C.H. Robinson Worldwide, Inc. v. Lobrano

• Decision Date: 03 October 2012
• Docket Number: 11–2893.,Nos. 11–2777,s. 11–2777
• Parties: C.H. ROBINSON WORLDWIDE, INC.; C.H. Robinson Company, Inc.; C.H. Robinson Company, Plaintiffs–Appellants v. George LOBRANO, Jr., Defendant–Appellee. C.H. Robinson Worldwide, Inc.; C.H. Robinson Company, Inc.; C.H. Robinson Company, Plaintiffs–Appellees v. George Lobrano, Jr., Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

695 F.3d 758

C.H. ROBINSON WORLDWIDE, INC.; C.H. Robinson Company, Inc.; C.H. Robinson Company, Plaintiffs–Appellants

v.George LOBRANO, Jr., Defendant–Appellee.

C.H. Robinson Worldwide, Inc.; C.H. Robinson Company, Inc.; C.H. Robinson Company, Plaintiffs–Appellees

v.George Lobrano, Jr., Defendant–Appellant.

Nos. 11–2777, 11–2893.

United States Court of Appeals,

Eighth Circuit.

Submitted: May 17, 2012.

Filed: Oct. 3, 2012.

Shannon M. McDonough, argued, Donald Chance Mark, Jr., Peter A.T. Carlson, on the brief, Eden Prairie, MN, for Appellant/Cross–Appellee.

Sarah A. Horstmann, argued, Minneapolis, MN, William Zane Pentelovitch, Minneapolis, MN, Michael D. Lowe, S. Price Barker, Shreveport, LA, on the brief, for Appellee/Cross–Appellant.

Before LOKEN and BEAM, Circuit Judges, and PERRY,¹ District Judge.

BEAM, Circuit Judge.

After receiving a favorable judgment in a prior proceeding, George Lobrano, Jr., moved to dismiss Appellants' complaint in the present action on the basis of res judicata. Lobrano also filed a motion requesting sanctions and attorney's fees. The district court ² granted the motion to dismiss but declined to impose sanctions or award attorney's fees. Appellants now appeal the dismissal, and Lobrano cross-appeals the district court's judgment on sanctions and attorney's fees. We affirm both rulings.

I. BACKGROUNDA. Factual History

This dispute arises out of an employment contract between Lobrano and his employer, C.H. Robinson Worldwide, Inc.; C.H. Robinson Company, Inc.; and C.H. Robinson Company (collectively, C.H. Robinson). In 2005, C.H. Robinson promoted Lobrano to a management position in its Shreveport, Louisiana office. The parties executed a “Management–Employee Agreement” (“Employee Agreement”) as part of Lobrano's promotion. Minnesota law governed the Employee Agreement and a choice-of-venue clause required litigation to be initiated in Hennepin County, or the United States District Court for the District of Minnesota. Among other terms, the Employee Agreement contained several provisions imposing restrictive covenants. A noncompete provision precluded Lobrano from engaging in any business activity that competed with C.H. Robinson for two years after Lobrano left its employment. The territorial reach of the provision extended to the entire continental United States. In consideration for the noncompete, the Employee Agreement provided that Lobrano would be eligible to receive “equity grants” made by C.H. Robinson'smanagement under its 1997 Omnibus Stock Plan and any successor plans.

Appellants' complaint alleges that “[a]s a direct result of [Lobrano's] execution of the [Employee Agreement], C.H. Robinson issued equity grants to [him] in exchange for ... [his] forbearance from working for a competitor.” On three occasions from December 7, 2005, to November 5, 2009, C.H. Robinson issued stock to Lobrano, totaling 9,714 shares. Restricted Stock Plans provided the vesting schedule for these equity grants. Because Lobrano agreed to a noncompete clause in the Employee Agreement, the Restricted Stock Plans granted Lobrano two additional years of vesting after he separated from C.H. Robinson.

Around August 2010, C.H. Robinson gave Lobrano the option of transferring from a management position to a senior sales position or accepting a severance package. Lobrano chose the former, but on October 27, 2010, he resigned from the position. Shortly thereafter, Lobrano approached C.H. Robinson, requesting that the geographic scope of the noncompete clause be modified so as to allow him to work for a competitor, J.B. Hunt. C.H. Robinson declined Lobrano's request and litigation ensued over that matter.

B. Procedural History

On November 12, 2010, Lobrano commenced action in Louisiana state court seeking a judicial declaration that Louisiana law rendered the restrictive covenants void and unenforceable. C.H. Robinson removed the case to the United States District Court for the Western District of Louisiana (hereinafter the “Louisiana action”). On December 10, 2010, Lobrano moved for summary judgment and sought expedited consideration of the motion. The summary judgment hearing was set for January 25, 2011, and the district court denied the request for expedited consideration.

On December 21, 2010, C.H. Robinson commenced action in Minnesota state court and filed a motion for anti-suit injunction. Lobrano removed the case to the United States District Court for the District of Minnesota (hereinafter the “Minnesota action”), and moved to dismiss, stay, or transfer the suit. In response, C.H. Robinson sought a preliminary injunction to enjoin Lobrano from proceeding in the Louisiana action. Hearing was scheduled for January 21, 2011.

On January 7, 2011, before the scheduled summary judgment hearing, the district court in the Louisiana action rendered judgment on the merits, granting Lobrano's motion for summary judgment. Applying Louisiana's choice-of-law principles, the district court determined that it had to apply Louisiana law in deciding the validity of the noncompete provisions. And, pursuant to Louisiana law, the district court concluded that the noncompete provisions contained an overly broad geographic scope. Determining that it could not reform the geographic scope, the district court voided the noncompete provisions. Lobrano v. C.H. Robinson Worldwide, Inc., No. 10–cv–1775, 2011 WL 52602 (W.D.La. Jan. 7, 2011). C.H. Robinson never appealed this determination.

Following the court's ruling in the Louisiana action, Lobrano amended his motion to dismiss in the Minnesota action, seeking dismissal on the grounds of the Full Faith and Credit Clause and Louisiana's res judicata principles. C.H. Robinson then amended its complaint in the Minnesota action, deleting its claim for breach of the Employee Agreement and adding, among other claims, Count VI, which sought a declaration that, because the noncompete provisions were rendered void in the Louisiana action, Lobrano does not qualify for continued vesting under the 2008 and 2009 Restricted Stock Plans. In response to the amended complaint, Lobrano filed a motion to dismiss grounded in the Full Faith and Credit Clause, res judicata, and compulsory counterclaim rules. On March 14, 2011, Lobrano moved for sanctions and attorney's fees, arguing that C.H. Robinson ignored well-settled res judicata principles in pursuing the Minnesota action.

The Minnesota district court granted Lobrano's motion to dismiss, concluding that the Louisiana judgment precluded the Minnesota action on the basis of res judicata, and that the Minnesota action should have been brought as a compulsory counterclaim in the Louisiana action. However, finding C.H. Robinson's legal arguments “colorable,” the district court declined to impose sanctions or award attorney's fees to Lobrano. C.H. Robinson appeals the dismissal of Count VI of its amended complaint,³ and Lobrano cross-appeals the adverse ruling on sanctions and attorney's fees.

II. DISCUSSION

Two issues are currently before the court. First, we must decide whether the district court properly determined that res judicata precluded Count VI of C.H. Robinson's amended complaint in the Minnesota action. If res judicata precluded this claim, the second question is whether C.H. Robinson should have been subject to sanctions and/or attorney's fees for pursuing the Minnesota action.

“We review de novo the district court's grant of a motion to dismiss for failure to state a claim based on res judicata.” Laase v. Cnty. of Isanti, 638 F.3d 853, 856 (8th Cir.2011). We review the denial of a motion for sanctions for an abuse of discretion, affording the district court substantial deference and finding an abuse of discretion only if the court “bases its ruling on an erroneous view of the law or a clearly erroneous assessment of the evidence.” Monarch Fire Prot. Dist. of St. Louis Cnty., Mo. v. Freedom Consulting & Auditing Servs., Inc., 644 F.3d 633, 639 (8th Cir.2011).

A. Raising Res Judicata Through a Motion to Dismiss

C.H. Robinson makes a threshold argument that res judicata is not an appropriate defense to raise in a motion to dismiss.⁴ Our precedent counsels otherwise.

Res judicata is an affirmative defense. Howard v. Green, 555 F.2d 178, 181 (8th Cir.1977); Fed.R.Civ.P. 8(c)(1). Before adoption of the Federal Rules of Civil Procedure, we recognized “that a defense of res judicata” may be raised in a motion to dismiss when “the identity of the two actions can be determined from the face of the petition itself.” Potamitis v. Pittsburgh Plate Glass Co., 82 F.2d 472, 473 (8th Cir.1936). And under the Federal Rules, we have implicitly endorsed the use of a motion to dismiss to raise res judicata. See, e.g., Laase, 638 F.3d at 856 (reciting standard of review on “a motion to dismiss for failure to state a claim based on res judicata”). Indeed, “[i]f an affirmative defense ... is apparent on the face of the complaint ... that [defense] can provide the basis for dismissal under Rule 12(b)(6).” Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978, 983 (8th Cir.2008). Our interpretation of the phrase “face of the complaint ... include[s] public records and materials embraced by the complaint,” id., and “material[s] attached to the complaint,” Quinn v. Ocwen Federal Bank FSB, 470 F.3d 1240, 1244 (8th Cir.2006) (per curiam) (quotation omitted).

Here, the complaint, with its attachments, provided sufficient bases for a res judicata defense on a motion to dismiss. C.H. Robinson's complaint contains several allegations concerning the order and judgment in the Louisiana action, the Employee Agreement, and the Restricted Stock Plans. Each one of these documents is also attached to the complaint. Given that these materials reveal the applicability of res judicata to this case, we conclude the district court properly decided the merits of Lobrano's res judicata defense on a motion to dismiss.

B. Res Judicata Merits

“The law of the forum that...