Aquatherm Industries, Inc. v. Florida Power & Light Co.

• Citation: 84 F.3d 1388
• Decision Date: 11 June 1996
• Docket Number: No. 95-2077,95-2077
• Parties: 1996-2 Trade Cases P 71,505, 39 U.S.P.Q.2d 1038 AQUATHERM INDUSTRIES, INC., a foreign corporation, Plaintiff-Appellant, v. FLORIDA POWER & LIGHT COMPANY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1388

84 F.3d 1388

1996-2 Trade Cases P 71,505, 39 U.S.P.Q.2d 1038

AQUATHERM INDUSTRIES, INC., a foreign corporation, Plaintiff-Appellant, v. FLORIDA POWER & LIGHT COMPANY, Defendant-Appellee.

No. 95-2077.

United States Court of Appeals,

Eleventh Circuit.

June 11, 1996.

Blaine H. Winship, Miami, FL, for Appellant.

Elizabeth J. du Fresne, Miami, FL, for Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before HATCHETT and BARKETT, Circuit Judges, and OAKES ^*, Senior Circuit Judge.

OAKES, Senior Circuit Judge:

Appellant Aquatherm Industries, Inc. ("Aquatherm") appeals from a judgment entered on December 9, 1994, by the United States District Court for the Middle District of Florida, Anne C. Conway, Judge, dismissing Aquatherm's federal antitrust and Lanham Act claims against appellee Florida Power & Light Company ("FPL"). On appeal, Aquatherm argues that the district court erred in concluding that res judicata barred Aquatherm's claims under Florida preclusion law. While we agree with the district court that Aquatherm's Lanham Act claims were barred, we find that res judicata did not preclude Aquatherm's pursuit of its federal antitrust claims. We therefore affirm in part, reverse in part, and remand.

BACKGROUND

Aquatherm is a manufacturer of solar-powered heating systems for swimming pools. FPL is a regulated utility that sells electricity in an area of Florida containing more than 250,000 in-ground swimming pools. The underlying dispute in this case involves FPL's statements to its customers regarding electric pool heat pumps and solar pool heaters, and Aquatherm's contention that these statements have unfairly advantaged the market for pool heaters reliant on electricity.

Aquatherm and FPL have expended a great deal of energy on their journey to this court. Aquatherm commenced its suit in 1991 by filing state antitrust claims in Florida state court; it later amended its complaint to include a federal claim for unfair competition under the Lanham Act, 15 U.S.C. 1125(a) (1994). FPL then removed the action to the United States District Court for the Southern District of Florida, at which point Aquatherm voluntarily withdrew its Lanham Act claim. The District Court consequently remanded the action to state court.

After remand, Aquatherm again amended its complaint to include state law claims of trade libel and product disparagement. FPL moved for dismissal and the state court dismissed all of Aquatherm's claims with prejudice in November 1992. The state court's decision was affirmed by a Florida appellate court in March 1994.

Prior to dismissal of the state action, Aquatherm filed a federal action in the United States District Court for the Middle District of Florida in November 1992. The complaint alleged federal antitrust violations under the Sherman Act, 15 U.S.C. §§ 1 and 2 (1994), and reasserted Aquatherm's Lanham Act claim. After Aquatherm amended this complaint to add antitrust claims under the Clayton Act, 15 U.S.C. § 15 (1994), FPL moved for dismissal. The district court stayed the action pending resolution of the state court appeal.

When the Florida appellate court affirmed the dismissal of Aquatherm's claims, FPL renewed its motion to dismiss in the federal district court on the basis of res judicata and failure to state any colorable claim. In December 1994, the district court granted FPL's motion to dismiss on the ground that res judicata barred Aquatherm's antitrust and Lanham Act claims.

In this appeal, Aquatherm contends that the district court erred in its construction and application of res judicata principles in several ways: (1) by misapplying United States Supreme Court precedent to reach the conclusion that prior resolution of Aquatherm's state antitrust claims barred its later federal antitrust claims; (2) by misinterpreting Florida preclusion law to find that res judicata bars a subsequent antitrust claim when an earlier court lacked subject matter jurisdiction over the original antitrust claim; (3) by applying only two of the four elements required for res judicata under Florida law to hold that Aquatherm's Lanham Act claim was barred; and (4) by ignoring the "manifest injustice" exception to res judicata. We agree with Aquatherm that the district court erred in its analysis of Aquatherm's antitrust claims under res judicata principles. We therefore reverse the dismissal of the antitrust claims and remand for further proceedings. Because we find that the district court properly dismissed Aquatherm's Lanham Act claim, we affirm that portion of the district court's decision.

DISCUSSION

The application of res judicata principles to Aquatherm's claims constitutes a pure question of law that we review de novo. Meshulam v. General Motors Corp., 995 F.2d 192, 194 (11th Cir.1993); Israel Discount Bank Ltd. v. Entin, 951 F.2d 311, 314 (11th Cir.1992). We therefore must assess whether Aquatherm can prove any set of facts entitling it to relief on its antitrust and Lanham Act claims. St. Joseph's Hosp., Inc. v. Hospital Corp. of America, 795 F.2d 948, 953 (11th Cir.1986). Because Aquatherm's two sets of claims raise discrete issues under the doctrine of res judicata, ¹ we address them separately.

I. Antitrust Claims

This case presents the question whether a federal district court may give a Florida court judgment preclusive effect in a federal action brought under antitrust laws that are within the exclusive jurisdiction of the federal courts and therefore could not have been raised in the state court proceeding due to lack of subject matter jurisdiction. ² While this issue appears to be one of In Marrese, the Court reversed a lower court ruling that held that, as a matter of federal law, res judicata barred federal antitrust claims in a federal suit brought after an Illinois state court judgment. Balancing the exclusivity of federal court jurisdiction over federal antitrust claims with the full faith and credit given state court proceedings pursuant to 28 U.S.C. § 1738, the Court outlined a two-step analysis for federal courts to apply in cases such as the one before us.

first impression in this circuit, we are not without guidance: the Supreme Court has laid out the approach for determining whether a prior state court judgment may bar a later federal antitrust suit in Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985); see also Matsushita Electric Industrial Co., Ltd. v. Epstein, --- U.S. ----, ----, 116 S.Ct. 873, 878, 134 L.Ed.2d 6 (1996) ("Marrese provides the analytical framework for deciding whether the [state] court's judgment precludes this exclusively federal action.").

Marrese directs a court "to look first to state preclusion law in determining the preclusive effects of a state court judgment." 470 U.S. at 381, 105 S.Ct. at 1332. If state preclusion law indicates that res judicata should bar a claim in a subsequent federal suit, a court must then evaluate whether to permit the claim nevertheless as an exception to the full faith and credit requirements of § 1738. Id. at 383, 105 S.Ct. at 1333. The Court noted that:

With respect to matters that were not decided in the state proceedings, ... claim preclusion generally does not apply where "[t]he plaintiff was unable to rely on a certain theory of the case or seek a certain remedy because of the limitations of the subject matter jurisdiction of the courts...." Restatement (Second) of Judgments § 26(1)(c) (1982). If state preclusion law includes this requirement of prior jurisdictional competency, which is generally true, a state judgment will not have claim preclusive effect on a cause of action within the exclusive jurisdiction of the federal courts.

Id. at 382, 105 S.Ct. at 1333.

Under Marrese, therefore, we must determine whether Florida law would give preclusive effect to a judgment by a Florida court that lacked subject matter jurisdiction over the original claims. Id. at 386, 105 S.Ct. at 1334-35. If, as Marrese recognizes is usually the case, Florida preclusion law requires that the state court have subject matter jurisdiction for res judicata to apply, then Aquatherm's federal antitrust claims cannot be barred.

It is well-established that the general rule against splitting causes of action does not apply when suit is brought in a court that does not have jurisdiction over all of a plaintiff's claims. See Restatement of Judgments (Second) § 25 cmt. e (1982) ("If ... the court in the first action would clearly not have had jurisdiction to entertain the omitted theory or ground ... then a second action in a competent court presenting the omitted theory or ground should be held not precluded."); 18 Charles A. Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice and Procedure: Jurisdiction § 4470 (1981) ("On balance, it seems better to reject claim preclusion" when jurisdiction is exclusively federal); see also Hayes v. Solomon, 597 F.2d 958, 984 (5th Cir.1979) (holding that "[t]he principle of res judicata which prohibits splitting a cause of action 'applies only to claims capable of recovery in the first action.' " (citations omitted)), cert. denied, 444 U.S. 1078, 100 S.Ct. 1028, 62 L.Ed.2d 761 (1980).

From a review of Florida law, it appears that Florida does follow this general rule requiring subject matter jurisdiction over claims in the original action in order for res judicata to act as a bar to those claims in a later action. As stated in Florida Jurisprudence 2d:

The doctrine of res judicata applies to the judgments or decrees of courts of competent jurisdiction....

32 Fla.Jur.2d Judgments and Decrees § 130 (1994) (emphasis added). In order for a judgment or decree to operate as a bar, it must be rendered by a court having jurisdiction over the parties and subject matter.

33 id. at § 177.

Case law also supports the conclusion that Florida does not permit preclusion unless the prior court...