not refer to an exact identity between the legal theory of the claims brought in the first and second actions; rather, the question is whether there is an identity of facts and evidence between the two claims. Id. Here, the district court was mistaken in failing to recognize the lack of identity between the facts and evidence underlying some of the claims raised in the prior state court action and those raised in this action, a factor that should have prevented the application of claim preclusion. 6 On remand, therefore, the district court should carefully analyze this element as it pertains to each of the claims we remand for further consideration. 26
27 Plaintiffs' second argument, once appropriately narrowed, is easily resolved. It is essential to notice the scope of plaintiffs' argument on appeal. They are not arguing that the limited nature of a proceeding for review of a conditional use permit under Utah law did not permit them to raise unrelated claims, such as their claims about hindrance of subdivision development, denial of a beer license, being excluded from the city library, etc. They simply argue that their federal constitutional claims pertaining to the conditional use permit could not have been brought in a petition for review proceeding. 28 Although the statute under which plaintiffs sought judicial review, Utah Code Ann. § 10-9-1001 (subsequently renumbered as Utah Code Ann. § 10-9a-801), does not expressly provide an opportunity to raise federal constitutional claims, the Utah courts have considered and determined both state and federal constitutional claims in actions for review of, or challenging, municipal land use decisions. See, e.g., Anderson v. Provo City Corp., 108 P.3d 701, 707-09, 710 (Utah 2005) (addressing state equal protection and federal right-to-travel claims); Patterson v. Am. Fork City, 67 P.3d 466, 473-76 (Utah 2003) (considering federal equal protection and due process claims). Plaintiffs rely specifically on Utah Code Ann. § 10-9a-801(3)(a)(ii), which states that the courts shall . . . determine only whether or not the decision, ordinance, or regulation is arbitrary, capricious, or illegal. (emphasis added). The district court reasoned that this language refers only to the standard of review, and does not limit the type of ancillary, constitutional matters that a court conducting a review of a municipal land use decision may consider. We agree. 29
30 The district court found that plaintiffs could have and should have included in the Utah case all of their claims that arose from facts that occurred prior to the resolution of the Utah state court proceeding. See Aplt.App. at 450 (emphasis added) (To the extent[] that a few of plaintiffs' federal § 1983 claims arise from alleged facts occurring subsequent to the resolution of the state court action, such claims are not precluded under the court's claim preclusion analysis.). This finding, however, does not follow from the applicable Utah law. 31 In Macris, 16 P.3d at 1219, the defendant argued that the plaintiff's claims were barred by claim preclusion because they had not been included in a prior action, and the plaintiff knew of its claims against [defendant] before the trial in Macris I began and should therefore have amended its complaint in that action and asserted the claims now pursued in the present action. Id. (emphasis in original). The Utah Supreme Court rejected this argument, holding instead that a plaintiff need only include claims in a suit for res judicata purposes if the plaintiff was aware of the facts upon which the later claims were based at the time the first suit was filed. Id. at 1220 (emphasis added). 32 Plaintiffs filed their Utah state court action on July 12, 1999. Thus, any causes of action based on facts that occurred after that date need not have been included in the case for claim-preclusion purposes. This differs from the district court's conclusion, which would have barred any claims that arose prior to November 10, 1999, when the state court ruled in favor of plaintiffs on their claims. Although this is a difference of only four months, it is a difference required under Utah law.
33 Plaintiffs also contend that the prior state proceeding did not result in a final judgment on the merits of their claims. The Utah Court of Appeals, after ruling in plaintiffs' favor on the invalidity of Boulder's zoning ordinance, stated [t]he ordinance's invalidity renders moot [plaintiffs'] other claims. Hatch, 21 P.3d at 249. Defendants argue that this is in fact a judgment on the merits, as to the invalidity of the zoning ordinance claim. Plaintiffs argue, however, that since the prior judgment did not adjudicate their other claims on the merits (it merely found them moot), the judgment cannot have a preclusive effect on the claims that the court found moot, or any other claims they might have raised. 34 Had the state court resolved plaintiffs' claims entirely on mootness grounds, there would be no final judgment from which claim preclusion could result, because Utah follows the general rule that a dismissal for lack of jurisdiction does not bar another action by the plaintiff on the same claim. Snyder v. Murray City Corp., 73 P.3d 325, 332-33 (Utah 2003); Gibson v. Utah State Teachers' Ret. Bd., 99 Utah 576, 105 P.2d 353, 355 (1940). See also Restatement (Second) of Judgments § 20(1)(a). A final judgment that found some claims moot, however, and resolved at least one of them on the merits, is different. The final judgment here, on one of plaintiffs' claims, satisfied the requirement of a final judgment for claim-splitting rules. We believe the Utah courts would conclude that the judgment had a preclusive effect as to any claims that should have been brought, but were not.
35 The disposition of the prior state court action bars Hatch and Mitchell from bringing any claim involving identical facts or evidence that arose prior to the filing of their Utah state court action on July 12, 1999.
36 If the judgment reached in the prior federal suit only barred claims that accrued prior to the filing of Hatch's September 1996 complaint, it would not preclude any of plaintiffs' claims. Since the district court broadly determined that the judgment also barred any claims that could have been raised prior to the April 1999 final judgment in the prior suit, however, we discuss the relevant law, to permit the district court to apply the law more narrowly on remand. 37 Under federal law, the application of claim preclusion requires that three elements be satisfied: (1) a judgment on the merits in the earlier action; (2) identity of the parties or their privies in both suits; and (3) identity of the cause of action in both suits. Yapp, 186 F.3d at 1226. The district court correctly noted that the prior federal court judgment involved only Hatch and therefore did not preclude any claims by Mitchell in this case. The only meritorious argument that Hatch makes pertains to the third element: whether the cause of action sought to be precluded is identical with that raised in the prior action. 38 Hatch makes two arguments on this point. First, he argues that [t]he actions alleged by Hatch in this case could not have been raised in Hatch I [the § 1983 suit], because they occurred after September 1996 when Hatch I was filed. Aplt. Opening Br. at 38. Second, he argues that the only issues actually presented in the first case were those involving Hatch's business license for beer sales and camping in 1995, and the destruction of his sign in 1995. In other words, Hatch asserts that the causes of action now advanced are not identical with those that were litigated in the prior action, and that therefore claim preclusion should not apply.
39 This circuit has adopted the transactional test contained in the Restatement (Second) of Judgments § 24. Yapp, 186 F.3d at 1227. The transactional approach provides that a claim arising out of the same `transaction, or series of connected transactions' as a previous suit, which concluded in a valid and final judgment, will be precluded. Id. What constitutes the same transaction or series of transactions is `to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage.' Id. (quoting Restatement § 24). 40 Just as in the case of Utah state preclusion law, a question is presented under federal claim preclusion law about the cutoff date for Hatch's responsibility to add all available claims to his prior complaint. The district court concluded that the April 14, 1999, judgment in the prior § 1983 suit precluded any claims based on facts that were available to Hatch before that date. Aplt.App. at 444 (To the extent that the complaint in this case raises federal claims by Hatch based on facts occurring prior to the conclusion of his previous § 1983 action, such claims are dismissed with prejudice. (emphasis added)). The question, however, is not whether the claims raised in Hatch's new complaint are based on facts that occurred prior to the conclusion of his previous action. Instead, it is whether the new claims arose out of the same transaction as the claims in the prior action, and should therefore have been included in the prior action. 41 Under the transactional test, a claim should not be precluded merely because it is based on facts that arose prior to the entry of judgment in the previous action. See Mitchell v. City of Moore, 218 F.3d 1190, 1202 (10th Cir.2000) (stating in dicta we agree with those courts holding the doctrine of claim preclusion does not necessarily bar plaintiffs from litigating claims based on conduct that occurred after the initial complaint was filed in the previous suit.). The filing of the plaintiff's complaint frames the scope of litigation, establishing a transactional nexus into which facts and claims are fitted or excluded for purposes of claim preclusion. New claims, arising after the complaint has been filed, but before judgment, may be excluded from this transactional nexus, and thus be litigated in a subsequent action. As the Second Circuit has explained: 42 For purposes of res judicata, the scope of litigation is framed by the complaint [in the prior action] at the time it is filed. The res judicata doctrine does not apply to new rights acquired during the action which might have been, but which were not, litigated. Although a plaintiff may seek leave to file a supplemental pleading to assert a new claim based on actionable conduct which the defendant engaged in after a lawsuit is commenced, he is not required to do so. 43 Computer Assocs. Int'l, Inc. v. Altai, Inc., 126 F.3d 365, 369-70 (2d Cir.1997) (citations and quotation omitted). See also Mitchell, 218 F.3d at 1202-03 (suggesting, in dicta, that this court would follow Second Circuit's approach; and collecting cases). 7 See also, e.g., Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 530 (6th Cir.2006) (following majority rule that the opportunity to file a supplemental complaint [to allege ongoing alleged wrongdoing] is not an obligation); 18 Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice & Procedure § 4409, at 213 (2d ed.2002) (same). 44 This does not mean, however, that a plaintiff can avoid supplementing his complaint with facts that are part of the same transaction asserted in the complaint, in the hope of bringing a new action arising out of the same transaction on some later occasion. Under the transactional test, a new action will be permitted only where it raises new and independent claims, not part of the previous transaction, based on the new facts. See Storey v. Cello Holdings, LLC, 347 F.3d 370, 384 (2d Cir.2003) (Where the facts that have accumulated after the first action are enough on their own to sustain the second action, the new facts clearly constitute a new `claim,' and the second action is not barred by res judicata. ) (emphasis added). 8 Thus, any claims that Hatch now asserts that are part of the same transaction asserted in his previous complaint should be precluded, while new and independent claims may go forward. 45 We further note that even if Hatch has raised a new and independent claim, this claim could still be precluded, if it falls under one of several exceptions to the rule that only claims related to the existing transaction are precluded. Such exceptions arise, for example, where the judgment entered in the prior action (1) incorporated a settlement intended to govern future, related transactions between the parties, see 18 Wright, Miller & Cooper, Federal Practice & Procedure § 4409, at 220; (2) resolved claims for declaratory or injunctive relief dealing with conduct persisting through trial or into the future, see id. at 221; or where (3) the object of the first proceeding was to establish the legality of the continuing conduct into the future, id. at 232; see also Monahan v. N.Y. City Dep't of Corr., 214 F.3d 275, 288-89 (2d Cir.2000).
46 Hatch's second argument, that his new causes of action are not identical to those previously litigated, is also governed by the transactional test. The causes of action need not be identical in the sense that they raise the same claims based on the same facts. All that is required is that they arise out of the same `transaction, or series of connected transactions' as [the] previous suit. Yapp, 186 F.3d at 1227. This also is a matter for the district court to resolve on remand.
47 On remand, the district court should therefore consider whether the facts on which Hatch bases his new claims are part of the same transaction as those asserted in his previous complaint, or whether they give rise independently to a new claim. If the new claim is independent, the district court should consider whether any of the above-mentioned exceptions applies to the prior judgment in favor of Hatch. If the claims are not part of the same transaction and if no exception applies, then only those claims that accrued prior to the filing of Hatch's complaint, in September 1996, should be considered precluded in the current action by the prior § 1983 suit.