Roman-Rivera et al v Puerto Rico Electric Power Authority et al
Filing
69
OPINION AND ORDER adopting Report and Recommendation re 63 . For the reasons set forth in the instant Opinion and Order, the Court hereby denies Defendant's Motion for Summary Judgment 41 . IT IS SO ORDERED. Signed by Judge Daniel R. Dominguez on 03/14/2014.(MM)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
DARIO ROMAN RIVERA, ET AL.,
Plaintiffs,
v.
Civil No.: 11-2003(DRD)
PUERTO RICO ELECTRIC POWER
AUTHORITY, ET AL.,
Defendants
OPINION AND ORDER
On October 9, 2011, Plaintiffs filed a complaint against
the
Puerto
executives
Rico
and
Electric
Power
governing
Authority
board
(“PREPA”)
members
and
its
(collectively,
“Defendants”) alleging violations under the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-62(d),
and
for
mail
and
wire
fraud,
18
U.S.C.
§§
1341
and
1343.
Therein, Plaintiffs seek certification of the following class:
“All consumers of electricity sold by PREPA, both individuals
and corporations, who were overcharged by PREPA, as described in
[the] complaint, between the year 2007 and the present.”
Pending before the Court is PREPA’s Motion for Summary
Judgment
(Docket
No.
41)
and
Plaintiffs’
Opposition
Defendant’s Motion for Summary Judgment (Docket No. 50).
to
The
Court referred the instant motion to Magistrate Judge Marcos E.
1
López on July 29, 2013 (Docket No. 46). The Magistrate Judge
entered
his
Report
and
Recommendation
and
on
Recommendation,
February
10,
2014
(Docket No. 63).
In
his
Report
the
Magistrate
Judge
recommended that PREPA’s Motion for Summary Judgment be denied.
Specifically,
the
Magistrate
found
that
PREPA
was
unable
to
demonstrate that the case at bar should be dismissed under the
doctrines
Magistrate
of
claim
concluded
preclusion
and
that
failed
PREPA
issue
to
preclusion.
presented
The
evidence
that the prior state court claims were either actually litigated
or that a final judgment on the merits was issued.
Lastly, the
Magistrate determined that the parties in the state cause of
action were not identical to the ones in the instant matter,
therefore barring dismissal of the instant case.
On March 7, 2014, PREPA filed its Objection to Report and
Recommendation
(Docket
No.
67)
averring
that
the
Magistrate
Judge had erred in concluding that claim and issue preclusion
were
inapplicable
to
the
instant
1
case.1
PREPA
argues
that
On February 19, 2014, PREPA filed a Motion for Extension of Time until
February 28, 2014 to file its Objections to the Report and Recommendation
(Docket No. 64).
The Court summarily denied said request, emphasizing that
the instant motion was reportable in March 31, 2014 (Docket No. 65).
The
Court stresses that both the Order of Referral (Docket No. 46) and the Report
and Recommendation specifically stated that the parties had five (5) business
days to file any objections to the Magistrate Judge’s findings.
The Court
further emphasizes that all parties were forewarned that “no extensions of
time shall be authorized to the parties to file objections to the Report and
Recommendation and that failure to submit the objections within the deadline
provided shall be deemed by the Court as objections being waived.”
Docket
No. 46, Pg. 2.
However, in the interests of justice, the Court sua sponte
2
although
state
the
substantive
court,
the
issue
state
of
claims
class
were
not
litigated
certification
was,
in
thereby
warranting dismissal of the instant matter.
On March 11, 2014, Plaintiffs filed their Opposition to
Defendant’s Objections to Report and Recommendation (Docket No.
68) contending that the allegations in the instant complaint are
factually different from those in the state court proceedings
and that “due process precludes a non-certified class action
from having preclusive effect on absent parties.”
Docket No.
68, at 9.
I. REFERRAL TO THE MAGISTRATE JUDGE
The Court may refer dispositive motions to a United States
Magistrate Judge for a Report and Recommendation pursuant to 28
U.S.C. §636(b)(1)(B).
See FED. R. CIV. P. 72(b); see also Local
Rule
v.
72(a);
(1976).
Matthews
An
adversely
Weber,
423
affected
U.S.
261,
party
may
96
S.Ct.
contest
549
the
Magistrate’s Report and Recommendation by filing its objections.
FED. R. CIV. P.
72(b).
Moreover,
28
U.S.C.
§636(b)(1),
in
pertinent part, provides that
any party may serve and file written
objections to such proposed findings and
recommendations as provided by rules of
court. A judge of the court shall make a de
novo determination of those portions of the
reconsidered its decision on March 4, 2014 (Docket No. 66) and granted PREPA
until March 8, 2014 at 5:00 PM to file its objections.
The Court further
granted Plaintiffs until March 11, 2014 to file its opposition.
3
report or specified proposed findings or
recommendations to which objection is made.
A judge of the court may accept, reject, or
modify, in whole or in part, the findings or
recommendations made by the magistrate.
“Absent objection, . . . [a] district court ha[s] a right to
assume that [the affected party] agree[s] to the magistrate’s
recommendation.”
247
(1st
Cir.
Templeman v. Chris Craft Corp., 770 F.2d 245,
1985),
cert
denied,
474
U.S.
1021
(1985).
Additionally, “failure to raise objections to the Report and
Recommendation
waives
that
party’s
right
to
review
in
the
district court and those claims not preserved by such objections
are precluded upon appeal.”
Davet v. Maccarone, 973 F.2d 22,
30-31 (1st Cir. 1992); see Henley Drilling Co. v. McGee, 36 F.3d
143,
150-51
required
(1st
when
Cir.
1994)
challenging
(holding
findings
that
actually
objections
set
out
are
in
a
magistrate’s recommendation, as well as the magistrate’s failure
to
make
Standish,
additional
984
“[o]bjection
to
F.2d
a
findings);
25,
27
see
(1st
magistrate’s
also
Lewry
Cir.
1993)(stating
report
preserves
v.
Town
only
of
that
those
objections that are specified”); Borden v. Sec. of H.H.S., 836
F.2d 4, 6 (1st Cir. 1987)(holding that appellant was entitled to
a de novo review, “however he was not entitled to a de novo
review of an argument never raised”).
The Court, in order to accept unopposed portions of the
Magistrate Judge’s Report and Recommendation, need only satisfy
4
itself that there is no “plain error” on the face of the record.
See Douglass v. United Servs. Auto, Ass’n, 79 F.3d 1415, 1419
(5th Cir. 1996)(en banc)(extending the deferential “plain error”
standard of review to the un-objected to legal conclusions of a
magistrate judge); see also Nettles v. Wainwright, 677 F.2d 404,
410
(5th
Cir.
acceptance
reviewed
1982)(en
of
un-objected
for
“plain
banc)(appeal
to
error”);
from
findings
see
also
of
district
court’s
magistrate
judge
Nogueras-Cartagena
v.
United States, 172 F.Supp. 2d 296, 305 (D.P.R. 2001)(finding
that
the
“Court
reviews
Recommendation
to
recommendation
was
[unopposed]
ascertain
clearly
whether
Magistrate’s
or
not
the
erroneous”)(adopting
Report
and
Magistrate’s
the
Advisory
Committee note regarding FED.R.CIV.P. 72(b)); see also Garcia v.
I.N.S., 733 F.Supp. 1554, 1555 (M.D.Pa. 1990)(finding that “when
no objections are filed, the district court need only review the
record for plain error”).
In the instant case, Defendant PREPA has filed objections
to the Magistrate Judge’s Report and Recommendation (Docket No.
67).
Thus, the Court reviews the portions of the Report and
Recommendation to which objections were made de novo and reviews
all other unobjected-to portions only for plain error.
After a careful analysis, the Court finds no “plain error”
in
the
unobjected-to
Procedural
Background
and
Summary
of
Proposed Facts sections of the Magistrate Judge’s Report and
5
Recommendation.
Thus, rather than repeating the set of facts
that pertain to the instant case in their entirety, the Court
hereby
ACCEPTS,
ADOPTS
AND
INCORPORATES
by
reference
the
Magistrate Judge’s findings of fact in toto, noting particularly
that
they
remain
unchallenged.2
The
Court
agrees
with
the
Magistrate’s determination that Plaintiffs’ opposition fails to
comply with Local Civil Rule 56 and therefore deems admitted all
of the facts that were properly cited and set forth in PREPA’s
Statement of Uncontested Material Facts (Docket No. 41-10).3
II. STANDARD OF REVIEW FOR SUMMARY JUDGMENT MOTIONS
Rule 56 of the Federal Rules of Civil Procedure provides
that summary judgment should be entered where “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.”
56(c);
see
Celotex
Corp.
v.
Catrett,
477
FED. R. CIV. P.
U.S.
317,
324-325
2
Although PREPA argues that the Magistrate overlooked several key facts when
conducting his analysis (Docket No. 67, at 10), the Court ascertains that the
Procedural Background and Summary of Proposed Facts sections remain
unchallenged.
3
As the Magistrate correctly indicated, the parties were specifically
admonished that failure to comply with Local Rule 56 would result in the
Court deeming admitted the facts set forth in the movant party’s statement
(Docket No. 19, Pg. 4). Local Civil Rule 56 requires that a party opposing a
motion for summary judgment submit an opposing statement of material facts
admitting, denying, or qualifying “the facts supporting the motion for
summary judgment by reference to each numbered paragraph of the movant
party’s statement of material facts.” Local Civ. R. 56(c). Further, “unless
a fact is admitted, the opposing statement shall support each denial ... by a
record citation....” Id.
Therefore, facts supported by citations to the
record shall be deemed admitted unless properly controverted.
6
(1986).
Pursuant to the clear language of the rule, the moving
party bears a two-fold burden: it must show that there is “no
genuine issue as to any material facts;” as well as that it is
“entitled to judgment as a matter of law.”
Veda-Rodriguez v.
Puerto Rico, 110 F.3d 174, 179 (1st Cir. 1997).
A fact is
“material” where it has the potential to change the outcome of
the suit under governing law.
See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
A fact is “genuine” where a
reasonable jury could return a verdict for the nonmoving party
based on the evidence.
Id.
Thus, it is well settled that “the
mere existence of a scintilla of evidence” is insufficient to
defeat a properly supported motion for summary judgment.
Id.
After the moving party meets this burden, the onus shifts
to the non-moving party to show that there still exists “a trial
worthy issue as to some material facts.”
Cortes-Irizarry v.
Corporacion Insular, 11 F.3d 184, 187 (1st Cir. 1997).
At the summary judgment stage, the trial court examines the
record
“in
the
light
most
flattering
to
the
non-movant
and
indulges in all reasonable references in that party’s favor.
Only if the record, viewed in this manner and without regard to
credibility determinations, reveals no genuine issue as to any
material fact may the court enter summary judgment.”
v. Hayes, 116 F.3d 957, 959-60 (1st Cir. 1997).
Cadle Co.
“Credibility
determinations, the weighing of the evidence, and the drawing of
7
legitimate inferences from the facts are jury functions, not
those of a judge.”
Reeves v. Sanderson Plumbing Prod., 530 U.S.
133, 150 (2000)(quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 250-51, 106 S.Ct. 2505 (1986)).
Summary judgment is
inappropriate where there are issues of motive and intent as
related to material facts.
See Poller v. Columbia Broad. Sys.,
369 U.S. 470, 473, 82 S.Ct. 486 (1962)(summary judgment is to be
issued “sparingly” in litigation “where motive and intent play
leading roles”); see also Pullman-Standard v. Swint, 456 U.S.
273, 288, 102 S.Ct. 1781 (1982)(“findings as to design, motive
and intent with which men act [are] peculiarly factual issues
for the trier of fact.”);
see also
Dominguez-Cruz v. Suttle
Caribe, Inc., 202 F.3d 424, 433 (1st Cir. 2000)(finding that
“determinations of motive and intent . . . are questions better
suited for the jury”).
“As we have said many times, summary
judgment is not a substitute for the trial of disputed factual
issues.”
178-179
Rodríguez v. Municipality of San Juan, 659 F.3d 168,
(1st
Cir.
2011)(internal
quotations
and
citations
omitted).
Conversely, summary judgment is appropriate where the
nonmoving
party
improbable
rests
inferences
solely
and
upon
“conclusory
unsupported
allegations,
speculation.”
Ayala-
Gerena v. Bristol Myers-Squibb Co., 85 F.3d 86, 95 (1st Cir.
1996).
However,
while
the
Court
“draw[s]
all
reasonable
inferences in the light most favorable to [the non-moving party]
8
. . . we will not draw unreasonable inferences or credit bald
assertions,
empty
conclusions
or
rank
conjecture.”
Vera
v.
McHugh, 622 F.3d 17, 26 (1st Cir. 2010)(internal quotations and
citation omitted).
to
conclusory
Moreover, “we afford no evidentiary weight
allegations,
empty
rhetoric,
unsupported
speculation, or evidence which, in the aggregate, is less than
significantly
probative.”
Tropigas
De
P.R.
v.
Certain
Underwriters at Lloyd’s of London, 637 F.3d 53, 56 (1st Cir.
2011)(internal citations omitted).
Further, the Court will not consider hearsay statements or
allegations presented by parties that do not properly provide
specific reference to the record. See D.P.R. CIV. R. 56(e)(“The
[C]ourt may disregard any statement of fact not supported by a
specific citation to the record material properly considered on
summary judgment.
search
or
The [C]ourt shall have no independent duty to
consider
any
part
of
the
record
not
specifically
referenced.”);
see also Morales, 246 F.3d at 33 (finding that,
where
fails
record
a
party
citations,
appropriate);
to
buttress
judgment
factual
against
issues
that
with
party
proper
may
be
Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st
Cir. 1990)(“Hearsay evidence, inadmissible at trial, cannot be
considered on a motion for summary judgment.”).4
4
D.P.R. CIV. R. 56(b), often referred to as the anti-ferret rule, requires the
party moving for summary judgment to submit a “separate, short, and concise
statement of material facts, set forth in numbered paragraphs, a s to which
9
If a defendant fails to file an opposition to the motion
for summary judgment, the district court may consider the motion
as unopposed and disregard any subsequently filed opposition.
Velez v. Awning Windows, Inc., 375 F.3d 35, 41 (1st Cir. 2004).
Furthermore,
uncontested
the
district
statements
of
court
fact.
must
Id.
at
take
as
41-42;
true
see
any
D.P.R.R.
311.12; see Morales, 246 F.3d at 33 (“This case is a lesson in
summary judgment practice …. [P]arties ignore [Rule 311.12] at
their
own
disputed
peril,
facts,
and
…
failure
embroidered
with
to
present
specific
a
statement
citations
to
of
the
record, justifies deeming the facts presented in the movant’s
statement of undisputed facts admitted.”)(internal citations and
quotations omitted); see also Euromodas, Inc. v. Zanella , Ltd.,
368 F.3d 11, 14-15 (1st Cir. 2004).
However, this does not mean
that summary judgment will be automatically entered on behalf of
the moving party, as the court “still has the obligation to test
the undisputed facts in the crucible of the applicable law in
order to ascertain whether judgment is warranted.” See Velez,
375 F.3d at 42.
the moving party contends there is no genuine issue
Similarly, the non-moving party is required to submit
“admit[ing], deny[ing] or qualify[ing] the facts by
numbered paragraph in the moving party’s statement of
unless a fact is admitted, shall support each denial
record citation.” D.P.R. CIV. R. 56(c).
10
of material fact.”
a counter-statement
reference to each
material facts and
or qualification by
III. LEGAL ANALYSIS
The
Court
agrees
with
the
Magistrate
Judge
that
the
doctrines of issue preclusion and claim preclusion do not apply
to Plaintiffs’ causes of action in the instant case.
Defendants
aver that collateral estoppel, i.e. issue preclusion, bars the
re-litigation of a fact essential to the judgment entered in a
prior lawsuit amongst the parties and that res judicata, i.e.
claim preclusion, prohibits Plaintiffs from litigating claims
they
should
have
litigated
in
an
earlier
proceeding.
Conversely, Plaintiffs argue, inter alias, that neither claim
nor issue preclusion apply, as both the parties and the issues
litigated in state court were different from the ones currently
before the Court.
The doctrines of claim preclusion and issue preclusion are
sometimes incorrectly conflated into the single doctrine of “res
judicata.”
While both claim preclusion and issue preclusion
determine the preclusive effect of a judgment, they are two
separate concepts and doctrines.
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
Sturgell,
same
553
issues
U.S.
880,
as
892
the
earlier
suit.”
(2008)(quoting
New
Taylor
v.
Hampshire
v.
Maine, 532 U.S. 742, 748 (2001))(internal quotations omitted).
Conversely, issue preclusion “bars the successive litigation of
11
an issue of fact or law actually litigated and resolved in a
valid court determination essential to the prior judgment, even
if the issue recurs in the context of a different claim.”
Id.
(quoting New Hampshire, 532 U.S. at 748-749)(internal quotations
omitted).
Both claim preclusion and issue preclusion operate as a bar
to the litigation or re-litigation of claims or issues that were
or could have been adjudicated in a prior judicial action for
which a final judgment on the merits has been rendered.
Nuñez-
Colon v. Toledo-Davila, 648 F.3d 15 (1st Cir. 2011); SuarezCestero v. Pagan Rosa, 198 F.Supp.2d 73, 84 (D.P.R. 2002); BaezCruz v. Municipality of Comerio, 140 F.3d 24 (1st Cir. 1995);
Apparel Art International, Inc. v. Amertex Enterprises Ltd., 48
F.3d 576 (1st Cir. 1995); see also Parklane Hoistery Co., Inc.
v. Shore, 439 U.S. 322, 326 n.5 (1979).
The First Circuit has
further
and
indicated
that
claim
preclusion
issue
preclusion
operate “as an absolute bar to the re-litigation of the same
cause of action between the parties (or their privies) and that
a prior judgment rendered on the merits is conclusive not only
to the issues which were determined but as to all the matters
which might have been determined as well.”
Westcott Const. v.
Firemen’s
14,
Fund
of
New
Jersey,
996
F.2d
16
(1st
Cir.
1993)(quoting Griffin v. State of R.I., 760 F.2d 359, 360 (1st
Cir. 1991)).
12
Both
doctrines
“prevent[ing]
instead
seek
to
plaintiffs
“provide
a
conserve
from
strong
judicial
splitting
incentive
for
resources
by
claims”
and
their
them
to
plead
all
factually related allegations and attendant legal theories for
recovery the first time they bring suit.”
Apparel Art Int’l, 48
F.3d at 583; see Taylor, 553 U.S. at 892 (“By precluding parties
from
contesting
matters
that
they
had
a
full
and
fair
opportunity to litigate, these two doctrines protect against the
expense
and
vexation
attending
multiple
lawsuits,
conserve
judicial resources, and foster reliance on judicial action by
minimizing the possibility of inconsistent decisions.”)(quoting
Montana v. United States, 440 U.S. 147, 153-154 (1979))(internal
quotations omitted).
We
noting
briefly
that
analyze
“where,
as
each
of
here,
a
PREPA’s
arguments
[Magistrate]
has
in
turn,
produced
a
first-rate work product, a reviewing tribunal should hesitate to
wax longiloquence simply to hear its own words resonate.”
In re
San Juan Dupont Plaza Hotel Fire Litig., 989 F. 2d 36, 38 (1st
Cir. 1993); see Vega-Morales v. Commissioner of Social Security,
380 F. Supp. 2d 54, 60 (D.P.R. 2005) (quoting Lawton v. State
Mut. Life Assu. Co. of Am., 101 F. 3d 218, 220 (1st Cir. 1996))
(“The Court need not go further for it refuses to write ‘at
length to no other end than to hear its own words resonate.’”).
13
A. Collateral Estoppel
For claim preclusion to apply, the movant has the burden of
proving that: (1) the earlier suit resulted in a final judgment
on the merits; (2) the causes of action asserted in the earlier
and later suits are sufficiently identical or related; and (3)
the
parties
in
the
two
suits
are
sufficiently
identical
or
closely related.
See P.R. Laws Ann., tit. 31, § 3343; Baez-Cruz
v.
of
Municipality
Comerio,
140
F.3d
24,
29
(1st
Cir.
1998)(“Although the statute speaks of res judicata, i.e., claim
preclusion,
estoppel
by
it
also
permits
issue
judgment.”)(internal
preclusion,
citations
or
and
collateral
quotations
omitted).
i.
Finality of the Earlier Suit
For “finality” purposes, a final decision is one that “ends
the litigation on the merits and leaves nothing for the court to
do but execute the judgment.”
Firestone Tire & Rubber Co. v.
Risjord, 449 U.S. 368, 373-374 (1981)(citations omitted); see
Acevedo-Villalobos
1994).
v.
Hernández,
22
F.3d
384,
388
(1st
Cir.
“Ordinarily, a dismissal for failure to state a claim is
treated as a dismissal on the merits, and there is abundant case
law to this effect.”
AVX Corp. v. Cabot Corp., 424 F.3d 28, 30
(1st Cir. 2005)(citations omitted).
In
his
Report
and
Recommendation,
the
Magistrate
Judge
emphasized that PREPA failed to present a scintilla of evidence
14
showing that the underlying claims filed in state court were in
fact fully litigated.
The Magistrate noted that all of the
state court opinions produced by PREPA pertain to the issue of
class certification, stressing that none of the opinions on the
record
demonstrate
that
the
underlying
issue,
whether
PREPA
overbilled its clients, was fully litigated in the state forum.
In
fact,
in
its
objection,
PREPA
concedes
that
claims were not litigated in the state courts.”
“Plaintiffs’
Docket No. 67,
at 10.
Claim
preclusion
mandates
that
a
final
judgment
on
the
merits be entered for collateral estoppel to apply, meaning that
the overbilling claims before the state courts must have been
fully adjudicated.
In failing to certify the proposed class,
the state courts made a procedural decision, not a substantive
one.
Hence, as the underlying overbilling claims were never
litigated on the merits, PREPA is unable to satisfy the first
prong of the claim preclusion test.
ii.
The
Identity Between the Causes of Action
determine
whether
the
two
causes
of
actions
were
sufficiently identical or related, courts look to the identity
of “things” and “causes” being litigated.
See P.R. Laws Ann.
tit. 31, § 3343. Under Puerto Rico law, “the test for identity
of
‘things’
is
whether
a
decision
contradict the prior adjudication.”
15
in
the
second
action
may
Boateng v. InterAmerican
University, Inc., 210 F.3d 56, 61 (1st Cir. 1994)(citing Lausell
Marxuach
v.
(1975)).
Díaz
de
Yáñez,
3
P.R.
Offic.
Trans.
742,
745
Further, the test for identity of “causes” refers to
“the main ground or origin of the action.”
Id.
In the case at bar, PREPA argues that Plaintiffs’ causes of
action are almost identical to the causes of action set forth
against PREPA in the state court proceedings.
The Court, after
conducting a thorough review of the record, remains unconvinced
that
the
identical
state
or
and
related
federal
as
to
proceedings
warrant
the
are
sufficiently
invocation
of
the
collateral estoppel defense.
At the outset, the Court notes that the state proceedings
relate
to
PREPA’s
overbilling
of
its
customers
before
2007,
whereas the current matter pertains to acts undertaken by PREPA
from
2007
forward.
Further,
Plaintiffs
posit
a
myriad
of
different reasons, when compared to those set forth in the state
court proceedings, to support their overcharging allegations.
Additionally,
Puerto
Rico’s
the
state
court
contractual
complaint
law
whereas
raises
the
an
issue
instant
of
matter
concerns a RICO violation.
From the evidence on the record, the Court simply cannot
find that a decision in the case at bar will, or even may,
contradict a prior adjudication.
Additionally, the Court holds
that the “causes” giving rise to the instant matter are neither
16
identical nor substantially related to the causes giving rise to
the state court litigation.
Hence, PREPA is unable to satisfy
the second prong of the claim preclusion test.
iii.
Identity of the Parties
The application of claim preclusion to parties that did not
have
an
opportunity
to
litigate
and/or
contest
the
earlier
action raises important constitutional rights and due-process
concerns.
See Gonzalez v. Banco Cent. Corp., 27 F.3d 751 (1st
Cir. 1994).
Therefore, the Court must inquire whether the final
judgment was entered against the same parties or persons in
privity with the parties of the second action.5
Privity has been
found
represented
to
exist
“where
the
party
adequately
nonparties’ interests in the prior proceeding.”
F.Supp.2d at 449.6
the
Robertson, 148
The Court considers not only the identity of
interests between the two parties, but also “whether the party’s
interests were fully represented in the earlier case, albeit by
another.”
County of Boyd v. US Ecology, Inc., 48 F.3d 359, 361
(8th Cir. 1995)(citations omitted).
5
“The term privity is merely a word used to say that the relationship
between one who is a party on the record and another is close enough to
include the other within res judicata.” Robertson v. Bartels, 148 F.Supp.2d
443, 449 (D.N.J. 2001)(quoting EEOC v. United States Steel Corp., 921 F.2d
489, 493 (3d Cir. 1990))(internal quotations omitted)).
6
This category of privity is also known as the doctrine of virtual
representation, a concept that is common to both claim and issue preclusion
doctrines. See Robertson, 148 F. Supp. 2d at 450, n.4.
17
The
Court
also
considers
“whether
there
is
a
close
relationship between the prior and present parties . . .,” as
well as “the adequacy of the prior representation, where the
adequacy
is
viewed
in
terms
of
incentive
to
litigate.”
Robertson, 148 F.Supp.2d at 450; see Gonzalez, 27 F.3d at 762.
“One party ‘adequately represents’ the interests of another when
the interests of the two parties are very closely aligned and
the first party had a strong incentive to protect the interests
of the second party.”
Tyus v. Schoemehl, 93 F.3d 449, 455-56
(8th Cir. 1996).
In Smith v. Bayer Corp., the U.S. Supreme Court concluded
that in cases denying class certification “[t]he definition of
the term ‘party’ can on no account be stretched so far as to
cover a person ... whom the plaintiff in a lawsuit was denied
leave to represent.”
(2011).
Smith v. Bayer Corp., 131 S.Ct. 2368, 2379
The Smith Court proclaimed that “in the absence of a
certification ... the precondition for binding [plaintiff] was
not met. Neither a proposed class action nor a rejected class
action may bind nonparties.”
Id. at 2380; See Standard Fire
Ins. Co. v. Knowles, 133 S.Ct. 1345, 1349 (2013)(holding that “a
plaintiff who files a proposed class action cannot legally bind
members
of
the
certified.”)(citing
proposed
Smith,
class
131
before
S.Ct.
at
the
2380).
class
Hence,
is
a
potential member of a class that is never certified shall not be
18
bound by a prior decision unless said individual is in privity
with the plaintiffs in the first proceeding.
As the Magistrate Judge correctly indicates, PREPA fails to
argue or present evidence that any of the named plaintiffs in
the state case are part of the instant matter.
Thus, PREPA
would have to demonstrate that the current Plaintiffs are in
privity with the state court plaintiffs.
In holding that the
parties were not in privity with each other, the Magistrate
explained that “the holding in Smith provides strong support for
the proposition that they were not in privity; it suggests that
a named plaintiff never represents the interests of the unnamed
plaintiffs in a proposed class that is denied certification.”
See Docket No. 63, Pgs. 14-15 (citing Santiago-Ramos v. AEE,
Civ. No. 11-1987, at n. 2 (D.P.R. January 23, 2014)(“[W]e see
Smith
as
destroying
between
plaintiffs
unnamed
there.”)).
any
notion
named
in
Absent
the
that
there
might
state-court
more,
the
be
case
Court
privity
and
simply
those
cannot
ascertain that the plaintiffs in the state case are in privity
with the Plaintiffs in the case at bar.
PREPA
attempts
to
distinguish
the
holding
in
Smith
by
highlighting the factual difference between said case and the
instant matter and by emphasizing that said case involved the
application of the Anti-Injunction Act.
The Court finds PREPA’s
arguments to be wholly misguided, as the holding in Smith stands
19
for the proposition that all proposed class actions, regardless
of the underlying substantive issue, may not bind nonparties
absent certification.
See Standard Fire Ins. Co., 133 S.Ct. at
1349; Smentek v. Dart, 683 F.3d 373 (7th Cir. 2012); Thorogood
v. Sears, Roebuck & Co., 678 F.3d 546 (7th Cir. 2012); Brown v.
Am. Airlines, Inc., 285 F.R.D. 546, 552-53 (C.D. Cal. 2011);
Phipps v. Wal-Mart Stores, Inc., 925 F. Supp. 2d 875 (M.D. Tenn.
2013) motion to certify appeal granted, 3:12-CV-1009, 2013 WL
2897961 (M.D. Tenn. June 13, 2013).
Accordingly, the Court holds that the collateral estoppel
defense is not applicable to the RICO claims currently pending
before this Court.
As such, PREPA’s Motion for Summary Judgment
(Docket No. 41) is hereby DENIED on these grounds.
B. Res Judicata
Because the Court is tasked with deciding “the res judicata
effect of a state court judgment in a federal court,” Puerto
Rico law governs our analysis.
(1st Cir. 2000).
Cruz v. Melecio, 204 F.3d 14, 18
In order to determine whether res judicata
precludes litigation of a party’s claims, a three prong test
must be satisfied.
The elements of this test are: 1) a final
judgment on the merits in an earlier suit; 2) perfect identity
between the causes of action asserted in the earlier and later
suits; and 3) perfect identity between the parties in the two
suits.
See 31 L.P.R.A. § 3343; Boateng, 210 F.3d at 61-62.
20
The term “perfect” has not been read literally by state
courts
in
Puerto
Rico,
holding
instead
that
in
order
to
establish the perfect identity of the parties the movant must
demonstrate
that
the
parties
in
both
the
current
and
prior
causes of action were the same or in privity with each other.
See
Boateng,
210
F.3d
at
61-62;
Milan
v.
Centennial
Communications Corp., 500 F. Supp. 2d 6, 13 (D.P.R. 2007)(citing
Partido Independentista Puertorriqueño v.
Comision Estatal de
Elecciones, 120 D.P.R. 580,605, 20 P.R., Offic. Trans. 607, 632,
1988 WL 580845 (1988)).
After
careful
Plaintiffs’ claims
judicata.
consideration,
are not barred
the
Court
finds
under the doctrine of
that
res
We briefly explain.
With regards to the first prong, PREPA argues that the
state court’s denial of class certification constituted a final
judgment on the merits.
The Court agrees with the Magistrate
Judge’s findings that PREPA has failed to demonstrate that the
state court proceedings were decided on the merits, emphasizing
that a denial of class certification is not an adjudication on
the merits.
See Smith v. Bayer Corp., 131 S.Ct. 2368 (2011).
Further, the record is devoid of any evidence showing that the
state
court
decided
the
underlying
controversy
(PREPA’s
overbilling) on the merits, thereby failing to satisfy prong
one.
See supra, Pgs. 13-14.
In fact, PREPA admits that the
21
overbilling
allegations
were
not
adjudicated
in
the
state
proceedings, meaning that a final judgment on the merits was not
entered.
With regards to prong two, PREPA posits a myriad of reasons
as to why there is perfect identity of thing or cause between
both causes of action.
the
Court
hereby
fully
For the sake of not being repetitive,
incorporates
its
analysis
under
the
“Identity Between the Causes of Action” section above and holds
that PREPA fails to satisfy prong two.
See supra, Pgs. 15-17.
Lastly, the third prong requires a perfect identity of the
parties or their privies in both causes of action.
PREPA avers
that the proposed classes in both cases are identical and that,
therefore,
“all
PREPA
customers”
were
the
parties
in
both
disputes.
However, the class proposed by Plaintiffs in the
state court proceedings was never certified, meaning that not
all
PREPA
customers
were
parties
in
said
proceedings.
Furthermore, the Magistrate Judge correctly held that “the mere
proposal of a class ... [does] not bind persons who were not
parties there.”
Smith, 131 S.Ct at 2382.
Hence, individuals
who were part of the proposed class in the state proceedings but
not parties in the original suit are neither identical parties
nor in privity to the named plaintiffs in said proceedings.
As
previously discussed, the record does not evince that the named
plaintiffs in the state court proceedings are identical or in
22
privity to the Plaintiffs in the case at bar.
be
hard-pressed
to
grant
summary
judgment
The Court shall
and
dismiss
the
instant action in the absence of incontrovertible evidence that
the
parties
in
both
causes
of
action
were
“identical,”
as
required under P.R. Laws Ann. tit. 31, § 3343.
Accordingly, the Court finds that Plaintiffs’ claims are
not barred under the doctrine of res judicata, emphasizing that
the record simply does not show that a final judgment on the
merits was ever entered in the state court proceedings and that
the parties in both causes of action were “identical.”
As such,
PREPA’s Motion for Summary Judgment (Docket No. 41) is hereby
DENIED on these grounds.
IV. CONCLUSION
For
the
reasons
elucidated
in
the
instant
Opinion
and
Order, the Court hereby ADOPTS the Magistrate Judge’s Report and
Recommendation
HEREIN
BY
(Docket
REFERENCE.
No.
63)
IN
Accordingly,
TOTO
PREPA’s
and
INCORPORATES
Motion
for
IT
Summary
Judgment (Docket No. 41) is hereby DENIED.7
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 14th day of March, 2014.
S/ DANIEL R. DOMÍNGUEZ
DANIEL R. DOMÍNGUEZ
U.S. District Judge
7
The instant Opinion and Order should not be construed as deciding, one way
or another, the issue of class certification.
23
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