Porn v. National Grange Mut. Ins. Co.
| Decision Date | 05 April 1996 |
| Docket Number | No. 95-2197,95-2197 |
| Citation | 93 F.3d 31 |
| Parties | Daryl E. PORN, Plaintiff, Appellant, v. NATIONAL GRANGE MUTUAL INSURANCE COMPANY, Defendant, Appellee. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Catherine R. Connors, Portland, ME, with whom Scott T. Maker and Pierce, Atwood Scribner, Allen, Smith & Lancaster, were on brief for appellant.
Constance L. Epstein, Hartford, CT, with whom John R. Fitzgerald, Matthew D. Gilmond, Howard, Kohn, Sprague & Fitzgerald, Hartford, CT, Harold J. Friedman, Elizabeth A. Germani, Jonathan M. Dunitz, and Friedman & Babcock, Portland, ME, were on brief for appellee.
Before SELYA, STAHL, and LYNCH, Circuit Judges.
Having successfully sued his insurer, National Grange Mutual Insurance Company ("National Grange"), six months earlier for breach of contract in refusing to pay his claim for underinsured motorist benefits incurred during a July 1990 car accident, plaintiff-appellant Daryl E. Porn brought this diversity action in Maine's federal district court against National Grange seeking additional damages for its alleged mishandling of his underinsured motorist claim. The district court granted summary judgment in favor of National Grange based on the doctrines of collateral estoppel (issue preclusion) and res judicata (claim preclusion), concluding that an issue underlying one of Porn's claims had been decided in the earlier proceeding and that all of Porn's claims could have been raised therein. Porn appeals the district court's summary judgment order. Finding no error, we affirm.
On July 17, 1990, Porn, a Connecticut resident, was involved in an automobile accident in Portland, Maine, when motorist Lori Willoughby sped through a stop sign and broadsided his vehicle. Because his damages exceeded Willoughby's $20,000 policy limit, Porn made a claim to National Grange under his automobile policy seeking recovery from the underinsured motorist indorsement to the policy. For reasons not apparent in the record, National Grange refused to pay the claim.
Disgruntled by this refusal, Porn wrote to National Grange accusing it of bad faith in handling his claim and threatening legal action. Porn sent copies of his letter to the insurance commissioners of Connecticut and Massachusetts. National Grange, unimpressed, remained steadfast in its refusal to pay, and in November 1993, Porn filed suit against National Grange in Maine's federal district court for breach of the insurance contract ("first action").
Because Porn's policy with National Grange required a finding of legal liability on the part of the underinsured motorist as a condition precedent to the payment of benefits, the two-day trial before the magistrate judge 1 focused on the question of Willoughby's negligence and Porn's contributory negligence. Following the completion of the evidence, the magistrate judge entered judgment as a matter of law for Porn on the issue of contributory negligence, and the jury returned a verdict for Porn, finding that Willoughby's negligence had caused him $400,000 worth of damages. After reducing the jury's award to reflect Porn's $300,000 underinsured motorist policy limit and appropriate set-offs, the magistrate judge entered judgment for Porn in the amount of $255,314.40. The magistrate judge denied Porn's motion for prejudgment interest, finding that while Maine law allows prejudgment interest in excess of the policy limit where the insurer acted in bad faith and needlessly prolonged the litigation, Porn had presented no evidence that National Grange exhibited such behavior.
Six months later, Porn commenced this action against National Grange in Maine's federal district court ("second action"). This time Porn alleged that National Grange's conduct in handling his underinsured motorist claim constituted breach of the covenant of good faith, intentional infliction of emotional distress, negligent infliction of emotional distress, and violations of the Connecticut Unfair Insurance Practices Act and the Connecticut Unfair Trade Practices Act. National Grange moved for summary judgment, arguing that the judgment in the first action precluded Porn from bringing the second action. The district court accepted that argument and granted summary judgment in favor of National Grange on the grounds that (1) one aspect of Porn's bad-faith claim was barred by issue preclusion and (2) all of Porn's claims were barred by claim preclusion.
In reaching its first holding, the district court explained that the magistrate judge's decision not to award Porn prejudgment interest was based in part on his finding that Porn had presented no evidence to suggest that National Grange acted in bad faith and needlessly prolonged the litigation. Accordingly, the court concluded that the question of National Grange's alleged bad-faith conduct in litigating the first action was raised and decided in the first action, and, therefore, to the extent Porn's bad-faith claim involved National Grange's conduct during the first action, it was barred by issue preclusion.
In reaching its broader holding that all five of Porn's claims were barred by claim preclusion, the district court reasoned that once Porn chose to bring the first action against National Grange for breach of contract, he was required to raise all his claims arising from the breach or else forfeit the right to do so. Because it found that Porn's five tort and statutory claims, like the earlier breach of contract claim, involved National Grange's obligations arising under the insurance policy, the district court concluded that they should have been brought in the first action and therefore were barred by claim preclusion from being raised in the second action.
Porn appeals the district court's grant of summary judgment in favor of National Grange, arguing that the judgment in the first action for breach of contract does not preclude his bad-faith, emotional distress, and statutory unfair practices claims (collectively "bad-faith claim") against National Grange in this action. Specifically, Porn argues that (1) the facts relevant to his bad-faith claim are separate from those relevant to his contract claim, (2) the bad-faith facts do not form a convenient trial unit with the contract facts, (3) treatment of both sets of facts as a unit does not conform to the parties' expectations, and (4) it was inequitable to apply the res judicata bar where, as here, the insurer's conduct in the contract litigation forms part of the bad-faith action. 2 After reciting the standard of review and setting forth the governing res judicata law, we consider each argument in turn.
We review a grant of summary judgment de novo, under the same standards that govern the district court, to determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The applicability of the doctrine of res judicata is a question of law subject to plenary review. Wolf v. Gruntal & Co., 45 F.3d 524, 527 (1st Cir.1995).
Because the judgment in the first action was rendered by a federal court, the preclusive effect of that judgment in the instant diversity action is governed by federal res judicata principles. See Johnson v. SCA Disposal Servs., Inc., 931 F.2d 970, 974 (1st Cir.1991) (); see also Apparel Art Int'l, Inc. v. Amertex Enters. Ltd., 48 F.3d 576, 582-83, 583 n. 7 (1st Cir.1995). Under the federal law of res judicata, a final judgment on the merits of an action precludes the parties from relitigating claims that were raised or could have been raised in that action. Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980). For a claim to be precluded, the following elements must be established: (1) a final judgment on the merits in an earlier action, (2) sufficient identity between the causes of action asserted in the earlier and later suits, and (3) sufficient identity between the parties in the two suits. See Apparel Art, 48 F.3d at 583; Gonzalez v. Banco Cent. Corp., 27 F.3d 751, 755 (1st Cir.1994). Because there is no dispute that the first and third elements of the test are established, we focus on the second element: whether the causes of action in the two lawsuits are sufficiently identical.
In defining the cause of action for res judicata purposes, this circuit has adopted the "transactional" approach of the Restatement (Second) of Judgments. Manego v. Orleans Bd. of Trade, 773 F.2d 1, 5 (1st Cir.1985), cert. denied, 475 U.S. 1084, 106 S.Ct. 1466, 89 L.Ed.2d 722 (1986). Under this approach, a valid and final judgment in the first action will extinguish subsequent claims " 'with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.' " Id. (quoting Restatement (Second) of Judgments § 24 (1982)). We determine what factual grouping constitutes a "transaction" pragmatically, giving weight to such factors as "whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations." Restatement § 24; see also Aunyx Corp. v. Canon U.S.A., Inc., 978 F.2d 3, 7 (1st Cir.1992), cert. denied, 507 U.S. 973, 113 S.Ct. 1416, 122 L.Ed.2d 786 (1993). These factors, however, are merely suggestive; they are not intended to be exhaustive, nor is any one factor determinative. See Restatement § 24 cmt. b; Gonzalez, 27 F.3d at 756. Finally, in making...
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