Kale v. Combined Ins. Co. of America

• Citation: 736 F. Supp. 1183
• Decision Date: 01 May 1990
• Docket Number: Civ. A. No. 89-1640-T.
• Parties: Carl KALE, Plaintiff, v. COMBINED INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — District of Massachusetts

736 F. Supp. 1183

Carl KALE, Plaintiff, v. COMBINED INSURANCE COMPANY OF AMERICA, Defendant.

Civ. A. No. 89-1640-T.

United States District Court, D. Massachusetts.

May 1, 1990.

Paul L. Nevins and Philip R. Olenick, Boston, Mass., for plaintiff.

Kenneth M. Bello, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, Mass., for defendant.

MEMORANDUM

TAURO, District Judge.

Plaintiff, Kale is a Massachusetts resident and a twenty year employee of Defendant and its predecessor-in-interest. In May 1989, he brought an action in Middle-sex County Superior Court alleging a host of state law claims stemming from his employment termination in March 1983. Defendant, Combined, an Illinois corporation with a principal place of business in that state, timely removed the action to this court on the basis of diversity of citizenship.

Now, Combined asks this court to dismiss this case on res judicata grounds.¹ It argues that the claims raised now by Kale could have been asserted in a 1985 federal suit filed by him, that was later dismissed by Judge Skinner in September 1986. Combined argues further that Kale's failure to raise these claims in the 1985 suit precludes them now.

This motion to dismiss raises the novel question of whether a plaintiff asserting federal question jurisdiction in federal court must, on pain of later preclusion, also assert diversity jurisdiction, where available, in order to join all related state claims.

I.

Back in May 1985, Kale filed a civil action in the United States District Court for the District of Massachusetts, alleging that his employment was terminated in violation of the Age Discrimination in Employment Act "ADEA", 29 U.S.C. § 621, et seq. See Carl Kale v. Combined Insurance Company of America, C.A. No. 85-1840-S (D.Mass. dismissed Sept. 26, 1986) (Skinner, J.) "Kale I". In addition, Kale's complaint raised state law claims of intentional infliction of emotional distress and breach of the covenant of good faith and fair dealing.²

With respect to the state claims, Kale asserted discretionary pendent jurisdiction. Diversity jurisdiction was never properly plead.³

Kale I's ADEA claim was dismissed as time-barred. See Kale I, aff'd, 861 F.2d 746 (1st Cir.1988). With the lone federal claim gone, the court, having no apparent independent jurisdictional basis for adjudicating the related state claims, declined to exercise pendent jurisdiction. Id. (citing United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966)). With respect to these state claims, the court purported to dismiss them "without prejudice."

In this action, Kale II, which was removed from state court on the basis of diversity of citizenship,⁴ plaintiff asserts several state law claims of wrongful termination.⁵ Combined moves to dismiss because the claims raised in Kale II should have been included in the Kale I action. It contends that, had diversity jurisdiction been plead in Kale I, the state law claims could have been adjudicated on the merits. And so, because the pendent state claims could have been adjudicated in Kale I, pursuant to the court's mandatory diversity jurisdiction, they are now barred.

Kale's response is that the court in Kale I specifically dismissed the state claims "without prejudice." He argues, that these wholly state-created claims cannot now be barred by the fortuity of defendant's having removed Kale II to federal court.⁶

II.

Res judicata is a firmly rooted rule of "`fundamental and substantial justice,'" not "`a mere matter of practice or procedure inherited from a more technical time than ours.'" Federated Department Stores, Inc. v. Moitie, 452 U.S. 394, 401, 101 S.Ct. 2424, 2429, 69 L.Ed.2d 103 (1981) (quoting Hart Steel Co. v. Railroad Supply Co., 244 U.S. 294, 299, 37 S.Ct. 506, 508, 61 L.Ed. 1148 (1917)). Indeed, once the elements for claim preclusion have been established, there is little room for the making of "`ad hoc determinations of the equities in a particular case.'" See Rose v. Town of Harwich, 778 F.2d 77, 82 (1st Cir.1985) (quoting Moitie, 452 U.S. at 401, 101 S.Ct. at 2429). Because public policy demands that there be an end to litigation, the doctrine has been consistently invoked to "protect adversaries from the expense and vexation attending multiple lawsuits," "conserve judicial resources," and "foster reliance on judicial action by minimizing the possibility of inconsistent decisions." Walsh v. International Longshoremen's Assoc., Local 799, 630 F.2d 864, 867-68 (1st Cir.1980) (citations omitted). See also Allen v. McCurry, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1980).

A claim is deemed precluded when there is: "(1) identity or privity of the parties to the action; (2) identity of the causes of action; and (3) a prior judgment on the merits." Associated General Contractors v. Boston District Council of Carpenters, 642 F.Supp. 1435, 1438 (D.Mass.1986).

Here, the parties are identical. No one argues otherwise, nor does this suit's caption differ from the original one.

With respect to the identity of claims, the Restatement (Second) of Judgments makes clear that claims or causes of action are identical for claim preclusion purposes when they are "part of the transaction, or series of connected transactions, out of which the action arose." Restatement (Second) of Judgments, § 24(1) (1980). See also Rose, 778 F.2d at 79. Applying the federal definition of a claim or cause of action, Kale I and Kale II arise from the same core of operative facts—Combined's termination of Kale—and as such, constitute the same claim.⁷

Lastly, the dismissal of Kale I on statute of limitations grounds constituted a valid and final judgment. There is overwhelming support for giving preclusive effect to dismissals based on the statute of limitations. See Thompson Trucking, Inc. v. Dorsey Trailers, 880 F.2d 818 (5th Cir. 1989); Shoup v. Bell & Howell Co., 872 F.2d 1178 (4th Cir.1989); PRC Harris v. Boeing Co., 700 F.2d 894 (2d Cir.1983); Myers v. Bull, 599 F.2d 863 (8th Cir.1979); Cemer v. Marathon Oil Co., 583 F.2d 830 (6th Cir.1978); Chang v. Northwestern Memorial Hosp., 549 F.Supp. 90 (N.D.Ill. 1982); 18 C. Wright, A. Miller & E. Cooper, 18 Federal Practice and Procedure, § 4441 (1981) Wright & Miller. Cf. Rose, 778 F.2d at 80 ("For one thing, our survey of recent cases suggests a clear trend toward giving preclusive effect to dismissals based on the statute of limitations.") Once there is such an adjudication on the merits, all related claims that could have been brought are extinguished. See Moitie, 452 U.S. at 398, 101 S.Ct. at 2428; Isaac v. Schwartz, 706 F.2d 15, 17 (1st Cir.1983) ("The issue is `not whether the plaintiff in fact argued his ... claims in the first proceeding, but whether he could have.'") (quoting Lovely v. Laliberte, 498 F.2d 1261, 1263 (1st Cir.1974)); Restatement (Second) of Judgments, § 24(1); Wright & Miller, § 4411 at 86 ("A second action may be precluded on the ground that the same claim or cause of action was advanced in the first action even though a different source of law is involved.")

III.

Combined's motion to dismiss theorizes that not only all legal theories should have been brought in Kale I, but also that all jurisdictional bases, including diversity jurisdiction, should have been asserted as well. This court agrees. Indeed, several Supreme Court Justices have expressed this view with respect to the assertion of contingent pendent jurisdiction in an original federal question case.⁸ See Moitie, 452 U.S. at 404, 101 S.Ct. at 2431 (Blackmun, J., with whom Marshall, J. joins, concurring in judgment) ("The dismissal of Brown I is res judicata not only as to all claims respondents actually raised, but also to all claims that could have been raised."). Id. at 411, 101 S.Ct. at 2434 (Brennan, J., dissenting) ("I would hold that the dismissal of Brown I is res judicata not only as to every matter that was actually litigated, but also as to every ground or theory of recovery that might have been presented.").⁹

The only Circuit Court of Appeals answering this question with respect to diversity jurisdiction has held that a failure to assert the existence of diversity jurisdiction over state claims in a prior federal action precludes their assertion in a second action. See Shaver v. F.W. Woolworth Co., 840 F.2d 1361 (7th Cir.1988). The facts of Shaver are extraordinarily similar to those here. There, too, a federal action under the ADEA and various pendent state claims was brought by a former employee. After finding the federal claim time-barred, the district court refused to exercise pendent jurisdiction over the state claims. A second action brought in state court was removed to federal court on the basis of diversity of citizenship. Once there, the defendant moved for summary judgment on res judicata grounds and on the merits. Passing over the res judicata issue, the district court entered a summary judgment in defendant's favor on the merits.

The Court of Appeals for the Seventh Circuit, believing that the lower court should have avoided deciding the state law issues if it could have ruled solely on res judicata grounds, likewise dismissed the second suit, but for reasons of claim preclusion.¹⁰

IV.

Even when, as here, the preconditions for preclusion are met, some courts have recognized the necessity of an "occasional exception to prevent undue hardship." See Rose, 778 F.2d at 82. See also Moitie, 452 U.S. at 403, 101 S.Ct. at 2430 (Blackmun, J., with whom Marshall, J. joins, concurring in judgment). Rose would require a plaintiff to show clearly and convincingly that the policies favoring preclusion in the second action are outweighed by an extraordinary reason. Rose, 778 F.2d at 82 (citing Restatement (Second) of Judgment, § 26(1)(f)). This is not such a case. There were no jurisdictional obstacles to Kale bringing his state claims under the district court's mandatory diversity jurisdiction.¹¹

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