Muhammad v. Oliver

• Decision Date: 10 November 2008
• Docket Number: No. 07-3336.,07-3336.
• Citation: 547 F.3d 874
• Parties: Dennis MUHAMMAD, et al., Plaintiffs-Appellants, v. Christine OLIVER, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

547 F.3d 874

Dennis MUHAMMAD, et al., Plaintiffs-Appellants, v. Christine OLIVER, et al., Defendants-Appellees.

No. 07-3336.

United States Court of Appeals, Seventh Circuit.

Argued May 5, 2008.

Decided November 10, 2008.

Richard S. Fedder (argued), Carbondale, IL, for Plaintiffs-Appellants.

James P. Gaughan, Jr. (argued), Schiff Hardin, Chicago, IL, for Defendants-Appellees.

Before CUDAHY, POSNER, and ROVNER, Circuit Judges.

POSNER, Circuit Judge.

The plaintiffs have appealed from the dismissal of their suit for failure to state a claim. Fed.R.Civ.P. 12(b)(6). The suit is based on 42 U.S.C. § 1981, which provides in pertinent part that everyone "shall have the same right . . . to make and enforce contracts . . . as is enjoyed by white citizens." The appeal presents issues relating to pleading, res judicata, and the meaning of section 1981.

The principal plaintiff (the other plaintiffs needn't be discussed)—the Dennis Muhammad Community and Economic Development Corporation (MDC)—is a minority business enterprise. The defendants are the nonprofit Chicago Dwellings Association (CDA), the for-profit CDA Management (CDAM), and Christine Oliver, the chief executive officer of both defendant companies. MDC and CDAM signed a joint-venture agreement to bid on a contract to install air conditioners in buildings owned by the Chicago Housing Authority. The joint venture's bid was successful, but MDC and the defendants had a falling out and in 2002 MDC sued CDA and CDAM in an Illinois state court charging breach of contract. CDA and CDAM had, the suit charged, violated the joint-venture agreement by refusing to permit MDC to do the share of the installation work that the agreement allotted to it. CDA moved to be dismissed from the suit because it had not signed the contract. The judge granted the motion. In 2005, MDC moved to dismiss its suit (the record does not indicate why)—which now was just against CDAM—and the judge granted that motion too and dismissed the suit without prejudice.

Two years later MDC brought the present suit, this one in federal court, alleging the same violations of the joint-venture agreement but adding that CDA, CDAM, and Oliver (who had not been named as a defendant in the previous suit) had treated MDC as a "minority front." That is, they had used MDC's participation in the bid to increase the likelihood that CDAM would be the successful bidder for the contract with the Chicago Housing Authority but had never intended to allow MDC to do any of the work called for by the contract. This is the conduct alleged in the present suit to violate section 1981. The district judge held that the dismissal of the first suit barred the present one so far as the company defendants were concerned and that although the claim against Oliver was not barred by res judicata, because she had not been a party to the first suit, she could not be held liable for violating section 1981 because she had not been a signatory of the joint-venture agreement.

The two suits were based on different legal theories—the first on state contract law, the second on a federal civil rights statute—but both arose out of the same facts, namely conduct by the defendants that is alleged to have violated the joint-venture agreement to the prejudice of MDC, the plaintiff in both suits. Ordinarily a second suit arising from the same events as the first one is barred only if there was a final judgment, with prejudice, in the first suit; and the final judgment in the first suit was without prejudice. But when a suit is abandoned after an adverse ruling against the plaintiff, the judgment ending the suit, whether or not it is with prejudice, will generally bar bringing a new suit that arises from the same facts as the old one. "[A] plaintiff who splits his claims by voluntarily dismissing and refiling part of an action after a final judgment has been entered on another part of the case subjects himself to a res judicata defense." Hudson v. City of Chicago, 228 Ill.2d 462, 321 Ill.Dec. 306, 889 N.E.2d 210, 217 (2008). When a "final judgment rendered in an action extinguishes the plaintiff's claim," in this case against CDA, which the judge had dismissed from the case en route to entering the final judgment dismissing the entire case, "the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction . . . out of which the action arose." Restatement (Second) of Judgments § 24(1) (1982). Otherwise "any plaintiff could file an action with multiple counts, dismiss some but not all of the counts, obtain a final judgment on the undismissed counts, and if unsuccessful on the counts not dismissed, refile the previously dismissed counts. Such a practice would impair judicial economy and would effectively defeat the public policy underlying res judicata." Rein v. David A. Noyes & Co., 172 Ill.2d 325, 216 Ill.Dec. 642, 665 N.E.2d 1199, 1208 (1996).

And if as in this case there are multiple defendants, the extinction of the claim against one (CDA) extinguishes the plaintiff's claim against the others (CDAM and Oliver) if the claim against them arose out of the same facts as the first claim, as is true in this case. Otherwise a plaintiff could litigate the same claim indefinitely by suing one joint tortfeasor after another. Evans ex rel. Evans v. Lederle Laboratories, 167 F.3d 1106, 1113 (7th Cir.1999) (Illinois law). It is true that Evans was distinguished in Hendricks v. Victory Memorial Hospital, 324 Ill.App.3d 564, 258 Ill.Dec. 194, 755 N.E.2d 1013, 1015 (2001), on the ground that while in Evans "all three defendants were potentially liable for exactly the same conduct: providing the vaccine to plaintiffs' son . . . here plaintiffs' causes of action against Sipos and Victory, while relating in a general way to the same conduct, allege separate activities." But in the present case all three defendants are sought to be held liable for the identical conduct, namely the creation of a "minority front" in derogation of the plaintiff's rights.

The plaintiff points out that if "the parties have agreed in terms or in effect that the plaintiff may split his claim," Restatement, supra, § 26(1)(a), the bar of res judicata is lifted, which according to the plaintiff is the situation here. Its brief states that the defendants' lawyer "proposed that both sides [in the state court suit] agree to voluntarily withdraw their claims, and that all parties execute a standstill agreement to ensure that their legal rights would not be harmed in any way by the voluntary agreement to withdraw the lawsuit. Both sides agreed to this arrangement, and signed a standstill agreement."

The only support for this statement that the plaintiff offers is a paragraph in the complaint which says that one of the defendant's lawyers suggested such an agreement. The complaint does not say that the agreement was ever actually made, and the record contains no text of any such agreement. At argument the plaintiff's lawyer stated that the agreement is in a box of documents that he has not looked at. The excruciatingly long complaint contains 322 paragraphs; if there is an executed standstill agreement, one would expect an allegation to that effect. There is none. The complaint's silence is deafening. See Evancho v. Fisher, 423 F.3d 347, 354-55 (3d Cir.2005); Cline v. Rogers, 87 F.3d 176, 184 (6th Cir.1996).

For a plaintiff's lawyer who believes that his client has a document that shows his suit was not barred to fail to read it is neglect on a par with failing to conduct the preliminary investigation that a plaintiff must conduct before he can bring a suit. Fed.R.Civ.P. 11(b)(3); see, e.g., Teamsters Local No. 579 v. B & M Transit, Inc., 882 F.2d 274, 280 (7th Cir.1989). And for the lawyer not to have read the document before the appeal was argued was a stunning failure to assist this court in the proper disposition of the appeal. See, e.g., id. at 280; Medical Emergency Service Associates, S.C. v. Foulke, 844 F.2d 391, 399-400 (7th Cir. 1988); Allen v. Utley, 129 F.R.D. 1, 4-5 (D.D.C.1990).

The plaintiff cannot defeat the application of res judicata by arguing that the judge in the first suit, by allowing the plaintiff to dismiss it voluntarily and without prejudice, "expressly reserved the plaintiff's right to maintain the second action." Restatement, supra, § 26(1)(b). Such a dismissal does not "expressly" reserve anything. Rein v. David A. Noyes & Co., supra, 216 Ill.Dec. 642, 665 N.E.2d at 1207-08. Nor was it improper for the district judge to invoke res judicata even though the defendants had failed to argue it. The doctrine "`is not based solely on the defendant's interest in avoiding the burdens of twice defending a suit, but is also based on the avoidance of unnecessary judicial waste.'" Arizona v. California, 530 U.S. 392, 412, 120 S.Ct. 2304, 147 L.Ed.2d 374 (2000).

It is true that res judicata is not one of the affirmative defenses that Rule 12(b) permits to be made by motion rather than in the answer to the complaint. But when an affirmative defense is disclosed in the complaint, it provides a proper basis for a Rule 12(b)(6) motion. (For the general principle see Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007); Walker v. Thompson, 288 F.3d 1005, 1009-10 (7th Cir.2002), and Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003), and for its application to the defense of res judicata see In re Colonial Mortgage Bankers Corp., 324 F.3d 12, 20 (1st Cir.2003).) This proposition is entailed by the principle that a plaintiff can plead himself out of court. E.g., Tamayo v. Blagojevich, 526 F.3d 1074, 1086 (7th Cir.2008); American Nurses' Ass'n v. Illinois, 783 F.2d 716, 724 (7th Cir.1986). No purpose would be served by compelling the defendant to file an answer rather than proceed by motion when the plaintiff has pleaded the answer himself.

The remaining issue is ...