Nordhorn v. Ladish Co., Inc.

• Decision Date: 19 November 1993
• Docket Number: No. 92-35472,92-35472
• Citation: 9 F.3d 1402
• Parties: Arlyn W. NORDHORN, Plaintiff-Appellant, v. LADISH COMPANY, INC., a Wisconsin Corporation; Armco, Inc., an Ohio Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1402

9 F.3d 1402

Arlyn W. NORDHORN, Plaintiff-Appellant, v. LADISH COMPANY, INC., a Wisconsin Corporation; Armco, Inc.,

an Ohio Corporation, Defendants-Appellees.

No. 92-35472.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 4, 1993.

Decided Nov. 19, 1993.

Gerald A. Palm and Rebekah R. Ross, Williams, Kastner & Gibbs, Seattle, WA, for plaintiff-appellant.

J. Peter Shapiro and Heidi A. Irvin, Bogle & Gates, Seattle, WA, for defendant-appellee Armco, Inc.

Hugh E. Bangasser and Marc C. Levy, Preston, Thorgrimson, Shidler, Gates & Ellis, Seattle, WA, for defendant-appellee Ladish Co., Inc.

Appeal from the United States District Court for the Western District of Washington.

Before: GOODWIN, SCHROEDER and PREGERSON, Circuit Judges.

SCHROEDER, Circuit Judge:

In this breach of contract suit, the district court dismissed Arlyn Nordhorn's claim against Ladish Company and Armco, Inc. on res judicata grounds, holding that Nordhorn should have raised this claim in an earlier suit against HITCO, a former sister company of Ladish. Nordhorn appeals. We reverse because Nordhorn's claim in this case is based on a different contractual relationship and is against different parties than those involved in the preceding litigation. Res judicata principles therefore do not apply to bar this litigation. We reverse and remand for further proceedings, including a determination of whether this claim is barred by the statute of limitations.

I

In the early 1980's, HITCO and Ladish Company were both subsidiaries of Armco, Inc. At that time, Armco owned a "family of companies" that manufactured different airplane parts. Ladish and HITCO did not manufacture the same products, although as sister companies, they often engaged in collective marketing efforts. In 1983, Nordhorn promoted both HITCO and Ladish products to Grumman and Rohr, general contractors bidding on Gulfstream and Fokker Aircraft's "G-IV/F100 Program." The relationship between HITCO, Ladish, and Armco was dissolved sometime prior to 1988, when Nordhorn sued HITCO. HITCO therefore had no corporate relationship with Ladish or Armco at any time during the course of the HITCO litigation.

Nordhorn's suit against HITCO was based upon a breach of a written sales agreement signed in May 1984. Nordhorn was to promote a specific list of nacelle components manufactured by HITCO for use in Gulfstream and Fokker's G-IV/F100 Program, and was to be paid a commission on sales. A "nacelle" is an aircraft engine casing, and does not include the engine mounts manufactured by Ladish. That lawsuit was settled in July of 1989, pursuant to a written agreement in which Nordhorn agreed to waive "all claims and counterclaims asserted or which could have been asserted in [that] case."

During the course of discovery in the HITCO litigation, Nordhorn learned of his claim against Ladish and Armco. He asserts that this claim is based upon a separate oral agreement he had with Ladish to promote their forged metal engine mounts for use in the G-IV/F100 Program, along with the nacelle components manufactured by HITCO. According to Nordhorn, Grumman won the bid for the G-IV/F100 Program but informed him that the Ladish engine mounts would not be used in the contract. He alleges that months later, when Grumman decided to purchase the engine mounts after all, Ladish never informed Nordhorn of the sales. Nordhorn alleges that Ladish breached its agreement by failing to pay Nordhorn commissions on those sales.

Following the HITCO settlement, Nordhorn filed this action against Ladish and Armco (referred to collectively as "Ladish"). The district court entered judgment in favor of the defendants on res judicata grounds, stating that the claim against Ladish could and should have been brought in the earlier suit against HITCO.

II

In order to bar a later suit under the doctrine of res judicata, an adjudication must (1) involve the same "claim" as the later suit, (2) have reached a final judgment on the merits, and (3) involve the same parties or their privies. Blonder-Tongue Laboratories v. Univ. of Ill. Found., 402 U.S. 313, 323-24, 91 S.Ct. 1434, 1439-40, 28 L.Ed.2d 788 (1971); Davis Wright & Jones v. National Union Fire Ins. Co., 709 F.Supp. 196 (W.D.Wa.1989), aff'd, 897 F.2d 1021 (9th Cir.1990). Because Nordhorn's suit against Ladish involves an alleged breach of a different contract by a different company than that involved in the earlier suit against HITCO, the elements of res judicata are not met in this case.

A. Identity of claims

Nordhorn's suit against Ladish does not involve the same "claim" as his suit against HITCO. The Ninth Circuit determines whether or not two claims are the same for purposes of res judicata with reference to the following criteria:

(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.

Costantini v. Trans World Airline, 681 F.2d 1199, 1201-02 (9th Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 570, 74 L.Ed.2d 932 (1982) (quoting Harris v. Jacobs, 621 F.2d 341, 343 (9th Cir.1980)); Davis Wright, 709 F.Supp. at 199. First, no rights or interests established in the settlement agreement between Nordhorn and HITCO would be affected by the prosecution of this suit. Nordhorn has not sued HITCO, or any of HITCO's subcontractors on the nacelle bid. Ladish was not a party to the prior suit against HITCO, nor were the companies related at that point. There was no reason for HITCO voluntarily to take responsibility for commissions owed solely by companies with which it had no continuing relationship. Thus the settlement with HITCO, in covering all claims that could have been raised against HITCO, could not cover claims that could be asserted only against Ladish.

Second, while some of the same evidence is relevant to both suits, the crucial evidence in the Ladish suit, evidence that an oral contract between Nordhorn and Ladish existed and that Ladish sold forged metal engine mounts to Grumman without paying commissions to Nordhorn in violation of that contract, was at most tangential to the HITCO lawsuit. For the same reason, although the two suits are related in the sense that the companies and products were at one time related, Nordhorn is not alleging an infringement of the same "right," or a claim based on the same nucleus of facts in his suit against Ladish as he did against HITCO. Nordhorn claimed a right to be paid commissions under an alleged oral contract with Ladish which is separate from his right asserted in the HITCO litigation to be paid commissions under the written sales agreement with HITCO.

B. Identity of Parties

In addition, Ladish was neither a party to the HITCO action, nor in privity with HITCO at the time of the HITCO litigation. See Restatement (2nd) of Judgments §§ 34(3), 39, 43-61 (a person who is not a party to an action is generally not entitled to the benefits of res judicata). This Circuit has held that when two parties are so closely aligned in interest that one is the virtual representative of the other, a claim by or against one will serve to bar the same claim by or against the other. E.g., In re Dominelli, 820 F.2d 313 (9th Cir.1987) (junior lienholder not permitted to relitigate validity of senior lienholder's interest provision, where that claim had already been decided in suit brought by bankruptcy trustee); United States v. ITT Rayonier, Inc., 627 F.2d 996 (9th Cir.1980) (EPA could not sue to enforce Water Pollution Control Act, where same issue had been litigated in state court by the Washington Department of Ecology); Davis Wright, 709 F.Supp. 196 (insurance company could not sue law firm after suing firm's client for...