Mountain Pure, LLC v. Turner Holdings, LLC

• Decision Date: 10 March 2006
• Docket Number: No. 05-2213.,05-2213.
• Citation: 439 F.3d 920
• Parties: MOUNTAIN PURE, LLC, Plaintiff-Appellant, v. TURNER HOLDINGS, LLC; Portola Packaging, Inc.; Stone Container Corporation; Consolidated Container Company, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

439 F.3d 920

MOUNTAIN PURE, LLC, Plaintiff-Appellant, v. TURNER HOLDINGS, LLC; Portola Packaging, Inc.; Stone Container Corporation; Consolidated Container Company, LLC, Defendants-Appellees.

No. 05-2213.

United States Court of Appeals, Eighth Circuit.

Submitted: February 17, 2006.

Filed: March 10, 2006.

COPYRIGHT MATERIAL OMITTED

D.P. Marshall, Jr., argued, Jonesboro, AR (Brandon J. Harrison, Jonesboro, AR, and Timothy O. Dudley, Little Rock, AR, on the brief), for appellant.

Michael Stephen Bingham, argued, Little Rock, AR, for appellee Stone Container.

Bruce Munson and Brenna Ryan, Little Rock, AR, for appellee Turner Holdings.

Gary Corum, Little Rock, AR, for appellee Portola Packaging.

J. Cotten Cunningham, Little Rock, AR, for appellee Consolidated Container.

Before BYE, HEANEY, and MELLOY, Circuit Judges.

BYE, Circuit Judge.

Mountain Pure, LLC, appeals the district court's order dismissing its tort claims against Turner Holdings, LLC, Portola Packaging, Inc., Stone Container Corporation, and Consolidated Container Company, LLC, on grounds of res judicata and abstention. We reverse.

I

Mountain Pure bottles and sells water and juice. Turner Holdings, Portola Packaging, Stone Container and Consolidated Container (suppliers) provided Mountain Pure with jugs, bottle caps and cardboard boxes used in the packaging of its products. Mountain Pure alleges it encountered problems with each of these components and sued the suppliers in Arkansas state court for breach of contract.¹ The suppliers entered denials and counter claimed alleging Mountain Pure owed money on outstanding account balances. The suppliers moved for summary judgment on Mountain Pure's contract claims. Just before the summary judgment hearing, Mountain Pure amended its complaint to include tort claims against the suppliers. At the hearing, the state court indicated it intended to grant the suppliers' motions to dismiss Mountain Pure's contract claims. Before a written order dismissing the claims was entered, however, Mountain Pure moved to non-suit its contract and tort claims. The district court granted the motion to non-suit and dismissed the claims without prejudice.

After voluntarily dismissing the contract and tort claims, Mountain Pure refiled them in federal court. The suppliers then returned to state court and asked the court to amend its earlier judgment to reflect the court's intention to dismiss the contract claims on the merits, with prejudice. The court agreed, granted summary judgment on the contract claims, and amended the judgment. Later, the state court found for the suppliers on their counter claims and awarded damages against Mountain Pure. Thereafter, the parties voluntarily non-suited the remaining state claims and Mountain Pure appealed the award of damages. The Arkansas Court of Appeals dismissed the appeal, holding it was interlocutory because the non-suited tort claims were dismissed without prejudice and could be refiled.

Back in federal court, the suppliers filed motions to dismiss Mountain Pure's contract and tort actions on the basis of res judicata and abstention. The district court found the contract claims had been fully adjudicated on the merits and held they were barred by the doctrine of res judicata. It also held the tort claims were barred by res judicata because they arose out of the same nucleus of operative facts and could have been pursued in the state court action. Mountain Pure moved for reconsideration, pointing out the tort claims were dismissed without prejudice to its right to refile them, and the Arkansas Court of Appeals had held there had been no final adjudication of the state court action. The district court rejected Mountain Pure's arguments and reaffirmed its earlier ruling, adding that even if res judicata did not apply, it would abstain from hearing the case. On appeal, Mountain Pure argues the district court erred in applying res judicata to the tort claims,² and by applying the abstention doctrine.

II

The parties agree this diversity action is governed by Arkansas state law, Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and that our review of the district court's interpretation of state law is de novo, Burlington N.R. Co. v. Farmers Union Oil Co. of Rolla, 207 F.3d 526, 534 (8th Cir.2000).

A

Mountain Pure first argues the district court erred when it concluded the tort claims were barred by res judicata. The suppliers argue Mountain Pure's contract and tort claims arose out of the same nucleus of operative facts and should have been pursued together in the state court action. They contend Mountain Pure improperly split its cause of action by refiling the non-suited tort claims in federal court. We disagree.

Under the claim-preclusion aspect of res judicata, a valid and final judgment rendered on the merits bars another action by the plaintiff against the defendant on the same claim or cause of action. Magness v. Commerce Bank, 42 Ark.App. 72, 853 S.W.2d 890, 893 (1993). Res judicata prohibits the relitigation of claims which were actually litigated in the first suit and those which could have been litigated. Id. at 893-94. If subsequent litigation is based on the same events as the previous lawsuit, res judicata applies even if the later suit raises new legal issues and seeks additional remedies. Id. at 894. Res judicata, however, only applies when the party against whom the earlier decision is being asserted had a fair and full opportunity to litigate the issue in question. Cater v. Cater, 311 Ark. 627, 846 S.W.2d 173, 176 (1993).

Identical cases between the same parties can be pending in a federal district court and a state court at the same time. Carter v. Owens Ill., Inc., 261 Ark. 728, 551 S.W.2d 209, 209 (1977). In such instances, the first forum to dispose of the case enters a final judgment binding on the parties. Id. at 210. Conversely, a person having only a single cause of action is usually not permitted to split it and maintain more than one suit for different parts of the action; if the rule is violated the adjudication reached on the first action is, under res judicata, a bar to the maintenance of the second suit. Coleman's Serv. Ctr., Inc. v. F.D.I.C., 55 Ark.App. 275, 935 S.W.2d 289, 298 (1996). Thus, in Eiermann v. Beck, 221 Ark. 138, 252 S.W.2d 388, 389-90 (1952), a plaintiff who obtained rescission of a contract to purchase a restaurant plus consequential damages could not later sue for other damages resulting from the defendant's fraud. Similarly, in Lisenbey v. Farm Bureau Mutual Insurance Co. of Arkansas, Inc., 245 Ark. 144, 431 S.W.2d 484, 485 (Ark. 1968), the Arkansas Supreme Court held claims resulting from the loss of personalty and realty in one fire covered by one insurance policy constituted one cause of action.

Needless to say, the rule against the splitting of a single cause of action is intended to keep defendants from being harassed by a multiplicity of suits and to lighten the already overcrowded dockets of the trial courts. In finding the existence of a single cause of action we have placed some emphasis upon the fact that the several claims arise from a single transaction. In the case at bar we are firmly of the view that the fire created only one cause of action and that the plaintiffs ought not to be permitted to subdivide that cause of action, thereby burdening the defendant and the courts with the waste of time and expense that attends a needless jury trial.

431 S.W.2d at 485 (internal citation omitted).

The suppliers' attempt to invoke the doctrine of res judicata in this instance fails, however, because there is no valid final adjudication or judgment with respect to the claims Mountain Pure brought in state court. Thus, Mountain Pure's second suit filed in federal court does not violate the rule against splitting a cause of action and res judicata does not apply.

Despite the lack of a final judgment, the district court concluded Mountain Pure's contract claims were barred by res judicata, and, because the tort claims arose out of the same nucleus of operative facts, they too were barred. It concluded the absence of a final order was irrelevant because when Mountain Pure attempted to appeal the state court decision, it did not appeal the adverse ruling on the contract claims. Rather, it limited its appeal to the suppliers' counter claims. In so reasoning, the district court implies Mountain Pure waived the requirement under res judicata of a final judgment. We disagree. The appeal Mountain Pure attempted to take was premature and it could not have waived the finality requirement by failing to appeal an issue it was prevented from appealing.

The suppliers, quoting State Office of Child Enforcement v. Willis, 347 Ark. 6, 59 S.W.3d 438, 441 n. 1 (2001), argue an Arkansas "plaintiff cannot non-suit certain claims against a defendant in order to circumvent Rule 54(b). The underlying reason is that the principle of res judicata requires all claims against a defendant arising out of common facts to be brought, and non-suiting certain claims would lead to piecemeal appeals and splitting a cause of action." We agree Arkansas law prohibits a plaintiff from circumventing Rule 54(b) by non-suiting certain claims. This principle, however, does nothing to aid the suppliers' cause. It merely recognizes what the Arkansas Court of Appeals held—Mountain Pure could not render the state court's judgment final by non-suiting the remainder of its claims. Even assuming Mountain Pure attempted to circumvent Rule 54(b), the failed attempt merely highlights the fact that no valid final judgment has been entered. Because there has been no valid final judgment entered in the state law proceedings, res judicata does not bar Mountain Pure's federal suit.

Even assuming res judicata applies, the doctrine does not bar a subsequent action where, in an earlier action, a court has made an express reservation of right as to...