Opinion ID: 168501
Heading Depth: 2
Heading Rank: 4

Heading: Federal law of claim preclusion

Text: 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.