Court Opinion

ID: 9399665
Source: CourtListenerOpinion
Date Created: 2023-06-06 00:00:38.783237+00
Date Added: 2024-06-11T17:19:33.426817
License: Public Domain

Case: 22-20278         Document: 00516775583             Page: 1      Date Filed: 06/05/2023

              United States Court of Appeals
                   for the Fifth Circuit
                                                                                  United States Court of Appeals
                                                                                           Fifth Circuit

                                      ____________                                       FILED
                                                                                      June 5, 2023
                                       No. 22-20278                                   Lyle W. Cayce
                                      ____________                                         Clerk

   Kristin Guardino,

                                                                     Plaintiff—Appellant,

                                             versus

   Jim Hart; Sean H. McCarthy; John Eddie Williams, Jr.;
   Williams Kherkher Hart & Boundas L.L.P.; WKHB
   L.L.C.; Williams Kherkher L.L.C.; Williams BHE L.L.C.;
   Williams HBE L.L.C.; Williams Hart Boundas Easterby
   L.L.P.,

                                               Defendants—Appellees.
                      ______________________________

                      Appeal from the United States District Court
                          for the Southern District of Texas
                               USDC No. 4:21-CV-3721
                      ______________________________

   Before Dennis, Engelhardt, and Oldham, Circuit Judges.
   Per Curiam: *
          Plaintiff Kristin Guardino filed suit in federal court alleging violations
   of the Racketeer Influenced and Corruption Organizations Act (“RICO”),
   18 U.S.C. §§ 1961 et seq., and causes of action for fraud, breach of fiduciary

          _____________________
          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-20278          Document: 00516775583              Page: 2      Date Filed: 06/05/2023

                                           No. 22-20278

   duty and conflict of interest, breach of implied contract for bailment,
   conversion, theft, and vicarious liability. The district court dismissed
   Guardino’s common law claims, holding they were barred by res judicata and
   the doctrine of attorney immunity, and dismissed her RICO claims as
   insufficiently pleaded.
           Finding no error, we AFFIRM.
                            I. Factual and Procedural Background
           In 2002, Guardino, then an attorney in Texas, represented a minor
   plaintiff, Megan Madison, and her mother, Saskia Madison, 1 in a personal
   injury suit against Warren Reid Williamson. Guardino obtained a default
   judgment in her clients’ favor in 2005 and continued representing the
   Madisons in post-judgment collection proceedings. At some point, Guardino
   changed her fee arrangement with the Madisons to a contingency agreement.
   In 2007, Guardino entered into a co-counsel agreement with Williams,
   Kherkher, Hart, and Boundas, L.L.P. (“WKHB”), wherein the law firm
   agreed to provide a $20,000 loan to Guardino and cover litigation costs and
   expenses in exchange for 50% of Guardino’s contingency fees in the Madison
   matter. The post-judgment collection proceedings would continue until
   2017, but in 2009 the State Bar of Texas temporarily suspended Guardino’s
   license to practice law. While Guardino was ineligible to practice law, WKHB
   represented the management trust established on Megan Madison’s behalf
   to pursue her claims in the collection proceedings. When Guardino’s
   suspension ended, the trustee informed Guardino that it would continue to
   be represented by WKHB and no longer use Guardino’s services. Guardino’s
   law license was suspended again in 2011, and she was later disbarred.

           _____________________
           1
               We use the pseudonyms assigned to the plaintiffs in the original personal injury
   case.

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                                     No. 22-20278

          In 2011, Guardino filed a petition against WKHB, the trustee, and
   several other defendants in Texas probate court. The case was transferred to
   the 215th District Court of Harris County. Relevant here, Guardino asserted
   claims of breach of fiduciary duty and conflict of interest, fraud, vicarious
   liability, and breach of contract against WKHB arising out of WKHB’s
   conduct in representing the trustee in the Madison collection proceedings.
   Her petition also alleged that WKHB breached the co-counsel agreement by
   requiring Guardino to pay expenses up front and to seek reimbursement from
   WKHB, and by failing to adequately represent Megan Madison in the
   collection proceedings after Guardino’s law license was suspended. It also
   alleged that WKHB breached contractual and fiduciary duties it owed
   Guardino by virtue of her “contractual lien” on the Madison judgment,
   committed fraud, and created a conflict of interest, all by making certain
   litigation decisions in the collection proceedings after Guardino was no
   longer involved in the matter.
          WKHB and the other defendants moved for summary judgment,
   which the trial court granted without specifying grounds. Guardino appealed
   to the Texas Fourteenth Court of Appeals, which affirmed summary
   judgment for the defendants. The court held that Guardino failed to submit
   any evidence of a breach of contract, that there is no stand-alone vicarious
   liability claim under Texas law, and that any fraud or breach of fiduciary duty
   claims arising out of WKHB’s in-court conduct in the course of representing
   the trustee is shielded by judicial proceedings privilege. Additionally,
   Guardino abandoned any professional malpractice or conflict of interest
   claim by failing to address it before the court of appeals.
          More than seven years later, Guardino filed her federal complaint in
   the instant case. The complaint names as defendants WKHB, its member
   attorneys, and various corporate entities that are alleged to be its
   predecessors or successors in interest. It asserts three counts of violations of

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   RICO, as well as causes of action for fraud, breach of fiduciary duty and
   conflict of interest, breach of contract for bailment, conversion, theft, and
   vicarious liability. Guardino’s complaint alleges substantially the same set of
   facts as alleged in her prior state court petition, appearing in many cases to
   have copied the allegations from the latter verbatim. Like her state-court
   petition, Guardino’s complaint alleges that WKHB breached the co-counsel
   agreement by requiring Guardino to pay expenses up front and to seek
   reimbursement, and by failing to adequately represent Megan Madison in the
   collection proceedings. And like her state court petition, her complaint also
   alleges that WKHB’s in-court advocacy and litigation decisions constituted
   fraud, as well as a conflict of interest and breach of fiduciary duty owed to
   Guardino. Her complaint also asserts several new claims. Without specifying
   which factual allegations are supporting, the complaint asserts claims for
   violation of an implied contract of bailment, conversion, and theft. It also
   asserts that the defendants, along with several “unnamed co-conspirators,” 2
   formed an association-in-fact enterprise, whose affairs the defendants
   conducted through a pattern of racketeering activity, namely by entering into
   “Extortion Agreements,” committing theft, fraud, and witness tampering,
   in violation of 18 U.S.C. §§ 1962(b), (c), and (d).
           The district court dismissed Guardino’s complaint, taking judicial
   notice of the filings from Guardino’s Texas state court proceedings. The
   court held that Guardino’s common law claims arising from facts that
   occurred prior to the state court judgment were barred by res judicata, that
   her common law claims arising from facts that occurred after that judgment
   were barred by the doctrine of attorney immunity, and that she failed to

           _____________________
           2
            The complaint alleges that two other groups, the “Of Counsel Participants” and
   the “Judicial Participants” also were part of this enterprise, but it does not identify or
   describe who these participants are.

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   sufficiently plead the existence of a RICO enterprise separate from the
   alleged pattern of racketeering activity. Guardino appealed.
                                 II. Standard of Review
          We review a district court’s dismissal under Rule 12(b)(6) de novo,
   accepting all well-pleaded facts as true and viewing them in the light most
   favorable to the plaintiff. Molina-Aranda v. Black Magic Enters., L.L.C., 983
   F.3d 779, 783 (5th Cir. 2020). To meet this standard, a plaintiff “must allege
   ‘enough facts to state a claim that is plausible on its face.’” Id. at 784 (quoting
   Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals
   of the elements of a cause of action, supported by mere conclusory
   statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
   Additionally, allegations of fraud must meet Rule 9(b)’s heightened pleading
   standard, which requires a plaintiff to “state with particularity the
   circumstances constituting fraud.” Fed. R. Civ. P. 9(b).
                                     III. Discussion
                                     A. Res Judicata
          Generally, res judicata cannot be raised in a motion to dismiss; it must
   be pleaded as an affirmative defense. Test Masters Educ. Servs., Inc. v. Singh,
   428 F.3d 559, 570 n.2 (5th Cir. 2005) (citing 5 Charles Alan Wright
   & Arthur R. Miller, Fed. Prac. & Proc. § 1357 (3d ed.)).
   However, we have permitted dismissal under Rule 12(b)(6) on the basis of
   res judicata “when the elements of res judicata are apparent on the face of
   the pleadings.” Stevens v. St. Tammany Par. Gov’t, 17 F.4th 563, 571 (5th Cir.
   2021) (citing Murry v. Gen. Servs. Admin., 553 F. App’x 362, 364 (5th Cir.
   2014) (per curiam) (unpublished)); see also Wright & Miller, Fed.
   Prac. & Proc. § 1357). We may also “consider documents attached to or
   incorporated in the complaint and matters of which judicial notice may be
   taken.” United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336

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   F.3d 375, 379 (5th Cir.2003); see also Dean v. Mississippi Bd. of Bar Admissions,
   394 F. App’x 172, 175 (5th Cir. 2010) (per curiam) (unpublished).
          “A federal court, asked to give res judicata effect to a state court
   judgment, must apply the res judicata principles of the law of the state whose
   decision is set up as a bar to further litigation.” Hernandez v. City of Lafayette,
   699 F.2d 734, 736 (5th Cir. 1983). Under Texas law, a prior judgment has
   claim preclusive effect if there is: “(1) a prior final judgment on the merits by
   a court of competent jurisdiction; (2) identity of parties or those in privity
   with them; and (3) a second action based on the same claims as were raised
   or could have been raised in the first action.” Amstadt v. U.S. Brass Corp.,
   919 S.W.2d 644, 652 (Tex. 1996). Guardino concedes that there was a prior
   final judgment rendered by a court of competent jurisdiction. She contests
   only whether there is identity or privity between the parties to her state court
   action and this one and whether the two cases involve the same claims or
   causes of action.
          Some of the parties—Guardino and WKHB—in the two lawsuits are
   identical. As to the remaining parties, there is privity under Texas law.
   Parties “can be in privity in at least three ways: (1) they can control an action
   even if they are not parties to it; (2) their interests can be represented by a
   party to the action; or (3) they can be successors in interest, deriving their
   claims through a party to the prior action.” Amstadt, 919 S.W.2d at 653.
   Furthermore, “[w]hen the allegation is that the parties were in a vicarious
   relationship, as it is here, a judgment for the principal bars a later suit against
   the agent.” Soto v. Phillips, 836 S.W.2d 266, 270 (Tex. App.-San Antonio
   1992, writ denied). Guardino’s state petition named WKHB as a defendant
   and alleged vicarious liability based on the actions of the firm’s “owners,
   officers, directors, managers, employees, agents or assigns.” Her federal
   complaint names as defendants WKHB, the firm’s predecessors and
   successors in interest, and three of its attorneys. It also alleges that all

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   defendants are vicariously liable for the acts of their “employees, agents or
   assigns” described in the complaint. Guardino’s complaint, therefore, only
   names as defendants parties that are the same as, are successors in interest
   to, or are vicariously liable to WKHB, the defendant in her state court action.
   Her complaint thus alleges privity between the defendants and a defendant
   in her prior state action.
          The claims in the two cases—at least those arising out of facts alleged
   to have occurred before the adjudication of the state court action—are the
   same. Texas employs a transactional test to determine this element of res
   judicata. Barr v. Resol. Tr. Corp., 837 S.W.2d 627, 631 (Tex. 1992). This test
   precludes claims arising out of the same factual transaction or series of
   connected transactions, thus barring claims that “were or could have been
   raised in the first action.” Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862
   (Tex. 2010). The allegations in Guardino’s complaint about the defendants’
   conduct during the Madison collection proceedings are substantially
   identical to, and in some cases verbatim copies of, her allegations of the same
   in her state court petition. For instance, both her complaint and petition
   allege that Guardino entered into a co-counsel agreement with WKHB
   wherein the latter would provide a loan of $20,000 and cover costs and
   expenses in exchange for 50% of Guardino’s contingency fees. Both allege
   that WKHB breached this agreement by requiring Guardino to pay court
   costs first and seek reimbursement from WKHB, and also by failing to (in her
   view) adequately represent Megan Madison. And both allege the same
   “continuum of acts” committed by WKHB after Guardino was removed
   from the litigation in derogation of her “contractual lien” on the Madison
   judgment yet to be collected.
          The claims in Guardino’s complaint of breach of contract, fraud,
   breach of fiduciary duty, and “vicarious liability” premised on these
   allegations are, for the purposes of res judicata, the same claims that

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   Guardino asserted in her state action because they arise out of the same
   transaction. Guardino’s new claims of theft, conversion, and breach of
   implied contract for bailment—to the extent they depend on these already-
   litigated allegations—are also barred by res judicata because they could have
   been brought in Guardino’s original state action.
          In sum, the district court did not err in determining that there was
   privity between the parties in the two lawsuits and that the common law
   claims based on facts that were or could have been litigated in her state court
   action are the same. Res judicata bars Guardino’s claims for breach of
   contract, fraud, breach of fiduciary duty, “vicarious liability,” theft,
   conversion, and breach of implied contract for bailment arising out of facts
   alleged in the complaint to have occurred before 2012.
                               B. Attorney Immunity
          Guardino’s complaint also alleges that in 2016 Williamson, the
   judgment debtor in the Madison matter, died. Guardino filed a claim for her
   legal fees with the Williamson Estate, which the administrator rejected.
   WKHB then filed a claim on behalf of Megan Madison in probate court
   which, according to Guardino’s complaint, was denied because WKHB used
   Megan Madison’s real name instead of the pseudonym assigned to her in the
   litigation. According to Guardino, this mistake caused the “loss to Megan
   Madison of her entire remaining claim and the entirety of [Guardino’s] lien.”
   Her complaint alleges that WKHB took no steps to correct this error, such as
   filing a claim against the Williamson Estate or otherwise seeking to enforce
   Megan Madison’s claim. These “acts and omissions constituted the
   misappropriation of [Guardino’s] fee.”

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           The district court held that any legal claims 3 arising out of these
   allegations of WKHB’s mistakes in litigation strategy were barred by the
   doctrine of attorney immunity. In Texas, “an attorney is immune from
   liability to nonclients for conduct within the scope of his representation of his
   clients.” Youngkin v. Hines, 546 S.W.3d 675, 681 (Tex. 2018). Guardino has
   not alleged that she was a client of WKHB. As a nonclient, any harm that
   Guardino may have suffered through WKHB’s “acts or omissions” in the
   course of representing Megan Madison in the Williamson probate matter is
   not actionable by operation of attorney immunity. The district court did not
   err in dismissing Guardino’s claims on this basis.
                         C. Failure to State a Claim Under RICO
           Finally, the district court dismissed Guardino’s RICO claims, to the
   extent they were not barred by res judicata and attorney immunity, for failure
   to state a claim. Noting that Guardino’s complaint is “mainly comprised of
   statutory text and conclusory statements,” the district court concluded that

           _____________________
           3
             It is unclear from the complaint and Guardino’s briefing what claims she believes
   these allegations give rise to. The complaint states that the defendants “converted her
   property to their own use” when they “took further action to prevent her from being paid
   for her services completely,” suggesting she may be premising her conversion claim on
   these allegations. The complaint also states that the defendants “represented the interests
   of Megan Madison” and, by operation of Guardino’s “lien” on Madison’s judgment, also
   the interests of “Kristin Wilkinson Guardino” in the probate case against the Williamson
   Estate. In doing, Guardino asserts, WKHB created both a conflict of interest and “an
   implied in fact contract,” suggesting she may be asserting breach of contract claims and a
   professional malpractice claim based on these facts. Finally, the complaint states that in
   “representing Megan Madison” in the probate proceedings, the defendants “completely
   ignored” Guardino’s “contractual lien” and breached their fiduciary duties, suggesting
   she may be asserting another breach of fiduciary duty claim based on these allegations. We
   cannot ascertain, however, whether Guardino is premising her theft, fraud, or violation of
   bailment claims on these facts.

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   the complaint failed to allege the existence of an enterprise separate from the
   pattern of racketeering. We see no error in this determination.
          18 U.S.C. § 1962(b) and (c) prohibit any person from gaining an
   interest in or conducting the affairs of an enterprise through a pattern of
   racketeering activity. While the RICO statute defines “enterprise” broadly
   to include a “group of individuals associated in fact although not a legal
   entity,” 18 U.S.C. § 1961(4), an association-in-fact enterprise must have an
   existence “that can be defined apart from the commission of the predicate
   acts.” Montesano v. Seafirst Com. Corp., 818 F.2d 423, 427 (5th Cir. 1987);
   see also Ocean Energy II, Inc. v. Alexander & Alexander, Inc., 868 F.2d 740, 748
   (5th Cir. 1989) (“[A]s we have noted on several occasions, ‘[a]n enterprise
   must be ‘an entity separate and apart from the pattern of activity in which it
   engages.’”).
          Here, Guardino attempts to allege the existence of an association-in-
   fact enterprise, “The John Eddie Williams Jr. Enterprise,” comprised of the
   defendants as well as several other unnamed groups of individuals. She
   alleged the enterprise “was created and used as a tool to effectuate
   Defendants’ pattern of racketeering activity.” No other purpose, feature, or
   function of the enterprise is alleged. Rather, the enterprise is alleged to be a
   “group of ‘persons’ associated together for the common purpose of”
   inducing others into entering “Extortion Agreements” and then through
   fraud, threats, and extortion, converting the non-enterprise parties’ property
   to the benefit of the enterprise. These allegations fail to state the existence of
   an enterprise that is “an entity separate and apart from the pattern of
   [racketeering] activity in which it engages,” and as such, fails to state a claim
   under RICO. United States v. Turkette, 452 U.S. 576, 583 (1981). The district
   court did not err in dismissing Guardino’s RICO claims.

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                                  IV. Conclusion
         For the foregoing reasons, Guardino’s claims are barred by res
   judicata, attorney immunity, and are insufficiently pleaded. The judgment of
   the district court is AFFIRMED.

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