Funny Guy, LLC v. Lecego, LLC

• Decision Date: 16 February 2017
• Docket Number: Record No. 160242
• Citation: 795 S.E.2d 887,293 Va. 135
• Parties: The FUNNY GUY, LLC, et al. v. LECEGO, LLC, et al.
• Court: Virginia Supreme Court

293 Va. 135

795 S.E.2d 887

The FUNNY GUY, LLC, et al.

v.LECEGO, LLC, et al.

Record No. 160242

Supreme Court of Virginia.

February 16, 2017

Maureen E. Carr (Robert J. Cunningham ; Alison R. Mullins, Tysons Corner; Rees Broome, on briefs), for appellants.

Scott D. Helsel (Michael J. Holleran, Reston; Evan M. Stepanick; Walton & Adams, on brief), for appellees Lecego, LLC and Heather Cogdell.

Toni Shannon, pro se.

No brief field by appellee Vision-IT, Inc.

PRESENT: All the Justices

OPINION BY JUSTICE D. ARTHUR KELSEY

This case involves only one underlying dispute: The Funny Guy, LLC contends that it was not paid for work it did for Lecego, LLC.¹ That dispute, however, generated three cascading theories of recovery against Lecego. Funny Guy first claimed that, after the dispute arose, Lecego agreed to pay almost all (about 97%) of the money that it allegedly owed as part of a settlement agreement (the settlement theory). Funny Guy filed suit on that theory and lost because the trial court found that no such settlement ever existed.

After that theory proved unsuccessful, Funny Guy filed a second suit claiming that the initial promise to pay constituted a binding contract (the oral-contract theory) and argued alternatively that Lecego should pay anyway even if no binding contract existed (the quantum-meruit theory). The trial court dismissed the second suit because these two alternative theories of recovery could have been, and thus should have been, asserted in the first suit. On appeal, Funny Guy contends that the trial court erred in dismissing this second suit on the basis of res judicata. We disagree and affirm.

I.

In 2014, Funny Guy sued Lecego and claimed that, from 2012 to 2013, Funny Guy had "provided certain information technology and related services" pursuant to a contract with Lecego. J.A. at 312.² When the parties terminated their agreement, a dispute arose over payment for Funny Guy's services and other issues. Funny Guy alleged that Lecego had agreed to pay approximately 97% of the fees claimed (amounting to $73,290) in an "attempt to resolve" the dispute but later refused to do so. Id. at 312-14. Finding there was "no meeting of the minds as a matter of law" on the alleged compromise of the payment dispute, the trial court sustained Lecego's demurrer. Id. at 406.

Less than a year later, Funny Guy again sued Lecego asserting two alternative theories of recovery, breach of contract and quantum meruit. This second complaint, like the first, alleged that Funny Guy had performed work for Lecego but was never paid for it. Compare id. at 6, with id. at 312, 314. Seeking $75,790,³ Funny Guy alleged that Lecego breached its oral agreement to pay for the services and that, even if there were no oral agreement, Lecego should still make the requested payment under quantum-meruit principles. Lecego filed a plea in bar and contended that res judicata precluded Funny Guy's second suit because these alternative theories of recovery could have been, and thus should have been, asserted in the first suit. The trial court agreed and dismissed the second suit with prejudice. See id. at 245, 300-01.

II.

The trial court correctly reasoned that Rule 1:6 prohibited Funny Guy from filing two separate lawsuits when one would have been perfectly sufficient. Drafted to have a pragmatically broad reach, Rule 1:6 revived the historic principles of res judicata and applied them to modern litigation. See infra Part II.B. Both the text and historical context of Rule 1:6 calibrate its scope to Virginia's statutes governing pleading and joinder of claims. Because Funny Guy could have joined all three of its claims in a single suit and no disqualifying principle of res judicata applies, Rule 1:6 prohibited Funny Guy from filing a second suit after losing its first suit on the merits.

Funny Guy's argument to the contrary treats this case as two wholly separate disputes: Lecego's initial promise to pay, on one hand, and Lecego's promise to pay what it had earlier promised to pay, on the other. We find this distinction artificial and overly formalistic. This analysis comes uncomfortably close to reconstituting the "same evidence" test applied in Davis v. Marshall Homes, Inc. , 265 Va. 159, 166–68, 171, 576 S.E.2d 504, 507–08, 510 (2003), that Rule 1:6 expressly rejected. For purposes of res judicata, the task of categorizing the cluster of facts that define a dispute is a pragmatic exercise that focuses on how the parties, not legal dictionaries, would view the conflict. From this perspective, there is no reason to subject the parties—and the judicial system—to two separate lawsuits to resolve one underlying dispute.

A.

The exact origins of res judicata cannot be found in any "statute or rule of the common law." Martin P. Burks, Common Law and Statutory Pleading and Practice § 357, at 672 (T. Munford Boyd ed., 4th ed. 1952).⁴

Some contend that res judicata "bears a close resemblance to the [plea of] exceptio rei judicatae of the Roman law." Robert von Moschzisker, Res Judicata , 38 Yale L.J. 299, 299 (1929). "The Roman principle, based on the solemnity of the judicial pronouncement, was early adopted in English law, developing into the principle now known as merger and bar." Note, Developments in the Law—Res Judicata , 65 Harv. L. Rev. 818, 820 (1952) (footnote omitted).⁵ "It is not too much to say that [res judicata] is a fundamental concept in the organization of every jural society." 2 Black, supra note 5, § 500, at 760.⁶ It protects not only parties from having to try the same case twice but also society from having to pay the institutional cost of adjudicating needlessly fragmented litigation.⁷

Res judicata involves both issue and claim preclusion. See generally Lee v. Spoden , 290 Va. 235, 245–46, 776 S.E.2d 798, 803–04 (2015). Issue preclusion bars relitigation of common factual issues between the same or related parties. "Under the concept of collateral estoppel, ‘the parties to the first action and their privies are precluded from litigating [in a subsequent suit] any issue of fact actually litigated and essential to a valid and final personal judgment in the first action.’ " Rawlings v. Lopez , 267 Va. 4, 4–5, 591 S.E.2d 691, 692 (2004) (alteration in original) (citation omitted). Claim preclusion, on the other hand,

bars the assertion of legal or equitable rights of action, even if they were not specifically resolved in earlier litigation .... Called "merger" when the claimant wins the first suit and "bar" when the claimant loses it, claim preclusion under the doctrine of res judicata treats unasserted claims as being subsumed in the disposition of the related, previously adjudicated, claims.

Kent Sinclair & Leigh B. Middleditch, Jr., Virginia Civil Procedure § 14.11 [B][5], at 1214 (6th ed. 2014) (emphasis in original).

For all of the legal argot making the doctrine sound tiresomely erudite, the thought is really no more complicated than saying that, as Henry Black put it, litigants must "make the most of their day in court." 2 Black, supra note 5, § 731, at 1096. With equal clarity, it could also be said: "The law should afford one full, fair hearing relating to a particular problem—but not two." Kent Sinclair, Guide to Virginia Law & Equity Reform and Other Landmark Changes § 11.01, at 246 (2006).

Claim preclusion has always been the stepchild of pleading and joinder rules. "Determining which claims should have been brought in earlier litigation largely depends on which claims could have been brought." Id. § 11.2, at 247 (emphases in original); see also 2 Black, supra note 5, § 618, at 944-45. "Early American res judicata doctrine evolved in the shadow of these pleading rules and statutes that limited what one could litigate in a single case." Sinclair, supra , § 11.2, at 248. "The plaintiff, in order to have an effective remedy in the common law courts, must have been able to fit his problem into or within one of the fixed, established original writs or forms of actions," which "dictated the type of process, the content of the declaration (the first pleading), the method of proof, and the type of remedy." W. Hamilton Bryson, Bryson on Virginia Civil Procedure § 6.02[2], at 6-7 to 6-8 (4th ed. 2005); see also Henry John Stephen, A Treatise on the Principles of Pleading in Civil Action 5-7 (Francis J. Troubat ed., 8th Am. ed. 1859).

"At common law, joinder of tort and contract claims was forbidden." Sinclair & Middleditch, supra , § 8.6[B], at 706-07. Similar nonjoinder rules arose from the separation of law and equity.⁸ Before the federal courts merged law and equity, legal and equitable claims "could not be united in the same suit in a court of the United States." Cherokee Nation v. Southern Kan. Ry. , 135 U.S. 641, 651, 10 S.Ct. 965, 34 L.Ed. 295 (1890).⁹ "[Some] jurisdictions, like Virginia, permitted legal claims to be asserted in a chancery suit under the ‘clean up’ doctrine, but only at the price of forfeiting the historic right to a jury." Sinclair, supra , § 11.2, at 248.¹⁰ Although an equity court could grant legal remedies to achieve complete justice between the parties, the opposite was not true. A law court could not hear a claim for equitable remedies. See Simmons v. Miller , 261 Va. 561, 570 n.1, 544 S.E.2d 666, 672 n.1 (2001) (noting that an equitable action "may not be brought on the law side of the court"). The common-law doctrine of claim preclusion mirrored these inflexible pleading and joinder rules.

Because what could have been brought in the former suit should have been brought, the merger-bar principle of claim preclusion depended on the procedural constraints on the first suit. If the later asserted claim could not [have been] raised in the earlier trial or, if it could have been raised, but at an unacceptably high juristic cost (like losing the right to a jury), claim preclusion permitted the second trial—no matter that both trials involved the same contest between the same litigants. Though antithetical to the policies

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