Joseph v. Linehaul Logistics, Inc.
Filing
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ORDER granting 7 Motion for Summary Judgment; granting 25 Motion for Sanctions. The parties shall respond to this order by filing simultaneous briefs no later than 5/20/2013. Signed by Judge Donald W. Molloy on 5/14/2013. (dle)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
ARLENE JOSEPH,
CV 13–08–M–DWM
Plaintiff,
ORDER
vs.
LINEHAUL LOGISTICS, INC.,
Defendant.
Linehaul Logistics, Inc., moves for summary judgment on Arlene Joseph’s
claim that Linehaul wrongfully terminated her employment because it retaliated
against her for reporting unpaid overtime. Linehaul argues that the claim is barred
by res judicata. Linehaul also moves for sanctions under Rule 11. Both motions
are well taken for the reasons set forth below.
BACKGROUND
Linehaul terminated Joseph’s employment on April 27, 2011, immediately
after she had complained about unpaid overtime. Joseph sued Linehaul in state
court alleging, among other things, that “[i]n response to [Joseph’s] reports of a
hostile work environment and state and federal wage and hour violations . . .
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[Linehaul] immediately terminated [Joseph].” (Doc. 9-4 at 2.) In her complaint,
Joseph didn’t identify any specific statutes that Linehaul allegedly violated.
Instead, she generically claimed that she was wrongfully discharged without good
cause (Count One), that she was wrongfully discharged on account of retaliation
(Count Two), and that Linehaul violated wage and hour laws (Count Three).
Linehaul then removed the case to this Court.
While not pleaded specifically, the first two counts were presumably
brought under Montana’s Wrongful Discharge from Employment Act, Mont. Code
Ann. §§ 39–2–901 to 39–2–915, and the third count was presumably brought
under § 207 of the Fair Labor Standards Act. The final pretrial order and the jury
instructions clarified the statutory bases of Joseph’s claims—showing that (1) her
wrongful discharge claims were, in fact, based on alleged violations of Montana’s
Wrongful Discharge from Employment Act (see docs. 9-6 at 2–3, 9-8, 9-9, 9-10)
and (2) her wage and hour claim was brought under the Fair Labor Standards Act
(see docs. 9-6 at 3.)
Joseph’s case went to trial, and the jury returned a verdict in her favor on
the wrongful discharge claim but not on the wage and hour claim. (doc. 9-11).
After trial, but before judgment was entered, Joseph moved to amend her
complaint to add a new claim—a wrongful termination claim under § 215(a)(3) of
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the Fair Labor Standards Act, which makes it unlawful for an employer to
terminate an employee for reporting or complaining about unpaid wages
(including overtime). (See doc. 9-12; 20-1, 20-2.) Joseph’s counsel, Stacey
Weldele-Wade never explained why she couldn’t have timely pleaded this claim in
her complaint or otherwise raised it before trial. (Doc. 9-12 at 45–46.) And she
expressly recognized that if she was to raise her § 215(a)(3) claim in a separate
lawsuit (like this one), she would run into some problems with res judicata. (Doc.
9-12 at 51–52.)
Magistrate Judge Lynch, who presided over the case and trial, denied
Joseph’s motion to amend. Joseph cross-appealed that decision to the Ninth
Circuit but then filed a new lawsuit in Montana state court, alleging the §
215(a)(3) claim and a tortious interference claim against Linehaul. Once again,
Linehaul removed the new case to this Court.
STANDARD
The court shall grant summary judgment if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). “[A] party seeking summary judgment
always bears the initial responsibility of informing the district court of the basis
for its motion, and identifying those portions of ‘the pleadings, depositions,
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answers to interrogatories, and admissions on file, together with the affidavits, if
any,’ which it believes demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Material facts are those
which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986).
ANALYSIS
Linehaul’s motions raise two questions: (1) Is Joseph’s § 215(a)(3) claim
barred by res judicata? and (2) should the Court impose sanctions under Rule 11
on Joseph because Joseph’s claim is frivolous and was made for an improper
purpose? Joseph’s claim is barred by res judicata. No reasonable attorney could
conclude otherwise. The § 215(a)(3) claim is frivolous in light of the prior
litigation and, for that reason, Rule 11 sanctions are appropriate. Even so, the
Court can’t conclude that Joseph made her § 215(a)(3) claim for an improper
purpose.
I.
Motion for summary judgment
There are two components of res judicata: claim preclusion and issue
preclusion (or collateral estoppel).1 Both are squarely at issue here.
Frequently, courts have used the term “res judicata” to refer only to “claim
preclusion” and have used “collateral estoppel” to refer to “issue preclusion.” See
United States v. Bhatia, 545 F.3d 757, 759 n.2 (9th Cir. 2008). The United States
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A.
Claim preclusion
“Claim preclusion treats a judgment once rendered, as the full measure of
relief to be accorded between the same parties on the same claim or cause of
action.” Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir. 1988). “It is
immaterial whether the claims asserted subsequent to the judgment were actually
pursued in the action that led to the judgment; rather, the relevant inquiry is
whether they could have been brought.” Tahoe Sierra Preservation Council Inc. v.
Tahoe Regional Planning Agency, 322 F.3d 1064, 1078 (9th Cir. 2003). In other
words, the doctrine “‘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.’” Robi, 838 F.3d at 321–22
(quoting Brown v. Felsen, 442 U.S. 127, 1331 (1979)).
Claim preclusion applies under federal law when there is:
1.
an identity of claims;
2.
a final judgment on the merits; and
Supreme Court, however, clarified that the terms “claim preclusion” and “issue
preclusion” are collectively referred to as “res judicata.” Taylor v. Sturgell, 553
U.S. 880, 892 (2008); see also United States v. Bhatia, 545 F.3d 757, 759 n.2 (9th
Cir. 2008).
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3.
identity or privity between the parties.2
Cell Therapeutics, Inc. v. Lash Group, Inc., 586 F.3d 1204, 1212 (9th Cir. 2009)
(citations omitted); Tahoe-Sierra Preservation Council, 322 F.3d at 1078.
Here, there is no dispute that the parties in this case are the same parties in
the previous litigation. The question is whether the first and second elements
above are met.
As to the first element, Joseph argues there’s no identity of claims here
because she didn’t specifically raise a claim under § 215(a)(3) in the previous
litigation. Instead, she maintains, her claim in the previous litigation was made
under Montana’s Wrongful Discharge from Employment Act instead of §
215(a)(3). That argument is a nonstarter.
In the previous litigation, Joseph argued that Linehaul wrongfully
discharged her because her termination was based on “retaliation” for reporting “a
violation of employment conditions [hostile work environment and wage and hour
2
The United States Supreme Court’s decision in Taylor, 553 U.S. 880,
suggests that the term “privity” might be outmoded. See id. at 894 n.8. Instead of
using the term “privity” the Court referred to six exceptions to the “rule against
non-party preclusion.” Id. at 893. Following Taylor, though, the Ninth Circuit has
continued to refer to the privity requirement in the context of claim preclusion. See
e.g. Miller v. Wright, 705 F.3d 919, 928 (9th Cir. 2012); Harris v. Co. of Orange,
682 F.3d 1126 (9th Cir. 2012); United States v. Liquidators of European F. Credit
Bank, 630 F.3d 1139, 1150 (9th Cir. 2011).
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laws].”(Docs. 9-3, 9-4.) She now claims in this case that she was wrongfully
discharged under the Fair Labor Standards Act because her termination was based
on retaliation for her complaint about “non-payment of her overtime
compensation.” (Doc. 1-1 at 2.); see 29 U.S.C. § 215(a)(3).
The only difference between this claim and her previous one is that this
claim is made under the Fair Labor Standards Act and the previous was made
under the Wrongful Discharge from Employment Act. The factual basis for the
two claims and the substance of the arguments are identical.
Whether Joseph attempted to vindicate her claim in the previous litigation
under precisely the same statute or legal theory isn’t the relevant inquiry. Instead,
the question is whether she could have brought the claims in this case in her
previous litigation. Tahoe Sierra Preservation Council Inc., 322 F.3d at 1078; see
also Stratosphere Litig. LLC v. Grand Casinos, Inc., 298 F.3d 1137, 1143 n.3 (9th
Cir. 2002) (citations and internal quotation marks omitted) (“Identity of claims
exists when two suits arise from the same transactional nucleus of facts.”)
Joseph’s § 215(a)(3) claim, by her own admission, arises out of the precise
facts that were at issue in her previous litigation. (Doc. 9-12 at 51.) Joseph hasn’t
offered any explanation for why she was unable to timely bring her § 215(a)(3)
claim in the previous litigation, even though it clearly arises out of the precise
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facts that were at issue in the previous litigation.
The record shows that counsel knew that res judicata would be a very
serious issue if she brought this claim, and indeed it is. (See doc. 9-12 at 52). The
undisputed facts show that counsel could have timely alleged the § 215(a)(3) claim
if she had wanted to, so that claim could have been brought in the previous
litigation. There is therefore an identity of claims here. See Tahoe Sierra
Preservation Council Inc., 322 F.3d at 1078.
As to the second element, Judge Lynch entered a final judgment in the
previous litigation on September 28, 2012. (Doc. 9-13.) As the defendants
correctly argue, the fact that the previous case is being appealed doesn’t alter
finality for purposes of res judicata. Tripati v. Henman, 857 F.2d 1366, 1367 (9th
Cir. 1988) (“The established rule in the federal courts is that a final judgment
retains all of its res judicata consequences pending decision of the appeal . . . .”
(citations and internal quotation marks omitted)); see also Harris v. Co. of
Orange, 682 F.3d 1126, 1132 (9th Cir. 2012).
For these reasons, Joseph’s § 215(a)(3) claim is barred by the claim
preclusion doctrine.
B.
Issue preclusion
Joseph’s claim is also barred by the issue preclusion doctrine. Issue
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preclusion “‘can apply to preclude relitigation of both issues of law and issues of
fact if those issues were conclusively determined in a prior action.’” Wolfson v.
Brammer, 616 F.3d 1045, 1065 (9th Cir. 2010) (quoting United States v. Stauffer
Chem. Co., 464 U.S. 165, 170–71 (1984)). Under this doctrine, a party is
precluded from relitigating issues of fact or law if four elements are met:
1.
there was a full and fair opportunity to litigate the issue in the
previous action;
2.
the issue was actually litigated;
3.
there was final judgment on the merits; and
4.
the person against whom [issue preclusion] is asserted was a party
to or in privity with a party in the previous action.
Id. (citations omitted); see also Wash. Mut. Inc. v. United States, 636 F.3d 1207,
1216 (9th Cir. 2011).
If these four elements are met, the factual or legal issue is precluded, even if
it is presented under the guise of a new legal theory or on the basis of new
evidence. Adam Bros. Farming, Inc. v. Co. of Santa Barbara, 604 F.3d 1142, 1149
(9th Cir. 2010); Restatement (Second) of Judgments § 27 (1982). “If a party could
avoid issue preclusion by finding some argument it failed to raise in the previous
litigation, the bar on successive litigation would be seriously undermined.” Paulo
v. Holder, 669 F.3d 911, 918 (9th Cir. 2011) (citing 18 James W. Moore et al.,
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Moore’s Federal Practice § 132.02[2][c] (3d ed. 2010) (“If a new legal theory or
factual assertion raised in the second action is relevant to the issues that were
litigated and adjudicated previously, the prior determination of the issue is
conclusive on the issue despite the fact that new evidence or argument relevant to
the issue wasn’t in fact expressly pleaded, introduced into evidence, or otherwise
urged.”)).
The first, third, and fourth elements are met, as discussed above. Joseph
claims, though, that the second element isn’t met because the § 215(a)(3) claim
wasn’t “actually litigated” in the previous action. Again, she is wrong. Whether
she specifically articulated the § 215(a)(3) claim is irrelevant. What matters is that
counsel could have raised the claim in the previous litigation. Joseph’s §
215(a)(3) claim is merely a guise of the same claim she pursued previously.
Joseph’s § 215(a)(3) claim is barred by the issue preclusion doctrine.
II.
Sanctions
A court may sanction parties through three avenues: “(1) Federal Rule of
Civil Procedure 11, which applies to signed writings filed with the court, (2) 28
U.S.C. § 1927, which is aimed at penalizing conduct that unreasonably and
vexatiously multiplies the proceedings, and (3) the court’s inherent power.” Fink
v. Gomez, 239 F.3d 989, 991 (9th Cir. 2001). Linehaul moves for sanctions under
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Rule 11. It argues that Joseph’s § 215(a)(3) claim is frivolous and made for an
improper purpose.
Sanctions may be imposed under Rule 11 if a party violates Rule 11(b).
That subsection provides:
(b) Representations to the Court. By presenting to the court a
pleading, written motion, or other paper--whether by signing, filing,
submitting, or later advocating it--an attorney or unrepresented party
certifies that to the best of the person's knowledge, information, and
belief, formed after an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose, such as to harass,
cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by
existing law or by a nonfrivolous argument for extending, modifying, or
reversing existing law or for establishing new law;
....
The Ninth Circuit set out the standard for Rule 11 sanctions in Holgate v.
Baldwin, 425 F.3d 671, 676 (9th Cir. 2005):
When, as here, a “complaint is the primary focus of Rule 11
proceedings, a district court must conduct a two-prong inquiry to
determine (1) whether the complaint is legally or factually baseless from
an objective perspective, and (2) if the attorney has conducted a
reasonable and competent inquiry before signing and filing it.” As
shorthand for this test, we use the word “frivolous” “to denote a filing
that is both baseless and made without a reasonable and competent
inquiry.”
If a party pleads a claim that is clearly barred by res judicata, that may be
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grounds for sanctions under Rule 11. See e.g. Buster v. Greisen, 104 F.3d 1186
(9th Cir. 1997). In Buster, the Ninth Circuit affirmed a district court’s decision to
impose sanctions on account of a claim that was clearly barred by res judicata:
“Frivolous” filings are those that are “both baseless and made without
a reasonable and competent inquiry.” Townsend v. Holman Consulting
Corp., 929 F.2d 1358, 1362 (9th Cir.1990) (en banc). The district court
concluded that this suit was barred by the res judicata and collateral
estoppel effects of the prior judgment. These findings are supported by
the record, and a reasonable and competent inquiry would have led to
the same conclusion. This action involves the same parties and the same
“transactional nucleus of fact” as the prior suit and it seeks to relitigate
issues that were conclusively resolved in the prior suit. See In re
Grantham Brothers, 922 F.2d 1438, 1442 (9th Cir.1991) (collateral
attack with no basis in law or fact is frivolous under Rule 11), cert.
denied, 502 U.S. 826, 112 S.Ct. 94, 116 L.Ed.2d 66 (1991); Roberts v.
Chevron, 117 F.R.D. 581 (M.D.La.1987) (bringing state court action
attacking prior federal judgment and failing to dismiss after removal
justified Rule 11 sanctions; reasonable inquiry would have shown that
res judicata barred action), aff'd, 857 F.2d 1471 (5th Cir.1988). The
district court did not abuse its discretion in concluding that Buster's
claim was frivolous.
Id. at 1190.
This reasoning is equally applicable here. Joseph’s § 215(a)(3) untimely
claim is frivolous. First, the claim is legally baseless from an objective
perspective. No reasonable attorney could have concluded that Joseph’s §
215(a)(3) claim isn’t barred by res judicata. Second, if a reasonable attorney would
have conducted a reasonable and competent inquiry before signing and filing
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Joseph’s complaint, he or she would have learned that the § 215(a)(3) claim is
barred.
The thrust of counsel’s argument as to why the claim isn’t barred is that she
didn’t specifically plead a § 215(a)(3) claim in the previous litigation.3 That
argument misses the point, though, and ignores well-established case law—what
matters is whether she could have pleaded that claim, not whether she actually did.
Paulo, 669 F.3d at 918; Adam Bros. Farming, Inc., 604 F.3d at 1149; Tahoe
Sierra Preservation Council Inc., 322 F.3d at 1078; Restatement (Second) of
Judgments § 27.
Here, counsel has neither denied that she could have timely pleaded the
claim nor has she provided any evidence to that effect. Her § 215(a)(3) claim in
this litigation violates Rule 11(b)(2). There is insufficient evidence in the record,
though, to conclude that Joseph, through her lawyer, filed the § 215(a)(3) for an
“improper purpose” under Rule 11(b)(1).
Even though the record doesn’t show that Ms. Weldele-Wade ran afoul of
Rule 11(b)(1), her violation of Rule 11(b)(2) warrants sanctions. There was no
good reason for filing the § 215(a)(3) claim, except perhaps the self interest of
Ms. Weldele-Wade also argues that the judgment in the previous litigation
isn’t final for purposes of res judicata, but that argument fails on its face. See
Tripati, 857 F.2d at 1367.
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potential attorney’s fees under that claim.
A reasonable sanction in this case is to have Ms. Weldele-Wade—not
Joseph—pay Linehaul’s attorney’s fees that it incurred in bringing its motion for
partial summary judgment.
IT IS ORDERED that Linehaul Logistics Inc.’s motion for partial summary
judgment (doc. 7) is GRANTED.
IT IS FURTHER ORDERED that the parties are ordered to show cause why
this case shouldn’t be remanded to the Montana state court under 28 U.S.C. §
1367(c). The parties shall respond to this order by filing simultaneous briefs no
later than May 20, 2013.
IT IS FURTHER ORDERED that the preliminary pretrial conference
scheduled for May 22, 2013, as well as the associated deadlines, are VACATED
and will be rescheduled, if necessary, after the parties have responded to the order
to show cause.
IT IS FURTHER ORDERED that Linehaul’s motion for sanctions (doc. 25)
is GRANTED. Joseph’s counsel, Stacey Weldele-Wade, shall pay to Linehaul its
attorney’s fees that it incurred in filing and pursuing its motion for partial
summary judgment. Linehaul must file an affidavit detailing those costs no later
than May 20, 2013. If Ms. Weldele-Wade objects to the amount of attorney’s fees
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(not the imposition of sanctions itself), she shall file those objections no later than
seven days after Linehaul files its affidavit. The Court will then rule on those
objections. If no objections are filed, Ms. Weldele-Wade must pay Linehaul no
later than 45 days after it files its affidavit.
Dated this 14th day of May 2013.
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