Court Opinion

ID: 9324546
Source: CourtListenerOpinion
Date Created: 2022-12-12 16:01:36.15985+00
Date Added: 2024-06-11T17:14:55.322759
License: Public Domain

Appellate Case: 22-6030     Document: 010110780289      Date Filed: 12/12/2022      Page: 1
                                                                                 FILED
                                                                     United States Court of Appeals
                       UNITED STATES COURT OF APPEALS                        Tenth Circuit

                              FOR THE TENTH CIRCUIT                       December 12, 2022
                          _________________________________
                                                                         Christopher M. Wolpert
                                                                             Clerk of Court
  ANTHONY CLARENCE DESMET,

        Plaintiff - Appellant,

  v.                                                        No. 22-6030
                                                     (D.C. No. 5:21-CV-01081-J)
  SCOTTSDALE INSURANCE                                      (W.D. Okla.)
  COMPANY,

        Defendant - Appellee.
                       _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

 Before TYMKOVICH, PHILLIPS, and EID, Circuit Judges.
                  _________________________________

       Anthony Clarence DeSmet filed two separate lawsuits against Scottsdale

 Insurance Company relating to an umbrella policy. The first suit asserted a claim for

 breach of the implied duty of good faith and fair dealing (also known as bad faith),

 and the second suit (filed shortly after Scottsdale was awarded summary judgment on

 the bad-faith claim) asserted a breach-of-contract claim. This court has already

 affirmed the district court’s ruling on the bad-faith claim. See DeSmet v. Scottsdale

       *
         After examining the briefs and appellate record, this panel has determined
 unanimously that oral argument would not materially assist in the determination of
 this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
 ordered submitted without oral argument. This order and judgment is not binding
 precedent, except under the doctrines of law of the case, res judicata, and collateral
 estoppel. It may be cited, however, for its persuasive value consistent with
 Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 22-6030      Document: 010110780289        Date Filed: 12/12/2022      Page: 2

 Ins. Co. (DeSmet I), No. 21-6143, 2022 WL 2288681, at *1 (10th Cir. June 24, 2022).

 Mr. DeSmet now appeals from the district court’s order dismissing his

 breach-of-contract suit as barred by res judicata. Exercising jurisdiction under

 28 U.S.C. § 1291, we affirm the dismissal.

                                  I.     BACKGROUND

          As we explained in detail in DeSmet I, Mr. DeSmet was severely injured in an

 automobile accident in 2018. The person who hit him was an underinsured motorist,

 so Mr. DeSmet sought coverage for his damages under his own insurance policies:

 three primary motor-vehicle liability policies that each provided $500,000 in

 uninsured/underinsured motorist (UM) coverage, and a secondary umbrella policy

 with Scottsdale that provided $2 million in excess liability coverage and $1 million in

 excess UM coverage. Mr. DeSmet was unhappy with how one of the primary

 insurers was handling his claim, so he asked Scottsdale to pay the claim in 2019.

 Scottsdale responded that it would pay only after the primary insurance limits were

 exhausted.

 A.       First Lawsuit

          In 2020, Mr. DeSmet filed a petition in Oklahoma state court, alleging that

 Scottsdale’s conduct surrounding its refusal to pay on his claim amounted to bad

 faith. Twice, he stated in his petition that he was not bringing a breach-of-contract

 claim:

          37. Consistent with Oklahoma law, Plaintiff is bringing only a single
          tort cause of action for breach of the ex delicto implied duty of good
          faith and fair dealing, but is seeking damages pursuant to his single tort

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        claim in the form of his loss payable under the policy, along with
        compensatory damages for Scottsdale’s bad faith conduct and punitive
        damages for Scottsdale’s tortious conduct.

        38. Plaintiff is not bringing an independent or separate cause of
        action for breach of contract, only the tort cause of action referred to in
        the preceding Paragraph.

 DeSmet I, Aplt. App. vol. 1 at 18.1 At the time the petition was filed, Mr. DeSmet

 had not received any payment under the UM provisions of his primary insurance

 policies.

        Scottsdale removed the lawsuit to federal court. The district court granted

 summary judgment in Scottsdale’s favor on October 21, 2021. Finding the policy

 language clear, the court reasoned that the umbrella policy was not triggered (and

 Scottsdale’s liability did not attach) until the primary insurers had paid, or been held

 liable to pay, the full amount of their respective UM coverage—which occurred on

 March 26, 2020. Under these circumstances, Scottsdale had no obligations to

 Mr. DeSmet when he filed his petition on March 3, 2020. Therefore, the court found,

 Scottsdale “could not have violated an implied duty of good faith and fair dealing

 with respect to such non-existent obligations.” Id. vol. 6 at 1056.

        Also relevant to this appeal, the district court denied Mr. DeSmet’s request for

 leave to amend his petition to include a breach-of-contract claim. The court

        1
         We take judicial notice of the appendix filed in DeSmet I because it is a
 publicly filed document in our court “concerning matters that bear directly upon the
 disposition of the case at hand,” United States v. Ahidley, 486 F.3d 1184, 1192 n.5
 (10th Cir. 2007).

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 reasoned: (1) the request was made within the response to Scottsdale’s summary

 judgment motion, and the local rules prohibited a party from making a motion within

 a response to a motion; (2) Mr. DeSmet had not sought leave to amend the petition

 under Federal Rule of Civil Procedure 15(a)(2) or to amend the scheduling order

 under Federal Rule of Civil Procedure 16(b)(4); and (3) “even if the Court were to

 consider such a request at this juncture,”2 the “minimal reasons” provided in the

 response did not show that justice required the amendment and did not constitute

 good cause or a showing of diligence, id. at 1057. Mr. DeSmet had told the court

 only that “[a]llowing the amendment will not necessitate any further discovery, but

 will allow the pleadings to conform to the evidence in this case,” id. vol. 5 at 837.

       This court affirmed both the summary judgment and procedural rulings in

 DeSmet I. See 2022 WL 2288681, at *1, *5.

 B.    Second Lawsuit

       On the same day the district court entered judgment in Scottsdale’s favor on

 the bad-faith claim (October 21, 2021), Mr. DeSmet sent a letter to Scottsdale’s

 counsel, requesting payment under the umbrella policy and advising that he

 “intend[ed] to file a lawsuit asserting a breach of contract claim for UM benefits

 owed under the [umbrella] [p]olicy” now that it was “ripe,” Aplt. App. at 11.

 Scottsdale declined to pay him, and Mr. DeSmet filed the threatened lawsuit in

 federal court on November 10. His complaint repeated many of the allegations from

       2
        The response was filed on October 13, 2021, two months before the
 scheduled trial date.
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 the petition in the first lawsuit, though the allegations about the primary policies were

 updated to reflect that Mr. DeSmet had received payments under their respective UM

 provisions.

        The district court dismissed the complaint with prejudice under Federal Rule

 of Civil Procedure 12(b)(6) based on res judicata principles, holding: “There can be

 no doubt that [the] breach of contract claim could have been raised in the earlier

 action.” Id. at 68. The court rejected Mr. DeSmet’s argument that he could not have

 brought the breach-of-contract claim in the first lawsuit because it would have been

 premature at the time he filed his petition, noting that he “could have amended his

 DeSmet I complaint to include the breach of contract claim at the time it became

 ripe.” Id. at 67.

        Mr. DeSmet filed this timely appeal.

                                     II.    ANALYSIS

        We review de novo the district court’s grant of a motion to dismiss on

 res judicata, or claim preclusion,3 grounds. Campbell v. City of Spencer, 777 F.3d

 1073, 1077 (10th Cir. 2014). Oklahoma’s preclusion law applies. See Knight v.

 Mooring Cap. Fund, LLC, 749 F.3d 1180, 1186 (10th Cir. 2014).

        The Oklahoma Supreme Court has explained the res judicata doctrine as

 follows:

        Claim preclusion, or res judicata at common law, prevents a party in a
        second suit between the same parties, or their privies, from relitigating an

        3
         Oklahoma case law uses the terms “res judicata” and “claim preclusion”
 interchangeably.
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        adjudicated claim as well as issues of fact or law necessary to the previous
        final judgment on the merits, or relitigating those issues which could have
        been decided in the previous suit.
 Farley v. City of Claremore, 465 P.3d 1213, 1227 n.54 (Okla. 2020). “The purpose

 of the doctrine is to prevent piecemeal litigation caused by splitting a single claim

 into separate suits.” Min. Acquisitions, LLC v. Hamm, 477 P.3d 1159, 1166 (Okla.

 2020) (internal quotation marks omitted). The doctrine “relieve[s] the parties of the

 cost and vexation of multiple lawsuits, conserve[s] the resources of the judiciary,

 [prevents] inconsistent decisions, . . . [and] afford[s] finality to litigation where the

 same parties or their privies have once had a full and fair opportunity to litigate their

 claims.” Feightner v. Bank of Okla., N.A., 65 P.3d 624, 629-30 (Okla. 2003).

        The elements of claim preclusion are: 1) identity of subject matter and the
        parties or their privies in the prior litigation; 2) a court of competent
        jurisdiction heard the prior litigation; and 3) the judgment rendered in the
        prior litigation must have been a judgment on the merits of the case and not
        upon purely technical grounds.
 Robinson v. Texhoma Limestone, Inc., 100 P.3d 673, 677 n.11 (Okla. 2004)

 (emphasis omitted).

        On appeal, Mr. DeSmet challenges the district court’s conclusion that his two

 claims are the same, which is part of the first element. He also contests the district

 court’s application of res judicata principles on the ground that he could not have

 brought his breach-of-contract claim in the first lawsuit because it would have been

 premature to do so.

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 A.     The bad-faith claim and the breach-of-contract claim involve the same
        subject matter.

        We start with Mr. DeSmet’s argument that the bad-faith claim asserted in his

 first lawsuit is not the same as the breach-of-contract claim asserted in his second

 lawsuit, so the district court erred in applying res judicata principles to bar his

 contract claim. The gist of his argument is that they are independent claims with

 different elements, such that his “failure to succeed on his claim against Scottsdale

 for bad faith” did not “affect his rights regarding his separate claim for breach of

 contract.” Aplt. Opening Br. at 17.

        Oklahoma law instructs to the contrary. In Taylor v. State Farm Fire &

 Casualty Co., 981 P.2d 1253 (Okla. 1999), the Oklahoma Supreme Court definitively

 stated that these two types of claims constitute “a single cause of action” in the

 insurance context: “While numerous items of damage may result from one injurious

 occurrence, the party who seeks to recover for an insured loss has but a single cause

 of action, although its claim may be advanced concurrently on ex contractu [contract]

 and ex delicto [tort] theories.” Id. at 1257-58.

        Some of the allegations in the first lawsuit track this language from Taylor.4

 And Mr. DeSmet brought both bad-faith and breach-of-contract claims against two of

        4
         Mr. DeSmet pivoted away from his Taylor-based recitation of Oklahoma law
 when he sought to resurrect his breach-of-contract claim. Compare DeSmet I,
 Aplt. App. vol. 1 at 18 (stating that under Oklahoma law, a policyholder “has a single
 cause of action [but] may advance his claim concurrently on ex contractu and
 ex delicto theories”) (petition in first lawsuit), with Aplt. App. at 9 (highlighting the
 “broad distinction” between breach-of-contract and bad-faith causes of action)
 (complaint in second lawsuit).
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 the primary insurers. Yet on appeal, he insists that “Taylor allows for concurrent

 assertion of the two claims” but “does not require” it. Aplt. Opening Br. at 19; see

 also id. at 21 (“[T]he Taylor Court acknowledged the separate and distinct nature of

 the claims for breach of contract and bad faith, and noted a plaintiff’s choice in how

 to assert those claims.”). He directs our attention to the permissive “may” within the

 phrase “although its claim may be advanced concurrently on ex contractu and

 ex delicto theories,” Taylor, 981 P.2d at 1258 (emphasis added). But he takes that

 phrase out of its context and completely disregards the “single cause of action”

 language at the crux of the holding.

       His argument contravenes other well-established Oklahoma law, too.

 Oklahoma adheres to “the wrongful act or transactional definition of a ‘cause of

 action,’” Retherford v. Halliburton Co., 572 P.2d 966, 969 (Okla. 1977). Under this

 definition, “no matter how many ‘rights’ of a potential plaintiff are violated in the

 course of a single wrong or occurrence, damages flowing therefore must be sought in

 one suit or stand barred by the prior adjudication.” Id.; see also Willis v. RMLS Hop

 OKC, LLC, 414 P.3d 374, 379 (Okla. Civ. App. 2018) (reaffirming Oklahoma’s

 commitment to the transactional approach).5 “Under the transactional test, a new

       5
         The transactional approach generally tracks the Restatement (Second)
 of Judgments § 24 and its prohibition on claim splitting. See Farley, 465 P.3d at
 1237-38. According to the Restatement, the factual grouping that constitutes a
 “transaction” is “to be determined pragmatically.” Restatement (Second) of
 Judgments § 24(2). “In general, the expression connotes a natural grouping or
 common nucleus of operative facts.” Id. cmt. b. “[W]hether the facts are so woven
 together as to constitute a single claim” depends on “their relatedness in time, space,
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 action will be permitted only where it raises new and independent claims, not part of the

 previous transaction, based on the new facts.” Hatch v. Boulder Town Council, 471 F.3d

 1142, 1150 (10th Cir. 2006).6

       Mr. DeSmet does not acknowledge that Oklahoma follows the transactional

 approach, let alone attempt to apply it to his situation. But it is clear from the

 significant overlap in the allegations underlying both lawsuits that his claims arise

 from the same transaction—namely, Scottsdale’s handling of his insurance claim and

 its refusal to pay him anything under the umbrella policy until the primary insurers

 had paid, or been held liable to pay, the full amount of their respective UM coverage.

 Indeed, in seeking to consolidate the appeal in DeSmet I with this one, he

 acknowledged the two appeals “arise from the same factual transaction and involve

 closely-related issues.” Aplt. Mot. to Consolidate Related Appeals at 4.

 origin, or motivation, and whether, taken together, they form a convenient unit for
 trial purposes.” Id.
       6
           We note that the complaint in the second lawsuit contains one allegation
 about conduct that occurred after the district court entered judgment in the first
 lawsuit. See Aplt. App. at 12 (“Scottsdale’s October 29, 2021 refusal to engage in
 settlement negotiations regarding Plaintiff’s contractual damages constitutes a breach
 of contract.”). But Mr. DeSmet does not mention this allegation on appeal, let alone
 argue that it alters the res judicata analysis in any way. Therefore, we do not address
 it. See Addo v. Barr, 982 F.3d 1263, 1266 n.2 (10th Cir. 2020) (“Issues not raised in
 the opening brief are deemed abandoned or waived . . . .” (internal quotation marks
 omitted)); Perry v. Woodward, 199 F.3d 1126, 1141 n.13 (10th Cir. 1999) (“This
 court . . . will not craft a party’s arguments for him.”).

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         The inextricable connection between the two claims is also evident from

  Mr. DeSmet’s appellate briefs and some of the cases cited therein. See Aplt. Opening

  Br. at 16 (“Breach of the duty sounds in tort, notwithstanding that it also constitutes

  a breach of contract.”); id. (“[T]he tort arises from a breach of the insurance

  contract . . . .”); see also McCarty v. First of Ga. Ins. Co., 713 F.2d 609, 612

  (10th Cir. 1983) (“Without question, the [appellants’] tort and contract claims arose

  out of the same transaction.”); Taylor, 981 P.2d at 1258 (“[I]ndemnity for loss (under

  the contract) constitutes the centerpiece element of damages included in every

  ex delicto recovery for bad-faith refusal to settle.” (emphasis omitted)); id. at 1258

  n.22 (discussing the “ex contractu underpinnings” to “a bad-faith tort claim for

  refusal to settle”).

         As for Mr. DeSmet’s argument that the two claims are not the same because

  they do not share the same elements, Oklahoma law imposes no such requirement.

  See Farley, 465 P.3d at 1237 (“Generally, a cause of action is defined by a

  ‘transaction or occurrence’ and multiple theories of liability do not turn a single

  cause of action into multiple causes of action.”). And as the Restatement (Second) of

  Judgments makes clear, “[t]hat a number of different legal theories casting liability

  on an actor may apply to a given episode does not create multiple transactions and

  hence multiple claims.” Restatement (Second) of Judgments § 24 cmt. c.

         For these reasons, we hold that Mr. DeSmet’s bad-faith and breach-of-contract

  claims arose from the same transaction and involved the same subject matter for

  purposes of the first element of res judicata.

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  B.    Mr. DeSmet’s breach-of-contract claim could have been decided in the
        first lawsuit, as evidenced by his request to amend his complaint to add
        that claim.

        Mr. DeSmet also argues that the district court erred in barring his

  breach-of-contract claim because that claim could not have been decided in the first

  lawsuit. He reasons that he did not have a cause of action for breach of contract

  because it had not accrued. This argument derives from the general definition of

  res judicata, as opposed to a specific element. The res judicata doctrine extends to

  “any theories or issues that . . . could have been decided[] in [the first] action.” Loyd

  v. Michelin N. Am., Inc., 371 P.3d 488, 493 (Okla. 2016) (emphasis added, internal

  quotation marks omitted).

        Mr. DeSmet cites two “unique circumstances” to support his argument.

  Aplt. Opening Br. at 13. First, he says, it would have been “premature” for him to

  bring the breach-of-contract claim in the first lawsuit for the same reason the district

  court found his bad-faith claim to be premature: Scottdale’s obligations under the

  umbrella policy were not yet triggered. Id.; see also Aplt. Reply Br. at 6 (arguing

  that he had “no legal right to sue” and the breach-of-contract claim “was not capable

  of being brought in DeSmet I”). Second, he says, the district court denied his

  request to amend his petition and “deprived [him] of the opportunity” to add a

  breach-of-contract claim “due to a procedural error.” Aplt. Reply Br. at 1. Neither

  circumstance allows Mr. DeSmet to avoid the res judicata bar.

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         1.     “Could have been decided”

         The first contention fails under close examination. It is true the res judicata

  doctrine extends to theories or issues that “could have been decided.” But under

  the framework Mr. DeSmet articulates to rescue his breach-of-contract claim, his

  bad-faith claim had not arisen yet either. Both claims were equally unripe. Yet he

  does not contest that his bad-faith claim was “decided,” as is clear from his failure to

  challenge the third element of res judicata—i.e., that “the judgment rendered in the

  prior litigation . . . [was] on the merits of the case,” Robinson, 100 P.3d at 677 n.11.

         In any event, the very fact that Mr. DeSmet sought leave to amend his

  complaint in the first lawsuit to include a breach-of-contract claim demonstrates that

  he could have brought the claim in that lawsuit. See U.S. Truck Co. v. Nat’l Am. Ins.

  Co., 186 F. Supp. 2d 1184, 1190 (W.D. Okla. 2002) (“‘[B]oth courts and

  commentators agree that theories which were the subject of an untimely motion to

  amend, filed in the earlier action, “could have been brought” there.’” (quoting Nilsen

  v. City of Moss Point, 701 F.2d 556, 563 (5th Cir. 1983)); cf. Manning v. City of

  Auburn, 953 F.2d 1355, 1360 (11th Cir. 1992) (“[F]or res judicata purposes, claims

  that ‘could have been brought’ are claims in existence at the time the original

  complaint is filed or claims actually asserted by supplemental pleadings or otherwise

  in the earlier action.” (footnote omitted)).

         Moreover, Mr. DeSmet’s predicament is a result of his own litigation strategy.

  A plaintiff’s “[choice] to advance, at [a] late date, a new theory of liability arising out

  of the same transaction does not suffice to obviate the application of the doctrine of

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  res judicata,” nor does it show that he “lacked the opportunity to raise those theories”

  in the first lawsuit. Plotner v. AT&T Corp., 224 F.3d 1161, 1172 (10th Cir. 2000).

  To avoid his current predicament, Mr. DeSmet could have filed both claims in his

  first lawsuit after the three primary insurers had paid their share, thus triggering

  Scottdale’s contractual duties. Alternatively, he could have rectified what turned out

  to be a bad tactical decision by filing a timely, procedurally proper motion to amend

  his complaint after that trigger date. He did neither. See Federated Dep’t Stores,

  Inc. v. Moitie, 452 U.S. 394, 403 (1981) (Blackmun, J., concurring) (reasoning that

  equity does not require the res judicata doctrine to “give way” where a party made

  “a deliberate tactical decision” and was not “caught in a mesh of procedural

  complexities” (internal quotation marks omitted)).

        2.     Denial of Motion for Leave to Amend

        The district court’s denial of Mr. DeSmet’s motion for leave to amend his

  complaint does not allow him to avoid the res judicata bar either. The umbrella

  policy was triggered on March 26, 2020, and the deadline to amend pleadings in the

  first lawsuit was September 10, 2020. As noted in the dismissal order, Mr. DeSmet

  “clearly believed” a breach of contract had occurred as of August 24, 2020. Aplt.

  App. at 67. In a filing on that date, he stated, twice: “Defendant breached its

  contract of insurance with Plaintiff by failing to pay the UM policy benefits it owed

  to the Plaintiff. In addition, Defendant breached its ex delicto duty to deal fairly

  and in good faith with Plaintiff . . . .” Joint Status Report & Disc. Plan, No. CIV-20-

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  330-J, ECF No. 19 at 1, 3 (emphasis added).7 Despite this awareness, he did not seek

  to timely amend his complaint to add a breach-of-contract claim.

        Instead, Mr. DeSmet waited until October 13, 2021—two months before his

  scheduled trial date—to make his request. Even then, he sought leave to amend in

  one line in a response brief in contravention of local rules and he did not follow the

  Federal Rules of Civil Procedure. This court has already affirmed the denial of

  his request to amend, finding no abuse of discretion under these circumstances.

  DeSmet I, 2022 WL 2288681, at *5. We will not revisit that decision here. See also

  U.S. Truck Co., 186 F. Supp. 2d at 1190 (“Denial of leave to amend does not negate

  an otherwise valid defense of res judicata, particularly when that denial is premised

  upon the party’s own dilatory conduct.”).

                                  III.   CONCLUSION

        We affirm the judgment of the district court.

                                               Entered for the Court

                                               Timothy M. Tymkovich
                                               Circuit Judge

        7
           This document was not included in the record for DeSmet I, but we take
  judicial notice of it as a publicly filed document. See Ahidley, 486 F.3d at 1192 n.5.

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