Raser Techs. Inc. v. Merrill Lynch, Pierce, Fenner & Smith Inc.

• Decision Date: 17 February 2022
• Docket Number: 20200941-CA
• Parties: RASER TECHNOLOGIES INC., et al., Appellants, v. MERRILL LYNCH, PIERCE, FENNER & SMITH INC., et al., Appellees.
• Court: Utah Court of Appeals

506 P.3d 1204

RASER TECHNOLOGIES INC., et al.,¹ Appellants,

v.MERRILL LYNCH, PIERCE, FENNER & SMITH INC., et al., Appellees.

No. 20200941-CA

Court of Appeals of Utah.

Filed February 17, 2022

Rehearing Denied March 21, 2022

John T. Anderson, Salt Lake City, L. Rich Humpherys, Karra J. Porter, Salt Lake City, Paul T. Moxley, Patrick E. Johnson, James W. Christian, and Alan M. Pollack, New York, NY, and Stephen Quesenberry, Attorneys for Appellants

James S. Jardine, Mark W. Pugsley, Carol Ann Funk, Salt Lake City, Richard C. Pepperman II, John G. McCarthy, Andrew J. Frackman, and Abby F. Rudzin, New York, NY, Attorneys for Appellees

Judge David N. Mortensen authored this Opinion, in which Judges Diana Hagen and Ryan D. Tenney concurred.

Opinion

MORTENSEN, Judge:

¶1 Raser Technologies Inc. (Raser) claims that the district court erred when it determined Raser's racketeering claims against Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) were barred under the doctrine of res judicata based on a final judgment rendered by a Georgia court. Seeing no error in the district court's determination, we affirm.

BACKGROUND

¶2 Raser, a corporation with its principal place of business in Utah, sued Merrill Lynch in Georgia in 2012, alleging that Merrill Lynch violated Georgia's RICO and securities fraud statutes, as well as other statutory and common law claims. Raser's claims centered on the contention that Merrill Lynch had "substantially injured [Raser] while at the same time reaping enormous profits by knowingly and intentionally creating, loaning and selling unauthorized, fictitious and counterfeit shares of Raser stock[ ] through various unlawful schemes and devices." Raser asserted that Merrill Lynch's "unlawful conduct occurred within the context of [its] pervasive and long-standing pattern of naked short selling, which is an unlawful form of market manipulation."²

¶3 The Georgia court granted Merrill Lynch's motion to dismiss the complaint in 2013. Six of Raser's claims were dismissed with prejudice. The remaining claims were dismissed without prejudice because they were improperly pled. Regarding the claims dismissed without prejudice, the court agreed with Merrill Lynch that under the principle of lex loci delicti ,³ the laws of Utah governed Raser's RICO claims. Accordingly, the court dismissed Raser's "remaining statutory claims ... without prejudice," adding that Raser was "permitted to re-plead securities and RICO claims based on the laws [of Utah]." Raser unsuccessfully moved for reconsideration and then appealed. The Georgia Court of Appeals affirmed the order. See Raser Techs., Inc. v. Morgan Stanley & Co. , 331 Ga.App. 838, 771 S.E.2d 517 (2015).

¶4 Raser then took up the Georgia trial court's offer and amended its complaint to include two claims (UPUAA Claims) under, among other statutes, the Utah Pattern of Unlawful Activity Act. See Utah Code Ann. §§ 76-10-1601 to -1609. A few months later, Raser voluntarily dismissed these Utah-law-based claims without prejudice in Georgia.

¶5 In November 2015, Merrill Lynch filed a motion in Georgia for entry of final judgment against Raser. And in 2016, the Georgia court granted the motion. Raser did not object to entry of the final judgment in Georgia, nor did Raser appeal that judgment.

¶6 The same day that it voluntarily dismissed its claims in Georgia, Raser re-filed those claims in Utah state court. The district court granted Merrill Lynch's motion to dismiss the case for lack of personal jurisdiction. On appeal, our supreme court vacated the decision and remanded with instructions "to examine [Merrill Lynch's] contacts with Utah, assess the conspiracy theory of jurisdiction, and determine how [Raser's] claim relates to [Merrill Lynch] and Utah and to address, if necessary, [Merrill Lynch's] alternative arguments for dismissal." Raser Techs., Inc. v. Morgan Stanley & Co. , 2019 UT 44, ¶ 88, 449 P.3d 150.

¶7 On remand, Raser requested leave to file an amended complaint to add parties, expand the facts, and modify its claims. Merrill Lynch opposed the amendment, arguing that it was futile because Raser's claims were barred by res judicata. The district court agreed that res judicata barred Raser's claims: "Because at least some claims arising out of these facts and circumstances were dismissed [by the Georgia court] with prejudice and on the merits, and this dismissal was affirmed on appeal, all claims that could have been asserted are likewise barred by res judicata." The district court explained,

[T]his court's ruling does not leave a plaintiff in these circumstances without a remedy. [Raser] had a remedy laid out before [it]. [Raser] could have litigated in Georgia—a forum [it] selected—the racketeering claims brought and then dismissed there. And if [Raser] had other claims under Utah law arising out of the same facts and circumstances, [it] could have sought leave to amend [its] Georgia complaint and, presumably, litigated those claims too. For reasons not explained, [Raser] chose not to finish litigating [its] claims in the place [it] selected to start litigating them, a forum that had made clear multiple times that it was more than willing to entertain those claims and whose subsequent rulings confirm the claims could have gone forward there.

....

The doctrine of res judicata, and its application both to claims that were asserted and could have been asserted , ensures the orderly resolution of disputes by requiring parties to bring all claims arising out of a common set of facts in a single forum. Here, [Raser] selected that forum, Georgia, and then inexplicably abandoned it after losing on appeal. As a result, claims [it] could have asserted there cannot be asserted here.

Given its res judicata determination, the district court also denied Raser's motion to amend.

¶8 Raser moved for reconsideration, a motion which the district court denied, reiterating its earlier reasoning:

In dismissing the Georgia racketeering claim, the Georgia court invited [Raser] to file the Utah racketeering claim and [Raser] did so. The Georgia court never determined that the Utah racketeering claim was subject to dismissal on "technical" grounds. To the contrary, the Georgia court appeared ready, willing, and able to adjudicate the Utah racketeering claim right up until [Raser] voluntarily dismissed it and refiled here [in Utah].

....

The Georgia court, upon dismissal of the Georgia racketeering claim, did not conclude that a Utah racketeering claim could not be heard there. It concluded the opposite. It invited the filing of the Utah racketeering claim, and [Raser] took the court up on that invitation.

Along with denying the motion for reconsideration, the district court granted Merrill Lynch's motion to dismiss all of Raser's claims against it. The court entered final judgment, and Raser appeals.

ISSUE AND STANDARDS OF REVIEW

¶9 The issue on appeal is whether the district court erred in concluding that Raser's claims were barred by the claim preclusion branch of res judicata and, consequently, denying Raser's motion for leave to amend as futile and granting Merrill Lynch's motion to dismiss. "Whether a claim is barred by res judicata is a question of law that we review for correctness." Gillmor v. Family Link, LLC , 2012 UT 38, ¶ 9, 284 P.3d 622. And a decision granting a motion to dismiss is reviewed for correctness. Citizens for Responsible Transp. v. Draper City , 2008 UT 43, ¶ 8, 190 P.3d 1245. "We review a denial of motions for leave to amend under an abuse of discretion standard. But when the purported futility of the amendment justifies the denial of a motion to amend, we review for correctness." Salt Lake City Corp. v. Kunz , 2020 UT App 139, ¶ 16, 476 P.3d 989 (cleaned up).

ANALYSIS

¶10 The claim preclusion branch of the doctrine of res judicata applies when three elements are met:

First, both cases must involve the same parties or their privies. Second, the claim that is alleged to be barred must have been presented in the first suit or be one that could and should have been raised in the first action. Third, the first suit must have resulted in a final judgment on the merits.

Snyder v. Murray City Corp. , 2003 UT 13, ¶ 34, 73 P.3d 325 (cleaned up). The claim preclusion branch of res judicata does not require that every claim be resolved on the merits but that the suit be resolved on the merits. See id. Thus, claim preclusion "prevents relitigation of claims that could and should have been litigated in the prior action but were not." Penrod v. Nu Creation Creme, Inc. , 669 P.2d 873, 875 (Utah 1983). In other words, "when there has been an adjudication, it becomes res judicata as to those issues which were either tried and determined, or upon all issues which the party had a fair opportunity to present and have determined in the other proceeding." Jacobsen v. Jacobsen , 703 P.2d 303, 305 (Utah 1985) (cleaned up).

¶11 Here, with regard to the first element, there is no dispute that both the Utah and Georgia cases involved the same parties.

¶12 As to the second element, it is clear that the Georgia court was willing and able to hear Raser's UPUAA Claims—which "could and should have been raised in the first action." See Snyder , 2003 UT 13, ¶ 34, 73 P.3d 325 (cleaned up). There was no purely technical ground, no procedural precondition, nor any jurisdictional bar that the Georgia court identified as preventing it from hearing the UPUAA Claims. And Raser points to none. Indeed, after Raser had amended its complaint to include the UPUAA Claims, there was no obstacle, procedural or otherwise, to the Georgia court hearing and adjudicating the case.

¶13 That the Georgia court never adjudicated the UPUAA Claims on the merits is of no import in the res judicata analysis. What matters is not that the UPUAA Claims were never adjudicated on the merits but that they "could and should have been raised in the [Georgia] action." See id. (cleaned up). Insofar as claim preclusion is concerned, the...