Andrew Robinson Intern. v. Hartford Fire Ins.

• Citation: 547 F.3d 48
• Decision Date: 10 November 2008
• Docket Number: No. 08-1255.,08-1255.
• Parties: ANDREW ROBINSON INTERNATIONAL, INC., et al., Plaintiffs, Appellants, v. HARTFORD FIRE INSURANCE COMPANY, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

547 F.3d 48

ANDREW ROBINSON INTERNATIONAL, INC., et al., Plaintiffs, Appellants, v. HARTFORD FIRE INSURANCE COMPANY, Defendant, Appellee.

No. 08-1255.

United States Court of Appeals, First Circuit.

Heard September 9, 2008.

Decided November 10, 2008.

Jack P. Milgram, with whom Law Offices of Jack P. Milgram was on brief, for appellants.

Felicia H. Ellsworth, with whom Mark C. Fleming and Wilmer Cutler Pickering

Hale and Dorr LLP were on brief, for appellee.

Before HOWARD, BALDOCK,^* and SELYA, Circuit Judges.

SELYA, Circuit Judge.

This is a diversity case, and the parties agree that Massachusetts law controls. The hostilities initially took the form of a garden-variety insurance dispute—but the case has now morphed into an interesting question about the preclusive effect (if any) of a declaratory judgment on a subsequent action for damages arising out of the same nucleus of operative facts. The district court determined that a final judgment in the original declaratory action barred the maintenance of the subsequent suit. After careful consideration, we reverse.

I. BACKGROUND

We glean the facts from the state court's rescript in the original declaratory judgment action and the plaintiffs' complaint in the subsequent suit.

The plaintiffs, appellants in this court, are a quartet of affiliated companies: Andrew Robinson International, Inc., Andrew Robinson International Financial Services, Inc., Andrew Robinson International Insurance Brokerage, Inc., and Andrew Robinson International Risk Management Consultants, Inc. (collectively, Robinson). The four corporations shared an office condominium at 165 Friend St., Boston, Massachusetts. On April 25, 2003, the occupant of a neighboring unit negligently discharged lead-laden dust into Robinson's unit. The incident proved costly: Robinson's premises were badly damaged and Robinson was forced to relocate until the clean-up was complete.

In due course, Robinson filed a first-party claim against its insurer, Hartford Fire Insurance Co. Hartford denied the claim, asserting that the dust constituted a pollutant under its policy (which, subject to certain exceptions, excluded coverage "for loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release, or escape" of pollutants).¹ Robinson responded by demanding an affirmation of coverage. Hartford demurred.

At that juncture, Robinson repaired to the state superior court in search of a declaration of the parties' rights and liabilities under the insurance policy. Following some preliminary skirmishing (not relevant here), the court, acting on cross-motions for summary judgment, concluded that lead-laden dust released within a commercial building did not constitute pollution and, therefore, did not trigger the policy exclusion. See Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co. (Robinson I), No. 03-1353, 2006 WL 1537382, at *13 (Mass.Super.Ct. Feb. 6, 2006). Hartford allowed the declaratory judgment to become final and paid Robinson's first-party claim.

Approximately eight months later, the other shoe dropped: Robinson again sued Hartford in the state court. This time, Robinson alleged that Hartford's stonewalling constituted an unfair and deceptive trade practice in violation of Mass. Gen. Laws ch. 93A, § 11, and prayed for treble damages and attorneys' fees. Hartford removed the case to the federal district court based on diversity of citizenship and the existence of a controversy in the requisite amount. See 28 U.S.C. §§ 1332(a), 1441.

Hartford's next step was to move for dismissal under Federal Rule of Civil Procedure 12(b)(6) on the ground that the chapter 93A suit was foreclosed by principles of res judicata. Robinson opposed the motion, arguing among other things that the Massachusetts courts would not give preclusive effect as to claims not actually litigated in a previous declaratory judgment action.² The district court sided with Hartford and dismissed the action. See Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co. (Robinson II), 533 F.Supp.2d 218, 222 (D.Mass.2008). This timely appeal followed.

II. PERTINENT LEGAL PRINCIPLES

We begin with a précis of some pertinent legal principles.

Our standard of review is familiar: we evaluate a dismissal for failure to state a claim de novo, accepting all well-pleaded facts delineated in the complaint and drawing all reasonable inferences therefrom in favor of the party contesting dismissal. Palmer v. Champion Mortg., 465 F.3d 24, 27 (1st Cir.2006); Jorge v. Rumsfeld, 404 F.3d 556, 559 (1st Cir.2005). The motion will be granted unless the facts, evaluated in that plaintiff-friendly manner, contain enough meat to support a reasonable expectation that an actionable claim may exist. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007); Morales-Tañón v. P.R. Elec. Power Auth., 524 F.3d 15, 18 (1st Cir.2008).

In passing upon a motion to dismiss for failure to state a claim, the reviewing court's focus on the well-pleaded facts is more expansive than might first be thought. Within that rubric, the court may consider matters fairly incorporated within the complaint and matters susceptible of judicial notice. In re Colonial Mortg. Bankers Corp., 324 F.3d 12, 14 (1st Cir.2003). Thus, where the motion to dismiss is premised on a defense of res judicata —as is true in the case at hand—the court may take into account the record in the original action. See, e.g., R.G. Fin. Corp. v. Vergara-Nuñez, 446 F.3d 178, 183-84 (1st Cir.2006); Boateng v. InterAm. Univ., 210 F.3d 56, 60 (1st Cir.2000).

The fact that this is a diversity case adds another dimension to our task. A federal court sitting in diversity must apply state law to determine the preclusive effect of an earlier state court judgment. Kathios v. Gen. Motors Corp., 862 F.2d 944, 946 (1st Cir.1988). In the first instance, this means that the federal court looks to pronouncements of the highest court of the state. Id. When that court has not spoken directly to an issue, the federal court must make an informed prophecy as to the state court's likely stance. See Blinzler v. Marriott Int'l. Inc., 81 F.3d 1148, 1151 (1st Cir.1996).

In undertaking this inquiry, the federal court may draw upon a variety of sources that may reasonably be thought to influence the state court's decisional calculus. While these sources are not arranged in any rigid hierarchy, the federal court as a general matter will start by inspecting analogous decisions of the state's highest court; then consider decisions of the lower courts of that state; then examine the precedents in other jurisdictions; then survey the collected wisdom found in learned treatises; and finally, mull any relevant policy rationales. See, e.g., Blinzler, 81 F.3d at 1151; Ryan v. Royal Ins. Co., 916 F.2d 731, 734-35 (1st Cir.1990). In conducting this tamisage, the federal court should pay particular attention to those sources that the state's highest court has endorsed in the past and to public policy considerations mentioned approvingly in that court's decisions. See Gibson v. City of Cranston, 37 F.3d 731, 736 (1st Cir.1994). In the final analysis, the federal court's objective is not to choose the legal path that it deems best but, rather, to predict what path the state court would most likely travel. See Kathios, 862 F.2d at 946.

III. ANALYSIS

Massachusetts recognizes two distinct types of preclusion arising out of the maintenance of prior litigation: res judicata (claim preclusion) and collateral estoppel (issue preclusion). See Kobrin v. Bd. of Regist. in Med., 444 Mass. 837, 832 N.E.2d 628, 634 (Mass.2005). Both the parties and the district court have analyzed this case in terms of res judicata. We follow their lead.

Res judicata "makes a valid final judgment conclusive on the parties ... and prevents relitigation of all matters that were or could have been adjudicated in the action." Id. This doctrine is sometimes known as "merger and bar," nomenclature that emphasizes the doctrine's role in guarding against claim-splitting. See Restatement (Second) of Judgments §§ 18, 19, 24 (1982).

The operation of res judicata requires the presence of three elements: "(1) the identity or privity of the parties to the present and prior actions, (2) identity of the cause of action, and (3) prior final judgment on the merits." Kobrin, 832 N.E.2d at 634; see McDonough v. City of Quincy, 452 F.3d 8, 16 (1st Cir.2006). Here, the parties are the same and the first action unarguably ended in a final judgment. That leaves the second element; Robinson's opening gambit is to suggest that the two actions it brought against Hartford fail to present the requisite identity of causes of action. We test that thesis.

Massachusetts deems causes of action identical for claim preclusion purposes if they "grow[] out of the same transaction, act, or agreement, and seek[] redress for the same wrong." Brunson v. Wall, 405 Mass. 446, 541 N.E.2d 338, 341 n. 9 (Mass. 1989) (quoting Mackintosh v. Chambers, 285 Mass. 594, 190 N.E. 38, 39 (Mass.1934)). Viewed against this backdrop, Robinson's premise is that because a violation of chapter 93A creates "an action independent from the [insurance] contract," Schwartz v. Travelers Indem. Co., 50 Mass.App.Ct. 672, 740 N.E.2d 1039, 1043 (Mass.App.Ct.2001), an action based on chapter 93A addresses a separate "wrong."

Massachusetts law is inhospitable to this premise. Discrete theories of liability may constitute identical causes of action for claim preclusion purposes if they are based on the same nucleus of operative facts. See Fassas v. First Bank & Trust Co., 353 Mass. 628, 233 N.E.2d 924, 925 (Mass. 1968) (explaining that "[t]he statement of a different form of liability is not a different cause of action, provided it grows out of the same transaction") (citation and internal quotation marks omitted); see also Isaac v. Schwartz, 706 F.2d 15, 17 (1st Cir.1983) (interpreting...