F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
AUG 3 1999
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
KENNETH E. YAPP,
Plaintiff-Appellant,
Nos. 98-1061
& 98-1069
v.
EXCEL CORPORATION, a Delaware
corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Colorado
(D.C. Nos. 96-S-1350 and 96-1578)
Pamela A. Shaddock, (Bradley D. Laue and Kathleen M. Flynn with her on the
briefs), of Brega & Winters P.C., Greeley, Colorado, for Appellant.
Walter V. Siebert, (Heather Fox Vickles with him on the brief), of Sherman &
Howard L.L.C., Denver, Colorado, for Appellee.
Before TACHA, HENRY, and MURPHY, Circuit Judges.
MURPHY, Circuit Judge.
Kenneth E. Yapp appeals the judgment of the United States District Court
for the District of Colorado, granting summary judgment to Excel Corporation
(“Excel”) on the basis of claim preclusion. In the summer of 1996, Yapp filed
suit against his former employer, Excel, for overtime compensation due under the
Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201-219. Two weeks
later he filed suit against Excel alleging numerous claims for wrongful
termination. After the first case was settled and an Order of Dismissal with
Prejudice was entered, the district court granted Excel’s motion for summary
judgment in the second case on the basis of claim preclusion. Yapp’s appeal is
primarily a challenge to that summary judgment. This court exercises jurisdiction
pursuant to 28 U.S.C. § 1291 and AFFIRMS.
I. BACKGROUND
Plaintiff Kenneth E. Yapp worked in Excel’s beef slaughter plant in
Sterling, Colorado from 1987 until he was terminated in 1995. [Appee. Appx. 4]
On June 7, 1996, Yapp sued Excel in the United States District Court for the
District of Colorado for violations of the FLSA seeking unpaid overtime
compensation [hereinafter “Overtime Action”]. Approximately two weeks later,
Yapp sued Excel in a Colorado state court, alleging wrongful discharge premised
on theories of violation of public policy, breach of employment contract,
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promissory estoppel, violation of implied covenant of good faith and fair dealing,
negligent misrepresentation, and multiple torts [hereinafter “Wrongful Discharge
Action”]. Excel removed the Wrongful Discharge Action to the same federal
district court in which the Overtime Action was pending, and then filed a motion
to consolidate the two cases, arguing that “[c]onsolidation . . . will eliminate
much duplication of effort and will result in decreased costs and expenses to both
parties.” Yapp responded in kind, arguing that consolidation would result in
delay and increased costs for both parties. The district judge denied the motion,
reasoning that “[p]laintiff has stated valid reasons for filing the two cases
separately and separate trials will be conducive to expedition and economy.”
The parties negotiated a settlement in the Overtime Action, agreeing that
Excel would pay Yapp $14,000 in return for a Stipulation for Dismissal with
Prejudice, signed by both parties on September 9, 1997. The district court issued
an Order of Dismissal with Prejudice in the Overtime Action on September 11,
1997. Approximately two weeks after the Overtime Action was dismissed with
prejudice, Excel filed motions to supplement its answer, its pending motion for
summary judgment, and the final pretrial order in the Wrongful Discharge Action
to include the affirmative defense of claim preclusion premised on the dismissal
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of the Overtime Action. 1
Yapp resisted Excel’s effort to supplement on the
grounds that the parties fully understood that settlement of the Overtime Action
did not extend to the Wrongful Discharge Action. Yapp relied upon language in a
proposed settlement agreement 2
and a September 9, 1997, letter from Yapp’s
counsel to Excel’s counsel, 3
both of which Yapp asserts shielded the Wrongful
Discharge Action from claim preclusion flowing from the dismissal in the
Overtime Action. The district court granted Excel’s motion to supplement.
1
Although the parties use the term “ res judicata ,” for purposes of clarity,
this court employs the term “claim preclusion” instead. See Migra v. Warren City
Sch. Dist. Bd. of Educ ., 465 U.S. 75, 76 n.1 (1984) (discussing why “claim
preclusion” and “issue preclusion” are preferred over terms “ res judicata ” and
“collateral estoppel”).
2
Paragraph D of the proposed settlement agreement stated: “Except as
specifically stated herein, this Waiver and Release Agreement is not intended to
release, settle, or discharge Excel from any claims, demands, causes of action, or
other rights asserted in [the Wrongful Discharge Action], now pending in the
United States District Court for the District of Colorado.” Because Excel
apparently objected to the inclusion of this language, a proposed settlement
agreement was never signed. Instead, the parties accomplished the settlement by
means of the Stipulation for Dismissal with Prejudice.
3
In a letter dated September 8, 1997, Excel reiterated that the “fundamental
terms of the settlement agreed upon were a payment of $14,000 in exchange for
the dismissal of the case with prejudice.” Yapp’s counsel responded the next day
with a letter which stated in part: “It is our understanding that the dismissal of
[the Overtime Action] will only determine the claims set forth in [the Overtime
Action].” The letter also stated, “If you have any objections to the contents of this
letter, please notify me of the same no later then September 16, 1997.” Excel
never responded to the letter.
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On October 20, 1997, Yapp filed a 60(b) motion, seeking to rescind the
Stipulation for Dismissal with Prejudice and Order for Dismissal with Prejudice
in the Overtime Action. Yapp argued that relief should be based upon fraud,
misrepresentation, misconduct of the adverse party, breach of covenant of good
faith and fair dealing, failure to achieve a meeting of the minds, mistake of law,
and mutual mistake. On February 2, 1998, the district court denied Yapp’s 60(b)
motion. A week later, the district court granted Excel’s Motion for Summary
Judgement on the basis of claim preclusion.
On appeal, Yapp primarily targets the summary judgment. He also
challenges the district court’s order allowing Excel to amend its answer in the
Wrongful Discharge Action and the district court’s denial of Yapp’s 60(b) motion
in the Overtime Action.
II. DISCUSSION
A. Motion for summary judgment
A grant or denial of summary judgment is reviewed using the same standard
applied by the district court. See King v. Union Oil Co. of California , 117 F.3d
443, 444-45 (10th Cir. 1997). Summary judgment is appropriate if “there is no
genuine issue as to any material fact and . . . the moving party is entitled to
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judgment as a matter of law.” Fed. R. Civ. Pro. 56(c); see also King , 117 F.3d at
445. Issues of fact are reviewed in a light most favorable to the nonmoving party.
See Craig v. Eberly , 164 F.3d 490, 493 (10th Cir. 1998).
Federal law of claim preclusion applies. See Murdock v. Ute Indian Tribe
of Uintah & Ouray Reservation , 975 F.2d 683, 687 (10th Cir. 1992) (citing, inter
alia, Restatement (Second) of Judgments § 87, at 314 (1982) (“Federal law
determines the effects under the rules of res judicata of a judgment of a federal
court.”)). Claim preclusion requires: (1) a judgment on the merits in the earlier
action; (2) identity of the parties or their privies in both suits; and (3) identity of
the cause of action in both suits. 4
See King , 117 F.3d at 445. The parties agree
4
Generally, Supreme Court precedent, Tenth Circuit precedent, and the
majority of circuit courts note only three requirements in the initial determination
of whether claim preclusion may apply. See Rivet v. Regions Bank of Louisiana ,
118 S. Ct. 921, 925 (1998) (“Under the doctrine of claim preclusion, ‘[a] final
judgment on the merits of an action precludes the parties or their privies from
relitigating issues that were or could have been raised in that action.’”) (quoting
Federated Dep’t Stores, Inc. v. Moitie , 452 U.S. 394, 398 (1981)); King v. Union
Oil Co. of California , 117 F.3d 443, 445 (10th Cir. 1997); Driver Music Co. v.
Commercial Union Ins. Cos. , 94 F.3d 1428, 1435 (10th Cir. 1996); Massachusetts
Sch. of Law at Andover, Inc. v. ABA , 142 F.3d 26, 37 (1st Cir. 1998); Board of
Trustees of Trucking Employees v. Centra , 983 F.2d 495, 504 (3rd Cir. 1992);
Jones v. SEC, 115 F.3d 1173, 1178 (4th Cir. 1997); Roboserve, Inc. v. Kato
Kagaku Co. , 121 F.3d 1027, 1034 (7th Cir. 1997); Cabrera v. City of Huntington
Park , 159 F.3d 374, 381 (9th Cir. 1998); Pleming v. Universal-Rundle Corp ., 142
F.3d 1354, 1356 (11th Cir. 1998); Stanton v. District of Columbia Court of
Appeals , 127 F.3d 72, 78 (D.C. Cir. 1997). Other courts articulate four elements,
but include as the fourth element a requirement that the prior court was of
competent jurisdiction. See Costner v. URS Consultants, Inc ., 153 F.3d 667, 673
(8th Cir. 1998); Corbett v. McDonald Moving Servs. Inc ., 124 F.3d 82, 88 (2d Cir.
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that the first two elements are present. The issue here is whether the Wrongful
Discharge Action is sufficiently similar to the Overtime Action to warrant the
operation of claim preclusion. Yapp argues that his two suits are rooted in
different transactions. Excel argues that all claims arising from an employment
relationship constitute a single transaction or a series of sufficiently connected
transactions for purposes of claim preclusion.
This court has adopted the transactional approach of the Restatement
(Second) of Judgments in determining what constitutes identity of the causes of
action. See Petromanagement Corp. v. Acme-Thomas Joint Venture , 835 F.2d
1329, 1335-36 (10th Cir. 1988). The transactional approach provides that a claim
arising out of the same “transaction, or series of connected transactions” as a
previous suit, which concluded in a valid and final judgment, will be precluded.
Restatement (Second) of Judgments § 24 (1982) [hereinafter “Restatement”]; see
also Nwosun v. General Mills Restaurants, Inc ., 124 F.3d 1255, 1257 (10th Cir.
1997); Bradley v. Armstrong Rubber Co. , 130 F.3d 168, 179 (5th Cir. 1997).
Occasionally, however, reference is made to a “full and fair opportunity to
litigate” as a requirement for claim preclusion. See, e.g. , Nwosun v. General
Mills Restaurants, Inc ., 124 F.3d 1255, 1257 (10th Cir. 1997). The three
requirements referenced in the text, however, are in most circumstances all that
are necessary for a principled application of the doctrine of claim preclusion.
Consequently, the absence of a full and fair opportunity to litigate should be
treated as an exception to the application of claim preclusion when the three
referenced requirements are otherwise present. Cf. Kremer v. Chemical Constr.
Corp ., 456 U.S. 461, 481 n.22 (1982) (characterizing, in dicta, a full and fair
opportunity to litigate as a “limitation” on the application of claim preclusion).
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1997) (“[A] cause of action includes all claims or legal theories of recovery that
arise from the same transaction, event, or occurrence.”). What constitutes the
same transaction or series of transactions is “to be determined pragmatically,
giving weight to such considerations as whether the facts are related in time,
space, origin, or motivation, whether they form a convenient trial unit, and
whether their treatment as a unit conforms to the parties’ expectations or business
understanding or usage.” Restatement § 24; see also King , 117 F.3d at 445.
The transactional test has been rearticulated by courts in a variety of ways,
most of which focus upon whether the two suits are both based upon a discrete
and unitary factual occurrence. For example, the First Circuit queries whether
both suits depend upon “the same operative nucleus of fact.” Kale v. Combined
Ins. Co. of Am. , 924 F.2d 1161, 1166 (1st Cir. 1991). The Seventh Circuit
assesses whether the two claims “are based on the same, or nearly the same,
factual allegations.” Herrman v. Cencom Cable Assoc’s Inc ., 999 F.2d 223, 226
(7th Cir. 1993). Some courts focus upon whether the two suits seek to redress the
same injury. See, e.g. , Kale , 924 F.2d at 1166 (noting as part of transactional test
whether suits “sought redress for essentially the same basic wrong”).
In a case factually indistinguishable from the one here, this court concluded
that the transactional test was met because “the ‘claims’ in each case were
predicated on [plaintiff’s] employment.” See Clark v. Haas Group, Inc ., 953 F.2d
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1235, 1239 (10th Cir. 1992). The plaintiff Clark first sued her former employer
under the FLSA, seeking to recover unpaid overtime compensation. See id. at
1236. Three months after the issuance of a stipulated order dismissing the action
with prejudice, the plaintiff again sued her former employer, this time for
wrongful termination 5
under the Age Discrimination in Employment Act and for
violations of the Equal Pay Act. See id. The case proceeded to trial on the
ADEA issue only. See id. at 1237. On appeal, this court held that the district
court erred in failing to hold that the plaintiff’s second claim was precluded by
the first since both were based upon a single transaction: the employment
relationship. Id. at 1239.
The pertinent facts of Clark and the case here are identical: both plaintiffs
first sued their former employers for unpaid overtime compensation under the
FLSA, and then both plaintiffs subsequently sued their former employers for
wrongful discharge. The court in Clark eliminated all ambiguity in the meaning
of “transaction” in this factual context: it stated that “the ‘transaction’ was
Clark’s employment.” Id. No other court applying the transactional test has held
5
The decision does not expressly state that the ADEA claim was premised
on wrongful termination. See Clark v. Haas Group , 953 F.2d 1235, 1237 (10th
Cir. 1992). Because the complainant sought and the jury awarded front pay,
however, the ADEA claim was necessarily based upon wrongful termination. See
Spulak v. K Mart Corp ., 894 F.2d 1150, 1157-58 (10th Cir. 1990) (stating that
front pay is awarded when reinstatement is not appropriate; both are remedies for
wrongful discharge).
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that suits arising from the same employment relationship are thereby necessarily
grounded upon the same transaction. 6
This panel, however, cannot overrule
Clark . See United States v. Foster , 104 F.3d 1228, 1229 (10th Cir. 1997) (noting
rule that one panel cannot overrule another). Consequently, we are not free to
transactionally distinguish wrongful termination claims from those claims arising
out of the employment but before and unrelated to the discharge.
B. Dissent
The dissent argues that the district court’s order denying Excel’s motion to
consolidate rescues Yapp from claim preclusion otherwise dictated by Clark
because he was somehow deprived of a full and fair opportunity to litigate the
6
Some courts have addressed cases in which multiple suits arose from the
same employment relationship and have concluded that the second suit was not
precluded by the first because it was grounded upon a different transaction. See,
e.g. , Doe v. Alllied-Signal, Inc ., 985 F.2d 908, 914-15 (7th Cir. 1993) (holding
suits premised upon different transactions when first suit against employer arose
from rape of employee on work premises and second suit arose from employer’s
misrepresentations about plaintiff’s status as an employee); Kent County Bd. of
Educ. v. Bilbrough , 525 A.2d 232, 239-40 (Md. 1987) (expressly rejecting
classification of employer-employee relationship as same transaction for claim
preclusion purposes). Additionally, courts have precluded second suits brought
by former employees because both suits were predicated upon the same discrete
event, such as the employee’s wrongful discharge, rather than the entirety of the
employment relationship. See, e.g. , Kale , 924 F.2d at 1166 (holding that claim
preclusion applied because both suits stemmed from plaintiff’s termination);
Langston v. Insurance Co. of N. Am. , 827 F.2d 1044, 1047 (5th Cir. 1987) (same);
Nwosun , 124 F.3d at 1257 (same); King , 117 F.3d at 445 (same).
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Wrongful Discharge Action. 7 The dissent is propped on two concepts: an
immunization of the Wrongful Discharge Action from claim preclusion by the
district court in its order denying Excel’s motion to consolidate, and Yapp’s
reliance on that order to preserve the claim. Both props, however, are illusory.
Ironically, the very court order purportedly depriving Yapp of his
opportunity to litigate was the work of his own advocacy in opposing the motion
to consolidate. The district court’s order merely maintained the very procedural
status Yapp himself sought, i.e., separate lawsuits. This offending court order
was both interlocutory and discretionary, and thus subject to reconsideration. See
Fed. R. Civ. P. 42; Fields v. Atchison, Topeka & Santa Fe Ry. Co., No. Civ. A.
95-4026, 1996 WL 109536, *1 (D. Kan. Feb. 7 1996) (citing Shump v. Balka, 574
F.2d 1341, 1344 (10th Cir. 1978)) (holding that grant or denial of motion to
consolidate is discretionary). Nevertheless, although Yapp realized and even
acknowledged to Excel 8 the risk of claim preclusion prior to settling the Overtime
Action, he made no effort to have the district court revisit its interlocutory and
discretionary order either to add language preserving his Wrongful Discharge
Action or to unwind the maintenance of separate lawsuits. Instead, along with the
risk of claim preclusion, Yapp took the $14,000 in settlement. It is thus difficult
7
See supra footnote 4.
8
See supra , notes 2 & 3.
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to label this particular court order as the culprit in denying Yapp a full and fair
opportunity to be heard.
Although the dissent eschews reliance upon Restatement § 26(1)(b),
providing an exception to the application of claim preclusion when the district
court has “expressly reserved the plaintiff’s right to maintain the second action”
(emphasis added), the tenor of its argument and its reliance upon Louis Cook
Plumbing & Heating, Inc. v. Frank Briscoe Co., 445 F.2d 1177 (10th Cir. 1971),
suggests otherwise. See Dissent at 5. The dissent treats Louis Cook as standing
for the proposition that a district judge may impliedly reserve a plaintiff’s
subsequent action. See Dissent at 4-5. First, we note that Louis Cook is of
questionable precedential value because it recited a test for claim preclusion
inconsistent with the transactional test, adopted by this court seventeen years later
in Petromanagement. See Louis Cook, 445 F.2d at 1179. Second, the crux of
Louis Cook’s holding is more consistent with an exception to claim preclusion
articulated by the Restatement which provides relief to a plaintiff who was
jurisdictionally barred in the first cause of action from asserting certain claims.
See Restatement § 26(1)(c); see also Charles Alan Wright, et. al., Federal
Practice & Procedure § 4412 (2d ed. 1994) (citing Louis Cook for the proposition
that “[t]here may be some room to permit a second action if a court erroneously
rules that an entire claim cannot be asserted in the first action”). Finally, even if
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Louis Cook could be taken as being consistent with the § 26(1)(b) exception,
unlike the district court here, 9 the court there did expressly provide, albeit not in
the written judgment, that the first action would not preclude a second. See Louis
Cook, 445 F.2d at 1178.
Finally, Yapp’s reliance on the court order was non-existent and is instead
simply a post hoc rationalization. The record shows that his conduct in settlement
of his Overtime Action was consistent only with the absence of reliance: Yapp
acknowledged the risk of claim preclusion despite the order and consequently he
sought from Excel, unsuccessfully, an express exclusion of his Wrongful
Discharge Action. At no point in his negotiations with Excel did Yapp invoke the
court’s order denying consolidation. On appeal, Yapp makes only brief and
oblique suggestions of reliance. Moreover, Yapp has never asserted to this court
that the district court’s denial of Excel’s motion to consolidate constituted a
reservation of his second action.
Unexpressed but underlying the dissent is a sense that Yapp is an innocent
victim of claim preclusion and thus deserving of the court’s gentle hand of equity
to save him from his own settlement. The dissent would rewrite the settlement
9
Neither party had raised the issue of claim preclusion prior to or during
the motion to consolidate and the court’s order denying consolidation because
doing so would be “conducive to expedition and economy” reflects that claim
preclusion was not an issue at this point in the litigation.
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agreement, the Stipulation, to reinsert the very language to which Excel objected.
In light of Yapp’s acknowledgment and purposeful acceptance of the risk that
claim preclusion would apply to his Wrongful Discharge Action, he is not entitled
to reformation of the settlement by court order. With his eyes wide open, Yapp
chose to forego a full and fair opportunity to litigate in order to satisfy his
immediate appetite for $14,000. The lesson of this majority opinion is the only
one consistent with Clark : Yapp was required to try or settle all of his
employment claims, or negotiate with Excel for an express reservation of the
Wrongful Discharge Action in the Overtime Action settlement agreement.
C. Motion to amend
This court reviews a trial court’s decision whether to allow amendment of
pleadings for abuse of discretion. See Gillette v. Tansy , 17 F.3d 308, 312 (10th
Cir. 1994). An abuse of discretion may be found only when the district court has
made an “arbitrary, capricious, whimsical, or manifestly unreasonable judgment.”
FDIC v. Oldenburg , 34 F.3d 1529, 1555 (10th Cir. 1994) (quotation omitted).
The Federal Rules of Civil Procedure provide that a court should freely grant
leave to amend when justice so requires. See Fed. R. Civ. P. 15(a).
Yapp’s argument that the district court abused its discretion by allowing
Excel to amend its answer is twofold: (1) Excel acted in bad faith by failing to
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allege claim-splitting at any time earlier in the litigation; and (2) Excel waived its
right to assert claim preclusion. Yapp’s bad-faith argument asserts that Excel
never put Yapp on notice that it thought the two suits constituted claim-splitting.
Instead, Yapp asserts, Excel engaged in a “carefully orchestrated campaign” to
lull Yapp into thinking that the Motion to Dismiss the Overtime Action would
have no effect on the Wrongful Discharge Action until after the ten-day deadline
had passed for Yapp to file a Rule 59 motion in the Overtime Action.
The proposed but unadopted settlement agreement 10
and the letter sent by
Yapp’s counsel to Excel on September 9, 1997, 11
do not constitute a waiver by
Excel of its right to assert claim preclusion as a defense in the Wrongful
Discharge Action. Yapp’s counsel had a duty to be vigilant to the strategic
nuances of litigation, which includes the ubiquitous multiple-litigation pitfall of
claim preclusion.
Yapp’s remaining waiver arguments were never made to the district court.
In his Response to Defendant’s Motion to Supplement Answer and Final Pretrial
Order to Assert Additional Affirmative Defense, Yapp argued only that Excel’s
dealings with him in settling the Overtime Action evinced bad-faith conduct. He
never mentioned or suggested Excel’s failure to raise claim-splitting earlier in the
10
See supra , note 2.
11
See supra , note 3.
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litigation. Similarly, during a pretrial hearing on October 9, 1997, Yapp only
asserted the alleged bad-faith behavior and never once suggested failure by Excel
to raise claim-splitting earlier in this litigation.
This court does not address issues that were not properly raised before the
district court. See Rademacher v. Colorado Ass’n of Soil Conservation Dists.
Med. Benefits Plan , 11 F.3d 1567, 1571 (10th Cir. 1993). Accordingly, in the war
of the waivers, Yapp loses. This court can find no abuse of discretion by the
district court in allowing Excel to amend its pleadings to include the affirmative
defense of claim splitting.
D. Rule 60(b) motion
A district court’s decision to grant or deny a Rule 60(b) motion is reviewed
for an abuse of discretion. See Stubblefield v. Windsor Capital Group , 74 F.3d
990, 994 (10th Cir. 1996). Relief under Rule 60(b), however, is “extraordinary
and may only be granted in exceptional circumstances.” See Cashner v. Freedom
Stores, Inc ., 98 F.3d 572, 576 (10th Cir. 1996) (quotation omitted).
Yapp’s 60(b) motion pleaded for relief from the September 11, 1997, Order
of Dismissal with Prejudice in the Overtime Action. Yapp asserted that he was
due relief under Rules 60(b)(1), (3), and (6), which provide relief to a party from
final judgment for: (1) mistake, inadvertence, surprise, or excusable neglect; (3)
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fraud, misrepresentation, or other misconduct of an adverse party; and (6) any
other reason justifying relief from the operation of the judgment. In denying
Yapp’s 60(b) motion, the district court stated:
Plaintiff chose to bring these actions separately. A Motion to
Consolidate was denied, at Plaintiff’s request . . . . The Stipulation
filed with the Court did not mention [the Wrongful Discharge
Action]. Whatever effect that Stipulation may have on the related
case, it is clear that the parties reached an agreement to dismiss [the
Overtime Action] with prejudice.
Rule 60(b)(1) motions premised upon mistake are intended to provide relief
to a party in only two instances: (1) when the party has made an excusable
litigation mistake or an attorney in the litigation has acted without authority; or
(2) when the judge has made a substantive mistake of law or fact in the final
judgment or order. See Cashner , 98 F.3d at 576 (citing 7 James Wm. Moore et.
al., Moore’s Federal Practice ¶ 60.22[2] (2d ed. 1985)). Excusable litigation
mistakes are not those which were the result of a deliberate and counseled
decision by the complaining party. See id . at 577. Rather, the kinds of mistakes
remediable under a Rule 60(b)(1) motion are litigation mistakes that a party could
not have protected against, such as counsel acting without authority. See id.
Thus, a party who simply misunderstands or fails to predict the legal
consequences of his deliberate acts cannot later, once the lesson is learned, turn
back the clock to undo those mistakes. See id. ; see also Pelican Prod. Corp. v.
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Marino , 893 F.2d 1143, 1146 (10th Cir. 1990) (“Carelessness by a litigant or his
counsel does not afford a basis for relief under Rule 60(b)(1).”).
Yapp’s careless or even simple mistaken reliance upon the language in the
proposed but unsigned settlement agreement and his September 9, 1997, letter
does not constitute the type of mistake deemed by this court as excusable. That
he twice attempted to have Excel agree to certain preservation-of-claim language
merely shows that Yapp’s decision to move forward with the Motion to Stipulate
as worded was counseled, if unwise. See also Nemaizer v. Baker , 793 F.2d 58,
61-64 (2d Cir. 1986) (declining to grant Rule 60(b)(1) or (6) relief to party who
later regretted preclusive effect of signed stipulation to dismiss with prejudice).
Yapp fares no better under Rule 60(b)(3). He must prove Excel’s alleged
misconduct by clear and convincing evidence. See Anderson v. Department of
Health & Human Servs ., 907 F.2d 936, 952 (10th Cir. 1990). This he can do only
by showing that Excel acted with “an intent to deceive or defraud the court,” by
means of a “deliberately planned and carefully executed scheme.” Robinson v.
Audi Aktiengesellschaft , 56 F.3d 1259, 1267 (10th Cir. 1995) (quotation omitted).
All that Yapp has alleged on appeal is that he may have attempted to safeguard
the Wrongful Discharge Action from claim preclusion by including claim-
preserving language in a proposed but unsigned settlement agreement and in a
letter to Excel’s counsel which went unanswered. Yapp has proved that Excel
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played hardball litigation. He has not, however, shown that the district court
made a clear and definite error in concluding that Excel’s behavior did not rise to
the level of Rule 60(b)(3) misconduct.
Finally, Rule 60(b)(6) relief is even more difficult to attain and is
appropriate only “when it offends justice to deny such relief.” Cashner , 98 F.3d
at 580 (quotation omitted). The denial of a 60(b)(6) motion will be reversed
“only if we find a complete absence of a reasonable basis and are certain that the .
. . decision is wrong.” State Bank of S. Utah v. Gledhill (In re Gledhill) , 76 F.3d
1070, 1080 (10th Cir. 1996) (quotation omitted). As with the other 60(b)
subsections, Yapp has failed to show that the district judge made a definite, clear,
or unmistakable error in denying the Rule 60(b) motion. See Pelican , 893 F.2d at
1147. Accordingly, we conclude that the district court did not abuse its discretion
and its denial of the Rule 60(b) motion is affirmed.
III. CONCLUSION
For the foregoing reasons, the judgment of the United States District Court
for the District of Colorado granting summary judgment to Excel is AFFIRMED.
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98-1061, Yapp v. Excel Corp.
HENRY, J. dissenting.
I respectfully dissent because I believe the district court’s decision – that the
interests of judicial economy and an expeditious trial warranted separate trials in this
matter – makes the application of claim preclusion improper in this case. This case does
not turn on the merits of the plaintiff’s case, or cases. Rather, it simply turns on the fact
that when a court determines to allow claims to proceed separately, the parties may –
indeed should – rely on the court’s order. Any other result would mean that parties may
never rely on a district court’s decision to allow separate claims to be litigated separately,
whether the court is motivated by trial economy, prejudice to the parties, or simple
fairness. The idea that, having convinced the court (maybe even correctly) that claims
should be tried separately, the plaintiff should subsequently suggest the court reconsider
the issue because there may be a claim preclusion problem takes away the power of courts
to adequately run their dockets. I also disagree with any suggestion that, even though a
plaintiff has prevailed on a hostile motion to consolidate (and the defendant has in
essence ratified that ruling by arguing it would be prejudiced by admission of evidence
related to the other matter), he has waived any right to object to the application of res
judicata because he did not ask the court to reconsider its decision.
Several reasons exist for this conclusion. First, a full and fair opportunity to
present a claim, whether an essential element or an exception, is essential to any fair
application of claim preclusion. And, just as courts have the power to expressly limit the
preclusive effects of judgments, this same power is inherent in a court’s decision that
claims should be tried separately. Otherwise, the plaintiff, who is precluded from
presenting evidence from the second, unconsolidated claim in the first law suit, is denied
a full and fair opportunity to litigate the unconsolidated claim if preclusion is applied.
Second, Clark v. Haas Group, Inc., 953 F.2d 1235 (10th Cir. 1992) is of arguable validity,
and a close reading of the case reveals that we are not required to apply claim preclusion
in this case under Petromanagement Corp. v. Acme-Thomas Joint Venture, 835 F.2d 1329
(10th Cir. 1988). Finally, any settlement of such a claim must be construed to effect the
intention of the parties, and it is clear from this record that the settlement did not reflect
Mr. Yapp’s willingness to waive the second claim.
I. Full and Fair Opportunity and the Court’s Power to Limit Preclusion
A. Full and Fair Opportunity
The majority argues that the requirement of “full and fair opportunity to litigate” is
an “exception.” See majority opinion at note 4. However, the district court and the
parties believed that it was an “element” of claim preclusion. See Aplt’s App., vol. I, at
251 (THE COURT: “The parties agree, and I don’t think there is any dispute as to the
elements of the res judicata, final judgment on the merits, the same parties, a full and fair
opportunity to litigate, and the same cause of action.”) (first and third emphasis added)).
Further, the Supreme Court has stated, and we have held, that application of claim
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preclusion requires a full and fair opportunity to litigate. See Kremer v. Chemical Constr.
Corp., 456 U.S. 461, 481 n.22 (1982) (“While our previous expressions of the
requirement of a full and fair opportunity to litigate have been in the context of collateral
estoppel or issue preclusion, it is clear . . . that invocation of res judicata or claim
preclusion is subject to the same limitation.”); Nwosun v. General Mills Restaurants,
Inc., 124 F.3d 1255, 1257 (10th Cir. 1997) (stating that the fourth factor necessary for
claim preclusion is “a full and fair opportunity to litigate”), cert. denied, 118 S.Ct. 1396
(1998).
I am not sure whether a full and fair opportunity is an element, or an exception, or
if it is an exception, whether it should nonetheless be treated like an element. Regardless,
a full and fair opportunity to litigate is essential to the application of claim preclusion.
Professor Wright notes:
The central proposition of res judicata remains, as it has always been, that a
party who has had a full opportunity to present a contention in court
ordinarily should be denied permission to assert it on some subsequent
occasion.
Charles Alan Wright, Law of Federal Courts § 100A (4th ed. 1983) (quotation omitted).
Like the majority, Professor Wright indicates that a full and fair opportunity is sometimes
called an “exception,” however, he concludes that it is nevertheless essential:
Neither claim preclusion nor issue preclusion can apply unless the party
against whom preclusion is asserted had a “full and fair opportunity” to
litigate the claim or issue in the first action. This is recognized in the
exceptions to the rule of claim preclusion.
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Id. (citing Kremer, 456 U.S. at 481 n.22). Thus, I believe that whether it is characterized
as an exception or an essential element, it is clear that a full and fair opportunity to litigate
is essential to the application of claim preclusion.
In Louis Cook Plumbing & Heating, Inc. v. Frank Briscoe Co., 445 F.2d 1177
(10th Cir. 1971), our court dealt with this issue. In that case, a contractor had brought a
prior action against the government under the Miller Act, 40 U.S.C. § 270, for labor and
material supplied in the performance of a government contract. At the time of judgment,
in the colloquy between the court and counsel for the plaintiff, counsel asked the court to
enter this judgment “without prejudice to the plaintiff to file an action in negligence or on
any other theory of law.” Id. at 1178. In response, the trial judge replied, “No, I would
not care to put that in the formal judgment. I have in essence said that in my findings, and
I think it is clear, that the whole basis of the court's decision is purely the liability of the
defendants under the Miller Act Bond, and nothing else.” Id.
This court then considered a subsequent action, related to the same project, in
which the defendant-appellee raised the defenses of res judicata, estoppel, election of
remedies, and waiver. Below, the trial judge – similarly to this case – had ruled that the
plaintiff’s claims were barred by the judgment in the prior Miller Act case. In reversing
the decision below, our court concluded:
We also conclude that the doctrine of res judicata does not bar appellant
Cook’s present action . . . . We fully recognize that even though the
existence of a separate cause of action sometimes may not be dispositive of
the issue of res judicata, such rule cannot apply here because Cook was
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actually denied the right to litigate any issue in the prior action except
Miller Act questions.
Id. at 1179 (emphasis added). Thus, while the judge in Louis Cook could have expressly
reserved the plaintiff’s right to proceed in the second case, the judge felt it was
unnecessary, that plaintiff’s right to proceed was implicit in his ruling. On appeal, we did
not apply claim preclusion. While it is true that the court found that the case involved
two distinct causes of action, the court went on to specifically acknowledge that the
existence of a separate cause of action is not always the dispositive issue in the
application of claim preclusion where a party was actually denied the right to litigate an
issue in the prior action.
B. The District Court has the Power to Control Preclusion and its
Decision Meant the Second Claim Would Not Be Heard in the First
Action.
Again, Professor Wright, this time joined by Professors Miller and Cooper, states
the black-letter law:
Despite the general rule that a court cannot dictate preclusion consequences
at the time of deciding a first action, it should have power to narrow the
ordinary rules of claim preclusion. A judgment that expressly leaves open
the opportunity to bring a second action on specified parts of the claim or
cause of action that was advanced in the first action should be effective to
forestall preclusion.
18 Wright, Miller & Cooper, Federal Practice and Procedure § 4413 (1981). Further, the
Restatement (Second) Judgments § 26(1)(b) provides a specifically defined “exception”
to the application of claim preclusion where the court “has expressly reserved the
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plaintiff’s right to maintain the second action.” This provision is not directly applicable
in this case as there is no “express” reservation. However, the comments to this section
of the Restatement explain the practical litigation realities that require a trial court to be
able to dictate the preclusive effects of a judgment.
It may appear in the course of an action that the plaintiff is splitting a claim,
but that there are special reasons that justify his doing so, and accordingly
that the judgment in the action ought not to have the usual consequences of
extinguishing the entire claim; rather the plaintiff should be left with an
opportunity to litigate in a second action that part of the claim which he
justifiably omitted from the first action.
Restatement (Second) Judgments § 26(1)(b), cmt. b (emphasis added).
Although the black-letter rule is in the context of a judgment whose preclusion is
expressly limited by the court, there is no functional difference between such a judgment
and a ruling that the claims are going to be tried separately. In the case at bar, we have a
decision, expressly made by the district court after argument and consideration, that Mr.
Yapp’s causes of action would be best tried in separate trials, and that the claims would in
fact be tried in separate trials. In its order, the district court specifically found that the
“Plaintiff has stated valid reasons for filing the two cases separately and separate trials
will be conducive to expedition and economy.” Aplt’s App., vol. II, at 69. Courts clearly
have the power to control the litigation before them, and the plaintiff, after having
convinced the court not to consolidate issues that would be better tried separately, clearly
could not present arguments and evidence from the second case in the first action.
Further, as discussed supra section III, the defense moved to exclude evidence from the
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second trial from being admitted into the first action because the evidence was
“irrelevant,” would cause “confusion of the issues,” would “unduly delay” the trial, and
would be a “waste of time.” Aplt’s App., vol. I, at 91-92. Under these circumstances,
application of preclusion to countermand the court’s decision that the matters would be
best tried separately clearly results in a failure to provide Mr. Yapp a “full and fair
opportunity to litigate,” an important part of the “central proposition” of res judicata. The
mere fact that the plaintiff persuaded the court that it made sense to separate the claims
should not foreclose the plaintiff from continuing to maintain his second claim, any more
than had the plaintiff persuaded the court to limit the preclusive effects of its judgment.
II. Clark and Petromanagement
A. Clark
I share my colleagues’ concerns about the desirability of Clark v. Haas Group,
Inc., 953 F.2d 1235 (10th Cir. 1992). See majority opinion at note 6, and accompanying
text. However, those concerns aside, I do not find that Clark is dispositive in this case.
Clark applies the transactional approach to claim preclusion first adopted by this circuit in
Petromanagement Corp. v. Acme-Thomas Joint Venture, 835 F.2d 1329, 1335 (10th Cir.
1988). However, whether Mr. Yapp’s claims constitute the “same transaction” is only
one factor necessary for claim preclusion. And while it may be true that the district court
erred in denying the defendant’s motion to consolidate under the holding of Clark, as in
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Petromanagement, “[w]hether the court abused its discretion in denying [the] motion to
consolidate is not raised in this appeal.” Id. at 1334. Rather, the dispositive issue before
the court is what the preclusive effect should be of the district court’s ruling that it was
proper for the two causes of action to be tried separately. In my view, under the facts of
this case, the district court’s denial of the motion to consolidate eliminated the possibility
of claim preclusion in the second action because to conclude otherwise would deny Mr.
Yapp a full and fair opportunity to litigate his wrongful discharge claim.
B. Petromanagement
I have been unable to find any case law addressing the preclusive effect of a denial
of a motion to consolidate other than Petromanagement Corp. v. Acme-Thomas Joint
Venture, 835 F.2d 1329, 1335 (10th Cir. 1988). At first blush, one might think that the
holding of Petromanagement would require the application of claim preclusion in this
case.
However, the holding of Petromanagement is very narrow. In Petromanagement,
the plaintiff, an oil and gas corporation, attempted to use consolidation to add additional
remedies to its already existing breach of contract action seeking recission and restitution.
The plaintiff filed a second, separate claim for breach of contract (the same breach by the
same parties) seeking actual and punitive damages. The plaintiff then filed a motion to
consolidate this second claim with its first claim for recission and restitution “shortly
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before [the first action] was scheduled to go to trial.” Petromanagement, 835 F.2d at
1331. The plaintiff argued that the “actions involve common parties as well as common
questions of law and fact.” Id. at 1332. However, the judge refused to allow the plaintiff
to consolidate the virtually identical actions because consolidation “would delay the trial”
of the first action. Id. at 1334 (the court further denied plaintiff’s motion to strike the first
case from the trial docket and plaintiff’s motion to dismiss the first action without
prejudice). The judge, however, did not address the merits of the motion to consolidate.
Ultimately, rather than go to trial without punitive and actual damages being
available remedies, Petromanagement stipulated to a dismissal with prejudice of the first
action. A week later, the defendants moved to dismiss the second claim on the ground of
claim preclusion. On the issue of claim preclusion, the district court found that “[b]ased
upon plaintiff’s admissions that these claims involve common parties and arise from a
common nucleus of operative facts and upon plaintiff’s contentions that these actions
‘would be most conveniently tried in one proceeding,’ and that ‘separate trials of these
cases would generate needless expense and needless demands upon the time and resource
of all parties,’ it is clear under the ‘transactional’ approach . . . that [the second] claim is
barred.” Id. at 1332. We upheld this ruling on appeal, holding that district court’s
“refusal to consolidate . . . does not eliminate the possibility of claim preclusion as to the
untimely issues excluded.” 835 F.2d at 1334 (emphasis added). But that ruling is
inapposite here.
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The key distinction between Petromanagement and the present case is that in
Petromanagement, in ruling on the motion to consolidate, the judge never substantively
ruled that the two cases should be tried in separate trials. Rather, the judge denied
consolidation because the motion to consolidate was untimely and would delay trial.
Undoubtedly, Petromanagement, if it had not waited until the eve of trial, certainly could
have litigated the actual and punitive damages issues in the claim for recission and
restitution – those remedies were based on the same underlying breach of contract by the
same parties.
In the present case, however, the district court substantively determined that the
two cases would best be tried in separate trials. After this ruling, both parties were
precluded from raising the issues presented by Mr. Yapp’s wrongful discharge claim in
the overtime action -- these claims were proceeding in separate trials. Thus,
Petromanagement’s decision that the second action was precluded with respect to
untimely issues is distinguishable from this case, where the motion was timely and district
court addressed and rejected the defendant’s motion to consolidate on the merits. While
it may be true that Mr. Yapp could have filed both cases in the same lawsuit, once a court
determines on the merits that a claim will be tried in a separate suit, the claim is not one
that “was or could have been litigated” and, therefore, I believe Mr. Yapp could not, and
did not, have a full and fair opportunity to litigate the excluded claim.
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III. Waiver & Intent of the Parties
The majority implies that Mr. Yapp waived his right to argue for a full and fair
opportunity to litigate and emphasizes the fact that Mr. Yapp could have asked the court
to “revisit” its “discretionary” order that the two claims would best be tried separately.
Unquestionably, this would have resolved the issue. However, it is not the burden of a
plaintiff to anticipate, raise, and negate affirmative defenses for which the defendant
clearly has the burden. See, e.g., Nwosun v. General Mills Restaurants, Inc., 124 F.3d
1255, 1257 (10th Cir. 1997) (“Res judicata is an affirmative defense on which the
defendant has the burden to set forth facts sufficient to satisfy the elements.”), cert.
denied, 118 S.Ct. 1396 (1998); see also Fed. R. Civ. P. 8(c) (“In pleading to a preceding
pleading, a party shall set forth affirmatively . . . affirmative defense[s]”). If anything,
the failure of the defendant to raise the issue of claim preclusion in the first proceeding
and its omission as a defense from its original answer should be the potential waiver.
The defense, however, not only did not raise the issue of res judicata in the first
lawsuit, it took advantage of the trial court's decision that the claims would best be tried
in separate law suits when it was to its advantage. In the first action, after the claims had
been split, the defendant essentially confirmed the district court’s conclusion regarding
consolidation by filing a motion to exclude evidence from the second action (wrongful
discharge), from being admitted into the first action because the evidence was
“irrelevant” and prejudicial because it would cause “confusion of the issues,” would
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“unduly delay” the trial, and would be a “waste of time.” Aplt’s App., vol. I, at 91-92.
Then, after settlement and dismissal, the defense seized the opportunity to again reverse
positions and essentially argue that the prejudicial, irrelevant, confusing evidence in the
second case should have been presented in the first case.
Finally, the record reflects that had the district court changed its ruling, Mr. Yapp
would not have accepted the settlement offer. In a letter to the defendant, Mr. Yapp’s
counsel expressly stated that it was accepting the $14,000.00 for the overtime action only.
The letter states in pertinent part:
Mr. Yapp has decided to authorize us to file the Stipulation For
Dismissal in this matter, in consideration of Excel’s Fourteen-Thousand-
Dollar ($14,000) payment.
This will serve as notice that in seven (7) days from the date of this
correspondence, we will disburse the funds represented by the two checks
your office forwarded to us . . . . It is our understanding that the dismissal
of this matter will only determine the claims set forth in Civil Action No.
96-S-1350 [the overtime action], in the U.S. District Court for the District
of Colorado.
....
If you have any objections to the contents of this letter, please notify me
of the same no later than September 16, 1997, after which time we will
disburse to ourselves and our client the checks forwarded in settlement of
Civil Action No. 96-S-1350.
Aplt’s App., vol. I, at 173 (emphasis added). The record does not reflect, and the parties
do not argue, that the defendant or his attorney responded with any objections.
It is clear from the letter that Mr. Yapp did not intend to settle the second claim,
and the general rule regarding consent judgments is that the intent of the parties should
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control their preclusive effect:
Consent judgments entered upon settlement by the parties may assume
forms that range from simple orders of dismissal with or without prejudice
to detailed decrees. Whatever form is taken, the central characteristic is that
the court has not actually resolved the substance of the issues
presented . . . .
The basically contractual nature of consent judgments has led to general
agreement that preclusive effects should be measured by the intent of the
parties.
18 Wright, Miller & Cooper, Federal Practice & Procedure § 4443 (1981). While it is
true that “consent judgments ordinarily support claim preclusion but not issue
preclusion,” see id., a consent judgment cannot, in my opinion, support claim preclusion
or issue preclusion where there was not a full and fair opportunity to litigate, a problem
compounded in this case by the fact that the plaintiff did not intend the preclusive effects
the majority’s opinion places on the consent judgment. Moreover, the fact that the parties
could not agree to specific language for a detailed consent judgment (hence the simple
order of dismissal in this case) does not somehow operate to waive plaintiff’s right to a
full and fair opportunity to litigate the excluded claim. Both parties chose to proceed
without a detailed decree, equally risking an adverse outcome. And, in my opinion, given
the district court’s ruling that judicial efficiency warranted separate trials, it was
necessary for the defendant in this case to include specific preclusive language in the
consent decree or other settlement agreement, in order to avoid the plaintiff’s right to a
full and fair opportunity to litigate the excluded claim.
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V. Conclusion
According to the Supreme Court, res judicata “has the dual purpose of protecting
litigants from the burden of relitigating an identical issue with the same party or his privy
and of promoting judicial economy by preventing needless litigation.” Parklane Hosiery
Co., Inc. v. Shore, 439 U.S. 322, 326 (1979) (cited with approval in 18 Wright, Miller &
Cooper, supra § 4403). For the reasons stated above, I simply fail to see how these
purposes are effectuated by applying claim preclusion in this case. This was one of those
relatively rare cases where the judge ruled that the claims should be tried separately for
the purpose of promoting judicial economy – evidently agreeing with the defendant’s later
argument that the evidence in the second case was “irrelevant” and prejudicial because it
would cause “confusion of the issues,” would “unduly delay” the trial, and would be a
“waste of time.” Aplt’s App., vol. I, at 91-92. Thus, the judge felt and ruled that the
claims were not identical when he denied appellant’s motion to consolidate – had they
been the identical issue with the same parties, he would have granted the motion to
consolidate. While Professors Wright, Miller and Cooper caution about creating
uncertainty in the doctrine of res judicata “in an effort to achieve individualized justice,”
18 Wright, Miller & Cooper, Federal Practice & Procedure § 4430, they also
acknowledges that there is a risk associated with the judicial desire for general, broadly
applicable rules regarding claim preclusion that do not take into consideration the
practical realities of litigation:
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To the extent that the newer [broader] rules force litigants to take advantage
of improved procedural opportunities for more comprehensive and effective
initial litigation they represent a desirable process of continually adapting
basic policies to new circumstances. There is a risk, however, that courts
may lose sight of the irrational tactical realities that often counsel freedom
for litigants to choose whether it is better to forego the possibility of a
single comprehensive suit. Contemporary concern for judicial efficiency
may augment this risk. Balancing these opportunities and risks will prove
one of the major challenges to res judicata doctrine as it evolves in the years
to come. The choices to be made will be complicated by the desirability of
achieving general rules.
Id. The majority’s position is clearly on one side of this legitimate divide and I am on the
other. As I have lost this round, I might ask for reconsideration – a proper thing to do, in
my opinion, but only when you lose.
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