Hook et al v. LNV Corporation

Filing 15

ORDER: The 10 Order to Show Cause is made absolute. This case is dismissed with prejudice and will be closed. Judgment shall enter accordingly. Entered by Judge Raymond P. Moore on 4/27/2021. (cpear)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Raymond P. Moore
Civil Action No. 19-cv-01097-RM
DAVID LEE SMITH, and
MARY JULIA HOOK
Plaintiffs,
v.
LNV CORPORATION, INC.,
Defendant.
______________________________________________________________________________
ORDER DISMISSING CASE WITH PREJUDICE
______________________________________________________________________________
By Order dated April 15, 2019, the Court withdraw the reference of Adversary
Proceeding No. 18-1250-TBM (“Hook II”). That proceeding is now the above-captioned case.
Thereafter, the Court ordered the parties to show cause why this action should not be dismissed
based on a number of legal bases including improper claim splitting and claim or issue
preclusion. Defendant timely responded but Plaintiffs did not.1 Nonetheless, even if the Court
considered Plaintiffs’ untimely response, they fail to show this action should not be dismissed.
I.

BACKGROUND
The parties are well-versed with the proceedings which precede this Order, so it will only

be briefly set forth here. In summary, Defendant filed an action against Plaintiffs and others,

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Because Plaintiffs are attorneys, their filing are not afforded the liberal construction ordinarily given to pro se
litigants. See Smith v. Plati, 258 F.3d 1167, 1174 (10th Cir. 2001); see also Hook v. United States, 624 F. App’x
972, 976 (10th Cir. 2015) (“Because Ms. Hook is an attorney proceeding pro se, we do not afford her filings the
liberal construction ordinarily given to pro se pleadings.”).

titled LNV Corp. v. Hook et al., 14-cv-00955-RM-SKC (“Hook I”), to foreclose on and
determine various interests in real property. Plaintiffs filed counterclaims and affirmative
defenses which were fully decided in Hook I. Indeed, Hook I has been decided in its entirety, the
real property has been sold, and the orders which Plaintiff Hook appealed have been affirmed.
See LNV Corp. v. Hook, 807 F. App’x 893, 894 (10th Cir. 2020), cert. denied, -- U.S. --, 141 S.
Ct. 939, 208 L. Ed. 2d 477 (2020); LNV Corp. v. Hook, No. 20-1167, 2021 WL 1343674, at *1, - F. App’x -- (10th Cir. Apr. 12, 2021). While Hook I was pending, Plaintiffs filed bankruptcy.
Dissatisfied with the orders and results in Hook I, Plaintiffs sought relief before the Bankruptcy
Court. When the Chapter 7 Trustee declined to pursue any action against LNV, Plaintiffs filed
their adversary proceeding, i.e., Hook II. As stated, the Court withdrew the reference on Hook II.
Plaintiffs’ complaint in Hook II is far from a model of clarity, failing to contain short and
plain statements of their claims showing they are entitled to relief. See Fed. R. Civ. P. 8(a).
Regardless, the complaint consists of the following four “matters”: (1) their “Verified Answer to
LNV’s Second Amended Complaint, Affirmative Defenses and Compulsory Counterclaims; and
Jury Demand” (“Verified Answer”) filed in Hook I; (2) grievances about LNV’s alleged failure
to disclose documents in Hook I; (3) LNV’s alleged violations of the automatic stay, discharge
order, and discharge injunction in Plaintiffs’ Chapter 7 bankruptcy case; and (4) whether
Plaintiffs are liable to LNV on the promissory note and deed of trust on the real property. The
issue before the Court is whether Hook II should be dismissed because it is nothing more than an
attempt to improperly redo Hook I. The Court’s review establishes dismissal is proper based on
claim and issue preclusion.2

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In light of the Court’s determination, it need not reach whether this action is also barred by claim splitting.
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II.

DISCUSSION
A. Claim Preclusion
Federal law controls the preclusive effect of the decisions of federal courts. Valley Imp.

Ass’n, Inc. v. U.S. Fid. & Guar. Corp., 129 F.3d 1108, 1120 (10th Cir. 1997). Under federal law,
claim preclusion applies if three elements are satisfied: “(1) a judgment on the merits in the
earlier action; (2) identity of the parties or their privies in both suits; and (3) identity of the cause
of action in both suits.” Hatch v. Boulder Town Council, 471 F.3d 1142, 1149 (10th Cir. 2006)
(quotation marks and citation omitted). An examination of the record shows these elements are
met as to all “claims.”
First, there has been a judgment on the merits and those issues which Plaintiffs wished to
appeal were appealed and affirmed. Plaintiff Smith did not appeal and the time for him to do so
has long passed. The orders have preclusive effect even if Plaintiff Hook decides to appeal the
most recent decision by the Tenth Circuit. MACTEC, Inc. v. Gorelick, 427 F.3d 821, 832 (10th
Cir. 2005) (“The appealability of a judgment, however, does not hinder its preclusive effect.”).
See also Leo v. Garmin Int’l, Inc., 464 F. App’x 737, 740 (10th Cir. 2012) (same). Plaintiffs’
conclusory argument to the contrary, without any legal support, do not show otherwise.
Second, the parties are the same: LNV and Plaintiffs.
And, finally, the Verified Answer was exactly what was filed in Hook I and the Court
disposed of all claims and defenses in that case, including those raised in the Verified Answer.
See Hook I at ECF Nos. 218, 301, 303, 306, 320, 387, 404, 436, 439, 441, and 443. The same
holds true for the remaining three matters in Plaintiffs’ complaint, to the extent they are claims,
as they were raised and rejected in Hook I. Sometimes more than once. See Hook I at ECF No.

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334 (rejecting Plaintiffs’ contention that the Bankruptcy Court’s order lifting automatic stay was
void and that this Court’s order reopening case was void and violated the automatic stay); No.
387 (addressing – and rejecting – Plaintiffs’ contention that proceeding with Hook I violated the
Bankruptcy Court’s order of discharge and injunction); No. 404 (same); No. 436 (same). See
Hatch, 471 F.3d at 1149 (“a claim arising out of the same transaction, or series of connected
transactions as a previous suit, which concluded in a valid and final judgment, will be precluded”
(quotation marks and citation omitted)); Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp.,
Inc., -- U.S. --, 140 S. Ct. 1589, 1594, 206 L. Ed. 2d 893 (2020) (“If a later suit advances the
same claim as an earlier suit between the same parties, the earlier suit’s judgment prevents
litigation of all grounds for, or defenses to, recovery that were previously available to the parties,
regardless of whether they were asserted or determined in the prior proceeding.” (quotation
marks and citation omitted)). Accordingly, these factors are met in this case.
Plaintiffs do not contest that these claims, defenses, or issues were actually decided or
necessarily decided. Instead, they contend they did not have a full and fair opportunity to litigate
in a Seventh Amendment jury trial. Plaintiffs’ argument consists of a single sentence; it is so
conclusory that it is deemed waived. Even if not waived, they still would not prevail.
In the context of claim preclusion, the “‘full and fair opportunity to litigate’ inquiry is a
‘narrow exception’ that ‘applies only where the requirements of due process were not afforded—
where a party shows ‘a deficiency that would undermine the fundamental fairness of the original
proceedings.’” Johnson v. Spencer, 950 F.3d 680, 709 (10th Cir. 2020) (citation omitted).
However, the Supreme Court “has already held that the right to a jury trial does not negate the
issue-preclusive effect of a judgment, even if that judgment was entered by a juryless tribunal.”

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B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 150 (2015). And the Seventh
Amendment is not violated by the dismissal of a complaint whether by motion to dismiss or by
summary judgment – as the Court did in this instance in Hook I. Smith v. Kitchen, 156 F.3d
1025, 1029 (10th Cir. 1997) (motion to dismiss); Overton v. United States, No. 99-2069, 2000
WL 14274, at *4, 202 F.3d 282 (10th Cir. 2000) (unpublished table decision) (recognizing no
Seventh Amendment violation by summary judgment or dismissal of complaint on legal
grounds). And Plaintiff Hook appealed these decisions which were affirmed. Accordingly, the
lack of jury trial is no barrier to the application of claim (or issue) preclusion.
B. Issue Preclusion
“Once a court has decided an issue, it is forever settled as between the parties.” B & B
Hardware, Inc., 575 U.S. at 147 (quotation marks and citation omitted). “[A] losing litigant
deserves no rematch after a defeat fairly suffered.” Id. (quotation marks and citation omitted).
Specifically, issue preclusion bars successive litigation of an issue of law or fact when “(1) the
issue previously decided is identical to the present one; (2) the prior action was finally
adjudicated on the merits; (3) the party against whom the doctrine is invoked was a party or in
privity with a party to the previous adjudication; … (4) the party against whom the doctrine is
raised had a full and fair opportunity to litigate the issue in the previous adjudication”; and (5)
the litigated issue is essential to the judgment. Keller Tank Servs. II, Inc. v. Comm’r of Internal
Revenue, 854 F.3d 1178, 1193 (10th Cir. 2017); B & B Hardware, Inc., 575 U.S. at 148
(identifying factors (1), (2), and (5)).
If Plaintiffs are raising the second through fourth matters in the complaint as “issues”
relevant to their claims and defenses in the Verified Answer, they are barred by issue preclusion.

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Specifically, those issues were previously decided and final judgment was entered,3 e.g., LNV
did not violate any bankruptcy order in proceeding with Hook I and LNV had standing and could
recover under the deed of trust on the real property. Plaintiffs were parties to Hook I and, as
addressed above, they had a full and fair opportunity to litigate the issues even though Hook I
was decided without a jury trial. The issues were essential to the judgment, and Plaintiffs do not
argue otherwise. For example, Plaintiffs argued in Hook I that the Court lacked subject matter
jurisdiction because of the Bankruptcy Court’s stay or injunction orders. Accordingly, these
issues are barred by issue preclusion.
III.

CONCLUSION
Based on the foregoing, it is ORDERED
(1) That the ORDER TO SHOW CAUSE (ECF No. 10) is MADE ABSOLUTE;
(2) That this action is DISMISSED WITH PREJUDICE;
(3) That the Clerk shall enter judgment for Defendant and against Plaintiffs; and
(4) That the Clerk shall close this case.
DATED this 27th day of April, 2021.
BY THE COURT:

____________________________________
RAYMOND P. MOORE
United States District Judge

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As previously stated, an appeal does not negate a judgment’s preclusive effect.
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