Kalos v. Centennial Sur. Assocs., Inc.
| Decision Date | 12 December 2012 |
| Docket Number | CCB-12-1532 |
| Parties | VERON LEE KALOS v. CENTENNIAL SURETY ASSOCIATES, INC. and GREENWICH INSURANCE COMPANY |
| Court | U.S. District Court — District of Maryland |
Plaintiff Veron Lee Kalos has brought this action alleging that defendants Centennial and Greenwich committed fraud involving surety bonds for a federal construction project undertaken by her company, Brickwood Contractors, Inc. The plaintiff, her husband, and Brickwood have filed numerous, duplicative lawsuits involving this transaction. The defendants have filed motions to dismiss Kalos's claim as well as motions for sanctions because of the repetitive filings. For the reasons set forth below, the defendants' motions will be granted.
Many courts have recounted the factual circumstances surrounding Kalos's various claims against Centennial and Greenwich (and other parties related to the same transaction). See, e.g., Kalos v. Law Offices of Eugene A. Seidel, P.A., 2009 WL 3583606 (E.D. Va. Oct. 26, 2009). In her current amended complaint, Kalos alleges that Centennial or Greenwich committed "fraud" or "lied" when Centennial issued surety bonds on behalf of Greenwich that were indemnified by Kalos. (Am. Compl., ECF No. 12, ¶¶ 78-79). As described in considerable detail by the Maryland Court of Special Appeals in examining an identical claim by Kalos, the bonds were surety for a construction project Brickwood was undertaking for the Federal Bureau of Prisons. Ex rel Peter and Veron Kalos v. Centennial Surety Assoc. et al., Sept. Term 2008, No.223, at *5 (Md. App. Sept. 3, 2009). Kalos and her husband, as managers of Brickwood, indemnified the bonds with commercial and residential property they owned in Virginia. Id. The Kaloses eventually defaulted on the bonds and were foreclosed upon. Id. at *6. On May 24, 2006, the Kaloses filed a complaint with the Maryland Insurance Administration ("MIA") Fraud Division asserting that, as Kalos does now, the Greenwich bonds were invalid. Id. After an administrative hearing in June 2007 on this issue, an ALJ concluded that Kalos's "allegation that [Centennial] fraudulently issued Greenwich bonds was totally unsupported by any evidence and consisted only of her assertions that the bonds were fraudulent." Id. at *8. The Circuit Court for Baltimore City affirmed the ALJ's conclusion on January 7, 2008. The Court of Special Appeals reexamined the MIA's record and concluded that the "evidence was sufficient to overcome [Kalos's] accusation of fraud . . . there was substantial evidence in the record to support the MIA's findings and conclusions that Centennial had not provided fraudulent bonds." Id. at *10.
The Kaloses have initiated over a dozen lawsuits related to the surety bonds and the resulting foreclosure.1 They have been warned not to file any further lawsuits on these issuesbecause they have been given the opportunity to present their claims related to the bonds and resulting foreclosures to numerous judicial bodies. On September 15, 2010, the Circuit Court for Fairfax County dismissed a claim by the Kaloses against Centennial and another party related to the transaction on res judicata grounds and ordered that the Kaloses "shall file no future cases in this Court involving any named defendant or counsel without the permission of the undersigned." Peter Kalos et al. v. United States Surety Co. et al., No. 2008-4649 (Va. Cir. Ct. (Fairfax) Sept. 15, 2010). The Fourth Circuit has noted that "the Kaloses have filed numerous actions against Greenwich" related to the foreclosure of their property because of their defaults on the surety bonds. Kalos v. Greenwich Ins. Co. et al., 404 F. App'x 792, 793 (4th Cir. 2010). In a claim primarily against the party that purchased the foreclosed upon property, the court "notifie[d] the [Kaloses] that any further suits arising from the foreclosure of the property at issue . . . and [the Kaloses'] defaults on the obligations leading to that foreclosure, whether against [the defendant in that case] or any other party, may result in the imposition of a pre-filing review system, if appropriate." Kalos v. Wisenbaker Holdings, LLC, 2011 WL 761474, at *3 n.3 (E.D. Va. Feb. 23, 2011). Nonetheless, Kalos initiated this lawsuit in May, once again attacking the validity of the surety bonds.
Both Greenwich and Centennial have filed Motions to Dismiss under Rule 12(b)(6) arguing, among other grounds for dismissal, that Kalos's claims are barred by the doctrine of res judicata. "'[T]he purpose of Rule 12(b)(6) is to test the legal sufficiency of a complaint' and notto 'resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.'" Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999)). The court may, however, rule on an affirmative defense such as res judicata where "it clearly appears on the face of the complaint." Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000) (quoting Richmond, Fredericksburg & Potomac R. Co. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993)). Furthermore, "when entertaining a motion to dismiss on the ground of res judicata, a court may take judicial notice of facts from a prior judicial proceeding when the res judicata defense raises no disputed issue of fact." Id.
Where res judicata is based on a state court judgment, federal courts must "give the same preclusive effect to state court judgments that those judgments would be given in the courts of the State from which the judgments emerged." Kremer v. Chem. Constr. Corp., 456 U.S. 461, 466 (1982). Thus, Maryland law controls what preclusive effect the MIA's administrative decision, and subsequent affirmance by the Circuit Court and Court of Special Appeals, should be afforded. In Maryland, the applicability of res judicata "to a judgment affirming or reversing an administrative or quasi-judicial decision appears to be well settled." Garrett Park v. Montgomery County Council, 262 A.2d 568, 571 (Md. 1970). To bar Kalos's claim under res judicata, the defendants must show "(1) that the parties in the present litigation are the same or in privity with the parties to the earlier dispute; (2) that the claim presented in the current action is identical to the one determined in the prior adjudication; and, (3) that there has been a final judgment on the merits." Anne Arundel County Bd. of Educ. v. Norville, 887 A.2d 1029, 1037 (Md. 2005).
The applicability of res judicata to Kalos's claim against Centennial is obvious. Kalos and Centennial were opposing parties before the MIA, Circuit Court, and Court of SpecialAppeals. This suit involves an identical claim, based on the same transaction, as the previous ones. See Snell v. Mayor and City Council of Havre de Grace, 837 F.2d 173, 176 (4th Cir. 1988) () (citing Mettee v. Boone, 247 A.2d 390, 395 (Md. 1968)). And, as demonstrated by both the Circuit Court's and Court of Special Appeals's reexamination of the MIA's administrative finding, after a hearing and extensive review of the evidence, a final judgment on the merits was reached on Kalos's claim. Accordingly, Kalos's new claim against Centennial must be dismissed.
Unlike Centennial, however, Greenwich was not a defendant in Kalos's litigation before the MIA. Nevertheless, Greenwich can also preclude Kalos's claim under the doctrine of non-mutual defensive collateral estoppel. See Standard Fire Ins. Co. v. Berrett, 910 A.2d 1072, 1083-85 (Md. 2006). "The doctrine of 'collateral estoppel' or 'issue preclusion' . . . is a subset of the res judicata genre." In re Microsoft Corp. Antitrust Litigation, 355 F.3d 322, 326 (4th Cir. 2004). Maryland gives collateral estoppel effect to the judgments of its administrative agencies. Stavely v. State Farm Mut. Auto Ins. Co., 829 A.2d 265, 270 (Md. 2003). Under Maryland law, a plaintiff is bound by a prior judgment on an issue where (1) "the issue decided in the prior adjudication [is] identical with the one presented in the action in question"; (2) there was a "final judgment on the merits"; (3) the party against whom the doctrine is asserted was a party in the prior adjudication; and (4) that party was "given a fair opportunity to be heard on the issue." Berrett, 910 A.2d at 1084.
Here, the application of defensive non-mutual collateral estoppel is paradigmatic and necessary to fulfill the doctrine's purposes of "avoid[ing] the expense and vexation of multiplelawsuits, conserv[ing] judicial resources, and foster[ing] reliance on judicial action by minimizing the possibilities of inconsistent decisions." Id. at 1083 (quoting Colandrea v. Wilde Lake Community Ass'n, 761 A.2d 899, 907 (Md. 2000)). Greenwich seeks to preclude Kalos from relitigating the issue of whether the surety bonds were fraudulent or otherwise invalid. (See MIA Final Order, Am. Compl., ECF No. 12, Ex. 9.) This issue is central to her claim. (See, e.g., Am. Compl. ¶¶ 79, 82, 109, 111, 128-29.) The MIA, Circuit Court, and Court of Special Appeals examined Kalos's claim that the Greenwich surety bonds were somehow invalid and both unequivocally held that they were not. Thus, there has been an adjudication of an "identical" issue to the primary one in this case. Obviously, an administrative judgment, arrived at after briefing and hearing testimony, and examined by two levels of appellate courts, is a final judgment on the merits, and one for which Kalos was given a full and fair opportunity to be heard. See also Kalos, 404 F. App'x at 793 ( ...
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