Russo v. Baxter Healthcare Corp.

• Decision Date: 09 January 1996
• Docket Number: Civil A. No. 94-0555-P.
• Citation: 919 F. Supp. 565
• Parties: Ronald D. RUSSO, Plaintiff, v. BAXTER HEALTHCARE CORP. and Baxter International, Inc., Defendants.
• Court: U.S. District Court — District of Rhode Island

919 F. Supp. 565

Ronald D. RUSSO, Plaintiff, v. BAXTER HEALTHCARE CORP. and Baxter International, Inc., Defendants.

Civil A. No. 94-0555-P.

United States District Court, D. Rhode Island.

January 9, 1996.

COPYRIGHT MATERIAL OMITTED

Steven Snow, Partridge, Snow & Hahn, Providence, RI, for plaintiff.

Edward L. Gnys, Jr., Donald L. Migliri, Gunning, LaFazia & Gnys, Providence, RI, for defendants.

MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

The plaintiff, Ronald D. Russo ("Russo"), has sued Baxter Healthcare Corp. and Baxter International, Inc. ("Baxter") for misappropriation of trade secrets, intentional interference with contractual relations, and negligence. Russo alleges that Baxter wrongly disclosed to the public Russo's design for a medical device, thereby preventing Russo from acquiring foreign patents for the design. Russo had previously sued Baxter and another party in state court regarding ownership of the design of the same device. The previous suit was settled, and Russo signed a general release. Baxter has now filed a Motion for Summary Judgment, arguing that the prior state suit and the release signed by Russo bar the current suit. Magistrate Judge Boudewyns has recommended that Baxter's motion be granted, but Russo has made a timely objection to this recommendation. For the reasons described below, Baxter's Motion for Summary Judgment is denied.

FACTUAL HISTORY

From 1983 to 1990, Russo worked part-time for Superior Healthcare Corporation and Superior Biosystems Inc. ("Superior") developing new medical devices in exchange for salary and royalty payments. Russo's supervisor was David Brodsky, the president and majority shareholder of Superior. In early 1990, Russo designed a new closed tracheal suction device. The design of the device was allegedly disclosed to Superior under conditions of secrecy. Subsequently, Superior entered into an agreement with Baxter, in which Superior granted Baxter the exclusive right to buy and market the device, as well as an option to acquire the right to manufacture the device. A dispute arose between Superior and Russo relating to the patent for the device and to allegedly unpaid royalties on other products which Russo had designed. Russo filed suit in Rhode Island Superior Court in June 1990. Russo sued Superior and its majority shareholders, David and Carolyn Brodsky, for breach of contract, rescission, unjust enrichment, fraudulent conveyance, interference with contractual relationships, and a preliminary injunction on production of these devices. Baxter was sued as a defendant, but the Complaint mentioned Baxter only in Count V, which sought a preliminary injunction on execution of the option contract between Baxter and Superior. Superior filed a counter-claim against Russo.

Russo filed a patent application for his device, and in November 1991, Russo notified Baxter that the patent would be issued in January 1992. On December 9, 1991, Baxter allegedly disclosed the design of the device to the public at a convention of the American Association of Respiratory Care in Atlanta, Georgia. Russo claims that this disclosure rendered the device unpatentable in virtually all foreign countries.

In April 1994, Russo and Superior entered into negotiations for settlement of the Rhode Island Superior Court suit. Baxter was not involved in these negotiations. In exchange for $400,000 and a dismissal of Superior's suit against Russo, Russo signed a release of Superior. The language of the release includes, inter alia, Superior's agents and representatives. Russo and his attorney for the previous suit assert that this language was not intended to include Baxter and that Russo planned to sue Baxter separately for the disclosure of the device in December 1991. Baxter apparently did not give Russo any consideration for the settlement. Baxter argues, however, that the plain language of the release includes Baxter. Russo executed a separate release for Carolyn and David Brodsky. On the same date that the release was executed, the parties filed a Stipulation of Dismissal with the Rhode Island Superior Court. Russo, David and Carolyn Brodsky, and representatives from Superior and Baxter signed the Stipulation, but Baxter was not included as a party in the text of the Stipulation. Superior's attorney stated in his affidavit that this omission was a mistake on his part. Russo and his attorney state that Baxter signed the Stipulation, even though Baxter was not a party to the settlement agreement between Russo and Superior, because all parties to a suit must sign in order to dismiss a case.

Subsequently, Russo filed suit against Baxter in federal court, alleging misappropriation of trade secrets, intentional interference with prospective contractual relations, and negligence. These causes of action arise from Baxter's alleged public disclosure of the design of the device in December 1991. Baxter has filed a Motion for Summary Judgment, pursuant to Fed.R.Civ.P. 56, arguing that Russo's suit is barred by res judicata because of the previous state court case and by the written release of Superior and its representatives from liability. On September 15, 1995, Magistrate Judge Boudewyns issued a Report and Recommendation advising that Baxter's motion be granted. Russo has objected timely, and Baxter's motion is now before this Court.

SUMMARY JUDGMENT

A federal court may grant summary judgment in a civil action "if 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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). To prevent summary judgment, the evidence, viewed in the light most favorable to the non-moving party, must be sufficient to permit a rational fact-finder to resolve the issue in favor of either side. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Mack v. Great Atl. & Pac. Tea Co., 871 F.2d 179, 181 (1st Cir.1989). The parties in this case have submitted affidavits and documentary evidence, which this Court has relied upon in evaluating the defendant's Motion for Summary Judgment.

THE ELEMENTS OF RES JUDICATA

Under the full faith and credit statute, 28 U.S.C. § 1738 (1994), federal courts must give state court judgments the res judicata effect that state law prescribes. Isaac v. Schwartz, 706 F.2d 15 (1st Cir.1983). As the prior suit relating to this case was brought in Rhode Island Superior Court, Rhode Island law regarding res judicata applies. According to the Rhode Island Supreme Court, a cause of action is barred in a subsequent proceeding if the prior litigation involved (1) the same parties, (2) the same issues, (3) the same claims for relief, and (4) finality of judgment. Estate of Bassett v. Stone, 458 A.2d 1078, 1080 (R.I.1983). Both Russo and Baxter were parties to the prior state court suit. The state court suit ended in settlement, which, under Rhode Island law, is considered a final judgment for purposes of res judicata. D'Amario v. Butler Hosp., 921 F.2d 8, 10 (1st Cir.1990), cert. denied, 501 U.S. 1223, 111 S.Ct. 2840, 115 L.Ed.2d 1008 (1991); Belanger v. Weaving Corp. of America, 120 R.I. 348, 387 A.2d 692, 693 (1978). Therefore, the question before this Court is whether the prior case involved the same claim and issues as the current case.

In order for the two cases to involve the same claim, they must have arisen from the same transaction or series of connected transactions. Gonsalves v. Alpine Country Club, 563 F.Supp. 1283, 1287 (D.R.I.1983), aff'd, 727 F.2d 27 (1st Cir.1984); Restatement 2d of Judgments, § 24. Courts have interpreted "same transaction" to mean actions based on a common nucleus of operative facts. Apparel Art Int'l, Inc. v. Amertex Enterprises Ltd., 48 F.3d 576, 583 (1st Cir. 1995) (applying federal law of res judicata, which uses the same standards as Rhode Island law); Schiavulli v. Aubin, 504 F.Supp. 483, 487 (D.R.I.1980). The First Circuit has outlined several factors which courts may weigh in determining whether two transactions are based on a common nucleus of operative facts:

1) whether the facts are related in time, space, origin or motivation; 2) whether the facts form a convenient trial unit; and 3) whether treating the facts as a unit conforms to the parties' expectations .... It is often helpful to consider the nature of the injury for which the litigant seeks to recover.

Apparel Art Int'l, 48 F.3d at 584.

Clearly a plaintiff cannot escape res judicata merely by changing the legal theory for a second claim, Dowd v. Society of St. Columbans, 861 F.2d 761, 764 (1st Cir.1988); Schiavulli, 504 F.Supp. at 487, or by altering the relief sought, Johnson v. SCA Disposal Serv., 931 F.2d 970, 975 (1st Cir.1991); Miles Un-Limited v. Town of New Shoreham, 602 F.Supp. 238, 239 (D.R.I.1985). In the original Rhode Island Superior Court case, Russo sued Baxter only for a preliminary injunction to prevent the execution of the contract between Superior and Baxter. In the present case, Russo has sued Baxter for damages arising from Baxter's alleged misappropriation of trade secrets, intentional interference with contractual relations, and negligence. However, these changes in the legal basis for the claim and in the relief requested do not, by themselves, meet the definition of a different claim. The factual underpinnings of these claims must be examined.

Baxter argues that, because the current claims stem from Baxter's marketing of the product and the state court case sought to enjoin the contract which authorized such marketing, the two suits arise from the same claim. However, according to the United States Supreme Court, the fact that a prior suit requested a preliminary injunction which, if granted, would have prevented the second suit from arising is not enough to make the two suits one cause of action. Lawlor v....