Hartsel Springs Ranch v. Bluegreen Corp.

• Decision Date: 16 July 2002
• Docket Number: No. 01-1322.,No. 01-1122.,01-1122.,01-1322.
• Citation: 296 F.3d 982
• Parties: HARTSEL SPRINGS RANCH OF COLORADO, INC., a Colorado corporation, as successor in interest to Outwest Resorts, Ltd., a Delaware corporation, and Mercantile Equities Corporation, a Nevada corporation, Plaintiff-Appellant, v. BLUEGREEN CORPORATION, a Massachusetts corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

296 F.3d 982

HARTSEL SPRINGS RANCH OF COLORADO, INC., a Colorado corporation, as successor in interest to Outwest Resorts, Ltd., a Delaware corporation, and Mercantile Equities Corporation, a Nevada corporation, Plaintiff-Appellant, v.BLUEGREEN CORPORATION, a Massachusetts corporation, Defendant-Appellee.

No. 01-1122.

No. 01-1322.

United States Court of Appeals, Tenth Circuit.

July 16, 2002.

COPYRIGHT MATERIAL OMITTED

Lee Katherine Goldstein(Glenn W. Merrick with her on the briefs), Brega & Winters P.C., Denver, CO, for Plaintiff-Appellant.

Justin D. Cumming(Michael D. Nosler with him on the brief), Rothgerber Johnson & Lyons, LLP, Denver, CO, for Defendant-Appellee.

Before SEYMOUR, ALDISERT,^* and EBEL, Circuit Judges.

EBEL, Circuit Judge.

Plaintiff-AppellantHartsel Springs Ranch of Colorado, Inc.("HSR") appeals from the dismissal of its suit against Defendant-AppelleeBluegreen Corporation.The district court ruled that the suit violated the rule against claim-splitting, and that it was an improper attempt to circumvent its orders in a separate pending suit between the same parties.Because the two lawsuits were brought on behalf of separate entities who do not share identical interests, we conclude that the district court erred in finding the second suit to be an example of improper claim-splitting.We therefore REVERSEthe district court's dismissal order and its award of attorney's fees to Bluegreen, and REMAND for further proceedings.

BACKGROUND

Hartsel Springs Ranch is a real property development in Park County, Colorado consisting of approximately 3,700 single-family residential lots.At the time of the events in question, HSR (the corporation, not the property itself) was a subsidiary of, and wholly owned by, Mercantile Equities Corporation("MEC").The two entities had identical boards of directors and officers.By October 1994, MEC had conveyed title to 1,592 lots to HSR, and MEC had retained title to 2,101 lots, allegedly for tax purposes.

On December 6, 1996, HSR and Bluegreen entered into a written marketing agreement in an effort to sell individual lots to the public.MEC was not mentioned in the agreement and did not sign it.Bluegreen agreed to sell lots for HSR as an exclusive marketing agent in return for approximately forty percent of the profits.The agreement was to last for three years, although either party could end the agreement for cause.After gradual deterioration of the parties' relationship, Bluegreen pulled out of the project on October 31, 1997.

On August 1, 1998, HSR filed a complaint in state court alleging breach of contract, promissory estoppel, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud and deceit, negligence, and negligent misrepresentation and omission.The action was removed to federal court based on diversity jurisdiction.MEC and its successor in interest, Outwest Resorts, Inc., were not mentioned in the complaint.The case became No. 98-B-2241.

The scheduling order in 98-B-2241 set March 8, 1999 as the deadline for joinder of parties and amendment of pleadings.In December 1999, HSR moved to amend its complaint to add Outwest as a plaintiff"to avoid any theoretical dispute in respect of entitlement to recovery as between HSR and MEC/Outwest."In January 2000, the district court denied the motion as untimely and because HSR should have known of the additional plaintiff at the time it filed its complaint.

On May 5, 2000, HSR merged with Outwest, resulting in one entity bearing the HSR name, but representing the interests of HSR, MEC and Outwest.HSR argued that as the surviving entity, it was due damages for all 3,700 lots, regardless of whether title was held by HSR or MEC.On May 15, 2000, Bluegreen moved for partial summary judgment on HSR's tort claims and claims based on damages attributable to lots owned by MEC.The court granted the motion as to the MEC damages claims, holding that HSR could claim damages only for lots that it owned at the time the alleged damages were incurred.In the order, the court rejected HSR's arguments that it had an identity of interests with MEC, that it had "equitable" title to the lots, and that, because of the merger, the distinction in ownership was moot.The court subsequently denied HSR's motion to reconsider.

HSR then filed the suit that is the subject of this appeal, No. 00-B-1653, bringing claims as successor in interest to Outwest and MEC.HSR asserted claims against Bluegreen for breach of contract, promissory estoppel, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud and deceit, negligence, negligent representation and omission, and tortious interference with business opportunity.The district court(Judge Babcock, who was assigned both cases) granted Bluegreen's12(b)(6) motion to dismiss, concluding that "both suits are the results of one alleged wrong, and equity supports dismissal of the suit."The court subsequently awarded Bluegreen $20,637 in attorney's fees.This appeal followed.

DISCUSSION

I.

The district court exercised jurisdiction pursuant to 28 U.S.C. § 1332(a), and we have jurisdiction under 28 U.S.C. § 1291.The district court dismissed the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), a dismissal which is ordinarily subject to de novo review.Sutton v. Utah State Sch. for the Deaf & Blind,173 F.3d 1226, 1236(10th Cir.1999).However, here the dismissal for claim-splitting was premised in significant measure on the ability of the district court to manage its own docket, and in that situation the appellate court reviews the dismissal under an abuse of discretion standard.SeeCurtis v. Citibank,226 F.3d 133, 138(2d Cir.2000)(describing claim-splitting dismissal as part of district court's "general power to administer its docket");Serlin v. Arthur Andersen & Co.,3 F.3d 221, 223(7th Cir.1993)(recognizing that district court may dismiss suit "for reasons of wise judicial administration... whenever it is duplicative of a parallel action already pending in another federal court"(internal quotation marks omitted)(omission in original));Curtis v. DiMaio,46 F.Supp.2d 206, 215(E.D.N.Y.1999)(dismissing duplicative complaint and observing that "[i]t is well established that federal district courts possess the power to administer their dockets in a manner that conserves scarce judicial resources and promotes the efficient and comprehensive disposition of cases"), aff'd on other grounds,205 F.3d 1322, 2000 WL 232060(2d Cir.2000).

II.

The district court acknowledged that courts"have not developed one clear and consistent test for claim-splitting," but characterized the relevant inquiry as "whether the two suits involve one wrong committed by one defendant, and whether the equity of the situation supports a dismissal of the second case."HSR contends that this is "the wrong legal standard" because it disregards the requirement that "[t]he parties, claims and available relief must be the same."HSR looks to the claim-splitting analysis set forth by the Supreme Court in United States v. The Haytian Republic,154 U.S. 118, 14 S.Ct. 992, 38 L.Ed. 930(1894):

When the pendency of a [previously filed] suit is set up to defeat another, the case must be the same.There must be the same parties, or, at least, such as represent the same interests; there must be the same rights asserted and the same relief prayed for; the relief must be founded upon the same facts, and the title, or essential basis, of the relief sought must be the same.

Id. at 124, 14 S.Ct. 992(internal quotation marks omitted).Consistent with these criteria, more recent cases analyze claim-splitting as an aspect of res judicata.SeeDavis v. Sun Oil Co.,148 F.3d 606, 613(6th Cir.1998)(per curiam)(referring to claim-splitting as "the `other action pending' facet of the res judicata doctrine");Shaver v. F.W. Woolworth Co.,840 F.2d 1361, 1365(7th Cir.1988)("This application of the doctrine of res judicata prevents the splitting of a single cause of action and the use of several theories of recovery as the basis for separate suits.");Iron Workers Local Union No. 17 Ins. Fund v. Philip Morris Inc.,182 F.R.D. 512, 522(N.D.Ohio1998)(noting that "the defense of claim splitting is related to the doctrine of res judicata and the notions of issue and claim preclusion");Foianini v. Brinton,855 P.2d 1238, 1240(Wyo.1993)(holding that Restatement (Second) of Judgments§ 24's definition of a "claim" applies "to both the doctrine of res judicata and the closely related rule against claim splitting");Maldonado v. Flynn,417 A.2d 378, 382(Del. Ch.1980)(describing "rule against claim splitting [as] an aspect of the doctrine of res judicata");Joseph E. Edwards, Annotation, Waiver of, by Failure to Promptly Raise, Objection to Splitting Cause of Action,40 A.L.R.3d 108, § 1 n. 2, 1971 WL 28557(1971)("It will be observed that the rule against `splitting' appears to be considered a part of the doctrine of res judicata in several [cases].").

Within the res judicata framework, this court applies federal law to determine the effect of a previous federal judgment, even if that judgment was issued in a case based on diversity jurisdiction.Petromanagement Corp. v. Acme-Thomas Joint Venture,835 F.2d 1329, 1332-33(10th Cir.1988)(citingRestatement (Second) of Judgments§ 87(1982)).However, "the best federal rule for the claim-preclusive effect of a federal diversity judgment is to adopt `the law that would be applied by state courts in the State in which the federal diversity court sits.'"Matosantos Commercial Corp. v. Applebee's Int'l, Inc.,245 F.3d 1203, 1208(10th Cir.2001)(quotingSemtek Int'l, Inc. v. Lockheed Martin Corp.,531 U.S. 497, 121 S.Ct. 1021, 1028, 149 L.Ed.2d 32(2001)).Given that our present inquiry, like a traditional claim preclusion analysis, focuses on the preclusive effect to be afforded an...