Rick v. Wyeth, Inc.

• Decision Date: 25 October 2011
• Docket Number: 10–3356,10–3355,10–3359,10–3357,10–3360,10–3358,10–3363.,10–3362,Nos. 10–3354,s. 10–3354
• Citation: 662 F.3d 1067
• Parties: Jeanette RICK, et al., Plaintiffs–Appellants, v. WYETH, INC., et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

662 F.3d 1067

Jeanette RICK, et al., Plaintiffs–Appellants,

v.WYETH, INC., et al., Defendants–Appellees.

Nos. 10–3354

10–3355

10–3356

10–3357

10–3358

10–3359

10–3360

10–3362

10–3363.

United States Court of Appeals, Eighth Circuit.

Submitted: June 15, 2011.Filed: Oct. 25, 2011.

Daniel E. Gustafson, argued, Minneapolis, MN, for appellants.

Frank Lane Heard, III, argued, Washington, DC, William Hoffman, Washington, DC, Lori B. Leskin, New York, NY, and Wendy S. Dowse, Los Angeles, CA, on the brief, for appellees.

Before LOKEN, BEAM, and GRUENDER, Circuit Judges.

LOKEN, Circuit Judge.

In 2004 and 2005, appellants, citizens of New York, sued the appellee pharmaceutical companies in New York state court claiming that appellees' hormone replacement therapy drugs caused appellants to develop breast cancer. After substantial discovery, appellees moved for summary judgment on the ground that the claims were time-barred under the three-year New York statute of limitations. Appellants argued the claims were not time-barred for many reasons. They also filed these diversity actions asserting the same claims in the District of Minnesota, a State with a six-year statute of limitations, and moved the New York court to dismiss their New York claims without prejudice.

In a lengthy opinion, the New York court denied dismissal without prejudice and dismissed the claims as time-barred. Applying New York law, the court granted appellees summary judgment after discussing and rejecting appellants' contrary assertions, namely, that an extended accrual statute applied, that appellees' fraud and deception warranted equitable estoppel, that the limitations period was extended by class action tolling, and that appellants' fraud claims were not time-barred under New York law. Addressing the motions to dismiss without prejudice, the court noted that appellants had filed actions in Minnesota and that grant of the motions would “allow them to avail themselves of Minnesota's six year statute of limitations and get around New York's obviously shorter three year statute.” It denied the motions because, “under the circumstances presented it is truly difficult for this court to fathom anything more prejudicial to defendants than being deprived of their right to judgment on the merits dismissing these clearly time-barred actions.”

The district court ¹ then granted appellees summary judgment dismissing the Minnesota actions. Recognizing that the issue is whether the New York judgment would be given preclusive effect under New York law, and that prior state and federal decisions applying New York law may not conclusively answer that question, the court concluded that, given the extent to which appellants had litigated their claims to the New York court, that court's grant of summary judgment based on timeliness “is sufficiently close to the merits to have preclusive effects in other jurisdictions.” (Quotation omitted.) On appeal, appellants argue, as they did to the district court, that we should give the New York state court's statute-of-limitations-based dismissal no preclusive effect in this diversity action in a Minnesota federal court. Reviewing the district court's grant of summary judgment de novo, we affirm.

I.

This appeal raises a single issue—whether dismissal of appellants' actions as time-barred under New York law precludes assertion of the same claims in a federal court diversity action in a State where the claims would not be time-barred. The issue lies at the intersection of three complex areas of the law, full faith and credit, diversity jurisdiction, and claim preclusion ( res judicata ). So we begin by reviewing relevant basic principles.

In Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001), the Supreme Court rejected contrary theories and held that the preclusive effect of a federal court judgment dismissing a diversity action as time-barred was a matter of federal common law. The Court then adopted, “as the federally prescribed rule of decision, the law that would be applied by state courts in the State in which the federal diversity court sits.” Id. at 508, 121 S.Ct. 1021. The Supreme Court noted that—

the traditional rule is that expiration of the applicable statute of limitations merely bars the remedy and does not extinguish the substantive right, so that dismissal on that ground does not have claim-preclusive effect in other jurisdictions with longer, unexpired limitations periods. See Restatement (Second) of Conflict of Laws §§ 142(2), 143 (1969); Restatement of Judgments § 49, Comment. a (1942).

531 U.S. at 504, 121 S.Ct. 1021. It would “violate the federalism principle” of Erie R. Co. v. Tompkins, 304 U.S. 64, 78–80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), if federal courts sitting in States adhering to this “traditional rule” nonetheless gave claim-preclusive effect to time-bar dismissals in diversity cases. Id. The Court remanded the case to a Maryland state court to determine the preclusive effect that the prior dismissal by a federal court in California would be given under California law.

By contrast, the preclusive effect of a prior state court judgment is determined by the Constitution's Full Faith and Credit Clause, Article IV, § 1, as implemented by the federal Full Faith and Credit Statute, 28 U.S.C. § 1738. “It is now settled,” the Supreme Court has explained, “that a federal court must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984). Thus, under the Full Faith and Credit Statute, the rule of decision is the same as the rule adopted in Semtek: the issue of preclusive effect turns on the law of the State where the prior judgment issued—here, New York—as the New York courts would apply it. See Marrese v. Am. Acad. of Orth. Surgeons, 470 U.S. 373, 385, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985) (“the concerns of comity reflected in § 1738 generally allow States to determine the preclusive scope of their own courts' judgments”); Hanig v. City of Winner, S.D., 527 F.3d 674, 676 (8th Cir.2008). It is a rule of federal law but not, as in Semtek, a rule of federal common law. “By the Constitutional provision for full faith and credit, the local doctrines of res judicata, speaking generally, become a part of national jurisprudence, and therefore federal questions cognizable here.” Riley v. New York Trust Co., 315 U.S. 343, 349, 62 S.Ct. 608, 86 L.Ed. 885 (1942).

II.

In New York, as in most States, the doctrine of claim preclusion bars successive litigation of claims arising out of the same transaction or series of transactions if “(i) there is a judgment on the merits rendered by a court of competent jurisdiction, and (ii) the party against whom the doctrine is invoked was a party to the previous action, or in privity with a party who was.” People ex rel. Spitzer v. Applied Card Sys., Inc., 11 N.Y.3d 105, 863 N.Y.S.2d 615, 894 N.E.2d 1, 12 (2008); O'Brien v. City of Syracuse, 54 N.Y.2d 353, 445 N.Y.S.2d 687, 429 N.E.2d 1158, 1159 (1981); Reilly v. Reid, 45 N.Y.2d 24, 407 N.Y.S.2d 645, 379 N.E.2d 172, 176 (1978). Every aspect of this general principle has spawned extensive litigation and commentary. At issue in this case is whether the New York judgment dismissing claims as time-barred was a determination “on the merits.”

New York law is far from silent on this issue. The leading modern case is Smith v. Russell Sage College, 54 N.Y.2d 185, 445 N.Y.S.2d 68, 429 N.E.2d 746 (1981). In the first suit, plaintiff sued his former employer for breach of an oral contract and tortious misrepresentation. The trial court dismissed the contract claims as barred by the Statute of Frauds and the tort claims as time-barred. Rather than appeal, plaintiff filed a new action alleging additional fraud that “first came to light while the earlier action was pending.” Id., 445 N.Y.S.2d 68, 429 N.E.2d at 748. The New York Court of Appeals held that the new fraud claim was part of the same transaction and therefore precluded. In rejecting the contention that claim preclusion did not apply because the prior judgment was not “on the merits,” the Court explained, in language anticipating the later discussion in Semtek:

[T]he impact of the Statute of Limitations, though often denominated as procedural, in a practical sense may also be said to be substantive; as we have had occasion to observe, while a time bar is usually said to affect the remedy its interposition is at least as often the difference between life or death for the right as well as the remedy. Suffice it to say that a dismissal on these grounds is at least sufficiently close to the merits for claim preclusion purposes to bar a second action, especially where the motion to dismiss the first action was treated as one for summary judgment on which the court considered submissions of the parties dehors the pleadings.

Id., 445 N.Y.S.2d 68, 429 N.E.2d at 750 (citations and quotations omitted). “It is pertinent,” the Court added, “that the Restatement, 2d, [of Judgments] has completely abandoned the term ‘on the merits.’ ” Id. at n. 3.

Russell Sage has been cited in at least a dozen published decisions of the New York intermediate appellate courts for the proposition that a “dismissal on statute of limitations grounds is considered a dismissal on the merits for claim preclusion purposes and bars a second action.” Karmel v. Delfino, 293 A.D.2d 473, 740 N.Y.S.2d 373, 374 (2002); see, e.g., Simmons v. N.Y.C. Health & Hosp. Corp., 71 A.D.3d 410, 894 N.Y.S.2d 750 (2010); Komlosi v. City of N.Y., 3 A.D.3d 343, 769 N.Y.S.2d 890 (2004); Cold Spring Harbor Area Civic Ass'n v. Bd. of Zoning Appeals, 305 A.D.2d 444, 762 N.Y.S.2d 392 (2003); Marinelli Assocs. v. Helmsley–Noyes Co., Inc., 265 A.D.2d 1, 705 N.Y.S.2d 571 (2000). These decisions...