Hurt v. Pullman Inc.

• Decision Date: 09 July 1985
• Docket Number: No. 84-7257,84-7257
• Citation: 764 F.2d 1443
• Parties: James Earl HURT, Jr., Plaintiff-Appellant, v. PULLMAN INCORPORATED, a corporation, and Pullman Incorporated Non-Contributory Pension Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1443

764 F.2d 1443

James Earl HURT, Jr., Plaintiff-Appellant, v. PULLMAN INCORPORATED, a corporation, and Pullman Incorporated Non-Contributory Pension Plan Defendants-Appellees.

No. 84-7257.

United States Court of Appeals Eleventh Circuit.

July 9, 1985.

Joe R. Whatley, Jr., Stewart, Falkenberry & Whatley, Birmingham, Ala., for plaintiff-appellant.

Stone Patton Kierce & Clifton, James B. Kierce, Jr., Bessemer, Ala., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before GODBOLD, Chief Judge, ANDERSON, Circuit Judge, and THORNBERRY ^*, Senior Circuit Judge.

R. LANIER ANDERSON, III, Circuit Judge:

Appellant James Earl Hurt, Jr. ("Hurt") appeals the grant of summary judgment in favor of appellees Pullman Incorporated ("Pullman") and Pullman Incorporated Non-Contributory Pension Plan ("Pension Plan") with regard to his claim under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C.A. Sec. 1001, et seq., and with regard to pendent Alabama state law claims of breach of fiduciary duty and bad faith. The district court held that in light of a prior workmen's compensation judgment in state court, Hurt was barred by the doctrine of res judicata from bringing his claims in federal court. Alternatively, the district court held that the Alabama court had fully and fairly litigated an issue which was dispositive of Hurt's claims and, thus, he was precluded by the doctrine of collateral estoppel. ¹ Hurt v. Pullman Standard, Inc., 582 F.Supp. 856 (N.D.Ala.1984). In addition, with respect to one of Hurt's pendent state claims, the tort of bad faith, the district court dismissed on the alternative ground that bad faith is applicable only in the insurance context. Id. at 860. With respect to both res judicata and collateral estoppel, Alabama law requires "substantial identity" of parties for one lawsuit to have preclusive effect upon the other. We find that substantial identity of the parties is lacking between the workmen's compensation proceeding and the instant case and, thus, reverse and remand for further proceedings. However, with respect to Hurt's pendent claim of bad faith only, we affirm the decision of the district court. ²

I. FACTS AND PROCEDURAL BACKGROUND

Hurt worked for Pullman from February, 1963 until March, 1980. On March 27, 1980, Hurt was injured when a board he was using as a pry bar broke and struck him on the wrist. Shortly after the accident, Hurt was referred by Pullman to the company physician who treated Hurt for nearly three years and performed four operations on the injured wrist. During this period of treatment, Hurt was paid temporary total disability compensation, and medical treatment was provided, by Pullman pursuant to the Alabama Workmen's Compensation Act. See Ala.Code Secs. 25-5-57(a)(1), 25-5-77. On February 1, 1983, the company physician reported to Pullman that Hurt was able to return to work. Thereafter, Pullman terminated all compensation it had been paying Hurt under the Workmen's Compensation Act.

A dispute arose between Pullman and Hurt as to the termination of compensation Hurt arguing that his disability entitled him to continuing compensation and medical benefits under the Workmen's Compensation Act. In order to resolve the dispute, Pullman sued Hurt in the Circuit Court of Jefferson County, Alabama, for a declaration of its workmen's compensation obligations under Ala.Code Secs. 25-5-81, 25-5-88 (setting out civil procedures for determination of disputes under the Workmen's Compensation Act). Pullman-Standard, Inc. v. James Hurt, No. CV 83-194 (Cir.Ct. Jefferson Cty., Ala.), Record at 120. Hurt counterclaimed that Pullman had breached a common law and statutory fiduciary relationship between himself and Pullman because of Pullman's "arbitrary and capricious refusal to pay medical bills ... and disability benefits." Record at 124-25. Hurt also claimed that Pullman was liable under the common law doctrine of bad faith. Id. at 125.

Pullman moved for summary judgment on Hurt's counterclaim. On November 21, 1983, the state trial judge entered an order granting summary judgment in Pullman's favor on the entirety of Hurt's counterclaim. Id. at 127. On January 9, 1984, after a full trial, the trial judge issued his opinion on the primary dispute. The trial judge noted that Pullman had already paid Hurt a total of $18,690.30 in temporary total disability compensation plus all of Hurt's doctor, hospital and drug bills from the time of the injury until January 27, 1983. The court then made the following finding:

Sifting all the evidence in the case, the Court finds and concludes that Mr. Hurt was able to return to work as of January 27, 1983 and that he has suffered a forty percent permanent partial disability to his left hand.

State court opinion at 3, Record at 130. As a result of this finding, the state court awarded Hurt $9,248 in permanent partial disability benefits, representing the total amount of Pullman's obligation under the Worker's Compensation Act, in addition to the amounts already paid, for the 40% permanent impairment of Hurt's left hand.

On August 18, 1983, during the pendency of the state workmen's compensation action, Hurt filed the instant case against Pullman and the Pension Plan in federal court, alleging that under ERISA he was entitled to disability benefits pursuant to an ERISA pension agreement between Pullman and Hurt's union, the United Steelworkers of America ("Pension Agreement"). Hurt also alleged pendent state claims of breach of fiduciary duty and bad faith. ³ The district court found that Hurt was collaterally estopped from raising the issue of his disability in federal court. Since, as the district court held, the Pension Agreement required total and permanent disability (defined as an employee's inability to return to work among his prior "category of employees") to enable a Pullman employee to collect disability benefits, the Alabama state court's finding that Hurt could return to work was a prior determination of the same issue and, as such, could not be relitigated in federal court under the collateral estoppel doctrine. Thus, collateral estoppel precluded Hurt from recovering on his ERISA claim and the pendent state claims. Hurt v. Pullman Standard, Inc., 582 F.Supp. at 860. Alternatively, the district court found that the doctrine of res judicata barred Hurt from bringing the instant action in federal court. First, the district court held that since the ERISA claim was based on the same historical facts as the workmen's compensation action, it was a compulsory counterclaim under Alabama law. Id. at 858-59; see Ala.R.Civ.P. 13(a). A compulsory counterclaim is lost if not pleaded. Second, the court held that even if the ERISA claim was not properly considered a compulsory counterclaim under Alabama law, it did arise out of the same operative facts as the counterclaim which Hurt had actually asserted. Id. at 859. Therefore, the district court found that Hurt's claims were res judicata in any event. The district court granted the defendants' motion for summary judgment on the res judicata and collateral estoppel issues. This appeal ensued.

II. DISCUSSION

A. Res Judicata

Under Alabama law, ⁴ "[t]he elements of res judicata are as follows:

(1) prior judgment rendered by court of competent jurisdiction; (2) prior judgment rendered on the merits; (3) parties to both suits substantially identical; and (4) same cause of action present in both suits.

Wheeler v. First Alabama Bank of Birmingham, 364 So.2d 1190, 1199 (Ala.1978), citing Stephenson v. Int'l Paper Co., 516 F.2d 103 (5th Cir.1975). A former adjudication may only be a bar to a subsequent suit if all four elements are present. The parties agree that the workmen's compensation judgment was rendered by a court of competent jurisdiction and was rendered on the merits. However, as indicated by our discussion below, the parties in both suits are not "substantially identical." Thus, we need not reach the question whether in the instant case Hurt is suing on the "same cause of action" as was present in the workmen's compensation action.

In the workmen's compensation action, Pullman sued Hurt for a declaratory judgment under the Workmen's Compensation Act. In the instant case, Hurt sued both Pullman and the Pension Plan under ERISA and pendent state law theories. ⁵ Hurt claims that the Pension Plan breached its fiduciary duty under ERISA by failing to pay him disability benefits as allegedly required under the Pension Agreement. There is a difference among the parties in the two suits, since the Pension Plan did not participate in the workmen's compensation action. Under Alabama law, however, the notion of "substantial identity" of parties does not require absolute identity, but extends as well to persons or entities in privity with those who did in fact litigate in the former action. See Teague v. Motes, 57 Ala.App. 609, 330 So.2d 434, 437-38 (1976); Suggs v. Alabama Power Co., 271 Ala. 168, 123 So.2d 4, 7 (1960); Sosebee v. Alabama Farm Bureau Mutual Casualty Ins. Co., 56 Ala.App. 334, 321 So.2d 676, 678 (1975). See also 1B Moore's Federal Practice p 0.411 (2d ed. 1984) (indicating that the terms "substantial identity of parties" and "privity" have the same meaning in res judicata jurisprudence). Regardless of label, the question in this case is whether the relationship between the Pension Plan and Pullman is sufficiently close that the results of Pullman's participation in the first suit, assuming the other elements of res judicata have been met, ought in fairness be binding in a second case involving the Pension Plan. See id. We hold that such a relationship of privity does not exist.

Under basic principles of res judicata jurisprudence, for a party to be bound by or take advantage of a prior suit that party or its privy must not only have been present in both suits, but it has to appear in the...