Ellingson v. Burlington Northern, Inc.

• Decision Date: 17 August 1981
• Docket Number: No. 79-4854,79-4854
• Citation: 653 F.2d 1327
• Parties: 1981-2 Trade Cases 64,235 Robert ELLINGSON, Jr., Plaintiff-Appellant, v. BURLINGTON NORTHERN, INC., dba Burlington Northern Railway, and Western Pacific Railroad Company, a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1327

653 F.2d 1327

1981-2 Trade Cases 64,235

Robert ELLINGSON, Jr., Plaintiff-Appellant, v. BURLINGTON NORTHERN, INC., dba Burlington Northern Railway, and Western Pacific Railroad Company, a

corporation, Defendants-Appellees.

No. 79-4854.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 15, 1981.

Decided Aug. 17, 1981.

Bartholomew Lee, San Francisco, Cal., for plaintiff-appellant.

Peter W. Davis (on brief), Crosby, Heafey, Roach & May, Oakland, Cal., Seymour Farber, Fleischmann & Farber, San Francisco, Cal., argued, for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before WRIGHT, TRASK and ANDERSON, Circuit Judges.

EUGENE A. WRIGHT, Circuit Judge:

I. Background.

Ellingson appeals the dismissal of his antitrust complaint against the Burlington Northern and Western Pacific Railroads and the award of $10,000 in attorneys fees.

Ellingson and his successors in interest operated a lumber mill in Klamath Falls. When the supply of harvestable timber in that area decreased, Ellingson purchased timber in California. In 1955 and 1957 he had it shipped on the defendant railroads, but he was dissatisfied with their charges. After negotiations, it was agreed that the railroads would give him a lower rate.

Dissatisfied, Ellingson filed a complaint against the railroads before the ICC in 1958. He alleged that the joint rate charged by the railroad was unreasonable, unjust, discriminatory and unduly prejudicial, and that Burlington Northern discriminated in favor of a mill it owned in Klamath Falls.

The ICC ruled that the rate was legal, just, reasonable and nondiscriminatory. Ellingson Lumber Co., 310 I.C.C. 249 (1960). ¹

Ellingson made no shipments over the railroads' lines after 1958. Following fires in his mill, Ellingson closed down in 1963.

He sued the railroads in state court in 1964 for conspiracy and antitrust violations. A nonsuit was entered in 1966.

1967 saw Ellingson suing again, this time in federal district court in Oregon, alleging antitrust violations. The court found there were no acts within four years which damaged him, that the claim was barred by the ICC's approval of the rates, and a lack of any other evidence of anticompetitive activity.

The district court was affirmed, per curiam, Ellingson Timber Co. v. Great N. Ry. Co., 424 F.2d 497 (9th Cir.), cert. denied, 400 U.S. 957, 91 S.Ct. 354, 27 L.Ed.2d 265 (1970). The court said that

the real substance of plaintiff's complaint had been submitted to the Commission and resolved in defendant's favor.

424 F.2d at 499.

In 1977 Ellingson filed in California Superior Court a petition to perpetuate the testimony of one railroad director. This was denied.

Ellingson filed his complaint in the present case on March 28, 1979. After the railroads moved to strike it and dismiss, Ellingson amended on June 4, 1979. The railroads timely moved to strike the amended complaint and to dismiss. On Ellingson's application, hearing on the motion was postponed to July 19.

The motion was granted on October 4, 1979. It is unclear on what grounds the court dismissed the complaint. The court referred to res judicata and to the complaint as sham and false. There is no mention of the statute of limitations in the court's order granting motion to dismiss, although the issue was before the court.

II. Dismissal.

A. Sham Pleadings.

The court below dismissed the complaint as false and sham pursuant to Fed.R.Civ.P. 11.

Essential allegations of the complaint were false. They included allegations that a substantial portion of the timber logged in the Klamath Falls area was on land owned by the railroads when neither owned such land, that the railroads sold that land to big lumber companies, and that the railroads excluded Ellingson from financing sources and tied loans to exclusive dealing contracts when the railroads made no loans to him.

Ellingson contends that it was improper for the court to consider the affidavits in support of the railroads' motions, or judicially-noticed records from the earlier cases. This contention is wrong as a matter of policy and law.

If a court could not consider facts beyond the pleading in a motion to strike the pleadings as false and sham, then it could never dismiss. Without some facts (whether judicially noticed, from affidavits or otherwise), a court could not rule on a motion to strike and every complaint would always be sufficient under Rule 11, however patently false. Unless Rule 11 is meaningless, the court must be able to consider facts.

The authorities are clear that it is proper for the court to consider judicially noticeable records from prior lawsuits, Bertucelli v. Carreras, 467 F.2d 214 (9th Cir. 1972), and affidavits, Pollock v. Citrus Associates of the New York Cotton Exchange, 1979-1 Trade Cas. P 62,581 (CCH) (S.D.N.Y.1978); 2A J. Moore Federal Practice P 11.02 at n.9 (2d ed. 1975).

The court below properly concluded this is a case in which no opportunity to amend was necessary, Bertucelli v. Carreras, 467 F.2d at 215-16. He has had abundant opportunity over the years to state a claim and has failed. Nevertheless, Ellingson was given one opportunity to correct the failure to file a proper complaint.

Dismissal under Rule 11 was proper.

B. Res Judicata.

Ellingson contends that dismissal for res judicata was improper on procedural and substantive grounds.

1. Procedural Issue

He claims the motion to strike and dismiss pursuant to Rule 12 was an improper "ad hoc proceeding( )" and "a premature summary judgment."

Under Rule 12(b)(6) (failure to state a claim upon which relief can be granted), if matters outside the pleadings are considered, the motion must be treated as a Rule 56 motion for summary judgment.

Since affidavits and records of earlier cases were considered, dismissal for res judicata must satisfy the requirements of Rule 56.

Ellingson has no basis to contend that Rule 56 was not followed. He had more than one month's notice when only 10 days are required. Fed.R.Civ.P. 56(c). If the action was barred by res judicata, there were no genuine issues of fact. He cannot complain if he introduced no affidavits when he had the opportunity.

Ellingson's only argument why dismissal pursuant to Rule 56 was improper is rhetoric concerning the balance between Rule 12 and 56, and the "importance" of the issues to "many independent operators in timber business."

Assuming the action was barred by res judicata, the action was properly dismissed under Rule 56. ²

2. Substantive Issues

The rate issues were resolved by the ICC. ICC-approved mergers of railroads are not subject to collateral attack under antitrust laws. United States v. ICC, 396 U.S. 491, 504, 90 S.Ct. 708, 714, 24 L.Ed.2d 700 (1970).

The anticompetitive allegations were at issue in the proceeding in federal court in Oregon. Since that proceeding involved the same parties and the same dispute, and was resolved on the merits, ³ the action is barred by res judicata. Restatement of Judgments, § 48 (1942); Hooker v. Klein, 573 F.2d 1360 (9th Cir.), cert. denied, 439 U.S. 932, 99 S.Ct. 323, 58 L.Ed.2d 327 (1978). ⁴

(a) Claims Not Previously Adjudicated.

Ellingson advances several reasons why res judicata should not apply. He alleges his present claims were not raised in prior lawsuits. This is irrelevant.

A final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.

Federated Dep't Stores, Inc. v. Moitie, --- U.S. ----, ----, 101 S.Ct. 2424, 2427, 68 L.Ed.2d --- (1981).

(b) Continuing Conduct.

He contends continuing conduct is not barred by the statute of limitations. Lawlor v. National Screen Service Corp., 349 U.S. 322, 75 S.Ct. 865, 99 L.Ed. 1122 (1955), cited by Ellingson, is inapposite here. The district court below specifically found there was no subsequent conduct by railroads which affected him. ⁵ This finding is not clearly erroneous.

(c) Change in Law.

Contrary to Ellingson's contention, a change in law does not affect the res judicata effect of a judgment. Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 375, 60 S.Ct. 317, 319, 84 L.Ed. 329 rehearing denied, 309 U.S. 695, 60 S.Ct. 581, 84 L.Ed. 1035 (1940). Even if the earlier case was wrongly decided, it is still res judicata. Federated Dep't Stores, Inc., supra, --- U.S. at ----, 101 S.Ct. at 2427-29.

Ellingson did not appeal the trial court's decision, so a subsequent change in law can have no effect on the conclusiveness of the earlier case. Otherwise, no judgment would ever be final.

The "change in law" which Ellingson relies upon has no effect on his action. His damages, if any, were fixed in 1963 when he quit the lumber business. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S.Ct. 795, 28 L.Ed.2d 77 rehearing denied, 401 U.S. 1015, 91 S.Ct. 1247, 28 L.Ed.2d 552 (1971), applies only when damages are speculative.

Ellingson's contention that "public policy" justifies disregard of res judicata is incorrect. Federated Dep't Stores, supra.

The dismissal for res judicata was proper.

C. Statute of Limitations.

Since the court below did not rely on the statute of limitations as a grounds for dismissal, we do not discuss it.

When the federal claims were dismissed, it was proper to dismiss the pendent claim. Lenske v. Steinberg, 415 F.2d 711, 712 (9th Cir. 1969), cert. denied, 397 U.S. 1075, 90 S.Ct. 1523, 25 L.Ed.2d 810 (1970).

III. Attorneys' Fees Below.

The district court ordered Ellingson to pay defendants' attorneys' fees and said:

(T)his court finds the plaintiff has abused the legal process and harassed defendants.

The actions of plaintiff in this case in relitigating issues which have already been decided against him demonstrate bad faith and vexatiousness to warrant the award of attorney's fees against plaintiff and in favor of defendants.

A....