Reinke v. Boden

Decision Date10 January 1995
Docket NumberNo. 93-1966,93-1966
Citation45 F.3d 166
PartiesHenry S. REINKE d/b/a Lakeside Properties, Plaintiff-Appellant, v. Robert W. BODEN, Richard M. Stark, and John C. Kalenberg, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Ben Barnow, Alan Marc Goldberg, Thomas Lee Hefty (argued), Sam Tuzzolino, Barnow & Hefty, Chicago, IL, for plaintiff-appellant.

Floyd Babbitt, James R. Latta, James A. Roth, Fagel & Haber, Mary E. Gardner (argued), McNeela & Griffin, Chicago, IL, for defendants-appellees.

Before BAUER and RIPPLE, Circuit Judges, and REYNOLDS, District Judge. *

RIPPLE, Circuit Judge.

This is an appeal from the district court's entry of summary judgment for the defendants Robert W. Boden, Richard M. Stark, and John C. Kalenberg ("defendants"). The court held that the complaint of Henry S. Reinke, d/b/a Lakeside Properties ("Mr. Reinke"), was barred by res judicata. For the reasons articulated below, we reverse the judgment of the district court and remand the case for further proceedings.

I BACKGROUND

Mr. Reinke, an Illinois resident, originally brought suit in September 1988 in Minnesota state court against the defendants, all Minnesota residents. His complaint alleged that the defendants had breached a written guarantee of a lease. 1 Although Mr. Reinke contended that Illinois' ten-year statute of limitations should control over Minnesota's six-year statute, the Minnesota trial court applied the Minnesota limitations period. The court determined that Mr. Reinke's cause of action had fully accrued in May 1982, and accordingly entered judgment against Mr. Reinke on the basis that his complaint was time-barred under Minnesota's limitations statute. The decision was affirmed by the state appellate court, and further review was denied by the Minnesota Supreme Court.

On January 29, 1992, Mr. Reinke filed this diversity action in federal district court in Illinois against the same defendants. His complaint was essentially identical to the one that he previously had filed in Minnesota. The defendants moved for summary judgment on the ground that Mr. Reinke's action was barred by res judicata. The district court agreed. It held that Mr. Reinke's diversity action was barred by res judicata and granted the defendants' summary judgment motion.

In reaching this conclusion, the district court relied upon 28 U.S.C. Sec. 1738, 2 which "requires federal courts to give the same preclusive effect to state court judgments that those judgments would be given in the courts of the State from which the judgments emerged." Kremer v. Chemical Constr. Corp., 456 U.S. 461, 466, 102 S.Ct. 1883, 1889, 72 L.Ed.2d 262 (1982). Relying on that mandate and the Court's later holding in Migra v. Warren City School District Board of Education, 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984), the district court decided that the preclusive effect of the Minnesota court's ruling was to be determined by reference to Minnesota law. Turning then to Minnesota law, the court determined that Minnesota would consider a judgment on the merits to bar a second suit on the same cause of action between the same parties. See Nitz v. Nitz, 456 N.W.2d 450, 451 (Minn.App.1990). The district court also observed that the present suit involved the same parties and same facts as the claim brought in Minnesota. It further noted that, in Minnesota, a summary judgment on the ground that the suit is barred by the statute of limitations is considered to be "on the merits" under Minnesota Rule of Civil Procedure 41.02(c). 3 The district court therefore The district court expressly rejected Mr. Reinke's assertion that this diversity action required the court to look to Illinois law for the preclusive effect of the Minnesota lawsuit. It stated:

                determined that the Minnesota judgment precluded other lawsuits on the same cause of action.  "Because Minnesota would consider plaintiff's Minnesota lawsuit precluded, so must this court."   Mem. op. at 6. 4
                

It is well settled that "[a] federal diversity court is required to accord all the res judicata effects that a judgment entered in another state would command as a matter of full faith and credit in any other state court." Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure: Jurisdiction Sec. 4472 at 730 (1981). Since a state court would be required to look to the preclusive effect of the judgment in the state which rendered the judgment, so would a federal diversity court. See Migra, 465 U.S. at 81, 104 S.Ct. at 896.

Mem. op. at 7. Nevertheless, noted the court, the action would still be barred under federal and Illinois law because dismissal based upon the statute of limitations is considered an adjudication on the merits under Federal Rule of Civil Procedure Rule 41(b) 5 and Illinois Supreme Court Rule 273. 6

II DISCUSSION
1.

As this case comes to us, an Illinois citizen has attempted to bring an action in federal court in Illinois. There are no issues regarding the requisite diversity jurisdiction or the exercise of in personam jurisdiction. Nevertheless, the federal court in Illinois, exercising jurisdiction based on the diversity of the citizenship of the parties, refused to hear this case because, in its view, the judgment of a Minnesota state court prevented it from doing so.

This previous Minnesota state court judgment involved the same cause of action and the same parties. That suit was dismissed by the Minnesota state court because, in Minnesota, the statute of limitations of the forum is employed, and the Minnesota statute of limitations barred the action. In reaching its decision, the Minnesota court rejected the argument that, rather than apply its own statute of limitations, it ought to use the statute of limitations of Illinois. In the past, the use of a statute of limitations other than that of the forum was usually, although not always, 7 considered the prerogative of the legislature. In recent times, however, such use of the statutes of limitations of the state whose substantive law governs the controversy has become "the emerging trend." 8 In rejecting an invitation to employ "the emerging trend," the Minnesota court explicitly noted that it was adhering to the traditional view that statutes of limitations are procedural in nature: "It is well-settled in our courts that the limitation of time statutes generally are procedural and that the law of the forum is applied." Mem. op. at 2.

2.

In assessing how the district court in Illinois, whose judgment is before us today, ought to treat this Minnesota decision, we note at the outset that the district court selected the correct starting point. Section 1738 of the Judicial Code commands in its third paragraph that, consistent with other constitutional strictures, a federal court must give the judgment of a state court the same effect that it would have in the courts of the state of rendition. 9 The task before us, then, is to determine the nature and scope of the Minnesota judgment and then to follow the command of Sec. 1738. See Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 381, 105 S.Ct. 1327, 1332, 84 L.Ed.2d 274 (1985); Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984); Kremer v. Chemical Constr. Corp., 456 U.S. 461, 481-82, 102 S.Ct. 1883, 1897-98, 72 L.Ed.2d 262 (1982). Although we agree with the district court on the nature of the task before us, regretfully we find ourselves in respectful disagreement on the difficult question of the correct characterization of the Minnesota judgment.

3.

Determining whether an action is time-barred is a very basic and essential component of the litigation process. It is a task that ought to be achieved easily, definitively, and quickly. In recent times, however, no area of traditional adjective law has precipitated more ambiguity and caused more theoretical and practical snarls than this area. Accordingly, at the beginning of the discussion, it is helpful to set forth the major features of the received tradition regarding statutes of limitations--a tradition that still animates much of the governing law today.

Statutes of limitations traditionally have been characterized as falling into one of two categories. Some statutes of limitations are considered an integral part of the cause of action; when the statute of limitations runs, the cause of action is extinguished. 10 When a statute of limitations is of this type, a judgment dismissing the cause of action because the time in which to bring suit has expired amounts to a decision "on the merits." Further litigation on that cause of action is barred. There is no contention, among either the litigants or the courts, that this sort of statute of limitations is at issue in this case.

The second and more common type of statute of limitations does not extinguish the cause of action upon the running of the limitations period; only the possibility of obtaining a remedy in that forum is gone. Such a determination is a matter of the forum's procedural law because it is designed to protect both the parties and the local courts against the prosecution of stale claims. Consequently, the dismissal bars a subsequent suit in that jurisdiction, a bar that cannot be avoided by shifting the legal theory or adding factual embellishment. However, under this traditional approach, a dismissal under this form of statute of limitations does not bar a subsequent suit in another jurisdiction. It simply means that the cause of action cannot be heard in the jurisdiction of dismissal because that jurisdiction considers suits of that vintage to be stale. That judgment establishes only that the suit is time-barred in the state of rendition; it says nothing about a suit in the second jurisdiction. 11

Finally, before turning to the case before us, the basic treatment of a statute of limitations of this second type...

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