Citibank, N.A. v. Data Lease Financial Corp.

• Citation: 904 F.2d 1498
• Decision Date: 05 July 1990
• Docket Number: No. 89-5213,89-5213
• Parties: CITIBANK, N.A., Plaintiff-Counter-Defendant-Appellee, v. DATA LEASE FINANCIAL CORPORATION, Defendant-Counter-Plaintiff-Third-Party-Plaintiff-Appellant, v. MIAMI NATIONAL BANK, et al., Third-Party Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1498

904 F.2d 1498

16 Fed.R.Serv.3d 1337

CITIBANK, N.A., Plaintiff-Counter-Defendant-Appellee, v. DATA LEASE FINANCIAL CORPORATION, Defendant-Counter-Plaintiff-Third-Party-Plaintiff-Appellant, v. MIAMI NATIONAL BANK, et al., Third-Party Defendants.

No. 89-5213.

United States Court of Appeals,

Eleventh Circuit.

July 5, 1990.

R. Lawrence Bonner, Greer, Homer & Bonner, Miami, Fla., Larry Klein, Klein, Beranek & Walsh, West Palm Beach, Fla., for Data Lease Financial Corp.

John H. Schulte, Michael D. Joblove, Paul J. McMahon, Jorden, Schulte & Burchette, Miami, Fla., Marc Cooper, Cooper, Wolfe & Bolotin, Miami, Fla., for Joseph Stefan.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY and KRAVITCH, Circuit Judges, and KAUFMAN ^*, Senior District Judge.

FRANK A. KAUFMAN, Senior District Judge:

This case, which was before the Fifth Circuit in 1981 and before this Circuit in 1987, was instituted in 1978 in the United States District Court for the Southern District of Florida. Herein, Citibank, N.A. (Citibank) originally sought to foreclose against collateral posted by Data Lease Financial Corporation (Data Lease) in connection with loans made by Citibank to Data Lease. ¹ Diversity jurisdiction is present.

BACKGROUND

In its answer to Citibank's complaint, Data Lease asserted twelve affirmative defenses to the foreclosure, and filed a counterclaim against Citibank and a third-party complaint. In the latter pleading, Data Lease named seven individuals as third-party defendants. In its counterclaim and third-party complaint, Data Lease contends, inter alia, that Citibank is vicariously liable for the misdeeds of the seven directors who, Data Lease alleges, were installed by Citibank as directors of Miami National Bank to act as agents of Citibank. ²

In 1988, after the second remand by this court, Data Lease entered into a Settlement Agreement and Mutual Covenant Not to Sue with the seven director defendants, pursuant to which the directors agreed to make payment of $1,000,000 to Data Lease and Data Lease agreed to dismiss all third-party claims "with prejudice." In addition, their respective counsel signed a document entitled "Stipulation and Order Dismissing All Claims by Data Lease Against the Directors With Prejudice." The district court approved that stipulation and entered an order of dismissal under Fed.R.Civ.P. 41(a)(1). That order stated:

The foregoing stipulation is approved, and all claims by Data Lease solely against the Directors (but not Citibank) as therein defined are dismissed with prejudice.

Although, as indicated supra, the settlement agreement between Data Lease and the directors specifically dismissed the third-party complaint against the directors "with prejudice," that agreement also stated several times that it would have no effect on Data Lease's counterclaims against Citibank. For example, the settlement agreement contains this statement:

[T]his Agreement is not intended nor shall it be construed to extend to or to inure to the benefit of Citibank nor shall it impair or diminish the right or ability of Data Lease to defend against the Citibank claims or to take or assert as against Citibank or any of its insurers any actions or claims prohibited by this paragraph ... to be taken or asserted against the Outside Directors, nor shall it impair or diminish the right of or ability of Data Lease to maintain any defenses to Citibank's claims or any counterclaims against Citibank in the Lawsuit.

Thus, the intent of Data Lease is clear: Data Lease intended to dismiss its third-party claims against the directors while reserving its right to proceed against Citibank. However, Data Lease did not obtain the consent of Citibank to that agreement--it only obtained the consent of the seven directors.

Despite the express language in both the settlement agreement and the order of dismissal, Citibank in this case defends against Data Lease's asserted counterclaim of vicarious liability against Citibank, contending that the dismissal with prejudice of the alleged agents, i.e., the seven directors, extinguished Data Lease's claim of vicarious liability against Citibank, as a matter of law. ³ According to Citibank, that dismissal is an "adjudication on the merits" which has the legal effect of barring Data Lease's claim against Citibank, regardless of the intention of Data Lease and the seven directors. The district court agreed and entered judgment for Citibank. Data Lease now appeals. We affirm.

LAW

"Under Florida law, 'a principal cannot be held liable if the agent is exonerated.' Bankers Multiple Life [sic] Ins. Co. v. Farish, 464 So.2d 530, 532 (Fla.1985)." Citibank, N.A. v. Data Lease Fin. Corp., 703 F.Supp. 80, 82 (S.D.Fla.1989) (footnote omitted). See also Walsingham v. Browning, 525 So.2d 996, 997 (Fla.Dist.Ct.App.1988): "In an action against an employer for the actions of the employee based upon the theory of vicarious liability or respondeat superior, the plaintiff must show liability on the part of the employee." Thus, the district court correctly stated and applied Florida law, for no matter what rights Data Lease intended to reserve against Citibank as the principal based on the latter's vicarious liability for the acts of the seven directors as agents, Data Lease gave up those rights when it caused its action in this case against the seven directors to be dismissed with prejudice, without any agreement or waiver by Citibank.

Nevertheless, even in a case which rests its subject matter jurisdiction solely upon diversity of citizenship, a federal court must apply federal law to determine the preclusive effect of a prior federal court decision. Empire Fire & Marine Ins. Co. v. J. Transport, 880 F.2d 1291, 1293 n. 2 (11th Cir.1989); Gibbs v. Air Canada, 810 F.2d 1529, 1535 (11th Cir.1987). It follows, then, that federal law defines the preclusive effect of a Rule 41(a) dismissal. See 5 J. Moore, Moore's Federal Practice p 41.14 at 41-198 (2d ed. 1988) ("Since the effect of dismissal under Rule 41 involves the construction of a federal rule, the effect of a judgment of dismissal involves a matter of federal law."). ⁴

The doctrine of res judicata, or claim preclusion, bars the filing of claims which were raised or could have been raised in an earlier proceeding. When claim preclusion does not apply to bar an entire claim or set of claims, the doctrine of collateral estoppel, or issue preclusion, may still prevent the relitigation of particular issues which were actually litigated and decided in a prior suit. I.A. Durbin, Inc. v. Jefferson Nat'l Bank, 793 F.2d 1541, 1549 (11th Cir.1986); Kaspar Wire Works, Inc. v. Leco Eng'g and Mach., Inc., 575 F.2d 530, 535, et seq. (5th Cir.1978). ⁵

Claim preclusion bars a subsequent lawsuit when four elements are present: "(1) there must be a final judgment on the merits, (2) the decision must be rendered by a court of competent jurisdiction, (3) the parties, or those in privity with them, must be identical in both suits; and (4) the same cause of action must be involved both cases." I.A. Durbin, 793 F.2d at 1549. ⁶

As to the first said element, dismissal of a complaint with prejudice satisfies the requirement that there be a final judgment on the merits. The phrases "with prejudice" and "on the merits" are synonymous terms, both of which invoke the doctrine of claim preclusion. The district court's order dismissing Data Lease's third-party complaint against the directors with prejudice, entered by stipulation of the parties pursuant to Rule 41(a), is a "final judgment on the merits." Astron Indus. Assocs., Inc. v. Chrysler Motors Corp., 405 F.2d 958, 960 (5th Cir.1968): ⁷ "It is clear that a stipulation of dismissal with prejudice ... at any stage of a judicial proceeding, normally constitutes a final judgment on the merits which bars a later suit on the same cause of action." See 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2367 at 185-86 and n. 36 (1971 & Supp.1989). But see Gall v. South Branch Nat. Bank of S.D., 783 F.2d 125, 127 (8th Cir.1986).

As to the second element of claim preclusion, there is no dispute that the district court's order of dismissal was entered by a court of competent jurisdiction. That court had subject matter jurisdiction over the third-party claim by virtue of ancillary jurisdiction. As both Data Lease and the directors were citizens of Florida, the district court had personal jurisdiction over them.

The third element of claim preclusion provides that a judgment will only bar subsequent claims involving the same parties or their privies. Since Citibank was not included in the order of dismissal, Citibank must demonstrate that privity exists between it and the third-party defendant directors. Citibank and the directors are not in privity simply because Data Lease made identical claims against each of them. Hart v. Yamaha-Parts Distributors, Inc., 787 F.2d 1468, 1473 (11th Cir.1986): " 'When a person suffers injury as the result of the concurrent or consecutive acts of two or more persons, he has a claim against each of them.... Accordingly, a judgment for or against one obligor does not result in the merger or bar of the claim that the injured person may have against another obligor.' " Id., quoting Restatement (Second) of Judgments Sec. 49 comment a (1980). However, since Data Lease, in its counterclaim, is seeking damages against Citibank only under the theory of respondeat superior or vicarious liability, ⁸ Data Lease does not claim any injury from "concurrent or consecutive acts" of Citibank; rather, Data Lease seeks damages from Citibank solely on the basis of the alleged wrongful acts of its agents. This Circuit has not yet addressed claim preclusion in a case in which the party seeking its benefit is related by vicarious liability or respondeat superior to a defendant in a prior lawsuit or, as here, is so related to a defendant in the same lawsuit...