Northern Natural Gas Co. v. Grounds

• Decision Date: 29 April 1991
• Docket Number: Nos. 88-1895,88-1994,s. 88-1895
• Parties: NORTHERN NATURAL GAS COMPANY, et al., Plaintiffs, v. Ralph GROUNDS, et al., Defendants. Malcolm MILLER, Movant-Appellant, v. FOULSTON, SIEFKIN, POWERS & EBERHARDT, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 678

931 F.2d 678

NORTHERN NATURAL GAS COMPANY, et al., Plaintiffs, v. Ralph GROUNDS, et al., Defendants.

Malcolm MILLER, Movant-Appellant, v. FOULSTON, SIEFKIN, POWERS & EBERHARDT, Appellee.

Nos. 88-1895, 88-1994.

United States Court of Appeals Tenth Circuit.

April 29, 1991.

As Amended June 3, 1991.

Frederic Dorwart of Holliman, Langholz, Runnels & Dorwart, Tulsa, Okl. (James D. Bryant of the same firm and Mark G. Ayesh of Ayesh, Docking, Herd & Theis, Wichita, Kan., with him on the brief), for movant-appellant.

Gerald Sawatzky of Foulston & Siefkin, Wichita, Kan., for appellee.

LOGAN, ALDISERT ^* and BARRETT, Circuit Judges.

ALDISERT, Circuit Judge.

Other issues are presented in this case, but central to our decision is the question whether the doctrine of res judicata effectively bars the federal claims of the appellant, Malcolm Miller, because of the Kansas Supreme Court decision in Miller v. Foulston, Siefkin, Powers & Eberhardt, 246 Kan. 450, 790 P.2d 404 (1990). For purposes of our disposition we shall assume proper jurisdiction here and in the district court and hold that the bar applies: The Kansas state court judgment precludes federal court consideration of Miller's claims.

I.

Malcolm Miller was a partner in the law firm Foulston Siefkin for many years. In late 1982, the law firm's executive committee recommended his expulsion from the partnership as permitted by the firm's written partnership agreement. Miller withdrew as a partner effective January 1, 1983.

The partnership agreement specified the terms, conditions, and payments available to a former partner. The partnership was on a cash basis, the profits being distributed periodically to partners based upon cash receipts. The agreement did not require any new partner to buy into the partnership and, on leaving the partnership, no lawyer had any interest in or right to accounts receivable or work in progress.

On December 11, 1987, Foulston Siefkin filed a verified application for an award of reasonable attorney fees and litigation expenses. Gerald Sawatzky, a partner, had acted as lead counsel for large classes of lessee producers, who, after years of litigation, prevailed on their claims for recovery of the value of helium extracted and sold by other parties.

This appeal arises out of an ancillary fee proceeding. Miller alleges that his ex-law firm owes him a portion of the fees the firm received from its 20-year litigation in two sets of class action cases that have become known as the Consolidated and the Private Helium Cases.

Miller filed a civil action in Kansas state court on November 30, 1987, seeking, inter alia, a share of these fees. On December 24, 1987, he filed a motion in federal district court requesting an award of the same share. In district court, Miller made an alternative motion: He requested the district court to stay disbursement of the attorney fees awarded to Foulston Siefkin until his rights were determined in the previously filed state court action.

We are not strangers to this litigation. Foulston Siefkin first became involved in complex helium litigation in 1963. See e.g., Brown v. Phillips Petroleum Co., 838 F.2d 451, cert denied, 488 U.S. 822, 109 S.Ct. 66, 102 L.Ed.2d 43 (1988); Northern Natural Gas Co. v. Hegler, 818 F.2d 730 (10th Cir.1987). In what became known as the Consolidated Helium Cases, one of which settled in 1985, the others in 1988, the court awarded attorney fees of approximately $17 million from a fund that had been deposited in the court's registry. The second set of cases, known as the Private Helium Cases, filed in 1971 and 1986, resulted in attorney fee awards of approximately $4.5 million. It was from Foulston Siefkin's share of the attorney fees of the Consolidated Helium Cases that Miller sought an award.

On April 7, 1988, the district court dismissed Miller's motion for a share of the Foulston Siefkin fee award, noting that diversity jurisdiction did not exist because the parties were from the same state. The court also refused to entertain ancillary jurisdiction over the motion. Alternatively, the court held that "[e]ven if ancillary jurisdiction did exist, the Court would decline to exercise that jurisdiction because the state court is able to fully litigate all claims between the parties, while litigation of those claims in this court would unduly and unnecessarily complicate and delay a final conclusion to these long-pending consolidated helium cases." Order Dismissing Motion of Malcolm Miller at 4; R.O.A., Vol. II, p. 2399.

On May 27, 1988, Miller filed a notice of appeal at No. 88-1895 from the denial of his motion. This date was beyond the 30-day requirement of Rule 4(a)(1), F.R.A.P. On the same day, however, he filed a motion in district court for an extension of time to file notice of appeal, averring "excusable neglect or good cause" as provided in Rule 4(a)(5). The district court denied the motion on June 10, 1988, and Miller has appealed from this denial at No. 88-1994.

In response to a challenge to jurisdiction filed by the appellees, Miller contends that his appeal was nevertheless timely because the notice was filed within 60 days of final judgment, a time period that permits appeals when the United States is a party to the litigation. See Rule 4(a)(1), F.R.A.P. He argues that inasmuch as the federal government was an intervenor in the helium cases, his appeal was timely.

Faced with this history, we are confronted with issues dealing with jurisdiction, both of the district court as well as of our own. As stated before, in the view we take of this case, we will assume, without deciding, that proper jurisdiction exists.

While these appeals were pending, the Kansas Supreme Court affirmed the state trial court's judgment denying Miller's claim for a share of attorney fees. The appellees have moved to dismiss the appeals because "all of Miller's claims are necessarily barred by res judicata as a result of the Kansas Supreme Court decision, and hence have become moot." Appellees' Alternative Motion for Summary Disposition at 4. Whether the doctrine of res judicata applies to this case is a question of law; accordingly, the standard of review before us is plenary. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988).

II.

Federal courts have traditionally adhered to the related doctrines of res judicata and collateral estoppel. In our system of jurisprudence the usual rule is that, once decided in a court of competent jurisdiction, merits of a legal claim are not subject to redetermination in another forum. Kremer v. Chemical Const. Corp., 456 U.S. 461, 485, 102 S.Ct. 1883, 1899, 72 L.Ed.2d 262 (1982); Stokke v. Southern Pacific, 169 F.2d 42, 43 (10th Cir.1948). Under res judicata, or claim preclusion, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in the prior action. Cromwell v. County of Sac, 94 U.S. 351, 352-53, 24 L.Ed. 195 (1876). Under collateral estoppel, or issue preclusion, once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case. Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979). Res judicata and collateral estoppel relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication. Id. at 153-154, 99 S.Ct. at 973-74.

Federal courts have also consistently accorded preclusive res judicata or collateral estoppel effect to issues decided by state courts. Montana v. United States, 440 U.S. at 153-64, 99 S.Ct. at 973-79; Angel v. Bullington, 330 U.S. 183, 184-93, 67 S.Ct. 657, 658-63, 91 L.Ed. 832 (1947). They reason that res judicata and collateral estoppel not only reduce unnecessary litigation and foster reliance on adjudication, but also promote the comity between state and federal courts that has been recognized as a bulwark of the federal system. See also Younger v. Harris, 401 U.S. 37, 43-45, 91 S.Ct. 746, 750-51, 27 L.Ed.2d 669 (1971).

The doctrine prevents the relitigation of "issues that were or could have been dealt with in an earlier litigation." Angel, 330 U.S. at 193, 67 S.Ct. at 662. A judgment in favor of the defendant is conclusive in a subsequent action between the parties on the same or a different claim, with respect to any issue actually litigated and determined if its determination was essential to that judgment. Restatement (Second) of Judgments Sec. 17(3) (1982). "A valid and final personal judgment rendered in favor of the defendant bars another action by the plaintiff on the same claim." Id., Sec. 19. Our research has disclosed no suggestion that Kansas courts would not apply res judicata in a perfectly traditional manner.

In 1942, Justice Roger Traynor listed the criteria essential to an understanding of res judicata:

In determining the validity of a plea of res judicata three questions are pertinent: Was the issue decided in the prior adjudication identical with the one presented in the action in question? Was there a final judgment on the merits? Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication?

Bernhard v. Bank of America Nat. Trust & Savings Ass'n., 19 Cal.2d 807, 813, 122 P.2d 892, 895 (1942). The Court observed in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 324, 91 S.Ct. 1434, 1440, 28 L.Ed.2d 788 (1971), that "[t]he federal courts found Bernhard persuasive." As Judge Hastie stated more than 40 years ago:

This second effort to prove [the case] is comprehended by the generally accepted precept that a party who has had one fair and full opportunity to prove a claim and has failed in that effort, should not be permitted to go...