Norris v. Hearst Trust

• Decision Date: 18 September 2007
• Docket Number: No. 05-20710.,05-20710.
• Citation: 500 F.3d 454
• Parties: William T. NORRIS, Edward Rossi, Steve Halpern, Jimmy O. Payne, Sue Packwood, and Thomas Stovall, Plaintiffs-Appellants, v. The HEARST TRUST, the Hearst Corporation, and Hearst Newspapers Partnership, L.P., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

500 F.3d 454

William T. NORRIS, Edward Rossi, Steve Halpern, Jimmy O. Payne, Sue Packwood, and Thomas Stovall, Plaintiffs-Appellants, v. The HEARST TRUST, the Hearst Corporation, and Hearst Newspapers Partnership, L.P., Defendants-Appellees.

No. 05-20710.

United States Court of Appeals, Fifth Circuit.

September 18, 2007.

Jerry Stephen Payne (argued), Payne & Associates, Houston, TX, for Plaintiffs-Appellants.

William W. Ogden (argued), Ogden, Gibson, Broocks & Longoria, Houston, TX, for Defendants-Appellees.

Appeals from the United States District Court for the Southern District of Texas.

Before GARWOOD, DENNIS and OWEN, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiffs appeal the district court's order dismissing their suit under Rule 12(b)(6). Plaintiffs, six former distributors of the Houston Chronicle, a newspaper owned by defendants (Hearst), brought this suit against Hearst alleging breach of contract, wrongful termination under Sabine Pilot Service Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985),¹ and antitrust claims. Five of the six plaintiffs (all except for Stovall) had previously sued Hearst on some similar state law claims in Texas state court. They argue that they had nonsuited the presently relevant claims prior to the final judgment dismissing that state court suit. Hearst moved to dismiss the instant complaint under Rule 12(b)(6) on two grounds: (1) plaintiffs' claims were barred by res judicata and collateral estoppel and (2) plaintiffs had not alleged antitrust injury and lacked antitrust standing. On September 29, 2004, the district court granted Hearst's motion, dismissing the antitrust claims of the five original plaintiffs on those latter grounds and also dismissing all of their claims on res judicata grounds. Stoval's antitrust claims were then dismissed on the same antitrust grounds applicable to the original plaintiffs. Subsequently, on Stoval's motion, his state law claims (other than antitrust) were dismissed without prejudice. All six plaintiffs have timely appealed. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are six former distributors of the Houston Chronicle, a Houston, Texas, daily newspaper published by Hearst. On June 28, 2002, plaintiffs Payne, Norris, Rossi, Halpern, and Packwood (collectively, the original plaintiffs) filed a suit asserting state law claims against Hearst in the 127th District Court of Harris County, Texas (the state court). In their original petition or first amended original petition in state court, the original plaintiffs claimed that Hearst wrongfully cancelled their distributor contracts in retaliation for "blowing the whistle" on, or complaining about, Hearst's alleged coercion of its distributors to produce fraudulent Houston Chronicle circulation reports. The state court sustained a special exception to the whistle-blower claim, leading the original plaintiffs to file a second amended original petition alleging breach of contract and wrongful termination under Sabine Pilot.²

Hearst moved for summary judgment on all claims and a hearing was held on November 7, 2003, in state court where the court orally granted defendants' summary judgment motion and specifically stated that the Sabine Pilot cause of action could not stand because the original plaintiffs were independent contractors, not employees, and therefore were outside the scope of Sabine Pilot.

It is undisputed that the defendants' state court summary judgment motion covered all claims alleged in the second amended original petition and this was specifically stated at oral argument on the motion.³ Although the parties and the court focused on the Sabine Pilot claim, the court also plainly indicated its determination that no other cause of action had been adequately alleged.⁴ The court went on to state that it did "grant the defendant's summary judgment that there is no standing by these plaintiffs to raise a Sabine Pilot cause of action" and then stated that "I think the law requires that I grant the plaintiffs an opportunity to plead any other causes of action you may have . . . and I will do so, and give you until December the 8th. . . . If you have any other causes of action to plead for breach of contract, you should make those pleadings. Otherwise, I will dismiss the case and enter a judgment on the summary judgment dismissing the case." (emphasis added).⁵ The court concluded the November 7, 2003 hearing by stating: "I grant the summary judgment for the Sabine Pilot cause of action as plaintiffs are independent contractors, not employees at will. Plaintiff granted leave to amend by December 8 as to any breach-of-contract theory. Otherwise, the case will be dismissed."

The next state court hearing was December 8, 2003, at which time the state court plaintiffs presented and tendered for filing their Third Amended Original Petition. This again asserted breach of contract and Sabine Pilot claims — substantially the same as in the Second Amended Original Petition — and, for the first time in the lawsuit, also asserted claims under the Texas and Federal antitrust laws. Having reviewed the proposed Third Amended Original Petition, the state court denied leave to amend, the defense then inquired "would the Court intend to enter a final appealable order at this time," and the court responded, "Just did. The Clerk will give everybody a copy."

The order in question, which was signed and filed by the judge on December 8, 2003, recites that the case came on to be heard on the defendant's motion for summary judgment, that the court had previously sustained that motion and granted plaintiffs leave to amend by December 8, that the court, after review of plaintiffs' Third Amended Original Petition, would not grant leave to file it, and that "it is therefore ORDERED, ADJUDGED and DECREED that this case is DISMISSED" and "Costs are taxed to Plaintiffs."⁶

On December 11, 2003, defendants wrote the court and requested certain clarifying formal changes in the December 8 judgment (enclosing a suggested form of judgment) and a hearing was held thereon on December 19, 2003. At the beginning of the December 19 hearing, plaintiffs' counsel announced that plaintiffs were taking a non-suit "as to everything," "all causes of action," and advised that the day before he had filed the instant suit in federal court. Defendants objected on the basis that the court had already disposed of the case by its December 8 order. The court then signed the defendants' suggested corrected final judgment form, stating that it was doing so because "I believe this corrected final judgment clearly sets out the Court's prior rulings." The court stated that it added the time of signing (9:45 a.m.) to the corrected final judgment so it would be clear that this was after the plaintiffs' non-suit earlier that same day. The December 19 "Corrected Final Judgment" concludes by stating that it is:

"ORDERED, ADJUDGED AND DECREED that this case be and is hereby FINALLY DISMISSED with prejudice to the refiling of same. All relief not expressly granted in denied. The Court's previous orders of November 7 and December 8 are brought forward, merged herein and made final. THIS IS A FINAL JUDGMENT, which disposes of all claims and all parties before the Court."⁷

The state district court's orders of December 8 and December 19, 2003, have never been set aside, by appeal, mandamus, bill of review, or otherwise.⁸

Meanwhile, on December 18, 2003, the original plaintiffs joined by Stovall, a distributor in the same position and with the same claims as the original plaintiffs, filed the instant case in federal district court below, the case that is now before us on this appeal. The claims in the complaint here are essentially the same as those filed in the state court case, with the addition of essentially the same state and federal antitrust claims as those the original plaintiffs attempted to add in their third amended state court petition.

In the present case, the district court below on September 29, 2004, granted Hearst's Rule 12(b)(6) motion to dismiss. The district court determined that all claims of the original plaintiffs were barred by res judicata and collateral estoppel due to the previous state court judgment. The district court also dismissed the antitrust claims of all six plaintiffs on the grounds that they failed to allege antitrust injury and lacked antitrust standing. The September 29, 2004 memorandum opinion essentially disposed of all claims and parties except for Stovall's state law claims which were subsequently dismissed without prejudice on his motion.

II. DISCUSSION

On appeal, the original plaintiffs argue that the district court erroneously concluded that res judicata and collateral estoppel barred all the claims of the original plaintiffs because they effectively nonsuited all their claims in state court. They assert that Texas law provides that a nonsuit prior to final judgment relieves the state court of jurisdiction over any causes of action, pleaded or not, and thereby prevents application of res judicata or collateral estoppel in this case. They do not, however, challenge the res judicata dismissal of their Sabine Pilot claim. Plaintiffs further argue that the allegations set forth in the complaint are sufficient to allege antitrust violations, damages and standing.

Hearst argues that all claims of the original plaintiffs are barred by res judicata and collateral estoppel. Hearst further contends that the original plaintiffs' effort to nonsuit the non-antitrust claims in state court cannot avoid the preclusive effects of the state court suit since the purported nonsuit came after the state court had heard and granted Hearst's summary judgment motion and dismissed the suit. Hearst also claims that the original plaintiffs could not have nonsuited their antitrust claims because those claims were never actually filed in state court. Therefore, according to Hearst, the original plaintiffs'...