Court Opinion

ID: 802656
Source: CourtListenerOpinion
Date Created: 2012-06-20 13:58:04+00
Date Added: 2024-06-11T18:00:04.986845
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                           Pursuant to Sixth Circuit Rule 206
                                  File Name: 12a0185p.06

               UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                 _________________

                                               X
                                                -
 CRYSTAL LUDWIG,
                                                -
                              Plaintiff-Appellant,
                                                -
                                                -
                                                    No. 10-1208
          v.
                                                ,
                                                 >
                                                -
                        Defendant-Appellee. -
 TOWNSHIP OF VAN BUREN,
                                                -
                                               N
                 Appeal from the United States District Court
                for the Eastern District of Michigan at Detroit.
                 No. 07-15317—Avern Cohn, District Judge.
                              Argued: September 27, 2011
                           Decided and Filed: June 20, 2012
          Before: ROGERS, McKEAGUE, and DONALD, Circuit Judges.

                                  _________________

                                       COUNSEL
ARGUED: Michael L. Donaldson, Plymouth, Michigan, for Appellant. Danielle C.
Schoeny, SOMMERS SCHWARTZ, P.C. Southfield, Michigan, for Appellee.
ON BRIEF: Timothy P. Murphy, Saint Clair Shores, Michigan, for Appellant. Henri
O. Harmon, SOMMERS SCHWARTZ, P.C. Southfield, Michigan, for Appellee.
                                  _________________

                                        OPINION
                                  _________________

        ROGERS, Circuit Judge.         Plaintiff Crystal Ludwig is an exotic dancer
challenging the nudity ordinances of Van Buren Township under 42 U.S.C. § 1983.
Ludwig works for Garter Belt, Inc., an entity that operates a strip club and is currently
enjoined from violating the Van Buren nudity ordinances. This injunction was issued
as part of a prior suit, in which Garter Belt unsuccessfully challenged the ordinances.
In light of this previous suit, the district court dismissed Ludwig’s action on res judicata

                                             1
No. 10-1208         Ludwig v. Twp. of Van Buren                                       Page 2

grounds, reasoning that Ludwig’s interests had been “adequately represented” by Garter
Belt in the previous suit. On appeal, Ludwig argues that the district court mistakenly
relied on the concept of virtual representation, a broad application of res judicata that has
been held by the Supreme Court to violate due process. Ludwig, however, is a dancer
at Garter Belt and, as such, she is bound by the injunction. Given her status, she cannot
now challenge the injunction on grounds already litigated.

        Ludwig, an exotic dancer working for Garter Belt, brings this First Amendment
challenge to Van Buren’s nudity ordinances. Although this is Ludwig’s first suit
challenging the ordinances, two arguably related parties have already lost constitutional
challenges to the same Van Buren ordinances. In 2000, Van Buren filed “Garter Belt
I,” seeking to compel Garter Belt to comply with the township’s nudity ordinances. Van
Buren Twp. v. Garter Belt, Inc., No. 00-036479 (Wayne Co. Cir. Ct. 2000). Garter Belt
removed the case to federal court, and then filed a separate federal suit asserting that the
nudity ordinances were unconstitutional. Garter Belt, Inc. v. Van Buren Twp., No. 00-
75630 (E.D. Mich. 2000) (“Garter Belt II.”) The two cases were consolidated. The
court remanded Garter Belt I for lack of federal jurisdiction, and dismissed Garter Belt
II on abstention grounds. Van Buren Twp. v. Garter Belt, Inc., No. 00-75395 (E.D.
Mich. Jan. 18, 2001), aff’d Garter Belt, Inc. v. Van Buren Twp., 66 F. App’x 612 (6th
Cir. 2003).

        On remand, the state court in Garter Belt I entered a judgment and permanent
injunction against Garter Belt, holding that the nudity ordinances were “without
constitutional or legal infirmity.” The injunction was upheld on appeal.

        In 2002, Samantha Bates, an exotic dancer working for Garter Belt, filed a
§ 1983 action challenging the nudity ordinances and seeking money damages. See Bates
v. Van Buren Twp., 02-73692, 2005 WL 1769525 (E.D. Mich. July 25, 2005). The
district court held that Bates’s action was barred by res judicata and we affirmed. Bates
v.Van Buren Twp., 459 F.3d 731 (6th Cir. 2006).

        Ludwig became an exotic dancer shortly after reaching the age of majority. At
the time of Garter Belt I and Bates, she was not employed or associated with Garter Belt.
No. 10-1208         Ludwig v. Twp. of Van Buren                                        Page 3

When Ludwig sued in 2007, Van Buren moved for summary judgment under the theory
that Garter Belt I precluded the action. Van Buren argued that Ludwig’s suit was
indistinguishable from Bates, and should be dismissed on the same grounds. Ludwig
argued that Bates was distinguishable because Ludwig was not yet employed as an
exotic dancer when Garter Belt I was decided. Ludwig further argued that the dismissal
of her case would violate due process.

        The district court held that Michigan’s res judicata doctrine barred Ludwig’s
claims. Noting that Michigan broadly construes res judicata under Adair v. State,
680 N.W.2d 386, 396 (Mich. 2004), the district court applied the doctrine to bind parties
“so identified in interest with another party that the first litigant represents the same legal
right that the later litigant is trying to assert.” Ludwig v. Twnship of Van Buren, 681 F.
Supp. 2d 848, 853 (2010). The district court held:

        Ludwig and the Garter Belt, like Bates and the Garter Belt, clearly have
        a substantial identity of interests: that the ordinance be struck down on
        constitutional grounds. Ludwig works at the same establishment which
        litigated the case in state court. Ludwig’s interest was presented and
        protected by the Garter Belt before the Michigan courts.

Id. (internal quotations omitted). Because the Garter Belt had already lost its challenge
to the nudity ordinances, the district court held that Ludwig’s claim was barred.

        In doing so, the district court determined that the application of res judicata did
not deny Ludwig due process. Mindful of the Supreme Court’s admonition that an
“extreme” application of res judicata could violate due process, see Richards v. Jefferson
Cnty., 517 U.S.793, 797 (1996), the district court held that barring Ludwig’s challenge
to the ordinance—which was substantially identical to that raised by Garter Belt—was
not an extreme application. Further, the district court held that a recent Supreme Court
decision, Taylor v. Sturgell, 553 U.S. 880 (2008), did not change that conclusion. While
Taylor “rejected the theory of virtual representation to establish privity for res judicata
purposes,” the district court held that the case was inapplicable to cases applying state
preclusion rules. Ludwig, 681 F. Supp. 2d at 853. The district court granted summary
judgment and Ludwig appeals.
No. 10-1208           Ludwig v. Twp. of Van Buren                                                Page 4

         Our analysis of Ludwig’s appeal proceeds in two steps. First, we must determine
if Michigan law precludes Ludwig’s appeal because “federal courts are required to give
the judgments of state courts the same preclusive effect as they are entitled to under the
laws of the state rendering the decision.” Executive Arts Studio v. City of Grand Rapids,
391 F.3d 783, 795 (6th Cir. 2004). Second, we must determine if the application of
Michigan law constitutes an “extreme application[] of the doctrine of res judicata . . .
inconsistent with a federal right that is fundamental in character.” Richards v. Jefferson
Cnty., 517 U.S. 793, 797 (1996). Neither step requires reversal in this case. Ludwig’s
appeal is precluded under Michigan law, which is not an extreme application that
violates the Constitution.

         Michigan courts would bar Ludwig’s action under the principles articulated in
Adair v. State, 680 N.W.2d 386 (Mich. 2004). In Michigan, res judicata “bars a second,
subsequent action when (1) the prior action was decided on the merits, (2) both actions
involve the same parties or their privies, and (3) the matter in the second case was, or
could have been, resolved in the first.” Id. at 396. Michigan “has taken a broad
approach to the doctrine of res judicata, holding that it bars not only claims already
litigated, but also every claim arising from the same transaction that the parties,
exercising reasonable diligence, could have raised but did not.” Id. It is undisputed that
the prior action—between Van Buren and Garter Belt—was adjudicated on the merits
and resolved the substantive dispute of the validity of the Van Buren ordinances. The
sole remaining question is whether both actions involve the same parties or their privies.
They do because Ludwig works only for Garter Belt, and in that capacity she is subject
to injunctions against the company.

         Ludwig’s suit is effectively a challenge to a permanent injunction levied against
her place of business, Garter Belt. According to her complaint, she is “at all times
pertinent . . . an expressive dancer at Garter Belt.”1 Although ordinarily an employee

         1
           The complaint also states that she “is an independent contractor renting space for the purpose
of exhibiting her art.” For purposes of the following claim preclusion analysis, there is no difference
between an employment relationship and one of an “independent contractor renting space” in a place of
entertainment.
No. 10-1208        Ludwig v. Twp. of Van Buren                                      Page 5

is not bound by litigation brought by an employer, see, e.g., United States v. Gurley,
43 F.3d 1188, 1198 (8th Cir. 1994), a special problem arises when an employer is subject
to prospective relief. See 18A C. Wright, A. Miller & E. Cooper, Federal Practice and
Procedure §4460 (2d ed. 2011). This is because an employer can only act through its
employees, so prospective relief must bind employees to have any effect. Upon entering
her contractual relationship with Garter Belt, Ludwig was bound by the injunction issued
in Garter Belt I to the extent she seeks to dance at Garter Belt.

       It is clear that Michigan’s doctrine of claim preclusion would preclude Garter
Belt from challenging the injunction on grounds already litigated. In Garter Belt I, the
Wayne County Circuit Court entered a Judgment and Permanent Injunction against
Garter Belt, stating in part that the Nudity on Licensed Premises ordinance “is without
constitutional or legal infirmity,” and dismissed Garter Belt’s counterclaims. Garter Belt
remains subject to the injunction, and is barred from challenging it.

       For purposes of her dancing at the club operated by Garter Belt, Ludwig became
bound by Garter Belt I when she accepted her employment-like contractual arrangement
with a corporation that was bound by a permanent injunction. Her suit seeks the right
to do at the club operated by Garter Belt what Garter Belt is enjoined from permitting
her to do. In Michigan, an injunction is binding on the parties to the action, their
officers, agents, servants, and employees. Mich. Ct. R. 3.310(C)(4). A corollary of this
rule is that a former employee is no longer bound by the injunction, and is free to act for
herself in the protection of her own rights, even if the employer was prohibited from
doing so. Alemite Mfg. Corp. v. Staff, 42 F.2d 832, 832–33 (2d Cir. 1930) (Hand, J.).
Here, once Ludwig knew of the injunction, she was bound by its terms such that she
cannot assist the Garter Belt in violating them. See id. Were Ludwig to quit her job, or
start working at an adult establishment not subject to an injunction, the case would be
different. She has not alleged such an intention. If she sued to dance elsewhere, the City
would have to defend the suit, without reliance on claim preclusion from prior litigation
with another party. But where the complaint raises only the same issues and seeks the
same result finally litigated by her current employer, as to her actions for that employer,
No. 10-1208           Ludwig v. Twp. of Van Buren                                   Page 6

the other party to the earlier litigation (here the City) should not have to defend against
repetitive actions.

       Such a result under Michigan law is not unconstitutional. If a party litigates
against a corporation, and obtains injunctive relief, claim preclusion should protect the
party against future litigation raising the same issue and seeking the same result. This
should apply even where the litigation is brought by a newly hired employee of the
corporation. Otherwise, those who litigate against corporations have effectively lost
altogether the finality interest that the claim-preclusion doctrine protects. For instance,
should a property owner win an injunction against a polluting manufacturer, she would
have to defend her victory against the repeated suits for declaratory judgment brought
by the polluter’s new employees. A copyright or trademark owner who had litigated
successfully against a publisher could be subjected to repetitive litigation by new
employees of the publisher. It is a state’s prerogative to protect against such wasteful
and burdensome litigation, and a state may do so by means of a claim preclusion
doctrine that prohibits current employees from relitigating issues already lost by their
employers.

       The Supreme Court did not mandate a contrary anomalous conclusion by
invalidating in Taylor v. Sturgell, 553 U.S. 880, 893–95 (2008), an extreme form of
claim preclusion in which the current litigant had no legal relationship with the prior
litigant. In Taylor, the Supreme Court held that claim preclusion doctrines could not go
so far as to preclude litigation where the Government in a Freedom of Information Act
suit had prevailed in a previous suit brought by a friend of the plaintiff. The two men
had “no legal relationship.” The Supreme Court in this context rejected a doctrine of
“virtual representation” based on a “diffuse balancing” of “equitable” factors, id. at 898,
and based in particular on “adequate representation” shown merely by the previous
litigant’s “strong incentive to litigate” and the use of the same lawyers, id. at 897. The
Supreme Court however preserved the constitutionality of federal common-law claim
preclusion as to non-parties in the previous litigation in the context of six discrete
“categories” with limited application. Id. at 893-95. These are where (1) a person
No. 10-1208         Ludwig v. Twp. of Van Buren                                   Page 7

agrees to be bound by determination of issues in an action between others; (2) there is
a pre-existing substantive legal relationship between the person to be bound and a party
to judgment, for instance preceding and succeeding property owners, bailee and bailor,
or assignee and assignor; (3) the nonparty was adequately represented by someone with
the same interests who was a party, as in a properly conducted class action or suit
brought by trustee, guardian or other fiduciary; (4) the nonparty assumed control over
the prior litigation; (5) the nonparty served as proxy for a party; and (6) a special
statutory scheme expressly foreclosed successive litigation by nonlitigants. Id. While
a corporate employer’s relationship may not precisely fit within one of these categories,
the categories are not constitutionally rigid. The Taylor Court made clear that the
foregoing list was “meant only to provide a framework for our consideration of virtual
representation, not to establish a definitive taxonomy.” Id. at 893 n.6. An enjoined
corporation must effectively bind its future employees; otherwise those seeking an
injunction cannot get full relief. The relationship between a corporation against which
an injunction is sought and its future employees who will be bound by the injunction
falls extremely close to category (2 ) involving legal relationship, and in any event is
fully as “discrete” and “limited” as that exception. Applying claim preclusion does not
suffer from the weaknesses identified by the Court in Taylor, and is not an instance of
the standardless “virtual representation” condemned by that case. On the other hand,
rejection of claim preclusion in this context severely undermines the policies underlying
claim preclusion.

       The district court’s judgment is affirmed.