Wellborn v. Mountain Accessories Corp.

• Decision Date: 20 October 1998
• Docket Number: No. 95-CV-211-J.,95-CV-211-J.
• Citation: 23 F.Supp.2d 1321
• Parties: Kris WELLBORN, Plaintiff, v. MOUNTAIN ACCESSORIES CORPORATION, a/k/a MAC, Inc., a Tennessee corporation; and Wayne Daniel, individually, Defendants.
• Court: U.S. District Court — District of Wyoming

23 F.Supp.2d 1321

Kris WELLBORN, Plaintiff, v. MOUNTAIN ACCESSORIES CORPORATION, a/k/a MAC, Inc., a Tennessee corporation; and Wayne Daniel, individually, Defendants.

No. 95-CV-211-J.

United States District Court, D. Wyoming.

October 20, 1998.

P. Richard Meyer, Mel C. Orchard, III, Meyer & Williams, Jackson, WY, for plaintiff.

Donald I. Schultz, Holland & Hart, Cheyenne, WY, John L. Gallinger, Paula Ann Fleck, Holland & Hart, Jackson, WY, Curtis B. Buchhammer, Orr Buchhammer & Kehl, Cheyenne, WY, Daniel Kane, Atlanta, GA, for Defendants.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

ALAN B. JOHNSON, Chief Judge.

This matter is before the court on plaintiff's Motion for Summary Judgment.

Plaintiff, Kris Wellborn, is a firearms enthusiast. He lost an arm when a "load your own" canister exploded in a launching device he was holding. He filed this action for strict products liability, express warranty implied warranty of merchantability, implied warranty of fitness for a particular purpose, and negligence against defendant Mountain Accessories Corporation (MAC) alleging it sold him the defective canister and launcher. Plaintiff also sued Wayne Daniel, MAC's sole shareholder, president, officer and director in his individual capacity. He also sued Dick Loffer, a MAC employee that allegedly provided improper directions for the use of the products. Shortly before trial, Mr. Daniel was dismissed in his individual capacity on summary judgment.

The case was tried before a jury between October 28, and November 6, 1996. Mr. Wayne Daniel attended all depositions in this case on behalf of MAC, attended the trial, testified as the representative of MAC, and participated in the defense.

The jury returned a verdict in favor of plaintiff and against MAC on all claims. The jury found Mr. Loffer not liable. The jury determined plaintiffs damages were $200,000 and determined he was ten percent negligent. Applying Wyoming's comparative fault statute, the court entered judgment for plaintiff in the amount of $180,000. The parties appealed.

On appeal, the Tenth Circuit Court of Appeals affirmed on all issues except the dismissal of Mr. Daniel in his individual capacity. The Appeals Court found that there was an issue of fact regarding whether Mr. Daniel could be individually liable on the claims citing Zimmerman v. First Federal Savings and Loan Ass'n, 848 F.2d 1047 (10th Cir. 1988), and remanded for further proceedings against Mr. Daniel.

On remand, plaintiff moves for summary judgment. He contends that he is entitled to summary judgment against Mr. Daniel on theories of respondeat superior, stare decisis, collateral estoppel and res judicata. He contends that the undisputed evidence shows Mr. Daniel is individually liable for the corporation's torts.

As an initial matter, the court finds that the doctrines of stare decisis and respondeat superior are not applicable. Stare decisis is not applicable to the determination of whether an individual defendant, who was dismissed from the case before his liability was determined, is liable for a judgment based on jury verdict against a corporate defendant.

Respondeat superior is a doctrine whereby the wrong of the agent is the wrong of his employer, where the agent is acting within the scope of his employment. See Parker v. Vanderbilt University, 767 S.W.2d 412, 415 (Tenn.App.1988). It is not a doctrine under which the liability of the employer, MAC may be imputed to its sole shareholder or officer. Similarly, the doctrine of respondeat superior can not be used to impute liability to Mr. Daniel under plaintiff's theory that if the jury found MAC liable and Mr. Loffer not liable, Mr. Daniel must necessarily be liable because his were the only other person's actions that were considered by the jury.

Plaintiff contends that res judicata or collateral estoppel require summary judgment on the issue of Mr. Daniel's personal liability because Mr. Daniel was the person conducting MAC's defense. Citing Restatement (Second) of Judgments § 39.

In Lowell Staats Mining Co. v. Philadelphia Elec. Co., 878 F.2d 1271, (10th Cir.1989), the Tenth Circuit examined the use of the doctrines of collateral estoppel and res judicata:

As a general rule we apply federal law to the res judicata issue in successive diversity actions, but federal law will incorporate state law when the issue is more distinctly substantive, as with concept of "privity." Petromanagement Corp. v. Acme-Thomas Joint Venture, 835 F.2d 1329, 1333 (10th Cir.1988). "Under res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980) (citing Cromwell v. County of Sac, 94 U.S. 351, 352, 24 L.Ed. 195 (1876); St. Louis Baptist Temple v. FDIC, 605 F.2d 1169, 1174 (10th Cir.1979). Stated differently, "`a final judgment on the merits bars further claims by parties or their privies based on the same cause of action.'" Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979) (quoting Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979)). We have adopted the transaction approach of the Restatement (Second) of Judgments § 24 (1982) to determine what is a single "cause of action." Petromanagement, 835 F.2d at 1335. Section 24 states a final judgment extinguishes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose. What constitutes a "transaction" or a "series" is to be determined pragmatically considering whether the facts are related in time, space, origin, or motivation, and whether they form a convenient unit. Id. at § 24(2).

There is no definition of "privity" which can be automatically applied to all cases involving the doctrines of res judicata and collateral estoppel. Privity requires, at a minimum, a substantial identity between the issues in controversy and showing the parties in the two actions are really and substantially in interest the same. St. Louis Baptist Temple, 605 F.2d at 1174. Privity has been held to exist in the following relationships: concurrent relationship to the same property right (i.e. trustee and beneficiary); successive relationship to the same property or right (i.e. seller and buyer); or representation of the interests of the same person. 1B J. Moore, J. Lucas, T. Currier, Moore's Federal Practice, ¶ 0.411[1] at 392 (2d ed.1988).

Under collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision precludes relitigation of that fact or issue in a second suit involving the same party of their privy. Montana v. United States, 440 U.S. at 153, 99 S.Ct. 970 (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979)); St. Louis Baptist Temple, 605 F.2d at 1175.

Lowell Staats Min. Co., 878 F.2d at 1274-75.

In Lowell Staats Mining, the court held that when a director is sued in his official capacity, "a director's close relationship with the corporation will generally establish privity" and therefore all claims against him in his capacity as a director were barred by res judicata. Id. at 1277 and 1278 (citing Oglala Sioux Tribe v. Homestake Min. Co., 722 F.2d 1407, 1410 n. 3 (8th Cir.1983)¹ However, the court also dismissed a claim against a director in his individual capacity because there was an insufficient basis alleged to establish individual liability for the corporation's fraudulent conveyance. Similarly, the court affirmed the dismissal of an individual defendant because the employee/employer relationship does not establish privity for purposes of barring a claim, 878 F.2d at 1276 (citing Morgan v. City of Rawlins, 792 F.2d 975, 980 (10th Cir.1986)).

In Morgan, the court held there was no privity between an employee and his employer despite the fact that the dismissed suit against the employer was based on the employee's actions under respondeat superior.

Wyoming law of res judicata applies only to parties or their privies. We fail to see how [defendant's] employee/employer relationship bars his presence in this suit when he is named for actions for which he allegedly was personally responsible. We, too fail to see how the prior suit against the City alleging the deprivation of procedural rights bars this action for punitive damages against [the city employee] for acts he allegedly committed under color of state law. If the only basis for the City's liability was respondeat superior, and the suit [against the employer] was dismissed, [defendant] can still be subject to suit in his own capacity. The trial court misapplied Wyoming law in precluding suit against [defendant] on the grounds of privity.

Morgan, 792 F.2d at 980.

In a case similar to Morgan, the Tenth Circuit held that a civil rights case against University of Kansas employees in their individual capacity was not barred by res judicata because the employees were not in privity with their employer, the University, which had previously prevailed on a trial on the merits of the discrimination claim. Willner v. Budig, 848 F.2d 1032, 1034 n. 2 (10th Cir.1988) (citing Morgan, supra). However, the court did find that collateral estoppel applied as to the fact of the alleged harassment because the plaintiff had a full and fair opportunity to prove in the previous suit that the University's agents retaliated against her. Id. at n. 3.

On the issue of the application of collateral estoppel against a non-party to a judgment the Tenth Circuit has held that merely testifying in the prior trial is insufficient to establish that estoppel should be applied.

The Supreme Court has held that due process is implicated when a prior judgment is urged as binding on a nonparty. See Hansberry v. Lee, 311 U.S....