Opinion ID: 788180
Heading Depth: 1
Heading Rank: 4

Heading: B. Impermissible Collateral Attack

Text: 31 In the alternative, even if Regions Bank had standing to raise RICO claims, we would find the present claims barred as a collateral attack on the final judgments of the bankruptcy court. Claims related to the Jones Realty bankruptcy sale are barred as impermissible collateral attacks because the bankruptcy sale conferred rights good as against the world, not merely rights good as against parties to the sale. Claims related to the alleged misappropriation of assets from J.R. Oil are barred under normal principals of res judicata. 32 Res judicata normally only applies against parties who participated in the prior proceedings and had a full and fair opportunity to litigate the matter in the proceeding that is to be given preclusive effect. Costner v. URS Consultants, Inc., 153 F.3d 667, 673 (8th Cir.1998) (explaining that a final judgment bars any subsequent suit where (1) the first suit resulted in a final judgment on the merits; (2) the first suit was based on proper jurisdiction; (3) both suits involve the same parties (or those in privity with them); and (4) both suits are based upon the same claims or causes of action). Here, Regions Bank was not a party to the Jones Realty bankruptcy which produced the final orders approving the sales of collateral to Northchase. Accordingly, normal principles of res judicata do not bar Regions Bank's claim as against a final judgment in the Jones Realty bankruptcy. This is true even though Regions Bank clearly had notice of the Jones Realty bankruptcy, and failed to intervene, because a party is not . . . required to intervene voluntarily in a separate pending suit merely because it is permissible to do so. Black Clawson Co. v. Kroenert Corp., 245 F.3d 759, 764 (8th Cir.2001); see also, Chase Nat'l Bank v. City of Norwalk, 291 U.S. 431, 441, 54 S.Ct. 475, 78 L.Ed. 894 (1934) (Unless duly summoned to appear in a legal proceeding, a person not a privy may rest assured that a judgment recovered therein will not affect his legal rights.). 33 Normal principals of res judicata, however, are not necessary for the judgment in the Jones Realty bankruptcy to bar Regions Bank's claims to the extent those claims relate to the sale of the collateral. The bankruptcy court in the Jones Realty bankruptcy approved the sale and found the sale to be in good faith, for fair value, and in the best interest of Jones Realty and its creditors. A bankruptcy sale under 11 U.S.C. § 363, free and clear of all liens, is a judgment that is good as against the world, not merely as against parties to the proceedings. As the Seventh Circuit has held: 34 [I]nsofar as [a] fraud suit is . . . on behalf of nonparties to the sale proceeding. . . it is not barred by res judicata. But it is barred. A proceeding under section 363 is an in rem proceeding. It transfers property rights, and property rights are rights good against the world, not just against parties to a judgment or persons with notice of the proceeding. 35 Gekas v. Pipin (In the Matter of Met-L-Wood Corp.), 861 F.2d 1012, 1017 (7th Cir.1988). The judgment, therefore, is shielded from collateral attack not by res judicata, but by virtue of the nature of rights transferred under 11 U.S.C. § 363. 36 Finally, Regions Bank was a party to the J.R. Oil bankruptcy proceeding. Accordingly, Regions Bank is barred from raising claims or causes of action that were, or should have been, raised in that proceeding. We have interpreted the phrase the same claims or causes of action to mean claims that arise out of the same nucleus of operative facts. See Costner, 153 F.3d at 673 (Regarding the `same claims or causes of action' element of claim preclusion, we have stated that whether a second lawsuit is precluded turns on whether its claims arise out of the `same nucleus of operative facts as the prior claim.') (quoting United States v. Gurley, 43 F.3d 1188, 1195 (8th Cir.1994)) (in turn quoting Lane v. Peterson, 899 F.2d 737, 742 (8th Cir.1990)). Here, at the time Regions Bank funded the loan to J.R. Oil and Steven Jones, it believed J.R. Oil held millions of dollars worth of inventory, equipment, and accounts receivable. When J.R. Oil filed for bankruptcy and claimed to the bankruptcy court that it did not hold such assets, Regions Bank knew that Steven Jones had misrepresented J.R. Oil's position or that J.R. Oil had somehow disposed of its assets. Regions Bank, however, took no action to challenge the allegations in J.R. Oil's bankruptcy filings or put the bankruptcy court on notice of potentially missing assets or potential fraud. Subsequently, when J.R. Oil sought and received voluntary dismissal of the bankruptcy based on the purported absence of assets and the absence of a reorganization plan, J.R. Oil again failed to object. On these facts, Regions Bank is barred from raising in subsequent RICO claims allegations of injury caused by fraud or the misappropriation of assets that Regions Bank failed to raise before the bankruptcy court. 37 In light of our decision to affirm the district court's grant of summary judgment on the RICO claims, we must review the district court's decision to decline the continued exercise of supplemental jurisdiction over Regions Bank's state law claims under 28 U.S.C. § 1367(c)(3). Our review is for abuse of discretion. See Eddings v. City of Hot Springs, 323 F.3d 596, 600 (8th Cir.2003). Finding no abuse of discretion, and no arguments on this issue that merit further discussion, we affirm. 38 The judgment of the district court is affirmed.