Pierson Sand and Gravel, Inc. v. Keeler Brass Co.

• Decision Date: 08 July 1999
• Docket Number: Docket No. 108730,Docket No. Calendar No. 3.,Docket No. 108729
• Parties: PIERSON SAND AND GRAVEL, INC., and Central Sanitary Landfill, Inc., Plaintiffs-Appellees, v. KEELER BRASS COMPANY and Chemetron Investments, Inc., Defendants-Appellants, and Pierson Township, Defendant-Appellee.
• Court: Michigan Supreme Court

596 N.W.2d 153

460 Mich. 372

PIERSON SAND AND GRAVEL, INC., and Central Sanitary Landfill, Inc., Plaintiffs-Appellees, v. KEELER BRASS COMPANY and Chemetron Investments, Inc., Defendants-Appellants, and Pierson Township, Defendant-Appellee.

Docket Nos. 108729, 108730, Calendar No. 3.

Supreme Court of Michigan.

Argued January 20, 1999.

Decided July 8, 1999.

Fausone, Taylor & Bohn, L.L.P. (by Thomas J. Fayfer and Paul F. Bohn, Northfield), and Deborah L. Bruce, Traverse City, for plaintiffs-appellees.

Varnum, Riddering, Schmidt & Howlett (by Michael F. Kelly), Grand Rapids, for defendant-appellant Keeler Brass Co.

Butzel, Long (by Alan S. Levine), Birmingham; Thorp, Reed & Armstrong, of counsel (by David G. Ries and Joseph R. Brendel), Pittsburgh, PA, for defendant-appellant Chemetron Inv., Inc.

Mika, Meyers, Beckett & Jones, P.L.C. (by Douglas A. Donnell), Grand Rapids, for defendant-appellant Pierson Township.

WEAVER, C.J.

We are called on to determine whether plaintiffs' instant lawsuit is barred by res judicata as a result of defendants having prevailed in a prior federal lawsuit. We hold that, where the district court dismissed all plaintiff's federal claims in advance of trial, and there are no exceptional circumstances that would give the federal court grounds to retain supplemental jurisdiction over the state claim, then it is clear that the federal court would not have exercised its supplemental jurisdiction over the remaining state law claims. For the reasons stated below, we find res judicata does not bar plaintiffs' instant action, and therefore, affirm the decision of the Court of Appeals.

I

Plaintiff Pierson Sand and Gravel, Inc., commenced an action in the United States District Court for the Western District of Michigan against Pierson Township on August 3, 1989, asserting claims under §§ 107(a) and 113(f) of the federal CERCLA¹ statute, as well as under the Michigan Environmental Protection Act (MEPA),² and for common-law trespass.³ Defendant Keeler Brass Company was added as a defendant in the federal action in a second amended complaint, but later dismissed without prejudice, and then again added in a third amended complaint.

Plaintiffs' third amended complaint, filed on October 15, 1992, stated claims against the township, Keeler, and defendant Chemetron Investments, Inc., as well as several other chemical manufacturers. The action sought recovery costs for the environmental cleanup of the Central Sanitary Landfill in Macomb County owned by the plaintiffs. By the time plaintiffs filed the third amended complaint, they were asserting only CERCLA claims, and had abandoned their prior state law claims.

Also in existence at this time was the Michigan Environmental Response Act (MERA),⁴ which forms the basis of the instant action. In 1989, when plaintiffs filed their initial complaint, the MERA did not recognize a private cause of action. Subsequently, the Legislature amended the MERA to recognize a private cause of action, and, at the time plaintiffs filed their third amended complaint, in October 1992, MERA recognition of a private cause of action had recently taken effect. Plaintiff did not, however, include a claim under the MERA in any of its federal complaints.

Following extensive procedural maneuvers, including the addition of many third-party defendants, the parties undertook discovery in the federal case and completed mediation. Cross motions for summary disposition were submitted to the court shortly before the scheduled start of trial. The district court issued an opinion and judgment granting summary judgment for defendants, ruling that the plaintiff was not entitled to recover response costs pursuant to the CERCLA on the basis of a finding that plaintiff could not prevail as a matter of law in an essential element of its claim, in that the plaintiff had not complied with the statutorily required National Contingency Plan (NCP), a necessary prerequisite to a CERCLA action.⁵

Plaintiff appealed to the United States Court of Appeals for the Sixth Circuit, which affirmed in an opinion not designated for publication.⁶ Shortly thereafter, plaintiff instituted the instant action, seeking relief under the MERA, as well as various common-law claims for negligence, negligence per se, private nuisance, public nuisance, common-law indemnity, and common-law contribution.

The parties do not dispute that the claims and theories in the instant case arise out of the same alleged transactions and occurrences that led to the prior federal litigation. The defendants are alleged to be liable because of contamination of landfill sites during a time when hazardous substances were alleged to have been disposed there. The claims against defendants Keeler and Chemetron are based on their alleged liability for disposal, or alleged arrangement for transfer of hazardous substances, while the township's liability is based on operating the landfill. The relief sought by the plaintiff, recovery of claimed response costs for remediation of the soil and ground water, is the same relief sought in the federal action.

Defendants moved for summary disposition pursuant to MCR 2.116(C)(7), asserting res judicata as a bar to the instant action. Citing Sherwin-Williams Co. v. City of Hamtramck, 840 F.Supp. 470 (E.D.Mich., 1993), the Ingham Circuit Court denied defendants' motion. Defendants appealed as of right in the Court of Appeals, which affirmed, citing Restatement Judgments, 2d, § 25, comment e, illustration 10, pp. 213-214.⁷

Defendants separately applied for leave to appeal to this Court, and this Court granted those applications and consolidated them to consider whether res judicata should operate to bar plaintiffs' instant action. We conclude that a proper application of established principles of res judicata will not lead to a finding of such a bar.

II

Defendants-appellants present us with the single question, whether the Court of Appeals erred in determining that res judicata would not bar the plaintiffs' instant state action.⁸ The Court of Appeals analyzed this issue as follows:

Defendants next argue that the doctrine of res judicata bars plaintiffs' present lawsuit. We disagree. The federal district court that decided plaintiffs' prior suit could have exercised pendent jurisdiction over plaintiffs' state law claims, had the claims been raised before it. However, where the district court dismissed all plaintiffs' federal claims in advance of trial, it is clear that the federal court would not have exercised its pendent jurisdiction over the remaining state law claims. See Sherwin-Williams Co. v. Hamtramck, 840 F.Supp. 470, 479 (E.D.Mich., 1993); see also Bell v. Fox, 206 Mich.App. 522, 522 N.W.2d 869 (1994). Res judicata therefore does not bar plaintiffs' subsequent state suit. Restatement Judgments, 2d, § 25, comment e, illustration 10, pp. 213-214, see Anderson v. Phoenix Investment Counsel of Boston, Inc., 387 Mass. 444, 449-452, 440 N.E.2d 1164 (1982).

The determination whether res judicata will bar a subsequent suit is a question of law that we review de novo. Cardinal Mooney High School v. Michigan High School Athletic Ass'n, 437 Mich. 75, 80, 467 N.W.2d 21 (1991).

The Court of Appeals relied on Restatement Judgments, 2d, § 25, comment e, illustration 10, pp., 213-214.⁹ A commences an action against B in a federal court for treble damages under the federal antitrust laws. After trial, judgment is entered for the defendant. A then seeks to commence an action for damages against B in a state court under the state antitrust law grounded upon substantially the same business dealings as had been alleged in the federal action. Even if diversity of citizenship between the parties did not exist, the federal court would have had "pendent" jurisdiction to entertain the state theory. Therefore unless it is clear that the federal court would have declined as a matter of discretion to exercise that jurisdiction (for example, because the federal claim, though substantial, was dismissed in advance of trial), the state action is barred.

III

"The doctrine of res judicata was judicially created in order to `relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication.'" Hackley v. Hackley, 426 Mich. 582, 584, 395 N.W.2d 906 (1986), quoting Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). Both Michigan and the federal system have adopted a broad approach to the application of res judicata. Hackley; Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 474-476, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998). As we have stated:

In Michigan, the doctrine of res judicata applies, except in special cases, in a subsequent action between the same parties and "`not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.'" [Hackley at 585, 395 N.W.2d 906 (citations omitted).]

As a general rule, res judicata will apply to bar a subsequent relitigation based upon the same transaction or events, regardless of whether a subsequent litigation is pursued in a federal or state forum. The rule, as applied by the federal courts, has been stated as:

If a plaintiff has litigated a claim in federal court, the federal judgment precludes relitigation of the same claim in state court based on issues that were or could have been raised in the federal action, including any theories of liability based on state law. The state courts must apply federal claim-preclusion law in determining the preclusive effect of a prior federal judgment. [18 Moore, Federal Practice, § 131.21[3][d], p. 131-50.]

We thus turn to the question whether the plaintiffs' claims fall within one of the "sp...