Howard v. City of Coos Bay, an Or. Mun. Corp.

• Decision Date: 25 September 2017
• Docket Number: No. 14-35506.,14-35506.
• Citation: 871 F.3d 1032
• Parties: Janell HOWARD, Plaintiff-Appellant, v. CITY OF COOS BAY, an Oregon Municipal Corporation; Craddock Rodger, in his individual capacity, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

871 F.3d 1032

Janell HOWARD, Plaintiff-Appellant,

v.CITY OF COOS BAY, an Oregon Municipal Corporation; Craddock Rodger, in his individual capacity, Defendants-Appellees.

No. 14-35506.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 7, 2017, Portland, Oregon

Filed September 25, 2017

Beth Creighton (argued) and Michael E. Rose, Creighton & Rose PC, Portland, Oregon, for Plaintiff-Appellant.

Robert E. Franz, Jr. (argued), Law Office of Robert E. Franz, Jr., Springfield, Oregon, for Defendants-Appellees.

Before: Diarmuid F. O'Scannlain, Raymond C. Fisher, and Michelle T. Friedland, Circuit Judges.

OPINION

O'SCANNLAIN, Circuit Judge:

We must decide whether the former employee of a City in Oregon may prevail on allegations that it violated the First Amendment and state law by refusing to rehire her.

I

A

Janell Howard served as the Finance Director for the City of Coos Bay ("City") from 1998 through 2008. On September 16, 2008, after an investigation into whether Howard had shoplifted from Wal-Mart (from which no charges were filed), she was terminated from such position for cause.

Howard maintained that her firing was actually the result of a complaint she had brought in June 2007 before the Oregon Board of Accountancy regarding an accountant whom the City had hired to conduct an audit. Howard believed that the accountant had billed the City for extra and unnecessary charges. The City Manager, Charles Freeman, requested that she withdraw the complaint, but Howard refused and was temporarily suspended in July 2007.

B

In September 2009, Howard filed suit ("Howard I ") against the City and Freeman, alleging multiple claims, including First Amendment retaliation and whistleblower retaliation under Oregon law. Howard filed an amended complaint in October 2010.

Howard eventually found a new position as the Administrative Services Director for the City of Brookings, although it provided a lower salary with fewer benefits and caused Howard to have additional housing expenses.

In May 2011, while Howard I was pending, the City Finance Director position became vacant. The City appointed Susanne Baker, who at that time worked in the Finance Department, as acting Finance Director. Roger Craddock, then current City Manager, asked Baker if she would be interested in the position permanently, but she declined because she wanted to continue with her education. In June 2011, the City opened the application period to fill this position permanently, and Howard applied for the job on June 13.

On July 6, 2011, Howard received a letter from Craddock explaining that her application would not be considered because she previously had been terminated for cause.

The letter read:

I am in receipt of your request to be considered for the open position of Finance Director with the City of Coos Bay. Unfortunately, as your prior employment with the City was terminated for cause, I am not in a position to consider you for the current position. I do wish you the best with your continued employment with the City of Brookings.

The application period for the Finance Director position closed on July 8, 2011. The City received a total of 29 applications, interviewed the top four applicants, but declined to make an offer to anyone. Craddock again approached Baker about applying, but she again declined. The City began a second hiring period in August. Howard did not reapply, although under City policy, her prior application should have remained on file. The second application period closed on September 30, 2011. The City received twenty-three applications and interviewed the top three candidates. Again, the City declined to make any offers.

On October 25, 2011, Craddock again approached Baker about taking the Finance Director position permanently. She accepted the position the following day. The paperwork officially promoting her was not completed until November 7 or 8, 2011, but the promotion became effective on November 1.

Meanwhile, Howard I had been progressing to trial. On October 11, 2011, Howard submitted a trial witness list, which stated that Craddock would testify to the receipt of Howard's 2011 application for City Finance Director and subsequent rejection. Howard also filed a proposed exhibit list that included the July 6, 2011 rejection letter from Craddock.

Trial on Howard's First Amendment retaliation claim began on October 31, 2011. Howard moved to admit the July 2011 rejection letter into evidence on the "theory" that it demonstrated "continued retaliation for her protected speech." The City's attorney objected, arguing that this was "another claim ... another set of circumstances" that was "outside the scope of this lawsuit." The court ruled that the letter was "still relevant with regard to damages."

The jury reached a verdict in favor of Howard on November 2, 2011. It awarded her $150,000 in economic damages, $50,000 in non-economic damages, and it further awarded her $1,000 in punitive damages against Freeman, the former City Manager.

C

On July 30, 2012, Howard filed this new suit ("Howard II ") against the City of Coos Bay and City Manager Craddock, contending that the City retaliated against her success in Howard I by hiring Baker and rejecting her application to become City Finance Director. She brought claims under 28 U.S.C. § 1983, alleging that the City violated the First Amendment of the United States Constitution, and Or. Rev. Stat. § 659A.230, Oregon's whistleblower-protection law. The City and Craddock moved for summary judgment arguing that Howard's claims were barred by both claim and issue preclusion, and, alternatively, that they failed on the merits. The district court granted summary judgment on May 13, 2014, determining that Howard's claims were barred by claim and issue preclusion. Howard timely appealed.

II

First, Howard argues that the district court erred by concluding that her claims were barred by claim preclusion.¹

Claim preclusion requires "(1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency , 322 F.3d 1064, 1077 (9th Cir. 2003) (quoting Stratosphere Litig. L.L.C. v. Grand Casinos, Inc. , 298 F.3d 1137, 1142 n.3 (9th Cir. 2002) ).

The parties do not dispute the application of the second and third factors; the central debate is over the first factor—whether the claims between the two suits are identical.

A

We employ four criteria to evaluate whether claims are identical:

(1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts.

Harris v. Cty. of Orange , 682 F.3d 1126, 1132 (9th Cir. 2012) (quoting United States v. Liquidators of European Fed. Credit Bank , 630 F.3d 1139, 1150 (9th Cir. 2011) ). These criteria are not applied "mechanistically." Garity v. APWU Nat'l Labor Org. , 828 F.3d 848, 855 (9th Cir. 2016). "The fourth criterion is the most important." Harris , 682 F.3d at 1132.

Indeed, as did the district court, the parties focus on this fourth criterion—whether the suits involve the same transactional nucleus of facts. "[T]he inquiry about the ‘same transactional nucleus of facts' is the same inquiry as whether the claim could have been brought in the previous action." Liquidators of European Fed. Credit Bank , 630 F.3d at 1151. This is because:

If the harm arose at the same time, then there was no reason why the plaintiff could not have brought the claim in the first action. The plaintiff simply could have added a claim to the complaint. If the harm arose from different facts at a different time, however, then the plaintiff could not have brought the claim in the first action.

Id. Thus, "[w]hether two suits arise out of the same transactional nucleus depends upon whether they are related to the same set of facts and whether they could conveniently be tried together." Turtle Island Restoration Network v. U.S. Dep't of State , 673 F.3d 914, 918 (9th Cir. 2012) (quoting ProShipLine Inc. v. Aspen Infrastructures Ltd. , 609 F.3d 960, 968 (9th Cir. 2010) ).

To answer this question, a number of other circuits have "adopted a bright-line rule that res judicata does not apply to events post-dating the filing of the initial complaint." Morgan v. Covington Twp. , 648 F.3d 172, 177–78 (3d Cir. 2011) ; see also Bank of N.Y. v. First Millennium, Inc. , 607 F.3d 905, 919 (2d Cir. 2010) ; Smith v. Potter , 513 F.3d 781, 783 (7th Cir. 2008) ; Rawe v. Liberty Mut. Fire Ins. Co. , 462 F.3d 521, 529–30 (6th Cir. 2006) ; Mitchell v. City of Moore , 218 F.3d 1190, 1202 (10th Cir. 2000) ; Manning v. City of Auburn , 953 F.2d 1355, 1360 (11th Cir. 1992) ; cf. Young-Henderson v. Spartanburg Area Mental Health Ctr. , 945 F.2d 770, 774 (4th Cir. 1991) (suggesting without deciding that res judicata need not "preclude claims that could not have been brought at the time the first complaint was filed"); 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4409 (3d ed. 2017) ("Most cases rule that an action need include only the portions of the claim due at the time of commencing that action, frequently observing that the opportunity to file a supplemental complaint is not an obligation."). Indeed, the Seventh Circuit has gone so far as to call it the "federal rule," Ellis v. CCA of Tennessee LLC , 650 F.3d 640, 652 (7th Cir. 2011), and the Supreme Court spoke approvingly of this line of cases in Whole Woman's Health v. Hellerstedt , ––– U.S. ––––, 136 S.Ct. 2292, 2305, 195 L.Ed.2d 665 (2016).

We have applied this rule in the context of California law, L.A. Branch NAACP v. L.A. Unified Sch. Dist. , 750 F.2d 731, 739 (9th Cir. 1984) (en banc),² and as an alternative holding in a footnote, ...