Deflon v. Sawyers

Decision Date24 April 2006
Docket NumberNo. 28,898.,28,898.
PartiesDiane G. DEFLON, Plaintiff-Petitioner, v. Dan SAWYERS, Steve Lasky, and Jon Vance Hartley, Defendants-Respondents.
CourtNew Mexico Supreme Court

Thomas L. Johnson Law Offices, L.C., Thomas L. Johnson, Foster, Johnson, McDonald, Lucero, Koinis, L.L.P., Kerri Lee Peck, Albuquerque, NM, for Petitioner.

Gilkey & Stephenson, P.A., George Christian Kraehe, Barbara G. Stephenson, The Jaffe Law Firm, Mark S. Jaffe, McCary, Wilson & Pryor, P.C., Alan R. Wilson, Kennedy, Moulton & Wells, P.C., Deborah D. Wells, Albuquerque, NM, for Respondents.

OPINION

CHÁVEZ, Justice.

{1} This case explores the res judicata and collateral estoppel effects of the dismissal of a federal lawsuit on subsequent state court proceedings. Plaintiff originally sued her former employer, Danka Corporation, Inc., in the United States District Court for the District of New Mexico for sex discrimination in violation of Title VII, 42 U.S.C. §§ 2000e-2, 2000e-3 (2000), and in violation of the Equal Pay Act, 29 U.S.C. § 206(d) (2000). Plaintiff also brought two state law claims for negligent retention and supervision and intentional infliction of emotional distress in her federal lawsuit. All claims in the federal lawsuit were based primarily on the actions of Danka employees. The federal district court granted Danka's motion for summary judgment, and the Tenth Circuit Court of Appeals affirmed. Deflon v. Danka Corp., 1 Fed.Appx. 807 (10th Cir.2001). Plaintiff then filed suit against Defendants, who were all Danka employees, in state court for intentional infliction of emotional distress, intentional interference with a contract, defamation, prima facie tort, and civil conspiracy. Finding that the doctrines of res judicata and collateral estoppel barred Plaintiff's claims, the district court dismissed Plaintiff's complaint with prejudice. Plaintiff appealed the dismissal of two claims — intentional interference with a contract and civil conspiracy — and the Court of Appeals affirmed that dismissal. DeFlon v. Sawyers, No. 23,013, slip op. at 2 (Ct.App. July 28, 2004). Plaintiff now asks this Court to reverse the Court of Appeals and reinstate her claims for intentional interference with a contract and civil conspiracy. We hold that res judicata does not bar Plaintiff's claims because Defendants, who allegedly acted outside the scope of their authority, are not in privity with the defendant in the federal suit. Collateral estoppel does not bar Plaintiff's claims because the Tenth Circuit did not actually and necessarily decide issues which would bar the present claims.

I. RES JUDICATA DOES NOT BAR PLAINTIFF'S CLAIMS BECAUSE DEFENDANTS ARE NOT IN PRIVITY WITH THE DEFENDANT IN THE FEDERAL SUIT

{2} Res judicata prevents a party or its privies from repeatedly suing another for the same cause of action. See Three Rivers Land Co. v. Maddoux, 98 N.M. 690, 694, 652 P.2d 240, 244 (1982), overruled on other grounds by Universal Life Church v. Coxon, 105 N.M. 57, 58, 728 P.2d 467, 469 (1986). Or, as the Court of Appeals explained, "Res judicata bars relitigation of the same claim between the same parties or their privies when the first litigation resulted in a final judgment on the merits." DeFlon, No. 23,013, slip op. at 4 (citing Ford v. N.M. Dep't of Pub. Safety, 119 N.M. 405, 407, 891 P.2d 546, 548 (Ct.App.1994)). Because the first final judgment in this case came from federal court, the Court of Appeals indicated that federal law governs the preclusive effect that the prior federal judgment should have on these state court proceedings. Id. at 4 (citing Ford, 119 N.M. at 409, 891 P.2d at 548 and Edwards v. First Fed. Sav. & Loan Ass'n, 102 N.M. 396, 402-04, 696 P.2d 484, 490-92 (Ct.App.1985)). We agree with the importance of recognizing and granting appropriate deference to federal court judgments but note that "[f]ederal law and New Mexico law are not divergent on claim preclusion doctrine." Moffat v. Branch, 2005-NMCA-103, ¶ 11, 138 N.M. 224, 118 P.3d 732. Therefore, we employ both federal and state precedent in analyzing this case.

{3} Because the parties do not dispute the facts in this case, we review the legal issue presented by the district court's application of res judicata de novo. Anaya v. City of Albuquerque, 1996-NMCA-092, ¶ 5, 122 N.M. 326, 924 P.2d 735. Res judicata bars a subsequent lawsuit if four elements are met: "1) the parties must be the same or in privity; 2) the subject matter must be identical; 3) the capacity or character of persons for or against whom the claim is made must be the same; and 4) the same cause of action must be involved in both suits." Myers v. Olson, 100 N.M. 745, 747, 676 P.2d 822, 824 (1984) (cited authority omitted). The only element at issue in this case is whether Defendants are in privity with Danka, the defendant in the federal litigation. See DeFlon, No. 23,013, slip op. at 4-5.

{4} Determining whether parties are in privity for purposes of res judicata requires a case-by-case analysis. In St. Louis Baptist Temple, Inc. v. FDIC, the Tenth Circuit provided insight into the flexible definition of privity:

There is no definition of "privity" which can be automatically applied in all cases involving the doctrines of res judicata and collateral estoppel. Thus, each case must be carefully examined to determine whether the circumstances require its application. This is so, notwithstanding the general assumption that res judicata applies only if the parties in the instant action were the same and identical parties in the prior action resulting in a judgment. Privity requires, at a minimum, a substantial identity between the issues in controversy and showing that the parties in the two actions are really and substantially in interest the same.

605 F.2d 1169, 1174 (10th Cir.1979) (citing Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 60 S.Ct. 907, 84 L.Ed. 1263 (1940) and Green v. Bogue, 158 U.S. 478, 15 S.Ct. 975, 39 L.Ed. 1061 (1895)). St. Louis Baptist further explained that parties have been found in privity where they represent the same legal right or where they have a "mutual or successive relationship to the same rights of property." Id. at 1175. Lowell Staats Mining Co. v. Philadelphia Electric Co., 878 F.2d 1271 (10th Cir.1989), clarifies and expands the St. Louis Baptist discussion. "Privity has been held to exist in the following relationships: concurrent relationship to the same property right (i.e. trustee and beneficiary); successive relationship to the same property or right (i.e. seller or buyer); or representation of the interests of the same person." Lowell Staats, 878 F.2d at 1275. Because none of these relationships exist in the present case, we will next consider those cases where privity was found not to exist.

{5} The Tenth Circuit has indicated that privity does not exist where an initial lawsuit is brought against an employer and a second lawsuit is then brought against an employee acting in his or her individual capacity. Morgan v. City of Rawlins, 792 F.2d 975, 980 (10th Cir.1986) (stating, "We fail to see how Mr. DeHerrera's employee/employer relationship bars his presence in this suit when he is named for actions for which he allegedly was personally responsible.") (citing Smith v. Updegraff, 744 F.2d 1354 (8th Cir.1984)). The case of Lowell Staats echos this proposition, finding that the plaintiff's claims against two employee defendants would have survived res judicata if those claims had been brought against the employee defendants in their individual capacities, instead of in their official capacities as corporate officers or agents. 878 F.2d at 1276, 1278. Lowell Staats found the fact that the plaintiff had "failed to allege any other basis of common law liability" against one of those two employee defendants to be of particular importance. Id. at 1278.

{6} Plaintiff in the present case asserts the basis of common law liability that was lacking in Lowell Staats: intentional interference with a contract. "Parties to a contract cannot bring an action for tortious interference with an existing contract against each other." Salazar v. Furr's, 629 F.Supp. 1403, 1410 (D.N.M.1986) (citing Wells v. Thomas, 569 F.Supp. 426, 434 (E.D.Pa. 1983)). The appropriate cause of action between parties to the same contract would be breach of contract. Thus, in the present case Plaintiff could not have sued Danka for interfering with her employment contract.

{7} Plaintiff can only bring an intentional interference with a contract claim against the present Defendants in their individual capacities. In Salazar, the United States District Court for the District of New Mexico held that the president of a corporation was not liable for tortious interference with a contract for firing a pregnant employee before her pension benefits could vest. 629 F.Supp. at 1406, 1410. Although Salazar offered little discussion on this issue, its holding was presumably based on the implicit finding that the president was acting as an agent of the corporation, and therefore was not a third party to the contract. Id. at 1410. A corporate officer acting outside the scope of authority, however, may be liable for interfering with a corporate contract. Ettenson v. Burke, 2001-NMCA-003, ¶¶ 16-17, 130 N.M. 67, 17 P.3d 440.

{8} In Ettenson, a former employee sued the defendant, the president and CEO of a magazine company, for civil conspiracy and tortious interference with a contract. The defendant allegedly offered the plaintiff stock in the company and assurances of long-term employment in lieu of salary increases, but then suddenly fired the plaintiff and tried "to squeeze him financially and force him to waive whatever legal claims he had arising out of the termination." Ettenson, 2001-NMCA-003, ¶ 7, 130 N.M. 67, 17 P.3d 440. Discussing the tortious interference with a contract claim, the...

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