United States Court of Appeals
For the First Circuit
No. 04-2656
AVX CORPORATION and AVX LIMITED,
Plaintiffs, Appellants,
v.
CABOT CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Boudin, Chief Judge,
Selya, Circuit Judge,
and Siler,* Senior Circuit Judge.
Evan Slavitt with whom Bodoff & Slavitt LLP was on brief for
appellants.
Robert S. Frank, Jr. with whom Brian A. Davis, Terrence M.
Schwab and Choate, Hall & Stewart LLP were on brief for appellee.
September 13, 2005
*
Of the Sixth Circuit, sitting by designation.
BOUDIN, Chief Judge. This appeal, raising an interesting
res judicata issue, grows out of two law suits between essentially
the same parties: AVX Corporation and AVX Limited (collectively,
"AVX"), and Cabot Corporation ("Cabot").1 AVX makes electronic
components and other products in which the metallic element
tantalum is sometimes employed. Cabot purchases tantalum, converts
it into powder or wire, and sells these products to manufacturers
such as AVX.
Because the present case was resolved on a motion to
dismiss, we accept as true the allegations in AVX's complaint.
Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). In early 2000,
AVX and Cabot, who had done business for some time, signed a letter
of intent to enter into a two-year tantalum purchase agreement.
Later in the year, as the market for tantalum tightened, the
parties signed a final five-year agreement (effective January 1,
2001) with quantity and price terms less favorable to AVX than
those contemplated by the letter of intent.
In July 2002, AVX Corporation sued Cabot and a Cabot
affiliate in the federal district court in Massachusetts, charging
them with unlawful price discrimination under the Robinson-Patman
Price Discrimination Act, 15 U.S.C. § 13 (2000), and asserting
claims under Massachusetts law; one aim of the suit was to
1
Cabot affiliate Cabot Performance Materials, Inc. was also a
defendant in the first law suit, but not in the second.
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invalidate the five-year agreement and to have the 2000 letter of
intent treated as a binding contract. Although the complaint
asserted diversity jurisdiction, AVX Corporation and Cabot
Corporation are both Delaware corporations, precluding diversity.
Nevertheless, the Robinson-Patman count is within the district
court's original jurisdiction, 28 U.S.C. § 1337 (2000), and the
state claims were potentially within the court's pendent
jurisdiction, id. § 1367.
On February 5, 2003, the court held a hearing on a motion
by Cabot to dismiss the action, during which the district judge
agreed with Cabot that the Robinson-Patman claim (and one of the
six state counts) had to be dismissed for failure to state a claim.
Specifically, the court found that the complaint's allegations did
not include all necessary elements of a Robinson-Patman claim,
although it said that AVX could try to repair the pleading
deficiency. The court also found that AVX Limited was a necessary
party and instructed AVX that it must amend the complaint to
include AVX Limited if it wished to move forward, giving AVX thirty
days to file any desired amendment.
Within thirty days AVX filed an amended complaint,
joining AVX Limited as a plaintiff and setting forth its state law
claims but no federal counts. Cabot responded by moving to dismiss
for lack of federal subject-matter jurisdiction, and shortly
thereafter Cabot filed a declaratory judgment action against AVX in
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Massachusetts Superior Court seeking to have the state court
declare the five-year agreement valid. Then, before the district
court took any further action, AVX and Cabot filed a joint
stipulation of dismissal under Fed. R. Civ. P. 41(a)(1)(ii)
dismissing "this action . . . without prejudice . . . ."
Back in state court, AVX subsequently asserted, as
counterclaims, the state law claims asserted in its original
federal court complaint. After a nine-month delay, AVX then sought
to add to its counterclaims an additional count alleging violations
of the Sherman and Clayton Acts, 15 U.S.C. §§ 1, 14, as well as
state antitrust laws. This claim asserted that Cabot used its
monopoly power over certain tantalum products to force AVX to
purchase other tantalum products that it did not need--in antitrust
parlance, a classic tying violation. Once again, AVX targeted the
five-year purchase agreement signed in late 2000.
After the Superior Court denied the motion to amend--
federal courts have exclusive jurisdiction over federal antitrust
claims, 15 U.S.C. §§ 4, 15; see Gen. Inv. Co. v. Lake Shore & Mich.
S. Ry. Co., 260 U.S. 261, 286-87 (1922)--AVX filed the present law
suit against Cabot in federal district court, presenting the same
Sherman and Clayton Act claim it had asserted in its proposed
state-court amended counterclaim. The case was transferred to the
same district judge who had presided over AVX's original 2002
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action. In due course, the district court dismissed the new
complaint on res judicata grounds.
The district court found that the case met the three-part
test for federal claim preclusion set forth in In Re Iannochino,
242 F.3d 36, 43 (1st Cir. 2001): it said that the original Rule
12(b)(6) dismissal of the Robinson-Patman claim was a final
judgment on the merits; that the new Sherman and Clayton Act claim
was sufficiently related to the Robinson-Patman claim to invoke res
judicata; and that the parties to the two federal actions were the
same. AVX now appeals to contest this ruling. Our review is de
novo. Porn v. Nat'l Grange Mut. Ins. Co., 93 F.3d 31, 33 (1st Cir.
1996).
The rules for res judicata, where a federal court is
considering the effect of its own prior disposition of a federal
claim on a newly brought federal claim, are a matter of federal
law. Apparel Art Int'l, Inc. v. Amertex Enters. Ltd., 48 F.3d 576,
582 (1st Cir. 1995). The rules have developed through judicial
decision, drawing on common law res judicata doctrine as it has
developed over time. This case does not involve collateral
estoppel (or issue preclusion) but rather the branch of res
judicata known as merger and bar (or claim preclusion).
Traditional merger and bar doctrine prevents a party from
asserting a claim previously decided on the merits by a final
judgment in another case between the same parties (or their
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privies): the re-asserted claim is deemed "merged" into the prior
judgment if the plaintiff had won or "barred" by it if the
plaintiff had lost. See Restatement (Second) of Judgments § 18 &
cmt. a (1982) (merger); id. § 19 (bar). 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. E.g.,
United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d
220, 241 (1st Cir.), cert. denied, 125 S. Ct. 59 (2004); Acevedo-
Villalobos v. Hernandez, 22 F.3d 384, 388-89 (1st Cir.), cert.
denied, 513 U.S. 1015 (1994).
In the common-law vocabulary, a price discrimination
claim under the Robinson-Patman Act would not be the same claim as
monopolization or tying claims under the Sherman and Clayton Acts,
because the Robinson-Patman claim has quite different elements that
must be proved to make out the claim. So one might expect that
claim preclusion would not operate in the present case. However,
as a result of case law development, identity of claims in the
common-law sense is no longer a precondition to federal claim
preclusion. In most situations involving federal claims, it is now
enough to trigger claim preclusion that the plaintiff's second
claim grows out of the same transaction or set of related
transactions as the previously decided claim. Aunyx Corp. v. Canon
U.S.A., Inc., 978 F.2d 3, 6-7 (1st Cir. 1992), cert. denied, 507
U.S. 973 (1993); Kale v. Combined Ins. Co. of Am., 924 F.2d 1161,
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1166 (1st Cir.), cert. denied, 502 U.S. 816 (1991). The implicit
rationale is that for the sake of efficiency, all such claims
should be brought together, if this is possible. In short, the res
judicata doctrine functions not only in its traditional role of
preventing repeat claims, but has become a compulsory joinder
requirement for closely related claims. Compare Fed. R. Civ. P.
13(a).
In this case, there is a substantial argument that the
Sherman and Clayton Act claim grows out of the same transaction or
set of transactions as the Robinson-Patman claim; the district
court so found, although AVX contests the ruling, and both
complaints focus on the same contract. We bypass the "same
transaction" issue because we conclude that the district court's
February 5, 2003, dismissal of the Robinson-Patman count was not a
"final judgment" and that the entire action was ultimately disposed
of by stipulation "without prejudice."
The first requirement for claim preclusion--the rules may
be somewhat different for issue preclusion, see Restatement
(Second) of Judgments § 13 & cmt. g--is that there be a final
judgment in the prior case. Id. §§ 13, 18-19. In this instance,
the district judge in the original federal action announced from
the bench his decision to dismiss the Robinson-Patman count (and
one state count); but a number of state claims were left pending,
quite apart from the leave given to amend the Robinson-Patman claim
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within thirty days. At no point did the court enter a final
judgment as to all of the claims, Fed. R. Civ. P. 58, or a partial
final judgment as to the Robinson-Patman claim, Fed. R. Civ. P.
54(b).
The order from the bench patently did not constitute a
final judgment for purposes of the statutes and rules governing the
timing of appeals from final judgments. Ordinarily, a judgment is
not final unless it disposes of all claims against all parties,
although it is possible to have a partial final judgment as to some
claims or some parties under Fed. R. Civ. P. 54(b). In a few
instances, the statutes or doctrine also permit interlocutory
appeals (e.g., preliminary injunctions and certified controlling
questions of law, 28 U.S.C. § 1292), but no such exception is
applicable here.
In each of the cases cited by the district court and by
Cabot for the proposition that Rule 12(b)(6) dismissals have
claim-preclusive effect, the dismissal disposed of an entire
complaint, not just some subset of the plaintiff's claims. See
Karvelas, 360 F.3d at 223, 241; Acevedo-Villalobos, 22 F.3d at 386;
Isaac v. Schwartz, 706 F.2d 15, 16-17 (1st Cir. 1983) (decided
under Massachusetts law); Andrews-Clarke v. Lucent Techs., Inc.,
157 F. Supp. 2d 93, 97 (D. Mass. 2001); Connaughton v. New England
Tel. & Tel., No. 87-2369-MA, 1988 WL 34321, at *1 (D. Mass. Mar.
-8-
18, 1988).2 As such, the dismissal in fact "end[ed] the litigation
on the merits and le[ft] nothing for the court to do but execute
the judgment," Acevedo-Villalobos, 22 F.3d at 388 (quoting
Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373-74
(1981)), and thus is properly considered a "final judgment" for
federal claim preclusion purposes.
A final judgment embodying the dismissal would eventually
have been entered if the state claims had been later resolved by
the court. Instead, before any further action by the court, AVX
and Cabot jointly dismissed the entire action without prejudice.
Even without the parties' use of the phrase, the entire action was
automatically dismissed without prejudice by virtue of Rule 41's
terms because the parties did not specify a dismissal with
prejudice. See Fed. R. Civ. P. 41(a)(1).
Thus, if the conventional finality tests for
appealability purposes are applied to determine the finality of a
judgment for claim preclusion purposes, there was never a final
judgment on the Robinson-Patman claim. There was only the
announcement of a dismissal, which would have matured into a final
judgment if the court had ever resolved the remaining claims.
2
The Rule 12(b)(6) dismissal that was the source of the
Supreme Court's oft-cited footnote in Federated Dep't Stores, Inc.
v. Moitie, 452 U.S. 394 (1981), stating that "[t]he dismissal for
failure to state a claim under Federal Rule of Civil Procedure
12(b)(6) is a 'judgment on the merits,'" id. at 399 n.3, was
likewise a dismissal of "all of the actions 'in their entirety,'"
id. at 396.
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Courts generally assume that the finality requirements in the two
spheres are interchangeable, 18A Wright, Miller & Cooper, Federal
Practice and Procedure: Jurisdiction 2d § 4432 & n.3, at 53, § 4434
& n.28, at 128 (2002) (collecting cases), and this approach
enhances predictability and avoids confusion.
The Restatement does contemplate a possible softening of
the traditional final judgment requirement in certain cases
involving issue preclusion. Restatement (Second) of Judgments § 13
cmts. b, g. There is some case law support for this view. See,
e.g., Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80, 89
(2d Cir. 1961) (Friendly, J.), cert. denied, 368 U.S. 986 (1962).
However, while its language on the matter is not crystal clear, the
Restatement appears to adhere to the conventional finality test for
merger and bar. See Restatement (Second) of Judgments § 13 & cmt.
b. While Wright, Miller and Cooper recognize that this may produce
some incongruities in some circumstances, they too appear generally
to support this approach. See 18A Wright, Miller & Cooper, Federal
Practice and Procedure: Jurisdiction 2d § 4434 & nn. 28-30, at 128-
30.
There might be cases that would tempt a court to apply a
more flexible approach to defining finality for federal claim
preclusion purposes. Imagine, for example, that shortly before the
present case, another district court had completed a lengthy trial
of AVX's Robinson-Patman claim and entry of a final judgment was
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awaiting only the disposition of other claims; at that point the
argument for giving the other court's ruling claim-preclusive
effect might appear to be a strong one. Indeed, one could
construct an entirely separate jurisprudence of finality for res
judicata responsive to its purposes rather than to concerns
governing immediate appealability vel non.
But every such deviation from the finality test used for
appealability purposes has a cost, namely, the uncertainty created
by having two different finality tests; it is not clear that much
would be gained; and there are some policy reasons for a single
test. In particular, an interim order that is not accompanied by
an express entry of final judgment "is subject to revision at any
time before the entry of judgment adjudicating all the claims and
the rights and liabilities of all the parties." Fed. R. Civ. P.
54(b); see also, e.g., United States v. Arkansas, 791 F.2d 1573,
1576 (8th Cir. 1986). In all events, nothing in the present facts
suggests that this is a case for an innovating departure from the
prevailing final judgment requirement for federal claim preclusion.
Cabot's position in this case is further weakened by the
dismissal of the entire original federal action without prejudice
by stipulation of the parties. The district court took the view
that at the point that this occurred, "there was no remaining
federal claim in the lawsuit." But this assumes the premise; the
Robinson-Patman claim was in some sense still in the law suit (the
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dismissal could have been reconsidered or eventually appealed) and
in some sense out (absent reconsideration by the judge, it could
not have been pursued at trial without an amendment to the
complaint--and the original time set for amending had expired).
What was dismissed without prejudice was "the action" in
which a Robinson-Patman claim had been asserted. If the
stipulation is taken at face value, it is easy enough to read it as
encompassing all claims asserted in the law suit at any stage;
Cabot would certainly have been aggrieved if, as soon as the
stipulation were signed, AVX had sought entry of a final judgment
on the Robinson-Patman claim and then attempted to appeal that
dismissal. In one earlier case we said as to a voluntary
dismissal:
Absent explicit conditions to the contrary,
the prior proceedings became a nullity. We
agree with the [In re] Piper [Aircraft
Distrib. Sys. Antitrust Litig., 551 F.2d 213
(8th Cir. 1977)] and [Cabrera v. Municipality
of Bayamon, 622 F.2d 4 (1st Cir. 1980)] panels
that, once an action has been voluntarily
discontinued, all markings are erased and the
page is once again pristine.
Sandstrom v. ChemLawn Corp., 904 F.2d 83, 86 (1st Cir. 1990); see
also Piper, 551 F.2d at 219 (voluntary dismissal without prejudice
under Fed. R. Civ. P. 41(a)(1)(i) "carries down with it previous
proceedings and orders in the action, and all pleadings, both of
plaintiff and defendant, and all issues, with respect to
plaintiff's claim" (internal quotation mark omitted)). Whether or
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not there are qualifications to this generalization, Cabot does not
explain how it is to be reconciled with the district court decision
in this case.
Admittedly, the parties almost surely did not expect that
the Robinson-Patman claim was ever going to be resurrected in this
law suit or any other. If Cabot had insisted, AVX might well have
agreed that the stipulation be drafted to say that the dismissal
was without prejudice except that the Robinson-Patman claim was
dismissed with prejudice. But Cabot did not so insist. However
the stipulation is read, it certainly does not itself constitute a
dismissal of the Robinson-Patman claim with prejudice; at best, it
leaves Cabot free to argue that the original dismissal was a final
judgment--a position we have rejected.
Of course, AVX has not sought to resurrect the Robinson-
Patman claim; what Cabot is losing is the arguable ability to
foreclose other antitrust claims (under the Sherman and Clayton
Acts) on which the district court never pronounced. It is hard to
shed too many tears for Cabot because it now has to defend against
claims not previously resolved on the merits at all. In the
unlikely event that AVX sought to assert the Robinson-Patman claim
now--which it has not attempted--the district judge would likely
make short work of the effort.
Rather, the real loser in this instance is the interest
in judicial efficiency that lies behind the replacement of the
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common law rule defining claims narrowly with the present
transactional test. See Apparel Art Int'l, 48 F.3d at 583 (quoting
Allen v. McCurry, 449 U.S. 90, 94 (1980)); see also Bay State HMO
Mgmt., Inc. v. Tingley Sys., Inc., 181 F.3d 174, 181-82 (1st Cir.
1999), cert. denied, 528 U.S. 1187 (2000). Rule 41(a)(1)(ii)
evidently permits parties to circumvent this interest for reasons
of their own by dismissing without prejudice and without the
district court's consent. There is no limit on when such a
stipulation can be filed, and it could easily occur after the court
had done considerable work on an action.
But one side usually has an interest in resisting such an
unqualified dismissal without prejudice as to any claim on which it
effectively prevailed (albeit short of final judgment), since
otherwise the case can later be resurrected. Further, there is
some interest in letting the parties agree to halt litigation, and
even if there is a net loss in efficiency in a particular case, it
was up to those who framed and approved Rule 41 to balance
efficiency for the court against party autonomy.
There is relatively little circuit case law on the
problem posed in this case. A Seventh Circuit case uses the same
approach we have adopted and so supports our position. See Gilbert
v. Braniff Int'l Corp., 579 F.2d 411 (7th Cir. 1978) (involving
dismissal with leave to amend). But the decision was analyzing the
effect of an earlier decision in a state court where the
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formalities of finality were somewhat different than those in a
federal court; and it is worth noting that in the Seventh Circuit
case a dissenting judge thought that res judicata should apply to
bar the second action. Id. at 414 (Pell, J., dissenting).
Contrary to Cabot's contention, this case is not
controlled by our prior decision in Kale. There, Kale brought a
federal age discrimination suit in the district court together with
associated state claims; when the district court found the federal
claim barred by the statute of limitations, it dismissed the
pendent state claims without prejudice--Kale having not troubled to
press them based on diversity jurisdiction which unquestionably
existed. Kale, 924 F.2d at 1163-64. When Kale then brought new
state claims in state court, the employer removed the new action to
federal court where the judge then invoked res judicata to dismiss
the state claims and we affirmed. Id. at 1164, 1169.
In Kale, there was a final judgment adjudicating the
federal claim and thus a traditional basis for the operation of res
judicata. Kale, 924 F.2d at 1165. The district court in
dismissing related state claims had said that this was without
prejudice, but this court said that because the state claims could
have been pursued in the first law suit based on diversity
jurisdiction, ordinary res judicata rules applied to bar the new
law suit on the same claims. Id. at 1166-67. In this case, there
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is no final judgment on the Robinson-Patman claim so res judicata
cannot operate.
The judgment of the district court is vacated and the
matter remanded for further proceedings consistent with this
decision. Costs are taxed in favor of the Appellants.
It is so ordered.
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AVX Corporation v. Cabot Corporation
Court: Court of Appeals for the First Circuit
Date filed: 2005-09-13
Citations: 424 F.3d 28
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