Verde v. Stoneridge, Inc. et al

Filing 175

ORDER ADOPTING REPORT AND RECOMMENDATIONS for 143 Report and Recommendations, and denying 106 MOTION to Dismiss Plaintiff's Second Amended Complaint and Petition for Class Certification, and Brief in Support filed by FTE Automo tive USA, Inc., denying 107 MOTION to Dismiss Plaintiff's Second Amended Complaint and Petition for Class Certification filed by Stoneridge, Inc., denying 148 Joint MOTION for Reconsideration re 106 MOTION to Dismiss P laintiff's Second Amended Complaint and Petition for Class Certification, and Brief in Support, 107 MOTION to Dismiss Plaintiff's Second Amended Complaint and Pet filed by FTE Automotive USA, Inc., Stoneridge, Inc., and gran ting 108 MOTION to Dismiss for Lack of Jurisdiction and for Failure to State a Claim filed by Arrow Manufacturing Co. Further, Mr. Verde' indemnitor liability claim against Arrow is dismissed with prejudice. Signed by Judge Michael H. Schneider on 9/22/15. (mjc, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
FERNANDO VERDE, Individually
and on behalf of putative class members,
Plaintiff,
v.
STONERIDGE, INC., et al.
Defendants.

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CASE NO. 6:14-CV-225-MHS KNM
JURY DEMANDED

ORDER ADOPTING REPORT AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
On June 23, 2015, Defendants FTE Automotive USA, Inc. (“FTE”) and Stoneridge, Inc.
(“Stoneridge”) filed separate Objections to the Magistrate Judge’s Report and Recommendation
Denying Defendants’ Motions to Dismiss (Doc. Nos. 146 & 147). Defendants also filed a Joint
Motion for Rehearing and Reconsideration of Motions to Dismiss Plaintiff’s Second Amended
Complaint and Petition for Class Certification (Doc. No 148). Having made a de novo review of
the written objections filed by Defendant, the Court concludes that the findings and conclusions
of the Magistrate Judge are correct and the objections are without merit. For the reasons below,
FTE’s and Stoneridge’s Objections are OVERRULED and the Motion for Rehearing (Doc. No.
148) is DENIED.
Defendants’ Objections and Motion for Rehearing use strong language and primarily take
issue with the Report’s recommendation to deny the Motions to Dismiss on the grounds of claim
splitting. Defendants argue that the Report commits legal error by finding that this action is not

barred by the “rule against claims splitting.” E.g., Doc. No. 147 at 1. Defendants argue that the
Court should not “make new law” by creating an exception for Mr. Verde and allowing him to
“flagrantly violat[e] the prohibition against claim splitting.” Doc. No. 146 at 1. Defendants
contend that the rule against claim splitting is not discretionary.

Doc. No. 146 at 2–3.

Additionally, Defendants argue that res judicata applies and that the Report improperly applies a
blanket exception for claim splitting in class actions. Doc. No. 147 2–3. Further, Defendants
assert that the Report relies on authorities not “raised or cited by Plaintiff.”1 Doc. No. 148 at 2.
The Report includes a thorough discussion and analysis of claim splitting, its relation to
res judicata, and whether the “rule” is discretionary. After concluding that the Court retains
discretion to dismiss a case on the basis of claims splitting, the Report discusses its bases for
declining to exercise its discretion to dismiss Mr. Verde’s case.
Despite the strong language of their objections, Defendants fail to cite any binding law
for the proposition that the Court must always dismiss a second complaint alleging the same
cause of action as a prior, pending related case. In fact, the binding legal precedent stands for the
contrary proposition. The second complaint may be dismissed. Friends of the Earth, Inc. v.
Crown Cent. Petroleum Corp., 95 F.3d 358, 362 (5th Cir. 1996) (“Finally, we find no error in the
district court’s order dismissing FOE’s second complaint as duplicative of the first. When a
plaintiff files a second complaint alleging the same cause of action as a prior, pending, related
action, the second complaint may be dismissed. This rule finds particular application where, as
here, the plaintiff files the second complaint to achieve procedural advantage by circumventing
the rules pertaining to the amendment of complaints.”) (internal quotations omitted); Oliney v.
Gardner, 771 F.2d 856, 859 (5th Cir. 1985) (“When a plaintiff files a second complaint alleging

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The Court is not limited to authority raised in the parties’ briefs. The Court may look to the entire body of 5th
Circuit law as precedent.

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the same cause of action as a prior, pending, related action, the second complaint may be
dismissed.”) (emphasis in original). Finding no error in a court’s decision to dismiss under the
claim-splitting doctrine does not equate to a mandatory directive to do so. Defendants confuse
dismissal on the basis of claim splitting with res judicata. But, as the Magistrate Judge correctly
noted, the two doctrines are distinct and focus on distinct underlying concerns. “[C]laimsplitting focuses on the district court’s comprehensive management of its docket, whereas res
judicata focuses on protecting the finality of judgments.” Doc. No. 143 at 9–10 (internal
quotation omitted). Additionally, claim-splitting is concerned with the principals of comity and
sound judicial administration, which are primarily a concern when cases are filed in separate
courts. Ameritox, Ltd. v. Aegis Sciences, Corp., 2009 WL 305874, at *4 (N.D. Tex. Feb. 9,
2009).
Defendants’ reliance on Ameritox is misplaced. Ameritox underscores the discretionary
nature of dismissal based on claim splitting. Id. at *4-*5 (“The court need not resolve this
dilemma, however, because it can dismiss Ameritox’s suit under the rule against claim-splitting.
. . .”) (emphasis added) (“A dismissal on this [claim-splitting] ground has been viewed as a
matter of docket management, reviewed for abuse of discretion, even in decisions that with some
exaggeration describe the theory as an aspect of res judicata.”) (internal quotations omitted);
(“Under the rule against claim-splitting, a claim may be dismissed if it arises out of the same
wrong (or transaction) as the first-filed claim.”) (emphasis added). As noted in Ameritox and by
Defendants, a decision to dismiss a case based on claim splitting is reviewed for an abuse of
discretion. Defendants stretch the bounds of reasonableness by arguing that a decision reviewed
for an abuse of discretion is not in fact discretionary. Although the Court does indeed have

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latitude in its application of the same transaction test as Defendants note, they cite no authority
for the proposition that the Court’s discretion is so limited.
The Report does not create a new blanket exception to the rule against claim splitting.
Instead, the Report based its recommendation to exercise discretion and deny dismissal of the
case on several relevant factors.2 As noted above, Defendants’ objections regarding claim
splitting and other issues are without merit. The Report provides a thorough and well-reasoned
analysis of all grounds for its recommendation for disposition of the Motions to Dismiss.
Accordingly, the Court adopts the Magistrate Judge’s Report and Recommendation
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(Doc. No. 143). Defendants’ Motion for Rehearing (Doc. No. 148) is DENIED. FTE’s and
Stoneridge’s Motions to Dismiss Plaintiff’s Second Amended Complaint and Petition for Class
Certification (Doc. Nos. 106 & 107) are DENIED, and Arrow’s Motion to Dismiss for Lack of
Jurisdiction and for Failure to State a Claim (Doc. No 108) is GRANTED under Rule 12(b)(6).
Further, Mr. Verde’s indemnitor liability claim against Arrow is DISMISSED WITH
PREJUDICE.
SIGNED this 22nd day of September, 2015.

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MICHAEL H. SCHNEIDER
Some of these factors are mentioned in the following excerpt: UNITED STATES DISTRICT JUDGE
Federal Rule of Civil Procedure 18 does not impose a strict requirement on Mr. Verde to bring all
possible claims in one action. Additionally, other courts recognize an exception to the rule against
claim splitting for class actions and the discretion entrusted to the Court to manage its own docket.
Here, many other potential plaintiffs with warranty claims but without personal injuries may exist,
so filing a separate class action suit provides members of the putative class a chance for relief.
Because this Court will oversee both suits, there are no comity concerns or risks of rulings that
will trench upon the authority of other courts. Further, various case management devices remain
available to the Court to ensure efficient use of party and judicial resources.

Doc. No. 143 at 11.

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