United States Court of Appeals
For the First Circuit
No. 07-2753
ROSALIND HERMAN, Individually and as Trustee of
FINANCIAL RESOURCES NETWORK, INC.
401(k) Profit Sharing Plan; GREGG D. CAPLITZ;
FINANCIAL RESOURCES NETWORK, INC.,
Plaintiffs, Appellants,
v.
RUDY K. MEISELMAN, Individually and as Trustee of the
Rudy K. Meiselman Revocable Trust; HOPE E. MEISELMAN,
Individually and as Trustee of the Laura Jane Meiselman Trust,
Paula Sue Meiselman Trust and Trust of Laura, Janet and Paula
Meiselman; LAURA PATTERSON; JANET MEISELMAN, Individually and
as General Partner of Meiselman Life Insurance Limited
Partnership; PAULA SUE MEISELMAN,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Torruella, Lipez and Howard,
Circuit Judges.
Robert D. Cohan, with whom Cohan Rasnick Myerson LLP was on
brief, for appellants.
Charles P. Kazarian, P.C., with whom Law Office of Charles
P. Kazarian was on brief, for appellees.
September 10, 2008
HOWARD, Circuit Judge. Appellants Rosalind Herman, Gregg
Caplitz and Financial Resources Network, Inc. ("FRNI") filed suit
in Massachusetts state court against appellees Rudy K. Meiselman
and various members of his family. The suit stemmed from
Meiselman's employment with FRNI and his participation in a profit-
sharing plan under the Employee Retirement Income Security Act of
1974 ("ERISA"). Meiselman removed the matter to federal court and
moved to dismiss on the ground that a 2005 judgment by the district
court against appellants and in favor of Meiselman barred the
current action. The district court agreed and dismissed on claim
preclusion grounds. We affirm.
I.
This is the latest installment of a dispute that has oft
darkened our doorstep.1 We take appellants' allegations as true
for purposes of reviewing the Rule 12(b)(6) motion to dismiss.
Meiselman, a retired doctor, became employed by FRNI in
late 2001 to provide investment strategy services. FRNI set up an
investment plan (the FRNI Plan) so that Meiselman could roll his
accumulated funds over from a previous employer's profit-sharing
plan free from negative tax consequences. Herman, who was
President, Secretary and a Director of FRNI during the relevant
1
Indianapolis Life Ins. Co. v. Herman, 204 Fed. App'x 908, 910 (1st
Cir. 2006) (per curiam); Indianapolis Life Ins. Co. v. Herman, 516
F.3d 5, 11 (1st Cir. 2008).
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time, was also the FRNI Plan Trustee. Caplitz provided financial
planning services to FRNI as an independent contractor.
By 2003, the parties began to disagree on certain
investment and management decisions surrounding the FRNI Plan. In
2004, Meiselman sued Herman, Caplitz and the FRNI Plan in federal
court in Massachusetts (the "First Action"), claiming breach of
contract and breach of fiduciary duty in violation of ERISA and
seeking to compel the release of his funds from the Plan account.
That suit was dismissed by the district court after the filing of
a Stipulation of Dismissal under Fed. R. Civ. P. 41(a) and
execution of a Settlement Agreement, as well as Meiselman's
execution of a Release, purporting to relinquish any and all claims
arising out of the employment relationship.2
The saga was far from over. In late 2004, the
Indianapolis Life Insurance Company ("Indianapolis Life") brought
suit in U.S. District Court for the District of Massachusetts (the
"Second Action"). The suit sought rescission of a life insurance
policy issued to FRNI insuring Meiselman and his spouse and a
determination of Indianapolis Life's rights and obligations under
2
While Meiselman has maintained that certain preconditions to the
Rule 41 dismissal were allegedly not performed, Herman and Caplitz
say that those conditions were not part of the Release or
Settlement Agreement executed by the parties. In any event, the
dismissal was filed with and accepted by the district court.
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the policy.3 The suit named as defendants Herman, Caplitz (who had
acted as agent when the policy issued), the FRNI Plan and Meiselman
and his spouse. In response, Meiselman cross-claimed against his
co-defendants Herman, Caplitz and FRNI (as administrator of the
FRNI Plan). In the cross-claim, Meiselman sought a declaratory
judgment that the 2004 Release was void under ERISA, 29 U.S.C. §
1110(a), and also alleged several state law claims including breach
of employment contract, breach of fiduciary duty, breach of
contract and conversion. The state law claims were accompanied by
demands for money damages.
Herman, Caplitz and FRNI, the cross-claim defendants,
failed to respond to the cross-claim. A notice of default was
entered in Meiselman's favor under Fed. R. Civ. P. 55(a), and
thereafter the district court entered a default judgment against
Herman, Caplitz and FRNI jointly and severally in the amount of
$938,640.4
3
At issue in the suit were alleged misrepresentations concerning
Meiselman's health, whether Caplitz had made sure that the
Meiselmans' finances had been reviewed by a certified public
accountant, and whether the Meiselmans had sought to rescind the
policy. The suit also sought restitution of the commission paid to
Caplitz in the course of his conduct as an agent for Indianapolis
Life.
4
Herman, Caplitz and FRNI sought relief from the default judgment,
alleging excusable neglect by their then-counsel. The district
court denied relief, and also entered summary judgment against all
of the defendants in favor of Indianapolis Life on intentional
misrepresentation grounds. Indianapolis Life Ins. Co. v. Herman,
No. 04-12481 (D. Mass. Jan. 27, 2006) (order granting summary
judgment), aff'd, 204 Fed. App'x at 910. Appellants have filed a
-4-
The present episode of this litigation was commenced the
following year when appellants Herman, Caplitz and FRNI filed suit
in Massachusetts state court against Meiselman and members of his
family, alleging state law claims of breach of contract, fraud,
negligent misrepresentation, negligence, negligent and intentional
infliction of emotional distress and unfair and deceptive business
practices. The complaint concerns acts in connection with the
employment relationship, the administration of the FRNI Plan, the
Release and Settlement Agreement and a specific harassing statement
allegedly made by Meiselman. Meiselman removed the matter to the
district court and moved to dismiss. He argued that the default
judgment against appellants in the Second Action served to bar suit
under the doctrine of claim preclusion. The district court agreed
and dismissed the claim, prompting this appeal.
II.
We review the granting of a motion to dismiss de novo.
Ezra Charitable Trust v. Tyco Int'l, Ltd., 466 F.3d 1, 5 (1st Cir.
2006).
Appellants have raised a plethora of issues, although
their ability to withstand a motion to dismiss hinges upon only
one: is their action barred by claim preclusion?5
malpractice action against their former counsel.
5
Appellants point to Kaspar Wire Works, Inc. v. Leco Eng'g & Mach.
Inc., 575 F.2d 530, 537 (5th Cir. 1978) and Arizona v. California,
530 U.S. 392, 414 (2000) to argue that claim preclusion does not
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We consider the following factors in determining whether
the judgment is given claim preclusive effect: the finality of the
judgment, the identity of the parties and the identity of the
causes of action.6 In re Iannochino, 242 F.3d 36, 43 (1st Cir.
2001). Finality of the judgment is satisfied by the issuance of a
default judgment. See SMA Life Assur. Co. v. Sánchez-Pica, 960
F.2d 274, 275 (1st Cir. 1992); see also Acevedo-Villalobos v.
Hernández, 22 F.3d 384, 388 (1st Cir. 1994) (dismissal has claim
preclusive effect where it "ends the litigation on the merits and
leaves nothing for the court to do but execute the judgment"
(quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368,
operate in the declaratory judgment context, and that they should
prevail under issue preclusion principles. These two cases concern
consent decrees, however, in which a court does not make a specific
declaration but rather endorses an agreement reached by the
parties. See Carteret Sav. & Loan Ass'n., F.A. v. Jackson, 812
F.2d 36, 38 (1st Cir. 1987) (distinguishing consent decrees from
declarations of a court). In this case, on January 27, 2006, the
district court actually entered a comprehensive judgment resolving
all claims in the Second Action, including an award of money
damages from the cross-claim defendants to Meiselman. Thus we will
not address the appellants' arguments that issue preclusion should
operate instead of claim preclusion.
6
Lurking in this case is an interesting question about whether the
claim preclusion law of the forum state plays a role in deciding
the federal common law question of whether the new complaint by
appellants is barred. See Semtek Int'l Inc. v. Lockheed Martin
Corp., 531 U.S. 497, 507-08 (2001); see also Taylor v. Sturgell,
128 S. Ct. 2161, 2171 (2008). Because both Massachusetts law and
federal common law apply the same analytical factors in deciding
claim preclusion questions, we needn't decide this issue. See,
e.g., TLT Const. Corp. v. A. Anthony Tappe & Assocs., Inc., 716
N.E.2d 1044, 1049 (Mass. App. Ct. 1999).
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373-74 (1981))). The requirement of identity of the parties also
is easily met here.7
Thus we need focus only on whether the appellants'
current claims are sufficiently identical to the claims at issue in
the Second Action to bar them. To do so, we inquire as to whether
a claim arose from the same "transaction, or series of connected
transactions, out of which the [prior] action arose." Restatement
(Second) of Judgments § 24; see also Negrón-Fuentes v. UPS Supply
Chain Solutions, 532 F.3d 1, 9 (1st Cir. 2008). "Although a set of
facts may give rise to multiple counts based on different legal
theories, if the facts form a common nucleus that is identifiable
as a transaction or series of related transactions, then those
facts represent one cause of action." Apparel Art Int'l, Inc. v.
Amertex Enters. Ltd., 48 F.3d 576, 583-84 (1st Cir. 1995). Facts
forming a common nucleus are those meeting the following criteria:
"1) whether the facts are related in time, space, origin or
motivation; 2) whether the facts form a convenient trial unit; and
3) whether treating the facts as a unit conforms to the parties'
expectations." Id. at 584.
7
Appellants' only argument that there is insufficient identity of
parties is that Herman was not a party to the Second Action because
she was named only in her capacity as a trustee. We have
previously rejected this argument, however, making it clear that
Herman was a party to the Second Action and thus subject to claim
preclusion related to that action. Indianapolis Life, 516 F.3d at
11.
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An analysis of the above factors overwhelmingly suggests
that Meiselman's cross-claims in the Second Action and the claims
now raised by appellants are "rooted in the same nucleus of
operative facts." Id. The factual basis for these counts was
formed in the same time period and from the same essential dispute
as the prior action: the employment relationship, the profit-
sharing plan and the parties' differences over them, as well as the
validity of the Release given by Meiselman in the First Action.
The two sets of claims form a convenient trial unit
because the "witnesses or proof needed in the second action overlap
substantially with those used in the first action." Mass. Sch. of
Law at Andover, Inc. v. Am. Bar Ass'n, 142 F.3d 26, 38 (1st Cir.
1998) (quoting Porn v. Nat'l Grange Mut. Ins. Co., 93 F.3d 31, 36
(1st Cir. 1996) (internal quotation marks omitted)). The facts and
evidence necessary to appellants' complaint -- the employment
contract, documentation of investment and other management
decisions, and documentation of subsequent interactions between the
parties -- are the same as those that would have been involved in
the cross-claim.
Finally, the parties' expectations further point towards
considering these two suits as a single cause of action. We
consider whether appellants "knew all the facts necessary for
bringing [their present claims]" at the time of Meiselman's cross-
claim. Iannochino, 242 F.3d at 49. Because appellants' present
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claims concern the souring of the employment relationship and
related events, we conclude that appellants did, in fact, know
these facts.8 In sum, appellants' claims are precluded by the
resolution of the earlier suit and were properly dismissed by the
district court.9
III.
For the foregoing reasons, we affirm the district court's
dismissal.
8
We note that certain of appellants' claims arguably arose after
Meiselman filed his cross-claims. As appellants make no attempt to
differentiate their claims based on their timing, however, we will
not differentiate them now. See United States v. Zannino, 895 F.2d
1, 17 (1st Cir. 1990).
9
To the extent appellants attempt to contest Meiselman's ability to
collect on the default judgment, we note only that the judgment is
final. For the reasons discussed, this action is not the
appropriate mechanism by which to mount what is essentially a
collateral attack on that judgment.
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