TRIUMPH ACTUATION SYSTEMS, LLC v. EATON CORPORATION et al

Filing 29

MEMORANDUM OPINION AND ORDER signed by CHIEF JUDGE WILLIAM L. OSTEEN, JR., on 9/30/2013; that Plaintiff's Motion to Dismiss Defendants' Counterclaims (Doc. 21 ) is GRANTED and that the Counterclaims filed in this case are hereby dismissed without prejudice. A judgment consistent with this Memorandum Opinion and Order will be entered contemporaneously herewith. (Lloyd, Donna)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

TRIUMPH ACTUATION SYSTEMS,
LLC, f/k/a FRISBY AEROSPACE,
Plaintiff,
v.
EATON CORPORATION,
AEROQUIP-VICKERS, INC.,
EATON HYDRAULICS, INC.,
and EATON AEROSPACE, LLC,
Defendants.

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1:11CV79

MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
This matter is presently before the court on a Motion to
Dismiss Defendants‟ Counterclaims (Doc. 21) filed by Plaintiff
Triumph Actuation Systems, LLC, otherwise known as Frisby
Aerospace (“Plaintiff” or “Frisby”).

Defendants Eaton

Corporation, Aeroquip-Vickers, Inc., Eaton Hydraulics, Inc., and
Eaton Aerospace, LLC (collectively, “Defendants” or “Eaton”)
have responded (Doc. 26) and Plaintiff has replied (Doc. 27).
The motion is now ripe for consideration.

Having evaluated the

filings submitted by both parties, this court finds that the
Motion to Dismiss should be granted.

I.

FACTUAL BACKGROUND
This court summarizes the factual background of this case

as follows:
In 2004, Eaton filed a complaint in Mississippi State Court
(Hinds County) based on the same factual transaction at issue in
the instant counterclaims; namely, Frisby‟s hiring of six former
Eaton engineers: James N. Ward, Rodney L. Case, Kevin E. Clark,
Michael K. Fulton, Douglas E. Murphy, and Billy D. Grayson.
(Pl.‟s Mem. in Supp. of Mot. to Dismiss Defs.‟ Countercls.
(“Pl.‟s Mem.”), Ex. A, Complaint (Doc. 22-1).)

That complaint

was founded primarily on the allegation that the listed six
engineers took proprietary information pertaining to technical
engineering design upon their departure from Eaton.
80)

(Id. ¶¶ 70-

The state court suit went on to allege that the engineers

used this information at Frisby, a direct competitor of Eaton.
(Id. ¶¶ 81-87)

Eaton sought relief on claims of breach/tortious

breach of contract, breach of fiduciary duties, tortious
interference with contract rights and prospective business
advantage, fraud, conspiracy, conversion, and violations of the
Mississippi Uniform Trade Secrets Act.

1

(Id. at 44-51.)1

In that

All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
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case, the defendants filed counterclaims including abuse of
process, tortious interference with existing and prospective
contracts and business relationships, unfair competition, and
defamation.

(Defs.‟ Resp. to Mot. to Dismiss Countercls.

(“Defs.‟ Resp.”), Ex. 1 (Doc. 26-1).)
The Mississippi state litigation was originally before
then-Hinds County Circuit Judge Bobby DeLaughter. (Pl.‟s Mem.,
Ex. E, Rulings of the Court (Doc. 22-5) at 4.)

Judge DeLaughter

resigned from his position as Circuit Judge in part due to
alleged improper conduct substantially intertwined with the
litigation between Eaton and Frisby.

(Id. at 4-6)

Such alleged

conduct included inappropriate ex-parte communications with the
plaintiffs (Eaton) in the Mississippi litigation.

(Id. at 5)

Following Judge DeLaughter‟s resignation, the state action
between Eaton and Frisby was before Judge W. Swan Yerger.
at 4)

(Id.

Judge Yerger referred substantial portions of the case to

a Special Master for review of Judge DeLaughter‟s orders in
light of the allegations against him, as well as the Frisby
defendants‟ motion to dismiss.

(Id. at 5 & 7)

The Special

Master subsequently recommended that Judge Yerger grant the
state court defendants‟ motion to dismiss.

(Id. at 7)

Judge

Yerger agreed and dismissed the state court Eaton plaintiffs‟
claims with prejudice.

His order was certified as a final
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judgment.2

(Id., Ex. F, Final Judgment of Dismissal with

Prejudice (Doc. 22-6) at 2.)
Following Judge Yerger‟s ruling, Frisby Aerospace, LLC, now
known as Triumph Actuation Systems, LLC; Triumph Group, Inc.;
Frisby Aerospace, Inc., n/k/a Four Seventeen Aerospace, Inc.,
and Frisby Aerospace, Inc.; Jeffry D. Frisby; Kevin J. Clark;
James N. Ward; Douglas J. Murphy; Michael K. Fulton; Rodney L.
Case; and William D. Grayson (that is, the six engineers) filed
a lawsuit in Mississippi state court (Hinds County) against
Eaton Corporation; Aeroquip-Vickers, Inc.; Eaton Hydraulics,
Inc., f/k/a Vickers, Inc.; and Eaton Aerospace, LLC.
Resp., Ex. 3, Complaint (Doc. 26-3).)

(Defs.‟

That complaint was filed

under 42 U.S.C. § 1983 and was based on allegations that Eaton
had conspired with Judge DeLaughter, a state actor, to deprive
Frisby and the six engineers “of property without due process of
law and [their] constitutional rights to a fair hearing and an
impartial tribunal.”

(Id. ¶ 69.)

The defendants in that suit

(Eaton) filed counterclaims that are materially the same as
those in the instant suit, enumerated below.

That case was

removed to federal court in the Southern District of
Mississippi, where the district judge dismissed the
2

The state court plaintiffs, Eaton, appealed Judge Yerger‟s
ruling to the Mississippi Supreme Court where it is presently
pending.
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counterclaims under the doctrine of res judicata based on Judge
Yerger‟s ruling.

(Pl.‟s Suggestion of Subsequently Decided

Authority, Attach., Opinion and Order, 3:11-cv-110-WHB-FKB (Doc.
28-1) at 10.)
In the Complaint before this court, Plaintiff (Frisby)
alleges violations of the Sherman Antitrust Act, namely 15
U.S.C. § 1, Unlawful Agreement in Restraint of Trade; 15 U.S.C.
§ 2, Scheme to Monopolize; and 15 U.S.C. § 2, Conspiracy to
Monopolize.

(Complaint (Doc. 1) at 57-62.)

Defendants‟

(Eaton‟s) answer to the Complaint includes Counterclaims (Doc.
14) alleging violations of the Mississippi Uniform Trade Secrets
Act, conversion, fraud, tortious interference with existing
contractual relationship, and common law unfair competition.
Plaintiff has now moved to dismiss the counterclaims on the
ground that they are barred under the doctrine of res judicata
as having been litigated as a final matter in the Mississippi
state litigation.
(Doc. 21) at 1.)

(Pl.‟s Mot. to Dismiss Defs.‟ Countercls.
For substantially the same reasoning

articulated by the Southern District of Mississippi, this court
will grant Plaintiff‟s motion to dismiss the counterclaims filed
by Defendants.

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II. ANALYSIS
Plaintiff‟s Motion to Dismiss is grounded in the
application of res judicata from a judgment issued in
Mississippi state court.

As both parties properly observed, a

federal court must apply the res judicata principles of the
state that entered the putative preclusive judgment.

Kremer v.

Chemical Constr. Corp., 456 U.S. 461, 466 (1982) (noting that
the principle of full faith and credit “requires federal courts
to give the same preclusive effect to state court judgments that
those judgments would be given in the courts of the State from
which the judgments emerged”).

In this case, evaluation of res

judicata principles thus requires the application of Mississippi
law.
Under Mississippi law, two requirements must be satisfied
for res judicata to apply.

First, the following four identities

must exist: “(1) identity of the subject matter of the action;
2) identity of the cause of action; (3) identity of the parties
to the cause of action; and (4) identity of the quality or
character of a person against whom the claim is made.”

EMC

Mortg. Corp. v. Carmichael, 17 So. 3d 1087, 1090 (Miss. 2009).
Second, the party seeking application of res judicata must
demonstrate that the “prior judgment [was] a final judgment that
was adjudicated on the merits.” Id.
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Defendants do not appear to contend that the four
identities are not present.

Indeed, their response does not

address the “identities” component of Mississippi state law at
all.

(See Defs.‟ Resp. (Doc. 26).)

Nor do Defendants contend

that the state court order entered by Judge Yerger was not a
final judgment for res judicata purposes.3

(Id.)

This court

agrees, noting that the factual allegations in this case, as in
the state court litigation, center on the actions of the six
engineers, and the parties remain identical.
Rather, Defendants‟ argument that res judicata should not
serve to bar their counterclaims proceeds in two parts.
Defendants contend first that res judicata does not apply in an
instance in which the party seeking to relitigate did not have a
“[f]ull and [f]air [o]pportunity to [l]itigate [i]ts [c]laims”
in the first suit.

(Id. at 10.)

Second, Defendants argue, res

judicata is not applicable as to “claims arising from conduct
that occurred following the prior litigation.”

(Id. at 17.)

As to Defendants‟ first argument, determination of whether
or not they had a full and fair opportunity to litigate in
Mississippi state court, the Fourth Circuit has held that
3

Judge Yerger‟s Final Judgment of Dismissal with Prejudice
specifically states that his order dismissing the case with
prejudice “constitutes a Final Judgment . . . in accordance with
Rule 54(b) of the Mississippi Rules of Civil Procedure.” (Pl.‟s
Mem. (Doc. 22-6) at 2)(emphasis added.)
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“„state proceedings need do no more than satisfy the minimum
procedural requirements of the Fourteenth Amendment's Due
Process Clause in order to qualify for the full-faith-and-credit
guaranteed by [the full faith and credit statute].‟”

Lee v.

Winston, 717 F.2d 888, 894 (4th Cir. 1983) (quoting Kremer v.
Chem. Constr. Corp., 456 U.S. 461, 481 (1982)).

The court in

Lee did determine that Lee was denied procedural fairness,
noting that “despite several pleas for continuance, he was given
insufficient time in the state court proceedings to prepare an
important and technically complex issue on constitutional
dimension.”

(Id. at 896.)

No such insufficiency exists here.

As stated by the Southern District of Mississippi in reviewing
the same Mississippi state court litigation between these
parties,
[A] review of the docket . . . shows that Defendants
were given a reasonable opportunity to litigate the
motion to dismiss that was filed in that case.
Although Defendants argue that Judge Yerger denied
their request(s) for an evidentiary hearing on the
motion to dismiss, they have not cited any Mississippi
law or rule of court to show that Judge Yerger was
required to conduct such hearing and/or that they were
entitled to such hearing before the motion was
decided.
(Pl.‟s Suggestion of Subsequently Decided Authority, Attach.
(Doc. 28-1) at 6-7.)

This court finds that Defendants were
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afforded a “full and fair opportunity” to litigate their claims
in Mississippi state court, despite the litany of procedural
irregularities stemming from Judge DeLaughter‟s resignation,
Judge Yerger‟s appointment of a Special Master, and the
subsequent dismissal of the case with prejudice.

The state

procedure, though unusual, does not run afoul of the Fourteenth
Amendment‟s guarantee of notice and an opportunity to be heard.
As a result, lack of an opportunity to litigate the underlying
claim does not serve as a bar to the application of res judicata
in this case.
This court turns to the second argument, that Defendants‟
counterclaims are not barred by res judicata as to “claims
arising from conduct that occurred following the prior
litigation.”

(Defs.‟ Resp. (Doc. 26) at 17.)

Defendants cite a

number of cases from other circuits alongside the proposition
that “res judicata bars only those claims „in existence at the
time the original complaint is filed or claims actually asserted
by supplemental pleadings or otherwise in earlier action.‟” (Id.
at 18 (quoting Manning v. City of Auburn, 953 F.2d 1355, 1360
(11th Cir. 1992)).
This court is not persuaded by Defendants‟ theory of
“continuing claims,” finding instead that the counterclaims at
issue here are indeed based on facts and violations “in
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existence at the time the original complaint was filed,” that
is, the alleged misappropriation of technical information at the
time of the original complaint in the state suit.

Again, this

court is bound to apply the law of the state of Mississippi in
its res judicata analysis.

That law prevents a reviewing court

from “revisit[ing] adjudicated claims and all grounds for, or
defenses to recovery that were available to the parties in the
first action, regardless of whether they were asserted or
determined in the prior proceeding.”
1090.

Carmichael, 17 So. 3d at

At least some of the claims at issue in the Mississippi

state litigation were based on alleged continuing use of Eaton
information by the six engineers.

(See Pl.‟s Mem., Ex. A (Doc.

22-1) ¶ 115) (alleging that Frisby “had available in early 2002,
[and] still have and are actively using Eaton Aerospace‟s
engineering design database and product specifications to
design, manufacture and sell aeronautical hydraulics products in
competition with [Eaton]”).

As a result, this court does not

view the instant counterclaims as new assertions not subject to
res judicata.
This court does not find that Defendants were unable to
fully litigate their claims in state court, nor that the instant
counterclaims are based on information that could not have been
alleged in that suit.

As such, all of Defendants‟ counterclaims
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are subject to res judicata analysis.

Having determined that

the four identities necessary for applying res judicata are
satisfied, and that the underlying dismissal order constitutes a
final judgment that was adjudicated on the merits, this court
finds that Plaintiff‟s Motion to Dismiss should be granted.
III. CONCLUSION
For the foregoing reasons, IT IS THEREFORE ORDERED that
Plaintiff‟s Motion to Dismiss Defendants‟ Counterclaims (Doc.
21) is GRANTED and that the Counterclaims filed in this case are
hereby dismissed without prejudice.

A judgment consistent with

this Memorandum Opinion and Order will be entered
contemporaneously herewith.
This the 30th day of September, 2013.

________________________________________
United States District Judge

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