Naughton v. Alden Management Services, Inc. et al

Filing 19

MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 4/3/2017. Mailed notice(gel, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
W. JAMES MAC NAUGHTON,
Plaintiff,

Case No. 16-cv-09027

v.
ALDEN MANAGEMENT SERVICES,
INC., et al.

Judge John Robert Blakey

Defendants.
MEMORANDUM OPINION AND ORDER
Pro se Plaintiff W. James Mac Naughton (“Mac Naughton”) alleges, inter alia,
that Defendant Alden Management Services, Inc. (“Alden”) improperly converted
various assets and was unjustly enriched at Mac Naughton’s expense. 1 [1] at 1-10.
Alden has moved to dismiss Mac Naughton’s claims on res judicata grounds. [5] at
1-3. For the reasons explained below, Alden’s motion is denied.

Though Mac Naughton has named multiple other entities related to Alden in his Complaint, those
same related entities have apparently not been served. [1] at 1-3 (naming, inter alia, Alden Estates
of Naperville, Inc., Alden Park Strathmoor, Inc., Alden Alma Nelson, Inc., Alden Poplar Creek
Rehabilitation and Health Care Center, Inc., Alden Lakeland Rehabilitation and Health Care
Center, Inc., and Alden North Shore Rehabilitation and Health Care Center, Inc.). Alden suggests
that its present motion is dispositive as to all named parties, as Alden is in privity with these other
named entities. The Court need not address this proposition, however, as Alden’s motion is
ultimately denied.
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I.

Background 2
A.

Factual Allegations

In 2006, non-party Russian Media Group, LLC (“RMG”) sued non-party SA
Satellite & Cable, Inc. (“USA Satellite”), in a matter captioned Russian Media
Group, LLC v. Cable America, Inc., et al., No. 06-cv-3578 (N.D. Ill.) (the “RMG
Action”). [1] at 5. RMG and USA Satellite settled the RMG Action in April of 2011.
Id. Pursuant to that settlement agreement (the “RMG Settlement Agreement”),
USA Satellite gave RMG “a first priority perfected security interest” in certain
“Collateral” as “security for the payment” of USA Satellite’s obligations. Id. The
RMG Settlement Agreement defined “Collateral” as “all accounts receivable and
contract rights of USA Satellite, both existing and future and the proceeds thereof.”
Id. USA Satellite also pledged to give RMG any revenues it stood to receive from
Alden (the “Alden Collateral”). Id.
In August 2014, RMG assigned certain rights arising out of the RMG
Settlement Agreement to Casco Bay Holdings, LLC (“Casco Bay”), including,
without limitation, RMG’s right to collect the Alden Collateral. Id. That same
month Casco Bay sent a letter to Alden, demanding delivery of the Collateral. Id. at
6.
Alden ignored Casco Bay’s letter, and “continued to permit the payment” of
the “Collateral to USA Satellite until in or about December 2014.” Id. Casco Bay
This section is based upon both the factual allegations in Mac Naughton’s Complaint, [1] at 1-10,
and “matter[s] of public record,” including “pleadings, orders, and trial transcripts from previous
litigation between the parties.” Bartucci v. Wells Fargo Bank N.A., No. 14-cv-5302, 2016 WL
1161283, at *4 (N.D. Ill. Mar. 24, 2016).

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later assigned its rights under the RMG Settlement Agreement to Mac Naughton in
July of 2016. Id. at 5.
B.

Previous Litigation

Alden’s res judicata argument turns on two other cases in this judicial
district: Casco Bay Holdings, LLC v. USA Satellite & Cable, Inc., et al., No. 14-cv10134 (Darrah, J.) (“Case I”) and USA Satellite & Cable, Inc. v. W. James
McNaughton and Casco Bay Holdings, LLC, No. 15-cv-6331 (St. Eve, J.) (“Case II”).
Case I was initiated by Casco Bay, which brought claims against Alden, USA
Satellite, Shai Harmelech (principal of USA Satellite) and the law firm of Leydig,
Voit & Mayer, Ltd. (counsel to USA Satellite). See Case I, Dkt. 1. Case I was
voluntarily dismissed by Casco Bay in September of 2015. See Case I, Dkt. 98.
Case II, meanwhile, was brought by USA Satellite against Casco Bay and
Mac Naughton in the Circuit Court of Cook County. See Case II, Dkt. 1. Casco Bay
removed Case II to this judicial district, id., and subsequently filed cross-claims and
third party claims against multiple parties, including Alden. See Case II, Dkt. 37 at
*23-25. Alden moved to dismiss, arguing that jurisdiction was “improper” under
Federal Rule of Civil Procedure 12. See Case II, Dkt. 103. Judge Amy J. St. Eve
granted Alden’s motion and dismissed the claims against it in June of 2016. See
Case II, Dkt. 133. Judge St. Eve specifically found that there were “no claims in
[Case II] that Alden is secondarily or derivatively liable as required under Rule
14(a),” and the third-party claims against Alden were dismissed “without prejudice”
in light of this same procedural defect. See id. at *3.

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II.

Legal Standard
As a preliminary matter, the Court notes that res judicata “is [usually] not

one of the affirmative defenses that Rule 12(b) permits . . . ; rather, res judicata is
an affirmative defense which should be raised in a motion for judgment on the
pleadings under Rule 12(c).” U.S. Bank, Nat’l Ass’n v. JKM Mundelein LLC, No. 14cv-10048, 2015 WL 2259474, at *2 (N.D. Ill. May 12, 2015). That said, depending
upon the allegations raised and the content of the public records subject to judicial
notice, “res judicata may provide grounds for dismissal under Rule 12(b)(6) for
failure to state a claim upon which relief can be granted.” Id.; see also Clark &
Leland Condo., LLC v. Northside Cmty. Bank, 110 F. Supp. 3d 866, 868-69 (N.D. Ill.
2015), on reconsideration in part sub nom. 2016 WL 302102 (N.D. Ill. Jan. 25, 2016)
(“res judicata is an affirmative defense [however] the doctrine of res judicata may
properly be raised as a basis to dismiss a complaint pursuant to Rule 12(b)(6)”).
Under Rule 12(b)(6), then, the Court must determine whether the Complaint
states “a claim to relief that is plausible on its face.” Yeftich v. Navistar, Inc., 722
F.3d 911, 915 (7th Cir. 2013). A “claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. This Court must construe
the Complaint in the light most favorable to Plaintiff, accept as true all wellpleaded facts, and draw all reasonable inferences in its favor.
Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999).

Id.; Long v.

Statements of law,

however, need not be accepted as true. Yeftich, 722 F.3d at 915. Rule 12(b)(6)

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limits this Court’s consideration to “allegations set forth in the complaint itself,
documents that are attached to the complaint, documents that are central to the
complaint and are referred to in it, and information that is properly subject to
judicial notice,” including public filings in other federal courts.

Williamson v.

Curran, 714 F.3d 432, 436 (7th Cir. 2013).
III.

Analysis
Alden argues that the questions presented by Mac Naughton’s instant

Complaint were definitively resolved in Case I and Case II, and thus his present
claims are untenable under the doctrine of claim preclusion or res judicata. Res
judicata bars any claims that were litigated or could have been litigated in a
previous action when three requirements are met: “(1) an identity of the causes of
action; (2) an identity of the parties or their privies; and (3) a final judgment on the
merits.”

Bell v. Taylor, 827 F.3d 699, 706 (7th Cir. 2016) (internal quotation

omitted).
Plaintiff implicitly concedes that the first two elements of this standard are
satisfied, and the Court will accordingly do the same.
A.

Final Judgment On The Merits

Contrary to Alden’s assertions, neither Case I nor Case II featured the
requisite final judgment on the merits, for the reasons explained below.
In Case I, Mac Naughton voluntarily dismissed his claims against Alden. See
Case I, Dkt. 98. A voluntary dismissal, however, “renders the dismissed action a
nullity,” In re Mission Bay Ski & Bike, Inc., No. 07-br-20870, 2009 WL 2913438, at

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*7 (Bankr. N.D. Ill. Sept. 9, 2009), such that “the doctrines of res judicata and
collateral estoppel have no application.” In re Hallahan, 99 B.R. 897, 899 (Bankr.
C.D. Ill. 1989), aff’d, 113 B.R. 975 (C.D. Ill. 1990), aff’d sub nom. Matter of
Hallahan, 936 F.2d 1496 (7th Cir. 1991); see also Robinson v. Willow Glen Acad.,
895 F.2d 1168, 1169 (7th Cir. 1990) (voluntarily dismissed claim should be “treated
as if it had never been filed”); United States v. Mt. Vernon Memorial Estates, Inc.,
734 F.2d 1230, 1236 (7th Cir. 1984) (voluntary dismissal “turns back the clock; it is
as if the plaintiff’s lawsuit had never been brought”); 9 Charles Alan Wright &
Arthur R. Miller, Fed. Prac. & Proc. Civ. § 2367 (3d ed.) (“As numerous federal
courts have made clear, a voluntary dismissal without prejudice under Rule 41(a)
leaves the situation as if the action never had been filed [and] [t]he general rule is
that a dismissal without prejudice is neither final nor appealable.”).

Alden’s

argument pursuant to Case I is a non-starter.
In Case II, Mac Naughton, as a Defendant/Third-Party Plaintiff, attempted to
bring claims against Alden pursuant to Federal Rule of Civil Procedure 14(a). See
Case II, Dkt. 37 at *23-25. Judge St. Eve dismissed Mac Naughton’s impleader
claims against Alden because there was no suggestion that Alden was “secondarily
or derivatively liable as required under Rule 14(a).” See Case II, Dkt. 133 at *3.
Case II (unlike Case I) featured an involuntary dismissal, such that Case II is
governed by Federal Rule of Civil Procedure 41(b). Rule 41(b) provides that an
involuntary dismissal is “on the merits,” unless the court order “specifies otherwise”
or the dismissal was for “lack or jurisdiction, improper venue, or failure to join a

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party.” Fed. R. Civ. P. 41(b). The dismissal in Case II was not “on the merits”
because Judge St. Eve “specifie[d] otherwise,” noting that the dismissal was
“without prejudice.” See Case II, Dkt. 133 at *3; Semtek Intern. Inc. v. Lockheed
Martin Corp., 531 U.S. 497, 498 (2001) (An “adjudication upon the merits in Rule
41(b) is the opposite of a dismissal without prejudice—that is, it is a dismissal that
prevents refiling of the claim in the same court.”) (internal quotation omitted); see
also Arast v. Pendelton, No. 13-cv-08882, 2014 WL 5469933, at *2 (N.D. Ill. Oct. 28,
2014) (“the term ‘without prejudice,’ when used in a dismissal order, clearly
manifests the intent of the trial court that the order not be considered final and
appealable. Those words also signal the trial court’s intent to allow a plaintiff to
refile the action.”) (internal quotations omitted); 9 Charles Alan Wright & Arthur R.
Miller, Fed. Prac. & Proc. Civ. § 1463 (3d ed.) (“When the court denies a motion to
bring in a third-party defendant, it only rules on the desirability of allowing that
claim to be pressed at that particular time and in that manner; it does not
determine the merits of the third-party claim. Defendant is free to assert the thirdparty claim as a separate suit.”).

Because Judge St. Eve’s dismissal of Mac

Naughton’s claims was not on the merits, Alden’s res judicata argument pursuant
to Case II also fails.

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IV.

Conclusion
For the reasons discussed above, Defendant Alden Management Services,

Inc.’s motion to dismiss [5] is denied.
Date: April 3, 2017

Entered:
____________________________________
John Robert Blakey
United States District Judge

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