Precision Air Parts, Inc. v. Avco Corp.

• Decision Date: 24 July 1984
• Docket Number: No. 83-7435,83-7435
• Citation: 736 F.2d 1499
• Parties: PRECISION AIR PARTS, INC., Plaintiff-Appellee, v. AVCO CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1499

736 F.2d 1499

PRECISION AIR PARTS, INC., Plaintiff-Appellee, v. AVCO CORPORATION, Defendant-Appellant.

No. 83-7435.

United States Court of Appeals Eleventh Circuit.

July 24, 1984.

Alvin D. Shapiro, Kansas City, Mo., for defendant-appellant.

David B. Byrne, Jr., Montgomery, Ala., John E. Enslen, Wetumpka, Ala., for plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Alabama.

Before TJOFLAT and HATCHETT, Circuit Judges, and GARZA ^*, Senior Circuit Judge.

GARZA, Senior Circuit Judge:

I.

FACTS & PROCEEDINGS BELOW

Defendant-appellant Avco Corporation ("Avco") and plaintiff-appellee Precision Air Parts, Inc. ("Precision") manufacture and sell replacement parts for gasoline airplane engines. Avco brought a diversity action charging Precision with trade secret misappropriation and copyright infringement with respect to certain replacement parts (Case No. 1).

The district court granted summary judgment for Precision, holding that any claims arising before January 1, 1978, were barred by the Alabama one-year statute of limitations and any claims accruing after January 7, 1978, were preempted by the provisions of the newly enacted Copyright Revision Act, 17 U.S.C. Sec. 301(b)(2).

Avco appealed the summary judgment ruling to the Eleventh Circuit. We upheld the grant of summary judgment on the grounds of the statute of limitations alone. Avco Corp. v. Precision Air Parts, Inc., 676 F.2d 494, 498 (11th Cir.1982).

On July 12, 1982, the Alabama Supreme Court ruled that an intangible such as a computer program could be the subject of conversion suits under Alabama law. National Surety Corp. v. Applied Systems, Inc., 418 So.2d 847 (Ala.1982).

Arguing (1) that our earlier opinion was limited to only six replacement parts and (2) that Alabama law had changed, appellant brought a suit against Precision on August 5, 1982, in an Alabama State court. (Case No. 2).

On September 3, 1982, Precision filed this suit in federal district court alleging that the state court suit constituted an abuse of process (Case No. 3). Precision also asked the court to protect its previous judgment affirmed by the Eleventh Circuit.

On June 24, 1983, the trial court granted appellee's motions for summary judgment on 44 counts and overruled it as to 16 counts. The district court reasoned that summary judgment was proper on the basis of res judicata and collateral estoppel because the alleged misappropriation of the 44 parts was actually litigated in the prior suit. In addition, the court held that its order involved a controlling question of law involving differing interpretations and thus certified it for an interlocutory appeal to the Eleventh Circuit.

Appellant's appeal to this court was granted on August 2, 1983.

II.

ISSUES

This case involves the application of the doctrines of res judicata and collateral estoppel. Although in a broad, general sense the term "res judicata" encompasses the concept of collateral estoppel, strictly speaking they do have distinct meanings. In its narrower sense res judicata bars a second suit involving the same parties and same cause of action on all matters that were part of the first suit and all issues that could have been litigated. Johnson v. United States, 576 F.2d 606, 611 (5th Cir.1978). The doctrine of collateral estoppel precludes relitigation only of issues that were actually litigated in the initial suit, whether or not the second suit is based on the same cause of action. Id.

In this case the trial court granted summary judgment for appellee on 44 parts that it found to have been actually litigated as part of Case No. 1. Consequently, we first examine the issue of defensive collateral estoppel, ¹ which defendants use to prevent a plaintiff from relitigating an issue that he has already lost in a previous case. Deweese v. Town of Palm Beach, 688 F.2d 731, 733 (11th Cir.1982). We have recognized that three prerequisites must be met before collateral estoppel is applied:

(1) that the issue at stake be identical to the one involved in the prior litigation; (2) that the issue have been actually litigated in the prior litigation; and (3) that the determination of the issue in the prior litigation have been a critical and necessary part of the judgment in that earlier action.

Deweese, 688 F.2d at 733 (quoting Stovall v. Price Waterhouse Co., 652 F.2d 537, 540 (5th Cir.1981)).

Appellant's argument on this issue is that application of collateral estoppel is inappropriate because this court's decision in Case No. 1 was limited to the six replacement parts alone, and the 44 parts on which it brought suit in Case No. 2 are consequently not part of the cause of action in Case No. 1. Appellant notes that after discussing when Avco's cause of action accrued, this court mentioned only six parts. Appellant also contends that nothing in our opinion indicates that the cause of action in Case No. 1 included anything more than the six parts to which we specifically referred.

What parts were actually litigated in Case No. 1 is a factual question subject to the clearly erroneous standard. See Rufenacht v. Iowa Beef Processors, 656 F.2d 198, 204 (5th Cir.1981). We agree with the trial court that the 44 parts in Case No. 2 are part of the same cause of action as in Case No. 1.

Although it is true that our opinion in case No. 1 specifically referred to only six parts, in determining the validity of appellant's argument one should examine the record as a whole, not simply our written opinion. An appellate opinion need not restate every fact contained in a lengthy record. Reference to every part was unnecessary to our first opinion. We mentioned the circumstances surrounding six parts--and not even all of them by number--to demonstrate that Avco's complaint was barred by the statute of limitations. Our decision was based on the record in the district court. The depositions there, and Avco's responses to interrogatories, reveal that the 44 parts were included in Case No. 1.

Appellant also advances various arguments that it is not splitting its cause of action. For example, it opines that the evidence it presently offers regarding the 44 parts in question is not the same as was used for whatever is deemed to have been the cause of action in the first suit. Although the evidence which it now presents may or may not be different, it does not make the trial court's ruling that the 44 parts were included in Case No. 1 clearly erroneous.

In the alternative, appellant posits that res judicata is inapplicable where there has been an intervening change of law between the first and second suit. Next, it maintains that a recent Alabama Supreme Court case has announced a change applicable to its case. In National Surety Corp. v. Applied Systems, Inc., 418 So.2d 847 (Ala.1982), the court ruled that "[a] computer program, in appropriate circumstances, can be the subject of conversion...." Id. at 849. Appellant contends that since a computer program is an intangible, that decision means that conversion of all intangibles are governed by the six year statute of limitations, and that the time bar ruling in Case No. 1 is no longer applicable.

We disagree with appellant on both points. First, National Surety did not establish a strict rule that all conversion actions involving intangibles are to be governed by the six year statute of limitations. The case merely held that "[a] computer program, in appropriate circumstances can be the subject of conversions." 418 So.2d at 849 (emphasis added). Indeed, since National Surety the Alabama Supreme Court has recognized the continuing applicability of the one year statute of limitations to conversion of intangibles. In Drill Parts & Service Co., Inc. v. Joy Mfg., 439 So.2d 43 (Ala.1983), the court upheld a trial court's injunction against a defendant's use of trade secrets (engineering designs) allegedly misappropriated. In reaching its decision the court addressed a statute of limitations issue and recognized that the one year provision was applicable to the case. ²

Second, even assuming that the six year statute of limitations is applicable to conversion of engine part designs, the alleged change in the law would be irrelevant because it would have occurred after a final judgment had been rendered. Appellant argues that when a change in law occurs between the time of two suits, res judicata and collateral estoppel cannot be used to bar the second suit. Appellant cites many federal cases for this proposition and appellee mistakenly assumes that Alabama law controls this issue. State law governs whether or not a state court judgment bars a subsequent federal diversity action. Commercial Box & Lumber Co., Inc. v. Uniroyal, Inc., 623 F.2d 371, 373 (5th Cir.1980); Cleckner v. Republic Van & Storage Co., Inc., 556 F.2d 766, 768 (5th Cir.1977). When a federal court sitting in diversity examines the collateral estoppel or res judicata effect of a prior federal judgment, based either on diversity or a federal question, it must apply federal common law. Rufenacht v. Iowa Beef Processors, Inc., 656 F.2d 198, 202 (5th Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1279, 71 L.Ed.2d 462 (1982); Stovall v. Price Waterhouse Co., 652 F.2d 537, 540 (5th Cir.1981); Commercial Box & Lumber Co., Inc. v. Uniroyal, Inc., 623 F.2d 371, 373 (5th Cir.1980); Southern Pacific Transportation Co. v. Smith Material, 616 F.2d 111, 115 (5th Cir.1980); Johnson v. United States, 576 F.2d 606, 611 (5th Cir.1978), cert. denied, 451 U.S. 1018, 101 S.Ct. 3007, 69 L.Ed.2d 389 (1981); Willis v. Fournier, 418 F.Supp. 265 (M.D.Ga.), aff'd without opinion, 537 F.2d 1142 (5th Cir.1976). See also Aerojet-General Corp. v. Askew, 511 F.2d 710 (5th Cir.), cert. denied, 423 U.S. 908, 96 S.Ct. 210, 46 L.Ed.2d 137 (1975).

The general rule in this circuit, ³ and throughout the nation, is that changes in the law after a final judgment do not prevent the application of res...