Birch Rea Partners Inc. v. Brombacher
| Decision Date | 11 May 2020 |
| Docket Number | Cause No. 1:19-cv-00387-SLC |
| Parties | BIRCH REA PARTNERS INC., Plaintiff, v. RANDOLPH BROMBACHER, et al., Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
Before the Court is a joint motion to dismiss (ECF 19) and accompanying memorandum in support thereof (ECF 20) filed by Defendants on November 7, 2019. Plaintiff filed a response (ECF 23) and accompanying brief (ECF 24) on November 27, 2019, to which Defendants replied on December 11, 2019 (ECF 27). Accordingly, the matter is fully briefed and ripe for adjudication. For the following reasons, Defendants' motion (ECF 19) is GRANTED and this case is DISMISSED.1
On July 7, 2016, Regent Bank, who is not a party to this action, filed a lawsuit ("Underlying Action") against Birch|Rea Partners, Inc. ("Birch|Rea"), alleging that Birch|Rea committed professional negligence, negligent misrepresentation, constructive fraud, and breach of contract by preparing a property appraisal for nonparty Suntrust Bank to be used in securing a mortgage loan from PNC Bank. (No. 1:16-cv-00262-TLS-SLC [hereinafter Underlying Action],ECF 1; see also Underlying Action, ECF 23 at 3-4).2 Regent Bank brought the suit as PNC Bank's successor in interest, having purchased the loan. (Underlying Action, ECF 1 ¶ 2). On May 25, 2016, prior to the initiation of the Underlying Action, counsel for Birch|Rea sent a letter to counsel for Regent Bank, Randolph M. Brombacher—who is also a Defendant in the present case—stating that Birch|Rea would seek to hold "[Brombacher] and [his] client accountable for filing of [what it saw as] frivolous litigation."3 (ECF 1-10). Despite surviving a motion to dismiss (see Underlying Action, ECF 14, 23), Regent Bank eventually voluntarily moved to dismiss the case with prejudice, which the Court granted (Underlying Action, ECF 32, 33).
On February 13, 2018, Birch|Rea brought suit ("Bank Action") in the Southern District of Florida against Regent Bank, alleging that Regent Bank committed the tort of malicious prosecution by initiating the Underlying Action knowing that its claims were frivolous. (No. 1:18-cv-00030-HAB-SLC [hereinafter Bank Action], ECF 1).4 The matter was subsequently transferred to the Northern District of Indiana, where it remains pending. (See Bank Action, ECF 4). In the Bank Action, on November 1, 2018, Birch|Rea sought the Court's leave to amend its complaint to assert claims against the attorneys who had represented Regent Bank during boththe Underlying Action and the Bank Action—"Saavedra Goodwin, Randolph Brombacher, Rothberg Logan & Warsco LLP and Andrew Palmison." (Bank Action, ECF 50 ¶ 14).
More specifically, Birch|Rea contended that Regent Bank should have known from the face of the initial appraisal—which reflects that it was prepared for use by SunTrust, as well as the relevant Uniform Standards of Professional Appraisal Practice and Office of the Comptroller of the Currency Interagency Appraisal & Evaluation Guidelines—that it could not have relied on Birch|Rea's appraisal when purchasing the mortgage loan. (Id. ¶¶ 7-15). Further Birch|Rea contends that Regent Bank was in possession of a later appraisal prepared by First Service PGP Valuation (the "First Service Report"), which Regent Bank relied on instead of Birch|Rea's appraisal when purchasing the mortgage loan. (Id. ¶¶ 19-23). According to Birch|Rea, Regent Bank should have been aware that its claims in the Underlying Action were baseless. (Id.). Relevant to the present action, Birch|Rea also asserted that Regent Bank's attorneys, the proposed defendants in the Bank Action, were in possession of a report prepared by John Potter of UTE Technology, Inc. (the "Potter Report"), which reviewed and included the initial Birch|Rea appraisal and the First Service Report. (Id. ¶¶ 24-27). As such, Birch|Rea contended that Regent Bank's attorneys had an independent basis for knowing that the claims made in the Underlying Action were frivolous prior to filing its complaint. (Id.).
The undersigned subsequently denied Birch|Rea's motion to amend in the Bank Action, finding that the motion was untimely under Federal Rule of Civil Procedure 16 and that the proposed amendment would cause the defendants undue hardship—requiring them to retain new counsel, and expanding the length and scope of discovery. (Bank Action, ECF 73, 75). Birch|Rea subsequently objected to the undersigned's ruling and requested review by District Court Judge Holly A. Brady. (Bank Action, ECF 74). On August 13, 2019, Judge Bradyoverruled Birch|Rea's objections and affirmed the initial order denying leave to amend. (Bank Action, ECF 79).
On September 6, 2019, Birch|Rea initiated the present action alleging that Defendants—the same attorneys Birch|Rea sought to add as defendants in the Bank Action—engaged in malicious prosecution and abuse of process by filing the Underlying Action. (ECF 1). Birch|Rea again alleged that Defendants were aware that the claims in the Underlying Action were baseless because they had reviewed the First Service Report and the Potter Report. (Id.).
Defendants subsequently filed the instant motion to dismiss alleging: (1) the filing of the present action constitutes improper claim splitting, and (2) Birch|Rea failed to plead the requisite malice to support its claims. (ECF 19, 20). Birch|Rea, in response, contends: (1) the doctrine of claim splitting is inapplicable as there are unique parties in the Bank Action and the present action, who are not in privity with each other, and (2) that it successfully pleaded malice. (ECF 24).
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, or any portion of a complaint, for failure to state a claim upon which relief can be granted. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations omitted); see also Ray v. City of Chi., 629 F.3d 660, 662-63 (7th Cir. 2011) . A plaintiff is required to include allegations in the complaint that "plausibly suggest that the plaintiff has a right to relief, raising that possibility above a 'speculative level'" and "ifthey do not, the plaintiff pleads itself out of court." E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 n.14 (2007)).
"Ordinarily, defenses such as res judicata (of which claim preclusion and claim splitting are 'component[s],' see Alvear-Velez v. Mukasey, 540 F.3d 672, 678 (7th Cir. 2008)) need not be anticipated in a complaint and cannot be resolved until after the close of pleadings." Rexing Quality Eggs v. Rembrandt Enters., Inc., 392 F. Supp. 3d 965, 967 (S.D. Ind. 2019) (alteration in original), aff'd, 953 F.3d 998 (7th Cir. 2020). But as the Court has all the information needed to rule on the matter, "it may do so without unnecessarily prolonging matters by waiting until after the defendant has filed an answer." Id. (citing Carr v. Tillery, 591 F.3d 909, 913 (7th Cir. 2010)). Further, "a federal suit may be dismissed 'for reasons of wise judicial administration . . . whenever it is duplicative of a parallel action already pending in another federal court.'" Serlin v. Arthur Andersen & Co., 3 F.3d 221, 223 (7th Cir. 1993) (quoting Ridge Gold Standard Liquors v. Joseph E. Seagram, 572 F. Supp. 1210, 1213 (N.D. Ill. 1983)).
As an initial matter, the Court must determine the proper law to apply in this matter. The doctrine of claim splitting is similar to more general principles of claim preclusion, except "courts have applied the doctrine of claim splitting before there is a final judgment in a prior action." Kim v Sara Lee Bakery Grp., Inc., 412 F. Supp. 2d 929, 941 (N.D. Ill. 2006). As this Court is currently sitting in diversity, it will apply "the law of preclusion 'that would be applied by state courts in the State in which the federal diversity court sits." Rexing Quality Eggs, 392 F. Supp. 3d at 970 (emphasis omitted) (quoting Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001)). Here, the alleged malicious prosecution occurred in a federal court inIndiana. Accordingly, an Indiana state court would likely apply Indiana law. See Simon v. United States, 805 N.E.2d 798, 805 (Ind. 2004) . In any event, neither party directly raises a choice of law issue and both cite to Indiana caselaw. Accordingly, the Court will apply Indiana claim-splitting doctrine. See Wood v. Mid-Valley Inc., 942 F.2d 425, 427 (7th Cir. 1991) ().
"Indiana bars parties from 'split[ting] a cause of action, pursuing it in a piecemeal fashion, and subjecting a defendant to needless multiple suits.'" Telamon Corp. v. Charter Oak Fire Ins. Co., 850 F.3d 866, 873 (7th Cir. 2017) (quoting Hilliard v. Jacobs, 957 N.E.2d 1043, 1048 (Ind. Ct. App. 2011)). While similar to the doctrine of res judicata, which requires a final judgment, "claim splitting is more concerned with the district court's comprehensive management of its docket . . . ." Rexing Quality Eggs, 392 F. Supp. 3d at 972 (quoting Katz v. Gerardi, 655 F.3d 1212, 1218 (10th Cir. 2011)). The Seventh Circuit Court of Appeals, in reviewing Indiana claim-splitting doctrine, has noted that "a court should find that a plaintiff split [i...
To continue reading
Request your trial