Kennedy v. Boles Investment, Inc. et al
Filing
52
ORDER denying the 9 & 31 Motion for Judgment on the Pleadings insofar as they seek Rule 12(c) adjudication of setoff issues. Any and all claims for setoff joined in the pleadings are dismissed without prejudice. The 51 Motion to Stay Entry of Final Judgment is denied. Signed by Chief Judge William H. Steele on 8/8/2011. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
J. GREGORY KENNEDY,
Plaintiff,
v.
BOLES INVESTMENT, INC., et al.,
Defendants.
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CIVIL ACTION 10-0475-WS-C
ORDER
This matter comes before the Court on the setoff issues presented in the parties’
respective Motions for Judgment on the Pleadings (docs. 9, 31), as well as plaintiff’s Motion to
Stay Entry of Final Judgment Pending Disposition of State Court Appeal (doc. 51).
On June 7, 2011, the undersigned entered a lengthy Order (doc. 41) that, inter alia,
awarded judgment to plaintiff, J. Gregory Kennedy, and against defendants, Boles Investment,
Inc. and Ian Boles (collectively, “BI/Boles”), in the amount of $3,330,000 based on defendants’
failure to pay off the subject promissory note at maturity. The June 7 Order also awarded
judgment to BI/Boles on Kennedy’s claims seeking award of prejudgment interest, attorney’s
fees and late fees. Because both sides’ Rule 12(c) Motions also sought entry of judgment as to
certain setoff issues (concerning whether and to what extent this federal judgment would be
properly set off against a larger state-court judgment previously entered in favor of BI/Boles and
against Kennedy), the June 7 Order directed supplemental briefing on those matters.1 A
Judgment (doc. 42) entered contemporaneously with that Order memorialized its key
determinations.
1
As described in the June 7 Order, the setoff issues joined by the parties in this
case consisted of the following: “(a) whether Kennedy is entitled to a right of setoff at all; (b) if
so, how that setoff should be calculated; and (c) the overall amount of any setoff and the net total
of any judgment that may be entered.” (Doc. 41, at 24.)
In the wake of the June 7 Order and Judgment, the state court entered an order in the
related litigation that effectively, conclusively resolved all pending setoff issues in this case. In
particular, on July 19, 2011, Baldwin County Circuit Judge James Reid entered an Order whose
salient features were as follows: (i) Kennedy’s request to set off the federal judgment against the
state judgment retroactively to July 2, 2009 (so as to avoid accrual of two-plus years of postjudgment interest at Alabama’s statutory rate of 12%) was denied; (ii) the federal judgment was
set off against the state judgment effective the day of entry of July 19 Order, leaving an unpaid
balance of $684,386.99 owed by Kennedy to BI/Boles on the state judgment, with interest
continuing to accrue on that figure at 12% per annum; and (iii) Kennedy was ordered to file a
satisfaction of judgment in this action as to the $3.33 million judgment entered by the
undersigned on June 7, 2011. (See doc. 49, at Exh. A.) On August 3, 2011, Kennedy filed a
Notice of Satisfaction (doc. 50) in this District Court, reflecting “that this Court’s Judgment of
June 7, 2011 (Document 42) has been fully satisfied.”
The July 19 Order in state court fully, finally adjudicated the very setoff issues that are
pending in this action. As such, principles of collateral estoppel / issue preclusion bar
relitigation of those matters here. “Collateral estoppel is an equitable defense that bars a party
from relitigating an issue that has been resolved in an earlier case.” Bonner v. Lyons, Pipes &
Cook, P.C., 26 So.3d 1115, 1121 (Ala. 2009) (citation omitted).2 For collateral estoppel to
apply, the following elements are required: “(1) that an issue in a prior action was identical to the
issue litigated in the present action; (2) that the issue was actually litigated in the prior action; (3)
that resolution of the issue was necessary to the prior judgment; and (4) that the same parties are
involved in the two actions.” Unum Life Ins. Co. of America v. Wright, 897 So.2d 1059, 1082-83
(Ala. 2004) (citation omitted). “Where these elements are present, the parties are barred from
relitigating issues actually litigated in a prior suit.” Id. (citations omitted). All of these elements
2
State law, rather than federal law, governs the application of collateral estoppel
principles in this case. See, e.g., Green v. Jefferson County Com’n, 563 F.3d 1243, 1252 (11th
Cir. 2009) (“When we are considering whether to give res judicata effect to a state court
judgment, we must apply the res judicata principles of the law of the state whose decision is set
up as a bar to further litigation.”) (citations omitted); Mike Smith Pontiac, GMC, Inc. v.
Mercedes-Benz of North America, Inc., 32 F.3d 528, 532 (11th Cir. 1994) (“State law governs
whether a state court judgment bars a subsequent federal diversity action under the doctrine of
collateral estoppel.”).
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are unquestionably present here. The setoff issues joined in this action, about which the parties
have filed dueling Rule 12(c) Motions, are identical to those presented to Judge Reid in the state
court action, were actually litigated and necessarily decided in that action, and involved precisely
the same parties in both actions. Accordingly, the doctrine of collateral estoppel bars the parties
from relitigating setoff issues in this case at this time. This determination is hardly controversial,
as the parties appear cognizant that they can no longer proceed on the setoff issues in this case.
Indeed, in the wake of the July 19 Order issued by the state court, neither side has asked this
Court to revisit Judge Reid’s setoff determinations, much less to evaluate such issues anew.3
In light of the foregoing, the parties’ respective Motions for Judgment on the Pleadings
(docs. 9, 31) are denied insofar as they seek Rule 12(c) adjudication of setoff issues. Moreover,
any and all claims for setoff joined in the pleadings are dismissed based on the preclusive effect
of the state court’s disposition of precisely the same claims involving precisely the same parties.4
Kennedy’s claims for setoff having been jettisoned, there are no longer any pending,
active claims or causes of action joined herein. In other words, there are no issues left for this
Court (or a factfinder at trial) to decide. Nonetheless, Kennedy has filed a “Motion to Stay Entry
of Final Judgment Pending Disposition of State Court Appeal” (doc. 51). The Motion reflects
that Kennedy may wish to pursue an appeal of this Court’s June 7 Order finding that, as a matter
of law, he is not entitled to prejudgment interest, attorney’s fees and late fees on BI/Boles’
breach of the underlying promissory note. The Motion further indicates that Kennedy desires to
appeal that issue only if his corresponding state-court appeal of the setoff issues is unsuccessful.
On that basis, Kennedy asks this Court to preserve this case in suspended animation, despite the
3
For example, although Kennedy (as to whom the state-court setoff ruling was
unfavorable) has filed post-July 19 documents in this action acknowledging the existence of the
July 19 Order, he has not suggested that it would be appropriate or even permissible for this
Court to review that decision. Any such argument would appear futile under applicable law, in
any event.
4
Even if preclusion were inapplicable for some reason, the Court would exercise
its discretion to abstain from hearing Kennedy’s setoff claims (and essentially reviewing the
state-court decision) based on considerations of federalism, comity, equity and judicial economy.
See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1173 (11th Cir.
19820 (“Gratuitous interference with the orderly and comprehensive disposition of a state court
litigation should be avoided.”).
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absence of any unresolved legal or factual issues, without entering a final judgment (and thereby
starting the appeal clock running for Kennedy) until such time as the state-court appeal is
concluded. The only rationale provided by Kennedy for the requested stay is a cursory reference
to judicial economy.
“The District Court has broad discretion to stay proceedings as an incident to its power to
control its own docket.” Clinton v. Jones, 520 U.S. 681, 706, 117 S.Ct. 1636, 137 L.Ed.2d 945
(1997). “[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants. How this can best be done calls for the exercise of judgment, which
must weigh competing interests and maintain an even balance.” Landis v. North American Co.,
299 U.S. 248, 254-55, 57 S.Ct. 163, 81 L.Ed. 153 (1936). Under the circumstances presented
here, the undersigned finds in its discretion that a stay is not appropriate. Judicial economy
would not be served by keeping this action open indefinitely on the docket of this District Court,
when there are literally no claims, causes of action or defenses left to be resolved, simply to
allow Kennedy to take a wait-and-see approach before deciding whether to appeal the June 7
Order and Judgment to the Eleventh Circuit. It may be more convenient to Kennedy to prosecute
one appeal at a time; however, there is no legal or practical reason why he could not pursue both
appeals simultaneously, given that they concern distinct, non-overlapping legal issues. Besides,
it would not likely be more convenient to BI/Boles for this action to be stayed, thereby raising
the spectre of sequential (rather than concurrent) appeals in related cases that might cause this
already-hoary dispute (which has been litigated continuously for more than six years to date) to
stretch out well beyond the foreseeable future. Finally, the undersigned believes that any request
for stay is more appropriately directed to one or both appellate courts (where live disputes are or
may soon be pending) rather than to this Court (where there is nothing left to adjudicate).
For all of the foregoing reasons, it is ordered as follows:
1.
The parties’ Motions for Judgment on the Pleadings (docs. 9, 31) are denied
insofar as they seek Rule 12(c) adjudication of setoff issues;
2.
Any and all claims for setoff joined in the pleadings are dismissed without
prejudice based on the preclusive effect of the state court’s disposition of
precisely the same claims involving precisely the same parties, as well as
considerations of comity and judicial economy;
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3.
Plaintiff’s Motion to Stay Entry of Final Judgment (doc. 51) is denied; and
4.
The Court will enter a separate final judgment, at which time the Clerk of Court is
directed to close this file for administrative and statistical purposes.
DONE and ORDERED this 8th day of August, 2011.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
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