Gulf Island-IV, Inc. v. Blue Streak-Gulf Is Ops

• Decision Date: 05 July 1994
• Docket Number: INC,D,No. 93-3539,STREAK-GULF,No. MC9792SA,ISLAND-I,MC9792SA,93-3539
• Citation: 24 F.3d 743
• Parties: GULFand Gulf Island IV a/k/a La Prt, Plaintiffs-Appellants, v. BLUEIS OPS a/k/a Blue Streak Inc., et al. and Lloyds Underwriters of London, Underwriters at Lloyds, London subscribing to policyefendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 743

24 F.3d 743

GULF ISLAND-IV, INC. and Gulf Island IV a/k/a La Prt Plaintiffs-Appellants, v. BLUE STREAK-GULF IS OPS a/k/a Blue Streak Inc., et al. and Lloyds Underwriters of London, Underwriters at Lloyds, London subscribing to policy No MC9792SAH, Defendants-Appellees.

No. 93-3539.

United States Court of Appeals Fifth Circuit.

July 5, 1994.

Rehearing Denied Oct. 7, 1994.

John T. Nesser, III, Liane K. Hinrichs, Elton A. Foster, Nesser, King & LeBlanc, New Orleans, LA, for appellants.

Steven J. Koehler, Richard K. Leefe, Leefe, Gibbs & Koehler, Metairie, LA, for Blue Streak, et al.

Charles M. Steen, Stephanie G. McShane, Phelps Dunbar, New Orleans, LA, for Lloyds Underwriters.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, JONES and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

The appellants, "Gulf Island," appeal from the district court's entry of summary judgment based upon res judicata. The appeal involves an attack on the district court's application of the doctrine of res judicata. We reverse.

I. FACTS AND PROCEDURAL HISTORY

In June 1985, the vessel L/B GULF ISLAND IV capsized in the Gulf of Mexico and suffered severe damage. In October 1985, after the vessel had been repaired, Hurricane Juan overturned it, and the vessel suffered additional damage. According to the parties on appeal, a partnership known as Blue Streak Gulf Island Operations (BS-GIO) was operating the vessel when it collapsed. ¹ The entity of BS-GIO has dissolved.

The two appellants, Gulf Island IV, a Louisiana partnership and owner of the vessel, and Gulf Island IV, Inc., the managing partner of Gulf Island IV, are referred to as "Gulf Island." ² The three appellees collectively referred to as "Blue Streak" are Blue Streak Operations, Inc., Blue Streak Marine, Inc. and Blue Streak Offshore, Inc. Underwriters at Lloyd's, London (Underwriters) had underwritten an umbrella liability insurance policy for Blue Streak and is now the fourth appellee.

In December of 1985, Gulf Island IV filed the first lawsuit, alleging diversity and admiralty and maritime jurisdiction, against their own insurance carriers, Wausau and American Marine Underwriters, Inc. (AMU), seeking damages due to the failure to pay benefits under the hull policy for physical damage to the vessel as a result of both of the above-described 1985 casualties and for downtime of the vessel occurring after the damage wrought by Hurricane Juan. The vessel was covered by two insurance policies, a hull and machinery policy and a protection and indemnity policy, which were issued by Wausau. Both policies listed the named assured as: Gulf Island Marine; Blue Streak Gulf Island Marine Operations, Inc. (Operator); and Oceanic Fleet, Inc. Ultimately, the parties advised the court that the action had been settled, and, as a result, the court, on September 29, 1986, issued a sixty-day order of dismissal, expressly allowing the right to reopen the action if the settlement had not been consummated. It is undisputed that Gulf Island never moved to reopen the 1985 suit.

Additionally, while that suit was pending, it was consolidated with several other suits, including a suit brought by Hope Contractors, Inc. In the Hope suit, the plaintiff-contractors named, among others, the following defendants, Gulf Island IV, Gulf Island IV, Inc., Gulf Island Marine, Inc., and Blue Streak/Gulf Island, which was identified as a Louisiana partnership. The Hope contractors sought payment on an account for post-casualty salvage and repairs to the vessel. Gulf Island impleaded AMU ³ and Wausau, seeking coverage under the hull and machinery policy for the salvage and repairs performed by the Hope contractors.

In June of 1988, Gulf Island brought the instant admiralty and maritime suit against Blue Streak Marine, Inc., Blue Streak Offshore, Inc., and Employers Insurance of Wausau ⁴ for negligence, breach of warranty of workmanlike performance in regard to both of the 1985 casualties, and for losses due to downtime of the vessel. Blue Streak then filed a third-party complaint naming Underwriters and seeking coverage under its umbrella policy. Blue Streak also filed a cross-claim against Wausau seeking coverage under its own protection and indemnity insurance policy, alleging that the policy required Wausau to protect and indemnify Blue Streak from the claims asserted by Gulf Island. Gulf Island later supplemented its complaint to name Underwriters as a defendant seeking the benefits of coverage under Blue Streak's umbrella policy.

Blue Streak and Underwriters both filed motions for summary judgment, arguing that res judicata applied as a bar to the proceedings against them on the basis of the court's September 29, 1986 order of dismissal in the prior suit. The district court agreed and granted summary judgment for Underwriters and Blue Streak. Gulf Island now appeals, arguing that the district court erred in finding that res judicata barred the instant claims against both underwriters and Blue Streak.

II. STANDARDS OF REVIEW

When a summary judgment is appealed, this Court evaluates a district court's decision to grant summary judgment by reviewing the record under the same standards that the district court applied to determine whether summary judgment was appropriate. Herrera v. Millsap, 862 F.2d 1157, 1159 (5th Cir.1989). Therefore, the summary judgment will be affirmed only when this Court is "convinced, after an independent review of the record, that 'there is no genuine issue as to any material fact' and that the movant is entitled to judgment as a matter of law." Id. (quoting Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1364 (5th Cir.1987) and Fed.R.Civ.P. 56(c)). Fact questions must be considered with deference to the nonmovant. Herrera v. Millsap, 862 F.2d at 1159. Questions of law are reviewed de novo. Id.

As previously set forth, the district court found that the claims were barred by res judicata. Federal law determines the res judicata effect of a prior federal court judgment. Russell v. SunAmerica Securities, Inc., 962 F.2d 1169, 1172 (5th Cir.1992). In order for res judicata to apply, the following four requirements must be met. First, the parties in the instant action must be the same as or in privity with the parties in the prior action in question. United States v. Shanbaum, 10 F.3d 305, 310 (5th Cir.1994). Second, the court that rendered the prior judgment must have been a court of competent jurisdiction. Id. Third, the prior action must have terminated with a final judgment on the merits. Id. Fourth, the same claim or cause of action must be involved in both suits. Id.

III. BLUE STREAK'S CLAIM OF RES JUDICATA

Regarding the first requirement, Blue Streak argues that it did not have to be a party (or in privity with a party) to the 1985 action. Instead, Blue Streak argues that only the party against whom the plea of res judicata is asserted (in this case Gulf Island) must be a party to the prior action. Contrary to Blue Streak's assertion, both parties must be identical to or in privity with the parties in the prior suit for res judicata to apply.

In support of the proposition that it did not have to be a party to or in privity with a party to the prior action, Blue Streak cites Blonder-Tongue Lab., Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). Blue Streak's reliance on Blonder-Tongue is misplaced. In Blonder-Tongue, the Supreme Court "eliminated the requirement of mutuality in applying collateral estoppel to bar relitigation of issues decided earlier in federal-court suits." Allen v. McCurry, 449 U.S. 90, 94-95, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980) (emphasis added). As this Court has recognized, the doctrine of res judicata, in its broadest sense, encompasses two distinct preclusion concepts, claim preclusion (res judicata) and issue preclusion (collateral estoppel). United States v. Shanbaum, 10 F.3d at 310. "Unfortunately, the terminology used in this area of the law often breeds confusion." Id. Thus, although the Blonder-Tongue opinion recites the term "res judicata," it apparently is using it in its broad sense. As the Supreme Court stated in Allen v. McCurry, supra, it was the mutuality requirement in the context of collateral estoppel that was eliminated.

Recently, in Russell v. SunAmerica Securities, Inc., 962 F.2d at 1172-76, this Court addressed the question whether res judicata should have barred the suit against a defendant-appellee that had not been a party to the prior suit. Addressing the identity of parties requirement of res judicata, this Court explained that "[a] non-party defendant can assert res judicata so long as it is in 'privity' with the named defendant." Id....