KNG, Inc. v. First Bank & Trust

Filing 15

OPINION AND ORDER: Defendant's Motion to Dismiss 3 is GRANTED. Accordingly, this case is DISMISSED. Signed on 7/27/2018 by Judge Ann L. Aiken. (ck)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
EUGENE DIVISION

KNG, INC.,
d/bla KLUPENGER NURSERIES INC.

Case No. 6:18-cv-00189AA
OPINION AND ORDER

Plaintiff,

v.
FIRST BANK & TRUST,
d/bla FIRSTLINE FUNDING GROUP
Defendant.

AIKEN, Judge:
In this action, plaintiff KNG, Inc. ("KNG") asserts a number of claims related to the
alleged breach of a series of shipping contracts. Plaintiff claims relief for unjust enrichment,
money had and received, and common law indemnification. Defendant First Bank & Ttust
("First Bank") moves to dismiss all of plaintiffs claims pursuant to Fed. R. Civ. P. 12(b)(6)
under the doctrines of claim and issue preclusion. (doc. 3). For the reasons set fo1th below,
defendant's motion is granted, and this action is dismissed.

Ill
Ill
Page 1 - OPINION AND ORDER

BACKGROUND
For the purposes of considering the motion to dismiss, plaintiffs allegations in its
complaint are accepted as true. 1

Plaintiff is a nursery and ornamental plant distributor

incorporated in the State of Oregon. Prior to 2012, Plaintiff entered into a series of shipping
contracts with United Distribution Services, Inc. ("UDS") who an-anged for transportation of
plaintiffs goods throughout the United States. Plaintiff contracted for compensation to UDS
through defendant First Bank.2 Under the terms of the contract, either UDS or First Bank was to
pay shipping agents on behalf of plaintiff. When plaintiff discovered that neither UDS nor First
Bank had made certain payments to plaintiffs shipping vendors as proscribed, plaintiff made
repeated demands that the funds be remitted or paid to the shipping vendors. Plaintiff alleges
that those defendants did not remit the funds or tender payments to the shipping vendors.
Further, neither UDS nor First Bank provided plaintiff with requested documentation regarding
the disputed transactions and disposition of the funds tendered to defendants by plaintiff.
In November 2012, plaintiff instituted an action (the "2012 suit") against UDS and First
Bank in Multnomah County Circuit Comi. Plaintiff included in the action Bardue Transportation
1

Although district cou1is ordinarily may not consider any material beyond the pleadings
in ruling on a Rule 12(b)(6) motion, they may take judicial notice of documents referenced in the
complaint, pleadings from other relevant proceedings, as well as matters in the public record,
without conve1iing a motion to dismiss into one for summa1y judgment. Intri-Plex Techs., Inc.
v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). Defendant requests that this Comi take
judicial notice of documents related to prior proceedings between both parties to the present suit.
See KNG, Inc. v. United Distribution Services, Inc., Multnomah County Circuit Court Case No.
1211-14979 and KNG, Inc. v. First Bank and Trust, Multnomah County Circuit Comi Case No.
l 7CV37923. These documents include the complaint, signed order of default, general judgment
with money award, and motion to correct judgment from the 2012 suit and the complaint,
general judgment of dismissal, and order denying motion to reinstate from the 2017 suit. Def.'s
Mot. Dismiss 3. No pmiy has objected to the submissions. The Comi concludes that the
documents are appropriate subjects for judicial notice, referencing such in development of the
present factual and procedural record.
2

The November 21, 2012 and the September 5, 2017 complaints refer to defendant First
Bank and Trust as "Firstline."
Page 2 - OPINION AND ORDER

Services, Inc. ("BTS"), an alleged continuation business of UDS, Baxter Baily & Associates,
Inc. ("BBA"), an assignee of two debts relevant to the disputed contracts, and Lukas Bardue
("Bardue"), the alleged owner of UDS and BBA. Plaintiff raised claims for breach of contract
against UDS, BTS, and Bardue, breach of fiduciary duty and indemnification against UDS, BTS,
Bardue, and First Bank, sought declaratory judgment against all defendants, and declaratory
judgment for veil piercing against UDS, BTS, and Bardue. Plaintiff claimed economic damages
in the sum of$95,000 plus prejudgment interest of9% per annum from July 1, 2012 until paid in
full. Id

at~

35.

On February 27, 2015, the Multnomah County Circuit Court issued a default judgment in
favor of plaintiff on plaintiffs claims for breach of contract, breach of fiduciary duty,
indemnification/contribution, and veil piercing as against defendants Bardue, UDS, and BTS.
Monetary damages were awarded to plaintiff against Bardue, UDS, and BTS in the amount of
$95,000 with costs pursuant to Oregon Rules of Civil Procedure ("ORCP") 68. Stein Deel. Ex.
3, 3:5, 3:9-10. The judgment also entitled plaintiff to pre-judgment interest in the amount of
$20,918.21 and post-judgment interest of 9% per annum from entry of judgment until paid in
full. Id. at 3:6-8. On June 21, 2016, more than one year after the default judgment was entered,
plaintiff filed a motion to cotTect the judgment pursuant to ORCP 71A. Plaintiff averred that,
although First Bank was subject to the judgment previously submitted to the court for signature,
that judgment was never signed and First Bank was omitted from the final judgment. Court
records reveal that the motion was neither granted nor denied by the circuit couti. No additional
actions have been taken by the parties with respect to the judgment against Bardue, UDS, and
BTS ..

Page 3 - OPINION AND ORDER

In September 2017, plaintiff initiated another action (the "2017 suit") against defendant
assetting claims for unjust enrichment and money had and received. Plaintiff again claimed
economic damages in the sum of $95,000 plus prejudgment interest of 9% per amrnm from July
1, 2012 until paid in full, attorney fees and associated costs, and any equitable relief granted at
the coutt's discretion. Stein Deel., Ex. 6, if 12.
The Circuit Court dismissed the action for failure to prosecute on December 28, 2017.
Plaintiff filed a motion to vacate the judgment of dismissal on January 26, 2018. Following
briefing by both parties and a hearing, plaintiffs motion was denied.
Plaintiff filed the present Complaint before this Cou11 on January 30, 2018. The facts
alleged arise from the same transactions underlying plaintiffs claims in both the 2012 and 2017
suits, namely, that plaintiff entered into a series of contracts with UDS and that defendant, acting
as the factoring agent, failed to pay the shipping agents on behalf of plaintiff. Plaintiff claims
that defendant's nonpayment of the shipping fees entitle it to relieffor unjust enrichment, money
had and received, and indemnification in money damages amounting to $95,000 plus
prejudgment interest from July 1, 2012 until paid in full. Id. at

~

8, 11, 12, 19. Defendant now

moves this Cout1 to dismiss the action under the doctrines of claim and issue preclusion.
STANDARDS

Courts must dismiss an action when the plaintiff "fail[s] to state a claim upon which
relief can be granted." Fed. R. Civ. P. 12(b)(6). A court considering a motion to dismiss for
failure to state a claim construes the complaint in favor of the plaintiff and takes the complaint's
factual allegations as true. Daniels-Hall v. Nat'! Educ. Ass'n, 629 FJd 992, 998 (9th Cir. 2010).
"[F]or a complaint to survive a motion to dismiss, the non-conclus01y 'factual content,' and
reasonable inferences from that content, must be plausibly suggestive of a claim entitling the

Page 4 - OPINION AND ORDER

plaintiff to relief." Moss v. US. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
"A claim has facial plausibility when the plaintiff pleads factual content that allows the
comi to draw a reasonable inference that the defendant is liable for the misconduct alleged."

Iqbal, 556 U.S. at 678. "Dismissal under Rule(l2)(b)(6) is proper only when the complaint
either (1) lacks a cognizable theory or (2) fails to allege sufficient facts to supp01i a cognizable
legal theory." Zixiang Liv. Keny, 710 F.3d 995, 999 (9th Cir. 2013).
DISCUSSION

Defendant asse1is that claim preclusion requires dismissal of the present action because
the claims asse1ied here are based on the same factual transactions underlying both the 2012 and
the 2017 suits. Defendant further contends that the 2015 general default judgment in plaintiffs
favor constitutes a final judgment precluding plaintiff from now relitigating those claims and
recovering additional or alternative remedies.
"Under the doctrine of claim preclusion, a final judgment forecloses 'successive litigation
of the very same claim, whether or not relitigation of the claim raises the same issues as the
earlier suit."' Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New Hampshire v. Maine,
532 U.S. 742, 748 (2001)). In determining the preclusive effect of a state comi judgment,
federal comis follow the state's mies of preclusion. White v. City of Pasadena, 671 F.3d 918,
926 (9th Cir. 2012). In Oregon:
[a] plaintiff who has prosecuted one action against a defendant through to a final
judgment is batTed ... from prosecuting another action against the same defendant when
the claim in the second action is one which is based on the same factual transaction that
was at issue in the first, seeks a remedy additional or alternative to the one sought earlier,
and is of such a nature as could have been joined in the first action.

Page 5 - OPINION AND ORDER

Zybach v. Perryman, 383 P.3d 314, 319 (Or. Ct. App. 2016) (quoting Drews v. EB! Cos., 795
P.2d 531, 535 (Or. 1990)). "The burden to establish the requisite elements of issue or claim
preclusion rests with the one seeking to invoke that rule." D'Amico ex rel. Tracey v. Ellinwood,
149 P.3d 277, 283 (Or. Ct. App. 2006) (citing State Farm Fire & Cas. Co. v. Centwy Home
Components, Inc., 550 P.2d 1185, 1188 (Or. 1976)).
Unlike issue preclusion, "claim preclusion requires neither that an issue of law or fact be
actually litigated nor that the determination of an issue be essential to the final or end result of
the proceedings." Evangelical Lutheran Good Samaritan Society v. Bonham, 32 P.3d 899 (Or.
Ct. App. 2001) (citing Drews, 795 P.2d at 535) (internal quotations omitted). Accord North
Clackamas School Dist. v. White, 752 P.2d 1210 (Or. 1988) (discussing issue preclusion, "[i]f a
claim is litigated to final judgment, the decision on a particular issue or dete1minative fact is
conclusive in a later or different action between the same paities if the determination was
essential to the judgment"). "Where there is an opportunity to litigate a question along the road
to the final dete1mination of the action or proceeding, neither party may later litigate the subject
or question." Drews, 795 P.2d at 535 (emphasis added).
Oregon courts rest claim preclusion law on policies that include "(1) achieving finality to
a conclusion of a dispute, and (2) preventing splitting of that dispute into separate controversies."
Id In an effort to "protect limited dispute-resolution resources from repeated expenditure upon
the same overall dispute ... a valid and final personal judgment is conclusive between the parties,
except on appeal or other direct review." Id (citing Restatement (Second) of Judgments§§ 17,
18, 19 and 27 (1982)).

I II
I II

Page 6 ~OPINION AND ORDER

I.

Effect ofDefault Judgment in the 2012 Suit

It is undisputed that plaintiffs claims in the present lawsuit arise from the same factual
transaction underlying the claims asserted in both the 2012 and 2017 suits. In the present suit,
plaintiff claims money damages for unjust enrichment, money had and received, and common
law indemnification in the amount of $95,000. To recover these damages would undisputedly
amount to an additional or altemative remedy to that obtained in the default judgment of the
2012 suit. Finally, the present claims are of the nature that they could have, and indeed were,
joined in the previous actions.
Hence, the relevant issue is whether the default judgment in the 2012 suit constitutes a
valid and final judgment. Plaintiff avers that the 2012 default judgment cannot be construed as
against defendant since defendant was omitted from the signed judgment.

Although the

procedural contours of the 2012 suit do convolute the assessment, I find both the Oregon
statutory framework defining conclusiveness of judicial orders and the post-judgment actions of
the Multnomah County Circuit Comt to be compelling assertions of finality against defendant.
According to Or. Rev. Stat.§ 43.130, the 2012, default judgment is cleanly construed as
(1) a judgment (2) in a proceeding before a comt or judge of this state (3) having jurisdiction

(assumed, arguendo, at this juncture).

That judgment is "in respect to the matter directly

determined, conclusive between the patties ... litigating for the same thing." Or. Rev. Stat.
§ 43.130(2).
Plaintiff brought the 2012 action against a number of patties, including defendant.
Although defendant did not make an appearance in the 2012 suit, all matters before the circuit
comt included it as a defendant to the contract dispute. When the default judgment was issued,
defendant was omitted. In its judgment, the Circuit Comt found the evidence sufficient to "find

Page 7 - OPINION AND ORDER

m favor of plaintiff as [to] its claims for breach of contract, breach of fiduciary duty,
indemnification/contribution, and veil piercing against defendants Lukas Bardue, United
Distribution Services, Inc., and Bardue Transportation Services, Inc." Stein Deel., Ex. 3 at 1:2225. Plaintiff later filed a motion to correct the judgment to include defendant, and the circuit
court in its discretion denied to the request to amend. Although defendant was not listed on the
final judgment list of debtors, the 2012 judgment is rightly construed as conclusive between the
patiies "litigating for the same thing" and, more persuasively, as "a judgment [in] favor of the
plaintiff." Or. Rev. Stat.§ 43.130(2). Restatement (Second) of Judgments§ 17 (1982) (cited by
Drews, 795 P .2d at 535).
Here plaintiff seeks to revive the oppmiunity to litigate a claim against defendant where
an oppo1iunity previously existed. "Well-settled principles of claim preclusions foreclose[ ] a
party that has litigated a claim against another from fmiher litigation on that same claim on any
ground or theory of relief that the paiiy could have been litigated in the first instance." Lincoln
Loan Co. v. City of Portland, 340 Or. 613, 619-20 (Or. 2007) (citing Bloomfield v. Weakland,
339 Or. 504, 511 (Or. 2005) (internal quotations omitted). Indeed the 2012 case involved a
unique series of events resulting in a default judgment in favor of plaintiff. However, even in its
obscurities, that action provided the opportunity to litigate plaintiffs claim of indemnification
and the related claims of unjust emichment and money had and received raised later in both the
2017 suit and in the present Complaint.

To assert otherwise would unde1mine the varied

procedural routes by which a claim is litigated to finality.
Plaintiff has a valid and final judgment in its favor issued by a state court upon which it
may act. The opportunity to litigate the present claims against defendant was present in that
action and the trial comi found sufficient evidence to award plaintiff damages of more than

Page 8 - OPINION AND ORDER

$100,000 against three of the five defendants to that suit. In denying plaintiffs request to
amend, the circuit court affirmed its judgment as against the listed parties and this Court should
not now upset that judgment. Moreover, Oregon's well-womjudicial framework provides routes
for appeal by which disapproving parties may seek review of unfavorable decisions thatfo/low a
general judgment. See Or. Rev. Stat. § 19.205(3). Plaintiff has or had mechanisms at its
disposal to appeal the trial court's denial of plaintiffs motion to correct the default judgment. Id.
Additionally, dismissing the present case on the doctrine of claim preclusion does not bar KNG
from seeking judicial enforcement of the 2012 judgment. Prudential considerations enumerated
by Oregon comis fmiher counsel that I dismiss an action that would upset a state comi judgment
pursuant to longstanding principles of finality.
I therefore conclude that defendant has met its burden to show that plaintiff has
previously asse1ied a claim against First Bank arising from the same transactions underlying a
previous suit, the result of which was a valid and final judgment in favor of plaintiff. It is both
legally proper and judicially prudent to deny relitigation of that claim here.3

IL

Effect ofDismissal in 2017 Suit

Under Oregon law, when "a court dismisses a plaintiffs action on a matter of
procedure ... without ruling as to the substantive validity of plaintiffs claim for relief, that
dismissal will not generally ... preclude subsequent action based on the same claim." Corn us
Corp. v. Geac Enterprise Solutions, Inc., 289 P.3d 267, 273 (Or. Ct. App. 2012) (quoting Rennie
v. Freeway Transport, 656 P.2d 919, 925 (Or. 1982)). Plaintiff relies on ORCP 54(B) for its

'An affomative finding of claim preclusion canies sufficient legal force to dismiss the
claim in its entirety. As such and in the interest of judicial economy, I need not decide the
application of issue preclusion to the present case.
Page 9- OPINION AND ORDER

assetiion that Oregon law would not give preclusive effect to the 2017 judgment. That rule
provides, in pati:
"(l) Failure to comply with rule or order. For failure of the plaintiff to prosecute or to
comply with these rules or any order of court, a defendant may move for a judgment of
dismissal of an action or of any claim against such defendant.

"*****

"(4) Effect of judgment of dismissal. Unless the comi in its judgment of dismissal
otherwise specifies, a dismissal under this section operates as an adjudication without
prejudice."
ORCP 54(B). Plaintiff contends that, because the judgment of dismissal merely states that
"[t]his action is dismissed," the judgment operates as an adjudication without prejudice and does
not have claim-preclusive effect. Pl.'s Resp. Opp'n Mot. Dismiss, 2 (doc. 8). Applying Oregon
common law, Oregon coutis would not give preclusive effect to a prior judgment of dismissal for
failure to prosecute or to comply with a comi's order because it was not the product of a decision
on the substantive merits of the dismissed claims. Cornus, 289 P.3d at 272. In this case,
because the circuit court's dismissal of the action was not based on the substantive validity of
plaintiffs claims, the judgment is not a decision "on the merits" and does not preclude this action
under Oregon law. Rennie, 656 P.2d at 925.
However, this issue is not dispositive to the present motion, as the Court has already held
that final Judgment in 2012 lawsuit has preclusive effect.

I II
I II
I II
I II
I II

Ill

Page 10 - OPINION AND ORDER

CONCLUSION

Defendant's Motion to Dismiss (doc. 3) is GRANTED. Accordingly, this case is
DISMISSED.
IT IS SO ORDERED.
Dated this

21 day of July 2018.
Arm Aiken
United States District Judge

Page 11 - OPINION AND ORDER