Betances v. Quiros

• Decision Date: 19 February 1985
• Docket Number: Civ. No. 84-0425(PG).
• Citation: 603 F. Supp. 201
• Parties: William Maldonado BETANCES, Plaintiff, v. Carlos S. QUIRÓS, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

603 F. Supp. 201

William Maldonado BETANCES, Plaintiff, v. Carlos S. QUIRÓS, et al., Defendants.

Civ. No. 84-0425(PG).

United States District Court, D. Puerto Rico.

February 6, 1985.

As Amended February 19, 1985.

COPYRIGHT MATERIAL OMITTED

M. Dolz Sanchez, Old San Juan, P.R., for plaintiff.

Edward Borges, O'Neill & Borges, Hato Rey, P.R., for Price Waterhouse & Co.

Hernando Rivera, Chapman, Duff & Paul, Hato Rey, P.R., for Carlos Quirós & Gabriel Coss.

Ivan Reichard, Dept. of Justice, San Juan, P.R., for H. Hdez. Soto, R. Cruz, P. Barés & D. Adamés Quirós, Feijoo, Coss & Sanchez.

OPINION AND ORDER

JUAN M. PEREZ-GIMENEZ, Chief Judge.

Present before us for adjudication is codefendant Price Waterhouse & Co.'s (Price Waterhouse) Motion to Dismiss Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, filed on May 18, 1984.¹ On October 9, 1984, and after several requests for extension of time, plaintiff, William Maldonado Betances (Maldonado), replied to said motion.² On November 20, 1984, Price Waterhouse responded to plaintiff's reply.³

In view that Price Waterhouse's Motion to Dismiss as well as plaintiff's reply thereto are supported by matters outside the pleadings, in accordance with Rule 12(b)(6), the motion shall be treated as one for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The matter, therefore, is ready for adjudication.

This is a civil rights action brought under 42 U.S.C. §§ 1983 and 1985(3) "to recover damages and to redress a deprivation, under color of the Laws and Regulations of the Commonwealth of Puerto Rico, of rights and/or privileges and/or immunities secured by the Constitution and the Laws of the United States ..." and "to recover damages and to redress a deprivation, under color of the Laws and Regulations of the Commonwealth of Puerto Rico and by means of a conspiracy, of rights and/or privileges and/or immunities secured by the Constitution and the Laws of the United States." (Complaint, at pages 1 and 2.)

This is the second time plaintiff files a case with this Court based on the same cause of action.⁴

In the instant complaint, plaintiff alleges to have been the Director of the Non-Occupational Temporary Disability Benefits Program (hereinafter referred to as SINOT), of the Department of Labor and Human Resources of the Commonwealth of Puerto Rico. He claims that, since 1977, eleven (11) governmental officials⁵ and Price Waterhouse⁶ allegedly engaged in a conspiracy to deprive him of his civil rights.

As a result of the overt acts allegedly committed generally by all defendants (Complaint, commencing at page 11, paragraph 34), it is alleged that the conspiracy deprived plaintiff from his position as Director of SINOT, resulted in demotions from positions within the Government of the Commonwealth of Puerto Rico and affected his health, dignity and professional reputation. Plaintiff seeks $1,500,000.00 in actual damages and an equal amount in punitive damages. (Complaint, page 53, paragraphs 137 and 138.)⁷

Concerning plaintiff's claim against Price Waterhouse, it is alleged that Price Waterhouse took part in a conspiracy among defendants to the detriment of plaintiff. The specific alleged overt acts by Price Waterhouse can be summarized as follows:⁸

1. On or about November or December 1977, Price Waterhouse entered into a contract with co-defendant Carlos S. Quirós (Quirós)⁹ to audit SINOT (Complaint, paragraphs 13 and 36).

2. During the month of December 1977, Price Waterhouse suspended its audit allegedly claiming that the account was not auditable, that it was not up to date, that it was not trustworthy, that it contained many data errors, and that the supervision of the account was extremely deficient. Price Waterhouse never finished the audit (Complaint, paragraph 38).

3. Quirós and some of the other co-defendants blamed plaintiff for said deficiencies, using Price Waterhouse's findings in support of their position (Complaint, paragraph 39).

4. On January 24, 1978, Price Waterhouse submitted to Quirós a written report on its audit (Complaint, paragraph 41).

5. It is alleged that Price Waterhouse's audit was plagued with voluntary errors and inconsistencies in "callous" disregard for the truth, and that Price Waterhouse was negligent in the preparation of its report (Complaint, paragraph 42).

After the January 24, 1978, report, no further overt acts are alleged to have been committed by co-defendant Price Waterhouse nor are there specific factual allegations to show that this co-defendant directly or indirectly participated in furtherance of the alleged conspiracy after that date.¹⁰ Plaintiff has failed to allege that Price Waterhouse intended to have its report serve as basis for the alleged conspiracy; that Price Waterhouse entered into any agreement or acted jointly in concert with the other co-defendants to perform the alleged conspiracy; or, that Price Waterhouse acted under color of state law with the other co-defendants in furtherance of the alleged conspiracy.

Price Waterhouse seeks dismissal of plaintiff's complaint for its failure to state a claim upon which relief can be granted based on the following grounds:

1. Plaintiff is precluded from bringing this action as to Price Waterhouse, under the nonmutual defensive claim preclusion rule of the res judicata doctrine, in view of a previous adjudication by this Court, on the merits, in Civil No. 83-0154 on the same cause of action as in the instant action;

2. Plaintiff failed to allege in the instant action that Price Waterhouse, a private accounting firm, acted under color of state law, a prerequisite to civil rights suits; and,

3. The cause of action against Price Waterhouse is time barred.

We pass to address the issues.

Plaintiff's claim against Price Waterhouse is barred by the nonmutual defensive claim preclusion rule of the res judicata doctrine. The instant action is identical to the prior action brought by plaintiff on January 26, 1983, upon which this Court has entered a final judgment on the merits. Any factual differences between the instant and the prior action are de minimis, with the only exception that Price Waterhouse was not a defendant in the prior action.

The legal principles governing this case are well settled. Res judicata applies to civil rights actions. Isaac v. Schwartz, 706 F.2d 15, 16 (1st Cir.1983) (under Sections 1981, 1985(3), 1986); Cf. Kremer v. Chemical Construction Corp., 456 U.S. 461, 466, 102 S.Ct. 1883, 1889, 72 L.Ed.2d 262 (1982); see also, Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980) (under Section 1983). State law on res judicata is inapplicable when, as here, plaintiff invoked federal question jurisdiction in both lawsuits. Gambocz v. Yelencsics, 468 F.2d 837, 841 (3rd Cir.1972); see also, 18 Wright-Miller-Cooper, Federal Practice and Procedure, 1981 Ed., section 4466, at page 618.

The traditional tests to determine whether res judicata bars a subsequent cause of action are: (a) whether the claim decided in the prior adjudication is identical to the one presented in the action in question; (b) whether there was a final judgment on the merits in the prior action; and (c) whether the party against whom the plea of res judicata is asserted was a party or in privity with a party to the prior adjudication; i.e., whether the parties or their prives are bound by the prior adjudication.¹¹ Blonder-Tongue Labs. v. University of Illinois Foundation, 402 U.S. 313, 323-324, 91 S.Ct. 1434, 1439-40, 28 L.Ed.2d 788 (1971), citing Bernhard v. Bank of America Nat. Trust & Savings Ass'n, 19 Cal.2d 807, 122 P.2d 892 (1942); see also, Article 1204 of the Puerto Rico Civil Code of 1930, as amended, 31 L.P.R.A. § 3343; Pol Stella v. Lugo Christian, 107 D.P.R. 540 (1978).

The res judicata doctrine prevents plaintiff here from relitigating "issues that were or could have been dealt within an earlier litigation", Isaac v. Schwartz, supra, 706 F.2d at 16, quoting Angel v. Bullington, 330 U.S. 183, 193, 67 S.Ct. 657, 662, 91 L.Ed. 832 (1947). Res judicata has the dual purpose "of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979); Cf. Blonder-Tongue Labs. v. Univ. of Illinois Foundation, supra, 402 U.S. at 328-329, 91 S.Ct. at 1442-1443. To permit this relitigation would be a misallocation of resources. Blonder-Tongue Labs. v. Univ. of Illinois Foundation, Id.

Such relitigation is precluded when the prior adjudication was on the merits. A judgment on the merits "extinguishes ... all rights of a plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the complaint arose." Isaac v. Schwartz, supra, 706 F.2d at 16, quoting Restatement (Second) of Judgments, Sec. 61(1), Tent-Draft No. 5. See also, Armando Capraro, et al. v. Telcon Gammino, Inc., et al., 751 F.2d 56 (1st Cir., 1985).

A dismissal of a claim for failure to state a claim under Rule 12(b)(6), F.R. Civ.P., is a ruling on the merits. This is more so when, as in the instant case, the plaintiff had already amended his complaint prior to the entry of judgment (Isaac v. Schwartz, supra, at 17) and such judgment did not specify that it was not on the merits. See Rule 41(b), F.R.Civ.P.¹²

We find that the instant claim is identical to that in the prior action, and that the judgment entered on the prior action was one on the merits. This Court must examine plaintiff's claims under the nonmutual defensive claim preclusion rule.

The nonmutual claim preclusion rule is an expansion of the res judicata doctrine that abandons the mutuality requirement as exclusive for limiting between which parties res judicata would be enforced.¹³ The rule applies in cases that, as in the...