The Humane Society of the United States v. National Union Fire Insurance Company of Pittsburgh, Pa.
MEMORANDUM OPINION AND ORDER granting 9 Motion to Dismiss with prejudice; denying 22 Request to supplement the record and denying as moot Request to Stay. Signed by Judge Paul W. Grimm on 10/6/2017. (jnls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
THE HUMANE SOCIETY
OF THE UNITED STATES,
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, P.A.,
Case No.: PWG-16-2029
MEMORANDUM OPINION AND ORDER
In Humane Society v. National Union Fire Insurance Co., No. DKC-13-1822 (D. Md.)
(“Humane Society I”), the Humane Society of the United States (“Humane Society” or “HSUS”)
and two of its attorneys sued their insurer, National Union Fire Insurance Company of
Pittsburgh, P.A. (“National Union”), for coverage under a claims-made insurance policy. They
sought to recover defense costs relating to a lawsuit filed against them in the United States
District Court for the District of Columbia. Although the lawsuit was filed during 2007, the
policy under which they sought coverage required that claims first be made against them during
2009-2010 (“2009-2010 Policy”).
Judge Chasanow granted partial summary judgment to
National Union with respect to Humane Society’s 2009-2010 Policy coverage claims, but denied
National Union’s other requests for summary judgment as to the individual plaintiffs. Before
Humane Society I concluded, Humane Society filed this suit, seeking to recover the same
damages it sought in Humane Society I, pursuant to two different insurance policies. Compl.,
ECF No. 1.1 National Union moved to dismiss or to stay pending resolution of Humane Society
I, ECF No. 9, and then the parties jointly moved to stay this litigation on the same basis, ECF
No. 15. I granted the joint motion, staying this case while Humane Society I concluded, and
reopened this case upon entry of final judgment in Humane Society I. ECF No. 16. Now,
because res judicata bars this action, I will grant National Union’s motion and dismiss this case.
FACTUAL AND PROCEDURAL BACKGROUND2
In 2007, Feld Entertainment, Inc. (“Feld”) filed suit in the United States District Court for
the District of Columbia against the Fund for Animals, an affiliate of Humane Society. Feld
amended its complaint in 2010 to name Humane Society and two of its in-house counsel as
additional defendants. July 30, 2015 Mem. Op. 1–3, ECF No. 84 in Humane Society I. Humane
Society sought to recover its litigation costs by providing notice on March 1, 2010 under
insurance policies (the 2009-2010 Policy and the “Employed Lawyer Policy”) that it held
through National Union.3 See id. at 3–4; Compl. ¶ 24. The 2009-2010 Policy provided coverage
for “claim[s] first made against the Organization [which was defined to include Humane Society
Citations to filings in Humane Society I are designated “Humane Society I”; citations without
that designation are to filings in the case pending before me.
For the purposes of resolving National Union’s Motion to Dismiss, I accept the facts alleged in
Humane Society’s Complaint as true. See Aziz v. Alcolac, 658 F.3d 388, 390 (4th Cir. 2011). I
also may take judicial notice of court records. Fed. R. Evid. 201(b); see also WW, LLC v. Coffee
Beanery, Ltd., No. WMN–05–3360, 2012 WL 3728184, at *6 (D. Md. Aug. 27, 2012).
National Union issued to Humane Society three separate insurance policies that provided
“insurance protection for the Organization and Individual Insureds”:
(1) Policy No. 01-932-56-98, for the period June 1, 2009 to June 1, 2010 (the
(2) Policy No. 965-95-51, for the period January 1, 2007 to January 1, 2008 (the
“2007-2008 Policy”); and
(3) Policy No. 01-950-29-84, for the period June 1, 2009 to June 1, 2010 (the
“Employed Lawyers Policy”).
Compl. ¶¶ 7(a)–(b), 9.
as the policy holder, as well as its affiliates] during the Policy Period,” that is, from June 1, 2009
to June 1, 2010. July 30, 2015 Mem. Op. 17, 21 in Humane Society I.
When National Union refused to pay under the 2009-2010 Policy (having not yet
determined whether it would provide coverage on the other claim), Humane Society (as well as
two individual plaintiffs, Humane Society’s in-house counsel) filed suit based on that denial.
Compl., ECF No. 2 in Humane Society I. Litigation began in the Circuit Court for Montgomery
County on June 21, 2013, where Humane Society alleged breach of contract and sought a
declaratory judgment. Id. National Union removed the case to this Court, where it was assigned
to Judge Chasanow. ECF No. 1 in Humane Society I. Judge Chasanow issued a scheduling
order that set the deadline for seeking leave to amend the pleadings as August 15, 2013, ECF No.
11 in Humane Society I; Humane Society never requested an extension of that deadline.
National Union denied coverage under the Employed Lawyers Policy on April 13, 2015,
Compl. ¶ 26, but Humane Society did not seek leave at that time to amend its complaint in
Humane Society I to add a claim under that policy. On summary judgment after the close of
discovery in Humane Society I, Judge Chasanow concluded that “no coverage is available for
HSUS under the 2009-2010 Policy” because Feld filed suit against Humane Society’s affiliate
“in 2007, outside the 2009-2010 coverage period.” July 30, 2015 Mem. Op. 22, 25 in Humane
Society I. The Court entered judgment in National Union’s favor on Humane Society’s claims
on July 30, 2015; the individual plaintiffs’ claims remained pending. July 30, 2015 Order, ECF
No. 85 in Humane Society I; see also July 11, 2016 Mem. Op., ECF No. 98 in Humane Society I
(summarizing procedural history); Jt. Ex. 4, ECF No. 10-2 (timeline).
Thereafter, on August 24, 2015, Humane Society “made a claim . . . for National Union
to provide coverage under the 2007-2008 D&O Policy” (“2007-2008 Policy”)4 and on September
8, 2015, it sought leave to amend its complaint in Humane Society I, inter alia, to add breach of
contract and declaratory judgment claims under that policy and the Employed Lawyers Policy,
alleging that National Union had rejected its claim under the Employed Lawyers Policy on April
13, 2015 and was “anticipated to breach its coverage under the 2007-2008 . . . Policy.” ECF
Nos. 87, 90, 90-2 in Humane Society I. National Union did indeed deny the claim on October
28, 2015. The Court denied the motion to amend on July 11, 2016, because Humane Society
failed to establish good cause for the untimely amendment or show due diligence in pursuing
these claims, and the proposed amendment, almost a year after discovery closed and about two
months after the summary judgment ruling, would prejudice National Union. ECF Nos. 98, 99 in
Humane Society I.5
One month before Judge Chasanow denied leave to amend and while the individual
plaintiffs’ claims (which they assigned to Humane Society) remained pending, Humane Society
filed this suit on June 10, 2016,6 bringing claims under the 2007-2008 Policy and the Employed
Lawyers Policy that are identical to the claims they sought to bring in Humane Society I.
National Union moved to dismiss or stay the claims in this case based on res judicata and
principles of comity. ECF No. 9. The parties fully briefed the motion, ECF Nos. 9-1, 10, 11,
Humane Society contends that, “[b]ecause both the 2007-08 D&O Policy and the 2009-10
D&O Policy are ‘claims made’ policies, HSUS is permitted to seek coverage on its own behalf
under one or the other of the policies, but not both at the same time.” Pl.’s Opp’n 5 n.7.
Humane Society filed a motion for reconsideration or clarification, ECF No. 138 in Humane
Society I, eight months later, and Judge Chasanow denied the motion, ECF Nos. 151, 152 in
Humane Society I.
Humane Society erroneously asserts that, “[w]hen Judge Chasanow, after some eight months,
denied HSUS’s motion for leave to amend, HSUS promptly filed this action in June 2016.” Pl.’s
and then filed a consent motion to stay the case pending resolution of Humane Society I, ECF
No. 15. I granted the consent motion, administratively closed the case, and struck the motion,
without prejudice to reinstatement when the case reopened. ECF No. 16.
In Humane Society I, the parties stipulated to the dismissal of the individual plaintiffs
with prejudice, which the Court approved. ECF No. 110, 111. On August 2, 2017, the parties
stipulated to the dismissal of the remaining claim and entry of judgment in National Union’s
favor. ECF No. 156. The Court approved the stipulation, ECF No. 157, and entered an order
dismissing any remaining claims and closing the case, ECF No. 158.
The parties filed a status report, informing me of the dismissal and agreeing that it
resolved Humane Society’s claims in this case under the Employed Lawyers Policy, such that
only the claims under the 2007-2008 Policy remain. Jt. Status Rep. 1-2, ECF No. 18. I reopened
this case and reinstated National Union’s motion to dismiss or stay. In light of the resolution of
Humane Society I, insofar as National Union sought to stay the case or to dismiss the claims
under the Employed Lawyers Policy, the motion is moot. With regard to dismissal of the claims
under the 2007-2008 Policy, the motion is ripe for resolution, and a hearing is not necessary. See
Loc. R. 105.6. Because res judicata bars the remaining claims, I will grant the motion and
dismiss the claims.
STANDARD OF REVIEW
National Union moves to dismiss pursuant to Rule 12(b)(6), under which Humane
Society’s pleadings are subject to dismissal if they “fail[ ] to state a claim upon which relief can
be granted.” Fed. R. Civ. P. 12(b)(6). A pleading must contain “a short and plain statement of
the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), and must state “a
plausible claim for relief,” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). “A claim has facial
plausibility when the [claimant] pleads factual content that allows the court to draw the
reasonable inference that the [opposing party] is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. Rule 12(b)(6)’s purpose “is to test the sufficiency of a [claim] and not to resolve
contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Velencia v.
Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012) (quoting Presley v.
City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006)). If an affirmative defense “clearly
appears on the face of the [pleading],” however, the Court may rule on that defense when
considering a motion to dismiss. Kalos v. Centennial Sur. Assocs., No. CCB-12-1532, 2012 WL
6210117, at *2 (D. Md. Dec. 12, 2012) (quoting Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th
Cir. 2000) (citation and quotation marks omitted)). One such affirmative defense is res judicata,
or claim preclusion.
Preliminarily, I must determine whether to apply state or federal law to decide what
preclusive effects the rulings in Humane Society I have. Humane Society insists that “federal res
judicata law . . . applies here,” Pl.’s Opp’n 14, whereas National Union argues that “substantive
Maryland law [is] controlling here,” Def.’s Reply 1; see also id. at 2–3. It is true that when a
party raises the defense of res judicata in federal court with regard to a prior judgment issued by
a federal court, federal common law governs the preclusive effect of the prior federal court
judgment. Taylor v. Sturgell, 553 U.S. 880, 891 (2008). But, when the federal court that issued
the prior judgment did so while exercising diversity jurisdiction, federal common law adopts the
preclusion rule of the state in which that court was located. Semtek Int’l Inc. v. Lockheed Martin
Corp., 531 U.S. 497, 508 (2001); see also Taylor, 553 U.S. at 891 n.4 (“For judgments in
diversity cases, federal law incorporates the rules of preclusion applied by the State in which the
rendering court sits.” (citing Semtek).
Thus, where, as here, a federal court in Maryland
exercises diversity jurisdiction to hear a case and issue a judgment, Maryland claim preclusion
law applies. See Taylor, 553 U.S. at 891 n.4; Semtek, 531 U.S. at 508.
Under Maryland law, res judicata provides grounds for dismissal if a defendant
establishes that “(1) the present parties are the same or in privity with the parties to the earlier
dispute, (2) the claim presented is identical to the one determined in the prior adjudication, and
(3) there has been a final judgment on the merits.” Capel v. Countrywide Home Loans, Inc., No.
WDQ-09-2374, 2010 WL 457534, at *3 (D. Md. Feb. 3, 2010) (citing Anne Arundel County Bd.
of Educ. v. Norville, 887 A.2d 1029, 1037 (Md. 2005)). Maryland law employs the “transaction
test” to determine whether the claims are identical. See Kent Cty. Bd. of Educ. v. Bilbrough, 525
A.2d 232, 238 (Md. 1987). “Under the transaction test, a ‘claim’ includes all rights of the
plaintiff to remedies against the defendant with respect to all or any part of the transaction, or
series of connected transactions, out of which the claim arose.” Boyd v. Bowen, 806 A.2d 314,
325 (Md. Ct. Spec. App. 2002) (citing FWB Bank v. Rickman, 731 A.2d 916, 928 (Md. 1999)).
Res judicata bars not only claims from the original litigation, but also other claims that could
have been brought in the original litigation. Id. (citing Gertz v. Anne Arundel Cty., 661 A.2d
1157, 1161 (Md. 1995)).
National Union contends that the parties are the same as in Humane Society I and that
Humane Society “advance[s] the exact same claims” that it sought to bring in its motion for
leave to amend its complaint in Humane Society I, which “Judge Chasanow has already
rejected,” and “an order denying leave to amend has res judicata effect on the rejected claims.”
Def.’s Mem. 1–2, 3. Additionally, it insists that the denial of leave to amend did not have to be
on the merits under these circumstances because “res judicata applies to denials based on mere
timeliness.” Id. at 4. In support of its position, National Union cites a single Maryland case,
Gonsalves v. Bingle, 5 A.3d 768 (Md. Ct. Spec. App.), cert. denied, 10 A.3d 1181 (Md. 2010)
(Table); federal case law; and treatises.
Humane Society concedes that the parties are the same, but counters that its claims are
not “de facto identical to the claims in Humane Society I simply because HSUS unsuccessfully
sought to add the same claims by way of amendment in Humane Society I.” Pl.’s Opp’n 11, 13.
Humane Society also argues that “National Union’s insurance coverage obligations to HSUS
under each policy are independent of its obligations under each other policy,” such that the
policies are not all part of the same transaction. Id. at 11–12. And, in Humane Society’s view,
there was no judgment on the merits of these claims. Id. at 2. Plaintiff cites federal case law and
differentiates Gonsalves on the basis that the claims at issue in that case were “virtually identical
to prior claims, so that the final resolution of the prior claim necessarily resolved the merits of
the subsequent claims as well.” Id. at 11.
For the first time in its Reply, National Union argues that the claims under the 2007-2008
Policy and the Employed Lawyers Policy are the same as the claim under the 2009-2010 Policy
for res judicata purposes because, as Judge Chasanow found, Humane Society “could have filed
suit under the two policies [at issue in this case] in 2012 because their causes of action had
already arisen by 2012.” Def.’s Reply 11. Although typically “courts should not consider new
arguments or new evidence raised for the first time in reply briefs,” courts may consider new
arguments when, as here, they are “offered to rebut arguments specifically raised in an
opposition.” Sprint Nextel Corp. v. Simple Cell Inc., 248 F. Supp. 3d 663 (D. Md. 2017) (citing
Clawson v. FedEx Ground Package Sys., Inc., 451 F. Supp. 2d 731, 734 (D. Md. 2006); Allen v.
Enabling Techs. Corp., 2016 WL 4240074, at *4, 11–13 (D. Md. Aug. 11, 2016). Moreover,
given that this Court may dismiss an action sua sponte under the doctrine of res judicata if it “is
on notice that the issues presented in a suit have been previously decided,” Roberts v. Thrasher,
No. ELH-15-1906, 2015 WL 4485477, at *2 (D. Md. July 20, 2015) (quoting Arizona v.
California, 530 U.S. 392, 413 (2000) (citation and citation marks omitted)), and I am aware of
Judge Chasanow’s decision, it is appropriate to consider this argument. See Innocent v. Bank of
New York Mellon, No. PWG-16-1132, 2016 WL 8273956, at *1 (D. Md. Apr. 25, 2016), aff’d
sub nom. Innocent v. The Bank of New York Mellon, 668 F. App’x 467 (4th Cir. 2016).
As noted, Maryland claim preclusion law applies, and therefore, Gonsalves is the starting
point for my analysis. There, Gonsalves, with the assistance of her attorney daughter (the
“Buyers”), entered into a contract to purchase real property, paying an immediate deposit and
promising to pay the remainder of the purchase price within thirty days. Id. at 769–71. The
Buyers failed to pay the balance, and the Sellers filed suit against them in the Circuit Court for
Anne Arundel County, Maryland for breach of contract, seeking to retain the deposit. Id. at 769–
70. While the case was pending, the Sellers “sold the property to another buyer at a price less
than the amount Gonsalves had agreed to pay,” and then “sought to amend their complaint to
recover, in addition to the deposit, damages for the difference in the sales price as contracted by
Gonsalves and as sold to a third party (‘actual damages’).” Id. at 770, 772. The Anne Arundel
County court denied the motion without explanation. Id. at 772.
Thereafter, the Sellers filed a second suit for breach of contract against the Buyers in the
Circuit Court for Montgomery County, Maryland, this time seeking to recover actual damages.
Id. at 770. After the Anne Arundel County court entered judgment in the Sellers’ favor in the
first case, the Buyers moved to dismiss the second case based on res judicata and later for
summary judgment on the same basis, both times without success. Id. at 773–74. After trial, the
court granted one of the buyers’ motion for judgment, and a jury returned a verdict in the Sellers’
favor, against Gonsalves, the other Buyer. Id. at 776.
On appeal, Gonsalves challenged the trial court denial of her motion to dismiss based on
res judicata. Id. at 776–77. The Court of Special Appeals stated that, to determine whether the
claim was “the ‘same claim’ they were not permitted to pursue in the Anne Arundel County
Case,” it applied the transaction approached described in the Restatement (Second) of Judgments
(“Restatement”) § 24:
(1) When a valid and final judgment rendered in an action extinguishes the
plaintiff’s claim pursuant to the rules of merger or bar . . . , the claim extinguished
includes all rights of the plaintiff to remedies against the defendant with respect to
all or any part of the transaction, or series of connected transactions, out of which
the action arose.
(2) What factual grouping constitutes a “transaction”, and what groupings
constitute a “series”, are to be determined pragmatically, giving weight to such
considerations as whether the facts are related in time, space, origin, or
motivation, whether they form a convenient trial unit, and whether their treatment
as a unit conforms to the parties’ expectations or business understanding or usage.
Gonsalves, 5 A.3d at 777 (quoting Restatement § 24; citing Norville, 887 A.2d at 1038); see also
Kent Cty. Bd. of Educ. v. Bilbrough, 525 A.2d 232, 238 (Md. 1987) (“We . . . generally approve
of the approach to resolving the question of identity of claims found in § 24 of the
The Court of Special Appeals observed that “[t]he transactional approach
effectively obligates a plaintiff to bring in a single action all claims ‘based upon the same set of
facts, and [that] one would [ordinarily] expect . . . to be tried together.’” Gonsalves, 5 A.3d at
778 (quoting Norville, 887 A.2d at 1038 (emendations in Gonsalves)). This is a common sense
approach that courts take because they “see [a] claim in factual terms and . . . make it
coterminous with the transaction regardless of the number of substantive theories, or variant
forms of relief flowing from those theories, that may be available to the plaintiff,” provided that
“the parties have ample procedural means for fully developing the entire transaction in the one
action going to the merits to which the plaintiff is ordinarily confined.” Id. (quoting Restatement
§ 24 cmt. a). The Restatement noted that the “modern procedural system does furnish such
means,” as it allows for mutually inconsistent allegations and “considerable freedom of
amendment.” Id. at 778 (quoting Restatement § 24 cmt. a).
The Gonsalves Court concluded that res judicata barred the Sellers’ claim in the second
litigation. Id. at 778. It reasoned that the claim was the same because each lawsuit “stated a
single cause of action against Gonsalves for breach of contract, based upon the same
transaction,” and “[g]iven that the damages [Sellers] were seeking stemmed from a single
occurrence/set of facts, namely, the alleged breach of the sales contract for the Property, the
parties to the contract reasonably would have expected that all claims for damages would be
brought in one forum, in one case.” Id. at 778.
Importantly, for purposes of the case before me, the court then considered the effects of
the Anne Arundel County Circuit Court’s denial of the motion to amend. Id. at 781. Its ruling
could not have been clearer:
[A] plaintiff who is denied leave to amend his or her complaint to add additional
claims . . . is nonetheless barred from raising those claims in a second suit based
on the same transaction or series of transactions as the first. . . . [R]es judicata
should apply regardless of whether (a) the trial court’s denial of leave to amend
was erroneous, (b) the trial court’s decision was based on procedural grounds
instead of the merits, and/or (c) the adverse party opposed the motion for leave to
amend. . . .
Gonsalves, 5 A.3d at 783 (footnotes omitted) (citing Professional Management Associates v.
KPMG, LLP, 345 F.3d 1030 (8th Cir. 2003) (per curiam); EFCO Corp. v. U.W. Marx, Inc., 124
F.3d 394 (2d Cir. 1997); Restatement § 25 & cmts. b & c); see also Powell v. Breslin, 59 A.3d
531, 538 (Md. 2013) (citing Gonsalves in support of its reasoning that res judicata applied
regardless whether “a ruling in an original suit was found later to be in error”); Hatch v. Trail
King Indus., Inc., 699 F.3d 38, 46 (1st Cir. 2012) (noting that “[c]ourts applying other states’
laws have held that denial of leave to amend constitutes a final judgment on the merits,
subjecting those claims to claim preclusion”; citing Gonsalves, 5 A.3d at 783, and Kaye v. S & S
Tree Horticulture Specialists, Inc., No. A08–1027, 2009 WL 1311808, at *3 (Minn. Ct. App.
May 12, 2009), in which the courts stated that res judicata applied even if the court denied leave
to amend based on procedural grounds, and Bush v. Dictaphone Corp., No. 98AP–585, 1999 WL
178370, at *5 (Ohio Ct. App. Mar. 30, 1999) (per curiam), and Dall v. Goulet, 871 F. Supp. 518,
521 (D. Me. 1994) (applying state law), in which the court did not address the basis for the
denial of leave to amend).
This may, at first, appear to be a harsh result, because the merits of the precluded claim
were never addressed. But, the Gonsalves Court explained that, even when a ruling issued on
procedural grounds without analysis, “once the case concluded after a bench trial, a final
judgment existed on the merits,” and “res judicata applies in that circumstance to the rulings that
preceded the final judgment, unless challenged and overturned on appeal.” Gonsalves, 5 A.3d at
783. It reasoned:
Allowing a plaintiff denied leave to amend to thereafter pursue his or her
additional claims in a separate action would undermine the judgment of the
original trial court and subvert the jurisdiction of appellate courts to review
matters raised in or decided by the trial court. See Rule 8-131(a). Moreover, . . .
multiple lawsuits based on the same set of facts . . . would waste judicial
resources and potentially lead to inconsistent decisions-outcomes that are directly
at odds with the purpose of the res judicata doctrine. See Norville, supra, 390 Md.
at 107, 887 A.2d 1029 (“‘[Res judicata] avoids the expense and vexation
attending multiple lawsuits, conserves the judicial resources, and fosters reliance
on judicial action by minimizing the possibilities of inconsistent decisions.’ ”
(quoting Murray Int’l Freight Corp., 315 Md. at 547, 555 A.2d 502)). Finally, to
allow such an exception to res judicata under these circumstances would be
inconsistent with the transactional approach endorsed by the Restatement,
supra, and followed in this State.
Gonsalves, 5 A.3d at 783–84 (footnote omitted). In a nutshell, the Court of Special Appeals
observed that “[t]he proper mode of redress for a plaintiff aggrieved by the denial of leave to
amend is to appeal that ruling upon the entry of a final judgment.” Id. at 783.
Claims from the Same Occurrence
Here, there can be no doubt that there was one event, involving one set of facts: Humane
Society, which held three insurance policies through National Union, incurred litigation costs
defending a lawsuit, and it sought to recover those costs from its insurer. Certainly, the policies
are distinct, such that a breach of one contract does not constitute a breach of another. It is true
that Humane Society placed—and was denied—its claims under the policies at different times.
But, all of its claims under the policies stem from the same event and seek to recover the same
damages—its litigation expenses in defending against the claims Feld brought. And, because
any factual differences only involve contractual language, hearing the claims together would not
require much, if any, additional discovery and would not confuse the trier of fact. Thus, the
claims under the 2007-2008 Policy and the Employed Lawyers Policy are related in origin and
motivation to the claims under the 2009-2010 Policy (and seek recovery for the identical
damages sought in the suit under the 2009-2010 Policy—recovery of litigation costs associated
with the Feld lawsuit) and would “form a convenient trial unit.” See Restatement § 24(2);
Gonsalves, 5 A.3d at 777–78. Indeed, the very fact that Humane Society sought to file an
amended complaint (belatedly) to add the 2007-2008 Policy and Employed Lawyers Policy
claims in Humane Society I proves this very point.
Nor can it be claimed that Humane Society lacked “ample procedural means for fully
developing the entire transaction” in Humane Society I. See Gonsalves, 5 A.3d at 778 (quoting
Restatement § 24 cmt. a). National Union denied its claims under the Employed Lawyers Policy
and the 2007-2008 Policy on April 13, 2015 and October 28, 2015, respectively, and Humane
Society I did not conclude until August 2, 2017. Thus, Humane Society had ample opportunity
to amend its pleading in Humane Society I to add a claim under the 2007-2008 Policy after it was
denied coverage under that policy. Moreover, when it untimely moved (on September 8, 2015)
to amend, it did so before National Union denied its claim under the 2007-2008 Policy,
proposing a claim based on anticipated breach, showing that it did not need to wait for the denial
to bring the claims it wished to bring. See Proposed Am. Compl., ECF No. 90-2 in Humane
Although the scheduling order for Humane Society I set August 15, 2013 as the deadline
for amending pleadings, Humane Society could have moved to extend that deadline, which it did
not do. And, even after the deadline passed, Humane Society had (and took) the opportunity to
file a motion for leave to amend to add these claims. Upon a showing of good cause, such
motions routinely are granted, see Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298 (4th Cir.
2008) (citing Fed. R. Civ. P. 16(b)), but the problem was that Humane Society failed to show
good cause for its delay. Indeed, in denying the motion for leave to amend, Judge Chasanow also
granted a 60-day extension of the discovery deadline, such that, had the motion to amend been
granted, Humane Society would have had the time for any necessary minimal discovery on its
new claims. See July 11, 2016 Mem. Op. 1. And, the fact that Judge Chasanow ultimately denied
leave to amend does not mean that Humane Society did not have ample prior opportunity to
bring its claims under the 2007-2008 Policy and Employed Lawyers Policy. See Gonsalves, 5
A.3d at 783–84.
Humane Society contends that, “[b]ecause both the 2007-08 . . . Policy and the 2009-10
. . . Policy are ‘claims made’ policies, HSUS [was] permitted to seek coverage on its own behalf
under one or the other of the policies, but not both at the same time,” such that it could not have
filed a timely motion to amend. Pl.’s Opp’n 5 n.7. But it provides no legal support for this
assertion. Nor is it even relevant, because National Union denied its claim under the 2009-2010
Policy in 2010, leaving Humane Society a generous opportunity to assert a claim under the 20072008 Policy. And, Judge Chasanow specifically concluded that Humane Society could have
brought its claims under the 2007-2008 Policy earlier. See July 11, 2016 Mem. Op. 11–12 (“The
underlying facts were long known to Plaintiffs, and Plaintiffs could have included some claims
under the 2007-2008 . . . Policy and the Employed Lawyers Policy when they commenced this
action, and certainly before the expiration of the scheduling order deadline”). Under the related
doctrine of collateral estoppel, “when an issue of fact or law is actually litigated and determined
by a valid and final judgment, and the determination is essential to the judgment, the
determination is conclusive in a subsequent action between the parties, whether on the same or a
different claim.” John Crane, Inc. v. Puller, 899 A.2d 879, 893 (Md. Ct. Spec. App. 2006)
(quoting Janes v. Maryland, 711 A.2d 1319, 1324 (Md. 1998)).7 This issue of fact was actually
litigated between these parties, and as I discuss below, there was a final judgment. Also, the fact
To “avoid [ ] . . . unnecessary judicial waste,” the Court may consider collateral estoppel sua
sponte, if it “is on notice that it has previously decided the issue presented.” Arizona v.
California, 530 U.S. 392, 412 (quoting United States v. Sioux Nation, 448 U.S. 371, 432 (1980)
(Rehnquist, J., dissenting) (citations omitted)), supplemented, 531 U.S. 1 (2000); see also Alston
v. Equifax Info. Servs., LLC, No. TDC-15-3343, 2016 WL 5349716, at *3 (D. Md. Sept. 22,
2016) (noting that “courts may raise the issue of collateral estoppel sua sponte”).
that Humane Society could have brought the claims earlier but elected not to was essential to
Judge Chasanow’s finding that Humane Society failed to exercise due diligence and
consequently had not shown good cause to amend. See July 11, 2016 Mem. Op. 13 (“Plaintiffs
offer no justification for their substantial delay in seeking to include claims under the 2007-2008
. . . Policy and the Employed Lawyers Policy, and the potential to pursue such claims came as no
surprise to Plaintiffs. They had ample time during the course of this litigation to have pursued
coverage under the additional policies. Accordingly, because Plaintiffs failed to establish that
they exercised diligence in seeking leave to amend the complaint, they have not satisfied Rule
16, and their motion will be denied.” (citation omitted)). Therefore, Judge Chasanow’s
determination that Humane Society could have brought the claims earlier is conclusive here, and
Humane Society is estopped from arguing otherwise. See Janes, 711 A.2d at 1324; John Crane,
Inc., 899 A.2d at 893.
Humane Society cites three cases in support of its argument that “each separate insurance
policy purportedly breached by a defendant constitutes a separate and independent transaction,
even when the same insurer issues the separate policies,” because the insurer’s obligations differ
under each, Pl.’s Opp’n 12: Mag-Dolphus, Inc. v. Ohio Cas. Ins. Co., 40 F. Supp. 3d 817, 826–
27 (S.D. Tex. 2014); Milone v. Fidelity Nat’l Ins. Co., No. 13 CV 6331 (SJF)(ARL), 2013 WL
6328254, at *3 (E.D.N.Y. Dec. 3, 2013); and Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556
F.3d 177, 210 (4th Cir. 2009). None of these cases provides controlling authority, as two are
from other district courts, and the Fourth Circuit opinion in Ohio Valley applied federal
preclusion law, not Maryland law. Moreover, these cases are inapposite. In Mag-Dolphus, the
Southern District of Texas applied the transactional test under Texas law to conclude that the
facts of the case before it—in which the plaintiff claimed water damage from a 2011 storm and
sought to recover from its insurance provider—were not a part of the same transaction or
occurrence as the previous lawsuit—in which the plaintiff claimed water damage from a
hurricane three years earlier and sought to recover from the same insurance provider. 40 F.
Supp. 3d at 826–27. Thus, the underlying facts were distinct from the previous litigation, and
“involve[d] an insurance policy that was not in effect when [the earlier hurricane] occurred,” id.
at 827, whereas here, Humane Society seeks to recover the same litigation expenses in both suits,
and claims that it was the 2007-2008 Policy that was in effect when Feld brought suit, not the
2009-2010 Policy, as it alleged in Humane Society I.
In Milone, the Eastern District of New York stated that “judicial economy and fairness
dictate that plaintiffs’ claims under each distinct insurance policy issued by defendant be tried
separately.” 2013 WL 6328254, at *3. But, it did so while considering when claims are the
same for purposes of permissive joinder of plaintiffs under Rule 20(a), not res judicata. See id.
Moreover, there, each of the six plaintiffs owned separate, insured property and each sought to
recover under his or her own insurance policy; the only unifying factors were that the properties
were damaged in the same storm, and the same defendant insurance provider issued all of the
policies. Id. Here, as noted, there was only one underlying event that affected one company (and
its in-house counsel), not six different events affecting six different plaintiffs in six different
In Ohio Valley, an environmental coalition (“Ohio Valley”) challenged four permits that
the U.S. Army Corps of Engineers (“Corps”) had issued to coal mining companies. 556 F.3d at
185–86, 187, 188. The affected companies intervened (“Intervenors”), arguing in district court
and on appeal that res judicata barred Ohio Valley’s claim for declaratory relief because Ohio
Valley had challenged the Corp’s authority under other permits in previous litigation. Id. at 189,
209. The district court concluded that res judicata did not bar the claims, and the Fourth Circuit
affirmed, reasoning that those permits at issue previously were not the same permits at issue in
Ohio Valley. Id. at 210. As in Mag-Dolphus, and unlike in the case before me, the contracts
(permits) at issue “were not even in existence at the time of [the earlier litigation],” such that the
claims “‘did not even . . . exist’” at the time of the prior judgment. Id. at 211 (quoting Lawlor v.
Nat’l Screen Serv. Corp., 349 U.S. 322, 328 (1955)). On that basis, the Fourth Circuit concluded
that the prior judgment could not “be given the effect of extinguishing claims” that did not exist
when it was entered. Id. (quoting Lawlor, 349 U.S. at 328). Here, in contrast, the policies all
existed when Humane Society filed Humane Society I, and Judge Chasanow found that Humane
Society’s claims under the Employed Lawyers Policy and the 2007-2008 Policy existed before
the August, 2013 scheduling order deadline for amending, four years before Humane Society I
closed in August 2016. And, even if the claims had not existed until National Union denied
coverage in April and August 2015, those denials still occurred well over a year before the case
closed. Thus, National Union has established that the claims stem from the same occurrence and
are the “same” under Maryland law for purposes of res judicata, and Humane Society has not
identified any facts or case law that would lead me to a different conclusion.
Final Judgment on the Merits
It is true that Judge Chasanow denied the motion to amend on procedural grounds
without reaching the merits of the claims, which in Humane Society’s view means that res
judicata cannot bar the claims because there has not been a final judgment on their merits. Pl.’s
Opp’n 2, 8–10. According to Humane Society, this case is unlike Gonsalves, where there was a
final judgment on the merits, because there, the later claim was for breach of the same contract
that was the subject of the earlier breach of contract claims on which the court entered judgment.
Id. at 11.
But, here, Judge Chasanow entered summary judgment in National Union’s favor on
Humane Society’s claims against it on July 30, 2015, and two years later issued an Order
dismissing all remaining claims, incorporating “[a]ll prior rulings,” and stating that the
“judgment is final for purposes of Fed.R.Civ.P. 58.” Aug. 2, 2017 Order in Humane Society I.
Thus, there was final judgment on the merits of the 2009-2010 Policy claim in Humane Society I.
Indeed, while Humane Society argues that there was no final judgment on the merits of its claims
under the 2007-2008 Policy and the Employed Lawyers Policy, it does not try to argue that there
was no final judgment on the merits of its claims under the 2009-2010 Policy against National
Union. As discussed, the claims before me are based on the same transaction as in Humane
Society I—the Feld litigation and ensuing expenses. Notably, in Gonsalves, the Court of Special
Appeals held, without limiting its holding to the facts before it, that “[a] plaintiff who is denied
leave to amend his or her complaint to add additional claims . . . is nonetheless barred from
raising those claims in a second suit based on the same transaction or series of transactions as the
first.” Gonsalves, 5 A.3d at 783; see also 18 Wright & Miller, Fed. Prac. & Proc. Juris. § 4412
(3d ed.) (“Unless the court can be persuaded to direct that denial of leave to amend is without
prejudice to advancing the new matter in a separate action, preclusion should apply. Any error
should be corrected by appeal in the first proceeding.” (footnote omitted)).8 Therefore, the final
Humane Society moved for reconsideration and clarification of the denial of leave to amend,
asking the Court to allow it to amend to bring the claims under the 2007-2009 Policy or at least
to state that the denial was without prejudice to raising those claims in a separate proceeding.
ECF No. 138 in Humane Society I. Judge Chasanow denied the motion, noting that
the issue of whether claim preclusion or some other doctrine precludes Plaintiff
from pursuing a separate action must be decided by Judge Grimm in the separate
action. It would not be appropriate to address it in this case. What was before this
judgment on the merits of the 2009-2010 Policy claim satisfies the third element of res judicata.
See Gonsalves, 5 A.3d at 783.
And, the Gonsalves Court further held that “res judicata should apply regardless of
whether (a) the trial court’s denial of leave to amend was erroneous, (b) the trial court’s decision
was based on procedural grounds instead of the merits, and/or (c) the adverse party opposed the
motion for leave to amend.” Gonsalves, 5 A.3d at 783. Thus, res judicata applies here, even
though the denial was based on a failure to show good cause. And it would apply even if
Humane Society actually had shown good cause, but the motion to amend had been denied
anyway. See id. A final judgment exists on the merits in Humane Society I, a judgment that
Judge Chasanow entered in National Union’s favor, and “res judicata applies in that
circumstance to the rulings that preceded the final judgment, unless challenged and overturned
on appeal.” Id.
Further, I note that Humane Society filed this lawsuit a month before Judge Chasanow
denied leave to amend to add the same claims, and it brought the same claims in state court,
where litigation still is pending. Additionally, it did not appeal Judge Chasanow’s denial of
leave to amend, which would have been the proper way to challenge the propriety of the denial
of the motion to amend. And, Judge Chasanow found that it failed to exercise due diligence in
bringing these claims in Humane Society I, which was before this Court for more than two years
before Humane Society moved to amend. Considering the policy reasons underpinning the
court was solely whether Plaintiffs had established good cause to alter the
scheduling order and satisfied the liberal standards regarding amendments to
pleadings in this action. The court will decline Plaintiff’s invitation to advise
Judge Grimm on the dispositive motion before him by “clarifying” its denial of
leave to amend the complaint.
Apr. 21, 2017 Mem. Op. 15–16, ECF No. 151 in Humane Society I.
doctrine of res judicata, if I were to allow this case to continue, it “would undermine the
judgment of the original trial court and subvert the jurisdiction of appellate courts to review
matters raised in or decided by the trial court,” as well as “waste judicial resources and
potentially lead to inconsistent decisions-outcomes that are directly at odds with the purpose of
the res judicata doctrine.” See Gonsalves, 5 A.3d at 783–84; see also Anne Arundel County Bd.
of Educ. v. Norville, 887 A.2d 1029, 1037 (Md. 2005). Consequently, res judicata bars Humane
Society’s claims in this litigation. See Gonsalves, 5 F.3d at 783–84.
In sum, National Union’s Motion to Dismiss, ECF No. 9, is granted and Humane
Society’s claims in this case are dismissed because they are barred by res judicata. After I
reopened this case, Humane Society sought leave to file motions to supplement the record with
documents from Humane Society I and to stay this litigation. ECF No. 22. Having chosen not to
appeal Judge Chasanow’s ruling, Humane Society cannot now present its issues with the
outcome of that case to the Fourth Circuit through an appeal in this case. In light of this ruling,
Humane Society’s request to supplement the record is denied, and its request to stay is denied as
Accordingly, it is this 6th day of October 2017, by the United States District Court for the
District of Maryland, hereby ORDERED that:
Defendant’s Motion to Dismiss, ECF No. 9, IS GRANTED;
This case IS DISMISSED WITH PREJUDICE; and
The Clerk SHALL CLOSE this case.
Paul W. Grimm
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?