Court Opinion

ID: 194526
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:19:09+00
Date Added: 2024-06-11T12:09:31.419175
License: Public Domain

February 8, 1993
                UNITED STATES COURT OF APPEALS
                    For The First Circuit

                                         

No. 92-1164

               DIVERSIFIED FOODS, INC., et al.,

                    Plaintiffs-Appellants,

                              v.

          THE FIRST NATIONAL BANK OF BOSTON, et al.,

                    Defendants-Appellees.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

                  FOR THE DISTRICT OF MAINE

         [Hon. D. Brock Hornby, U.S. District Judge]
                                                   

                                         

                            Before

             Torruella and Boudin, Circuit Judges,
                                                 
                 and Keeton,* District Judge.
                                            

                                         

Richard E. Poulos with whom John S.  Campbell, Poulos, Campbell  &
                                                                  
Zendzian, P.A., Daniel G. Lilley and John A. McArdle were on brief for
                                                
appellants.
William J. Kayatta, Jr., with whom  Peter W. Culley, Catherine  R.
                                                                 
Connors and Pierce, Atwood, Scribner, Allen, Smith & Lancaster were on
                                                          
brief for appellees.  
                                         

                       February 8, 1993
                                         

              
* of the District of Massachusetts, sitting by designation.

     BOUDIN, Circuit Judge.  In this  case the district court
                          

dismissed  a suit brought under the Bank Holding Company Act,

12 U.S.C.    1972, on  the ground that  it was barred  by res
                                                             

judicata.   The prior litigation, held to bar the new federal
        

action, was a state-court suit brought by the same plaintiffs

against  the same  defendants  and decided  in  favor of  the

latter.   The disappointed  plaintiffs now appeal,  urging on

several grounds  that res  judicata does not  properly apply.
                                   

In full  agreement with  the district  court,  we affirm  its

decision.

     The procedural history  of the two cases is  complex and

intertwined but a  brief summary will suffice  at the outset.

Diversified  Foods, Inc.,  and its  operating subsidiary  New

England Sales,  Inc.  (collectively, "the  borrowers"),  were

engaged in  a specialized  form of wholesale  distribution of

goods.   In  financing  their activities,  they entered  into

various borrowing  arrangements with First  National Bank  of

Boston   and  its   Maine  subsidiary  Casco   Northern  Bank

(collectively, "the  banks").  The arrangements,  at least in

the  borrowers'  view,  contained  terms   restricting  their

ability to obtain alternative sources of financing.

     During 1988, the borrowers  first sought to expand their

business and then suffered large losses.  They attribute this

reversal  of fortune to the  failure of the  banks to provide

adequate credit under  the borrowing arrangements.   Claiming

                             -2-

multimillion  dollar  damages, the  borrowers  on  August 21,

1989, brought suit against the banks in Maine Superior Court,

asserting various  state-law tort  and contract claims.   The

complaint, as later amended in 1990, included the charge that

the  banks violated  an  implied covenant  of  good faith  by

imposing  "unreasonable restrictions  so  as  to prevent  the

[borrowers] from obtaining alternative financing."  Discovery

in the state case proceeded during 1989 and 1990.

     On  September  14,  1990,   while  the  state  case  was

proceeding, the borrowers brought the present action  against

the  banks based  on the  anti-tying  provisions of  the Bank

Holding  Company Act, 12 U.S.C.    1972(1).   The new federal

claims  were  based,  it  appears,  on  information  obtained

through  discovery in the state case.  The borrowers say that

the  new claims  were  asserted in  a  separate action  in  a

different  court because at that  time the borrowers held the

view (contrary to two  circuit decisions) that federal courts

have exclusive jurisdiction over claims under section 1972.1

                    

     1Two  weeks before  filing  the  federal complaint,  the
borrowers moved to amend their state complaint to charge that
the  banks  had  breached  their   duty  of  good  faith   by
"unreasonable, illegal, and anticompetitive"  restrictions on
alternative financing.   Shortly after the federal  complaint
was filed, the banks  opposed the state amendment.   When the
borrowers responded  that the  federal claims were  not being
asserted  in the  state  case, the  state  court allowed  the
amendment,     striking     the    words     "illegal"    and
"anticompetitive."

                             -3-

     When the banks answered the federal complaint on October

24, 1990, they included  as a defense the assertion  that the

borrowers  "have improperly  split  their causes  of  action,

having  previously filed  in another court  another complaint

arising   out  of   the   same  transaction   or  series   of

transactions."  Thereafter, the banks resisted the borrowers'

efforts in January  1991 to introduce  the state claims  into

the federal action by amendment  of the federal complaint  or

to delay the state proceedings.  The banks  did agree to have

discovery in either case treated as if taken in both.

     On  April 18,  1991,  the Maine  Superior Court  granted

summary  judgment in  favor of  the banks,  a decision  later

affirmed on  appeal.  Diversified Foods, Inc.  v. First Nat'l
                                                             

Bank, 605  A.2d 609  (Me. 1992).   The  banks then  moved for
    

summary  judgment in  the  federal action  on grounds  of res
                                                             

judicata,  and  the  district  court granted  the  motion  on
        

January  9,  1992.   A belated  attempt  by the  borrowers to

reopen  the state case to add the federal claims was rejected

by  the state  court, and  this action  was also  affirmed on

appeal.  Id.  The  borrowers then pursued this appeal in  the
           

federal case.

     In  this court  the borrowers  first argue  that federal

courts have exclusive jurisdiction over claims under the Bank

Holding Company Act's anti-tying provisions.  Therefore, they

argue,  res judicata  cannot properly  derive from  the state
                    

                             -4-

court  judgment  because they  could  not  have included  the

federal  claims  in their  state case.    We need  not decide

whether  the  conclusion would  follow  if  the premise  were

sound, for the premise  is mistaken.  We follow  two circuits

and  several  other courts  that  uniformly  hold that  state

tribunals  have  concurrent  jurisdiction over  section  1972

claims.  Cuervo  Resources, Inc. v. Claydesta Nat'l Bank, 876
                                                        

F.2d 436 (5th  Cir. 1989);  Lane v. Central  Bank, N.A.,  756
                                                      

F.2d 814 (11th Cir. 1985).2  

     The  Bank  Holding  Company  Act  provides  that  anyone

injured  by a  violation  of section  1972  may sue  "in  any

district court  of the  United States," admittedly  making no

reference to state courts.  12 U.S.C.   1975.  But it is  now

settled that  there is a  presumption in favor  of concurrent

jurisdiction,  so  that state  courts  may  entertain federal

civil  claims  as a  matter  of course  "absent  provision by

Congress  to  the  contrary  or   disabling  incompatibility"

between the federal claim and state court jurisdiction.  Gulf
                                                             

Offshore  Co. v.  Mobil  Oil Corp.,  453  U.S. 473,    477-78
                                 

(1981).   Here  there  is  no  explicit  bar  to  state-court

jurisdiction  and the  subject  matter is  hardly beyond  the

                    

     2Several state courts have reached the  same conclusion.
See  United Central Bank, N.A. v. Kruse, 439 N.W.2d 849 (Iowa
                                       
1989); Waite v. Banctexas-Houston, N.A., 792 S.W.2d 538 (Tex.
                                      
Ct. App. 1990).

                             -5-

competence of state  courts, which routinely consider  claims

under their own antitrust laws.

     Of course,  the resemblance  to antitrust law  cuts both

ways,  providing the  borrowers' best argument  for exclusive

federal jurisdiction.   Section 1972 is a  blunter version of

section  3  of the  Clayton  Act, 15  U.S.C.    14,  and with

qualifications courts use Clayton  Act precedents in applying

section  1972.  E.g., Swerdloff v. Miami Nat'l Bank, 584 F.2d
                                                   

54, 58-59 (5th Cir.  1978).  In empowering federal  courts to

hear Clayton Act cases, Congress made  no reference to state-

court  jurisdiction, see  15  U.S.C.    15,  and it  is  well
                        

settled  (by judicial  construction)  that federal  antitrust

claims may be  asserted only in  federal court.   Blumenstock
                                                             

Bros. Advertising  Agency v. Curtis  Pub. Co., 252  U.S. 436,
                                            

440  (1920).   The  borrowers urge  that  the same  gloss  be

applied to the Bank Holding Company Act.

     Exclusive  federal-court   jurisdiction  over  antitrust

claims, although  a firmly  rooted rule,  is  the product  of

reasoning that the  Supreme Court  no longer  applies in  new

matters.    Like  baseball's judicial  "exemption"  from  the

antitrust  laws, see  Flood  v. Kuhn,  407  U.S. 258,  283-84
                                    

(1972), the result persists but is not extended.  This is the

clear  message of  Tafflin v.  Levitt, 493  U.S. 455,  459-60
                                     

(1990), where  the Supreme  Court affirmed the  state courts'

concurrent jurisdiction over  civil RICO claims  and rejected

                             -6-

the  same Clayton Act analogy offered here.  Indeed, the RICO

statute uses  jurisdictional  language quite  similar to  the

Bank Holding Company Act, compare 18 U.S.C.   1964(c) with 12
                                                          

U.S.C.   1975,  and was passed  by the same  Congress in  the

same  session.   Tafflin  offers the  coup  de grace  to  the
                                                    

borrowers' argument for exclusive jurisdiction.3

     Once  that  issue is  removed,  the  application of  res
                                                             

judicata is straightforward in the present case.   The branch
        

of that doctrine  of concern  here, known for  many years  as

merger  (if the plaintiff had won the first case) and bar (if

the plaintiff had lost),  has lately been rechristened "claim

preclusion"  in the  modern  functional style.    See Roy  v.
                                                         

Jasper  Corp., 666  F.2d  714, 717  (1st  Cir. 1981).    More
            

important,  the doctrine  has  evolved  subtly, although  not

uniformly in all jurisdictions,  to employ a functional "same

transaction" test,  as an overlay to  the traditional inquiry

whether the "cause of  action" in the two cases is  the same.

Maine,  whose  earlier  judgment   is  invoked  here  as  res
                                                             

judicata, employs  this test,  which is therefore  binding on
        

                    

     3We  give  little  weight to  occasional  references  by
Congress,  in the  legislative  history of  section 1972,  to
suits  in "federal" courts.   See,  e.g., 2  One-Bank Holding
                                                             
Company  Legislation of  1970:   Hearings  Before the  Senate
                                                             
Comm. on  Banking and  Currency, 91st.  Cong.,  2d Sess.  966
                               
(1970) (statement of Sen. Bennett) (referring to "the process
of   suit  through  the  Federal  courts  .  .  .").    These
references, if any intent is attributable to them,  appear to
reflect the natural assumption  that Bank Holding Company Act
claims would usually be litigated in federal forums.

                             -7-

us.  See Migra v. Warren City School Dist. Bd.  of Educ., 465
                                                       

U.S. 75, 85 (1984).

     In Currier v. Cyr,  570 A.2d 1205 (Me. 1990),  the Maine
                      

Supreme  Judicial Court  summarized  the rule  it follows  in

deciding whether new  claims are barred because  they were or

"might have been" litigated in the prior case: 

          Maine  has accepted  what is  known as  a
          "transactional test" of cause  of action,
          which defines "the measure of  a cause of
          action  as  the  aggregate  of  connected
          operative  facts  that  can   be  handled
          together  conveniently  for  purposes  of
          trial."

Id. at 1208 (quoting  Gurski v. Culpovich, 540 A.2d  764, 766
                                         

(Me. 1988)).   Accordingly, so  long as the  parties are  the

same in  both cases and a  final judgment was  entered in the

prior  action, "a subsequent suit that arises out of the same
                                                             

operative  facts shall be barred even  though the second suit
                

relies  upon a legal theory  not advanced in  the first case,

seeks  different relief than  that sought in  the first case,

and involves [different] evidence   . .  . ."  Id.  (emphasis
                                                 

added).

     In the present case  the borrowers' federal claims under

section 1972 unquestionably arise  out of "the same operative

facts" as the state claims earlier asserted by the borrowers.

They themselves, in an unsuccessful  attempt to add the state

claims  to the  federal case  based on  pendant jurisdiction,

told  the district court that  "[t]he facts forming the basis

                             -8-

for the state claims are the same facts which  form the basis

of the pending [federal] action . . . ."  A comparison of the

two   complaints   shows   that   the   factual   allegations

substantially overlap.  Further, the central tying allegation

in  the federal  complaint--that  the  banks  restricted  the

borrowers' access  to alternative sources of  credit--was one

of the express claims in the state action.

     In this  court, the  borrowers make only  a half-hearted

effort  to distinguish  the  two complaints  under the  Maine

transactions test for  res judicata, and  we think the  point
                                   

needs  no  further   discussion.    The   borrowers'  central

arguments in  resisting res judicata,  exclusive jurisdiction
                                    

aside,  are  variants  on a  single  theme.    They argue  in

substance that  the banks themselves  strove to keep  the two

actions separate,  resisted the assertion of  state claims in

the federal case  and vice versa, and now use the judgment in

the  suit first decided to prevent litigation of the other on

the  merits.   This effort  to resist consolidation,  say the

borrowers, should estop the  banks from invoking res judicata
                                                             

or should be treated as a waiver of the defense.

        We accept arguendo the  borrowers' version of events,
                          

although it is unclear whether the banks followed a conscious

strategy or merely opposed seriatim the successive demands of

an  opponent.   But in  either event  we do  not see  how the

gravamen    of   the   charge--the   banks'   resistance   to

                             -9-

consolidation of the federal  and state claims--gives rise to

an estoppel  of the banks.  The banks are not alleged to have

said  anything untrue.  Their  position throughout  has  been

consistent.   There is not even a valid charge of concealment

or surprise:  the banks' answer in the federal case gave fair

warning  of the  risk of  res judicata  by asserting  a claim
                                      

splitting  defense, expressly  referring  to  the  borrowers'

state  suit "arising out of the same transaction or series of

transactions."

     As for waiver, it may be  assumed that Maine, consistent

with  general law on the subject, would disallow res judicata
                                                             

if the  "parties have agreed  in terms or in  effect that the

plaintiff  may   split  his  claim,  or   the  defendant  has

acquiesced  therein."   Calderon Rosado  v. General  Electric
                                                             

Circuit  Breakers, Inc., 805 F.2d 1085,  1087 (1st Cir. 1986)
                      

(quoting  Restatement (Second)  of  Judgments     26(1)(a)).4
                                             

Indeed, in Thompson  v. Gaudette,  148 Me. 288,  92 A.2d  342
                                

(1952), the Maine Supreme  Judicial Court said that the  rule

against splitting a cause of action will be waived unless the

defendant  asserts it "at the earliest opportunity."  92 A.2d

at 348 (quoting Mayfield v. Kovac, 41 Ohio App. 310, 181 N.E.
                                 

                    

     4In  Calderon  Rosado  this  court  rejected  on  waiver
                          
grounds  a res  judicata defense  in a  federal action.   The
                        
defendant  had earlier  agreed to  the  plaintiff's voluntary
dismissal "with  prejudice"  of a  wrongful  discharge  claim
under  Puerto Rican law brought in  a local court, "seemingly
acceding to plaintiff's desire  to litigate in federal court"
under a federal statute.  805 F.2d at 1086.

                             -10-

28, 30 (1931)).  In our case, the banks at the outset pleaded

claim-splitting in their answer and maintained  that position

throughout the case.

     Courts  could, we suppose, disallow the claim preclusion

defense  wherever two  suits  are brought  and the  defendant

thereafter resists their consolidation.  But when a plaintiff

has  chosen  to bring  two lawsuits  in  the same  time frame

relating  to the same operative facts, it  is hard to see why

the defendant should not  be able to resist consolidation  on

proper  grounds, such as undue  delay.  If  the resistance is

unjustified, the plaintiff  may normally litigate  that issue

within the lawsuit.  In fact, the borrowers here  did seek to

add the federal claims to  the state action; but they  did so

only after summary judgment was  granted on the state claims.
          

Not surprisingly, the Maine  Supreme Judicial Court said that

this effort came too late.  Diversified Foods, Inc., 605 A.2d
                                                  

at 616.5

     Finally, the borrowers suggest that, estoppel and waiver

issues to one side, it would be inequitable to permit the res
                                                             

judicata  defense.  They argue that their decision to bring a
        

separate federal  suit, instead of adding  the federal claims

                    

     5The borrowers  were  only  slightly  more  diligent  in
seeking to add the state claims to the federal case.  In late
January 1991,  they moved to  amend the federal  complaint to
assert the state claims and  to stay the state action.   This
occurred, however, after the close of state discovery  and on
the  eve of the  banks' deadline for  filing summary judgment
motions.

                             -11-

to the  state case, was  based on  a good  faith belief  that

exclusive federal-court jurisdiction  prevented that  course.

Res   judicata   is   a   judge-made   doctrine   resting  on
              

considerations  of policy,  and doubtless  there is  room for

equitable adjustments.   See generally 18  Charles A. Wright,
                                      

Arthur R.  Miller & Edward  H. Cooper,  Federal Practice  and
                                                             

Procedure     4415 (1981).   But  in  this case  the mistaken
         

belief in  exclusive federal  jurisdiction was formed  in the

face of two circuit decisions to the contrary.

     Thus,  the  case for  an  equitable  departure from  res
                                                             

judicata  is very weak.  True, the banks played an aggressive
        

hand, but litigation is inherently  aggressive.  Further, the

borrowers  created  their own  dilemma  by  bringing the  two

actions  separately,   ignoring  the  concurrent-jurisdiction

precedents  directly in  point.   Then, in  the teeth  of the

warning furnished by the  banks' claim splitting defense, the

borrowers  failed to assert  the federal claims  in the state

case  until after that  case had been  lost.  Like  the Maine

Supreme  Judicial  Court,  we  see  no  equitable  basis  for

resurrecting claims that the  borrowers themselves allowed to

expire.

     Affirmed.
             

                             -12-