Advest Inc. v. Wachtel, 15090

• Decision Date: 19 December 1995
• Docket Number: No. 15090,15090
• Citation: 668 A.2d 367,235 Conn. 559
• Court: Connecticut Supreme Court
• Parties: ADVEST, INC., et al. v. ALLEN WACHTEL et al.

Page 367

668 A.2d 367

235 Conn. 559

ADVEST, INC., et al. v. ALLEN WACHTEL et al.

No. 15090.

Supreme Court of Connecticut.

Argued Sept. 27, 1995.

Decided Dec. 19, 1995.

Allan B. Taylor, with whom, on the brief, was Rhoda L. Rudnick, for appellants (plaintiffs).

Lawrence R. Gelber, pro hac vice, with whom, on the brief, was Patricia A. King, for appellees (defendants).

Before PETERS, C.J., and CALLAHAN, BORDEN, BERDON and KATZ, JJ.

BERDON, Justice.

The dispositive issue in this appeal is whether the trial court abused its discretion by refusing to permanently enjoin a party from pursuing arbitration in New York on the ground that there was a final personal judgment in Connecticut on the same claim in favor of the other party. More specifically, we must determine whether a judgment based upon an action barred by the statute of limitations in Connecticut is final on the merits so as to preclude, under the principles of res judicata, an action based upon the same claim in another jurisdiction in which the period of limitations had not yet expired. The plaintiffs, Advest, Inc. (Advest), and Billings and Company, Inc. (Billings), appeal from the judgment of the trial court ¹ denying their application to permanently enjoin nine defendants, three of whom are residents of Connecticut and six of whom are residents of other states, ² from bringing an arbitration claim in the state of New York.

For the purposes of the issues before this court, the following facts are undisputed and can be briefly stated. The defendants were individual investors in Cranmore Ridge Associates, a limited partnership formed to construct, own and operate a housing complex in New Hampshire. In 1991, these defendants commenced an action in the Superior Court of Connecticut against Advest and Billings, alleging fraud and other tortious conduct (hereinafter prior action) in connection with their purchase of an interest in Cranmore Ridge Associates. In 1992, the trial court in the prior action rendered summary judgment against the present defendants in favor of Advest and Billings on the ground that the claims asserted by the defendants were barred by Connecticut's three year statute of limitations pursuant to General Statutes § 52-577. ³ The defendants took no appeal from that judgment.

On May 20, 1993, the present defendants filed a claim against the plaintiffs for arbitration with the National Association of Securities Dealers, Inc. (NASD), in New York (hereinafter New York arbitration). The defendants in that arbitration proceeding, based upon the same transactions that had given rise to their claims in the prior action, alleged violations of federal and state securities laws, breach of contract, breach of the duty of good faith and fair dealing, breach of NASD rules, and violation of federal and state racketeering laws. Thereafter, the plaintiffs instituted this judicial action to enjoin the defendants from proceeding with the arbitration before NASD on the grounds that the arbitration proceeding was barred by the principles of res judicata and that as a result of instituting the prior action the defendants had waived their right to arbitration. All the defendants, resident and nonresident, appeared by counsel in this action and did not challenge the trial court's personal or subject matter jurisdiction. ⁴

The trial court denied the permanent injunction and rendered judgment for the defendants. The following reasons were furnished by the trial court for denying the permanent injunction: (1) enforcement of an injunction against the nonresident defendants would be difficult; (2) the plaintiffs are free to assert all their defenses in the New York arbitration proceeding; and (3) the statute of limitations in the New York forum may be longer than in Connecticut. This appeal followed.

I

The plaintiffs first argue that the trial court based its decision on the incorrect assumption that it did not have jurisdiction to issue a permanent injunction because a permanent injunction could not be enforced as to the six nonresident defendants. We disagree.

We recently set forth the governing principles for our standard of review as it pertains to a trial court's discretion to grant or deny a request for an injunction: "A party seeking injunctive relief has the burden of alleging and proving irreparable harm and lack of an adequate remedy at law.... A prayer for injunctive relief is addressed to the sound discretion of the court and the court's ruling can be reviewed only for the purpose of determining whether the decision was based on an erroneous statement of law or an abuse of discretion." (Citations omitted; internal quotation marks omitted.) Walton v. New Hartford, 223 Conn. 155, 165, 612 A.2d 1153 (1992). Therefore, unless the trial court has abused its discretion, or failed to exercise its discretion; Wehrhane v. Peyton, 134 Conn. 486, 498, 58 A.2d 698 (1948); the trial court's decision must stand.

This court has previously held that a party may be enjoined from prosecuting an action in another jurisdiction. Hartford Accident & Indemnity Co. v. Bernblum, 122 Conn. 583, 589, 191 A. 542 (1937). Usually, such an injunction is granted if "the party enjoined has sought by resort to the courts of another jurisdiction to deprive a fellow citizen of some benefit which should rightfully be accorded him under the law of the State of their common residence." Id. The trial court's discretion to issue an injunction prohibiting the pursuit of litigation in another state, based upon principles of res judicata, extends to nonresidents who have voluntarily submitted to the jurisdiction of this state. Wehrhane v. Peyton, supra, 134 Conn. at 497, 58 A.2d 698. In Receivers Middlesex Banking Co. v. Realty Investment Co., 104 Conn 206, 220, 132 A. 390 (1926), this court held: "The trial court, having not only jurisdiction of the parties but also the subject-matter, had the power to protect that jurisdiction, and its receivers, by an injunction against the prosecution of the litigation the [foreign banking institutions] were instituting in South Dakota." The trial court in this case, however, did not deny the injunction because it believed it lacked jurisdiction over the nonresident defendants who had voluntarily submitted to the jurisdiction of this state. Rather, the trial court held that although such a decree could be enforced against the three Connecticut defendants, the "out-of-state residents are effectively able to avoid any enforcement of orders of the court."

The difficulty of enforcing a decree of injunctive relief in an action in which a nonresident defendant has personally and voluntarily submitted to Connecticut's jurisdiction is a factor that a trial court may take into consideration. In Wehrhane v. Peyton, supra, 134 Conn. at 495-96, 58 A.2d 698, this court held that "courts usually refuse injunctions in actions of this kind where the defendant is a nonresident of the state where the relief is sought. Some courts place their decisions to that effect upon the ground that the courts of one state lack jurisdiction to enjoin a nonresident ... but jurisdiction as they use that word evidently does not mean the lack of authority of the court to act where the parties are properly before it but in the sense that equity will not ordinarily grant relief in such a case.... That is illustrated by the statement of high authority that if a nonresident has property within the jurisdiction of the court, an injunction may properly issue.... The true reason for denying the injunction against a nonresident is that, if granted, it could not ordinarily be enforced." (Citations omitted; internal quotation marks omitted.)

We conclude that the trial court properly exercised its discretion in this case by denying the claim for a permanent injunction. The court simply took into consideration the difficulty of enforcing the decree along with its other assigned reasons for denying the plaintiffs' request for an injunction. Even if the trial court had denied the permanent injunction on the erroneous basis that it did not have jurisdiction to enjoin the nonresident defendants who had submitted to the jurisdiction of the court, the denial of the injunction in this case was nevertheless proper for the reasons set forth in part II of this opinion.

II

The plaintiffs also argue that, as a matter of law, under the principles of res judicata the trial court was required to issue a permanent injunction predicated on the Connecticut judgment in the prior action. We disagree.

The term "res judicata" is often employed to refer to the related doctrines of claim preclusion and issue preclusion. 1 Restatement (Second), Judgments, p. 131 (1982); F. James & G. Hazard, Civil Procedure (3d Ed.1985) § 11.3. "Claim preclusion ... and issue preclusion, sometimes referred to as collateral estoppel, are first cousins. Both legal doctrines promote judicial economy by preventing relitigation of issues or claims previously resolved." Scalzo v. Danbury, 224 Conn. 124, 127, 617 A.2d 440 (1992). The preclusive effect of these two doctrines, however, is substantially different. "[C]laim preclusion prevents a litigant from reasserting a claim that has already been decided on the merits." ⁵ (Internal quotation marks omitted.) Virgo v. Lyons, 209 Conn. 497, 501, 551 A.2d 1243 (1988). "[I]ssue preclusion prevents a party from relitigating an issue that has been determined in a prior suit." (Internal quotation marks omitted.) Id.; Commissioner of Motor Vehicles v. DeMilo & Co., 233 Conn. 254, 267, 659 A.2d 148 (1995). In determining which principle applies--claim preclusion or issue preclusion--we must examine what was actually decided when summary judgment was rendered in favor of the plaintiffs and against the defendants in the prior action.

The judgment in the prior action was predicated on the running of the statute of limitations provided in § 52-577. Although a judgment based on the...