Bergeron v. Busch, Docket No. 199130
| Decision Date | 17 March 1998 |
| Docket Number | Docket No. 199130 |
| Citation | 579 N.W.2d 124,228 Mich.App. 618 |
| Parties | Donald D. BERGERON, Barbara J. Bergeron, Donald D. Bergeron, D.D.S., P.C., Donald D. Bergeron, D.D.S., P.C., Money Purchase Plan, Donald D. Bergeron, D.D.S., P.C. Pension Trust, and Donald D. Bergeron IRA, Plaintiffs-Appellees, v. Timothy R. BUSCH, Timothy R. Busch & Associates, P.C., Timothy R. Busch, J.D., P.C., a/k/a The Busch Firm, P.C., Stephan Busch, C.P.A., Karen M. Busch, C.P.A., Kim S. Rhoades, C.P.A., Busch Financial Group, Ltd., Busch Management Group, Ltd., Busch Realty Corporation, and TRB Management, Inc., Defendants-Appellants. |
| Court | Court of Appeal of Michigan — District of US |
Joseph H. Spiegel and MacAloon, Feldman & Weingarden by Barry M. Feldman, Southfield, for plaintiffs.
Plunkett & Cooney, P.C. by Michael J. Barton, Detroit, for defendants.
Before CORRIGAN, C.J., and GRIFFIN and HOEKSTRA, JJ.
This case is before us as on leave granted pursuant to a remand from the Supreme Court. Bergeron v. Busch, 453 Mich. 946, 557 N.W.2d 307 (1996). Defendants appeal the order of the lower court denying their motion for summary disposition pursuant to MCR 2.116(C)(7) and for reconsideration. We affirm.
The present action was filed in the Oakland Circuit Court and was one of two suits pending against defendants arising out of alleged erroneous investment advice. The case at issue sought relief under various state common-law theories, state securities fraud statutes, the Michigan Consumer Protection Act, and the Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs simultaneously filed a second action in the federal district court seeking recovery under the Employee Retirement Income Security Act (ERISA), as well as federal securities fraud statutes. Defendants removed the state court action to the federal court on the basis of federal question jurisdiction under the RICO. The two cases were thereafter treated as consolidated in federal court, although no formal order of consolidation was entered. Subsequently, pursuant to the parties' stipulation, the federal and state securities fraud claims and the RICO claims were dismissed with prejudice. Defendants then moved for summary judgment with regard to the remaining claims and prevailed with respect to the ERISA claim. However, finding that there was no federal preemption, the federal court declined to exercise supplemental jurisdiction over the state-law claims, denied defendants' motion to dismiss without prejudice the state-law claims, and granted plaintiffs' motion to remand the state-law claims to the Oakland Circuit Court for adjudication.
After remand, defendants moved to dismiss the state court action on the basis of res judicata. The trial court denied defendants' motion, holding that because the federal court did not rule on the state-law claims, there was no prior adjudication on the merits. The sole issue on appeal is whether the trial court erred in denying defendants' motion under MCR 2.116(C)(7) to dismiss on the basis of the doctrine of res judicata.
The applicability of res judicata is a legal question that this Court reviews de novo. Board of County Road Commissioners for the County of Eaton v. Schultz, 205 Mich.App. 371, 375, 521 N.W.2d 847 (1994). Michigan has adopted a broad application of res judicata that bars claims arising out of the same transaction that plaintiff could have brought but did not. Jones v. State Farm Mut. Automobile Ins. Co., 202 Mich.App. 393, 401, 509 N.W.2d 829 (1993). The doctrine serves a two-fold purpose: to ensure the finality of judgments and to prevent repetitive litigation. 1 However, in order for the first action to bar the second, res judicata requires that (1) the prior action was decided on the merits, (2) the matter contested in the second case was or could have been resolved in the first, and (3) both actions involved the same parties or their privies. Energy Reserves, Inc. v. Consumers Power Co., 221 Mich.App. 210, 215, 561 N.W.2d 854 (1997); Board of County Road Commissioners for the County of Eaton, supra.
As a preliminary matter, we are convinced in this case that the requisite similarity in the identity of the parties and claims in the state and federal proceedings is evident from a thorough review of the record. Both the state and federal complaints are based on identical factual allegations arising out of the same transactions and involving the same parties. Both lawsuits are the result of alleged erroneous financial advice that occurred during the same time frame and involved essentially the same assets and investments. The only cognizable difference between the lawsuits are the theories of relief.
We initially note that no federal rule prohibited plaintiffs from filing the two actions involved in this case. Unlike MCR 2.203(A)(1), the federal court rules do not require a plaintiff in federal court to assert all claims arising out of the same transaction in one action. F.R. Civ. P. 18(a). Nevertheless, a plaintiff's ability to split his cause of action is limited by the doctrine of claim preclusion/res judicata. See J Z G Resources, Inc. v. Shelby Ins. Co., 84 F.3d 211 (C.A.6, 1996) (successive federal actions); Cemer v. Marathon Oil Co., 583 F.2d 830 (C.A.6, 1978) (); Norman Tobacco & Candy Co. v. Gillette Safety Razor Co., 295 F.2d 362 (C.A.5, 1961) (parallel federal actions); see, generally, 6A Wright & Miller, Federal Practice & Procedure (2d ed.), § 1582, p. 525. Thus, the instant case turns on how we treat the federal court's pendent jurisdiction over state-law claims for purposes of res judicata. This Court has considered the res judicata effects of the federal court's pendent jurisdiction on two occasions, in King v. Michigan Consolidated Gas Co., 177 Mich.App. 531, 442 N.W.2d 714 (1989), and Brownridge v. Michigan Mut. Ins. Co., 115 Mich.App. 745, 750-751, 321 N.W.2d 798 (1982).
In King, supra, the plaintiff filed an action in state court alleging racial discrimination in violation of state and federal civil rights statutes and breach of contract. The defendant removed the action to federal court, which declined to exercise pendent jurisdiction over the state-law claims and remanded them back to the state court. Following a trial, a federal jury returned a verdict of no cause of action with respect to the federal claim. The state court then granted the defendant's motion for summary disposition, ruling that the state civil rights claim was barred by res judicata. On appeal, this Court held that the doctrine of res judicata did not preclude adjudication of the plaintiff's state civil rights claim in the state court:
Since plaintiff's state Civil Rights Act claim was not decided on the merits and was not dismissed with prejudice by the federal court, that claim should not be barred by the doctrine of res judicata. The federal court's decision in declining to exercise jurisdiction over the pendent state law claims in this case did not constitute an adjudication on the merits and should not create a situation in which the plaintiff's remanded state claims may be barred by the doctrine of res judicata. In this case, plaintiff did not split his causes of action and prudently raised all of his claims in one complaint. Accordingly, we find that the doctrine of res judicata is not applicable under the facts of this case and that the trial court erred in holding that plaintiff's state Civil Rights Act claim was barred by res judicata. [King, supra at 536, 442 N.W.2d 714.]
In contrast to the plaintiff in King, supra, plaintiffs in the instant case did split their cause of action. Although the federal court treated the instant plaintiffs' federal and state cases as consolidated and rendered one order encompassing both actions, the act of consolidation alone does not preclude the application of res judicata. Consolidation is permitted "as a matter of convenience and economy in administration, but does not merge the suits into a single cause, or change the rights of the parties, or make those who are parties in one suit parties in another." Johnson v. Manhattan R Co, 289 U.S. 479, 496-497, 53 S.Ct. 721, 727-728, 77 L.Ed. 1331 (1933). See also Beil v. Lakewood Engineering & Mfg. Co., 15 F.3d 546, 551 (C.A.6, 1994); Kraft, Inc. v. Local Union 327, Teamsters, 683 F.2d 131, 133 (C.A.6, 1982); State Mut. Life Assurance Co. of America v. Deer Creek Park, 612 F.2d 259, 267 (C.A.6, 1979); People ex rel MacMullan v. Babcock, 38 Mich.App. 336, 342-343, 196 N.W.2d 489 (1972). Accordingly, King is factually distinguishable.
Brownridge, supra, is the second decision of our Court to address the res judicata effects of the federal court's pendent jurisdiction. In Brownridge, the plaintiff commenced an action in federal court for discrimination under federal law. The plaintiff ultimately stipulated the court's dismissal of her claim with prejudice. A week before the federal court entered the final order, the plaintiff commenced an action in state court for wrongful discharge. Applying Michigan's broad rule of res judicata, this Court held that res judicata barred the claim because it arose out of the same transaction as the federal discrimination claim. This Court determined that the plaintiff could have asserted the wrongful discharge claim in the federal action because the federal court could have exercised pendent jurisdiction over it. This Court declined to speculate whether the federal court would have actually exercised jurisdiction, reasoning that the plaintiff's failure to assert the claim in the federal action deprived the federal court of the opportunity to exercise its discretion to hear the state-law claim. Brownridge, supra at 748-749, 321 N.W.2d 798.
The federal court in the instant case, contrary to the situation in...
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