United States Court of Appeals
Fifth Circuit
F I L E D
Revised July 21, 2004 July 19, 2004
In the Charles R. Fulbruge III
Clerk
United States Court of Appeals
for the Fifth Circuit
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m 03-20202
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THE PROCTER & GAMBLE COMPANY;
THE PROCTER & GAMBLE DISTRIBUTING COMPANY,
Plaintiffs-Appellants,
VERSUS
AMWAY CORPORATION, ET AL.,
Defendants,
AMWAY CORPORATION,
Defendant-Appellee.
_________________________
Appeals from the United States District Court
for the Southern District of Texas
_________________________
Before GARWOOD, HIGGINBOTHAM, and The Utah court granted Amway’s motion
SMITH, Circuit Judges. to dismiss the Third Amended Complaint.
P&G later filed a Fourth Amended Complaint
JERRY E. SMITH, Circuit Judge: asserting claims for product disparagement,
based on allegations that Amway had told con-
The Procter & Gamble Company and the sumers that P&G’s Crest toothpaste scratches
Procter & Gamble Distributing Company teeth, and asserting fraud, but the Utah court
(jointly referred to in the singular as “P&G”) dismissed that complaint as untimely filed.
appeal a summary judgment in favor of
defendant Amway Corporation, alleging that Meanwhile, P&G sued in the United States
the district court gave improper res judicata District Court for the Southern District of
effect to a judgment of the United States Texas, alleging causes of action for unfair
District Court for the District of Utah. competition, negligent supervision, negligence,
Concluding that the Utah court’s judgment is business disparagement, defamation, tortious
entitled to res judicata effect, we affirm. interference with prospective business
relations, vicarious liability, fraud, violations of
I. RICO, violations of the Lanham Act, and
The dispute between Procter & Gamble and violations of the Texas Business and
Amway has been before this court on two Commerce Code. These causes of action were
prior occasions. See Procter & Gamble Co. v. based on the Satanism rumor, the Crest rumor,
Amway Corp., 242 F.3d 539 (5th Cir. 2001) and Amway’s alleged pyramid scheme. In
(“P&G I”); Procter & Gamble Co. v. Amway April 1999, the Utah court entered a final
Corp., 280 F.3d 519 (5th Cir. 2002) judgment dismissing all of P&G’s claims.
(“P&G II”). Because the complete factual
history is set out in those opinions, we only The instant case went to trial in May 1999.
summarize the relevant procedural history. At the close of P&G’s case, Amway moved
for judgment as a matter of law. The district
P&G has long been the subject of rumors court granted the motion and dismissed P&G’s
linking it to Satanism and has attempted to Lanham Act claim on the basis of the res
identify Amway and its distributors as the judicata effect of the Utah court’s judgment.
source of those rumors. In 1995, P&G sued It also dismissed P&G’s remaining claims on
Amway and other defendants in federal district the merits. After the Texas court had entered
court in Utah. P&G then filed a second judgment, but before we heard the appeal, the
amended complaint alleging defamation, com- Tenth Circuit affirmed in part, reversed in part,
mon law unfair competition, violations of the and remanded the Utah district court’s
Utah Truth in Advertising Act, tortious judgment. See Procter & Gamble Co. v.
interference, negligent supervi sion and Haugen, 222 F.3d 1262 (10th Cir. 2000)
violations of the Lanham Act, and vicarious (“Haugen I”).
liability arising out of the Satanism rumor.
P&G later filed a third amended complaint In P&G I, we affirmed in part and reversed
alleging that Amway’s distribution method was in part the district court’s rulings on the
an illegal pyramid scheme, and claiming fraud merits. Most importantly, we found that at the
and product disparagement. time P&G I was decided, there was no res
2
judicata effect from the Utah case. We held clusion, or ‘pure’ res judicata, is the
that the district court had correctly accorded ‘venerable legal canon’ that insures the finality
the Utah court’s judgment res judicata effect of judgments and thereby conserves judicial re-
and that dismissal had been proper when sources and protects litigants from multiple
granted. The Tenth Circuit’s subsequent re- lawsuits.” United States v. Shanbaum, 10
versal and remand eliminated, however, any F.3d 305 (5th Cir. 1994). Res judicata applies
res judicata bar occasioned by the reversed where “(1) the parties to both actions are iden-
and remanded judgment. P&G I, 242 F.3d at tical (or at least in privity); (2) the judgment in
546. Accordingly, we vacated on the ground the first action is rendered by a court of
of res judicata. competent jurisdiction; (3) the first action
concluded with a final judgment on the merits;
The issues we considered in P&G II did and (4) the same claim or cause of action is
not concern Amway or the appeal before us involved in both suits.” Ellis v. Amex Life Ins.
today. We did, however, note that after Co., 211 F.3d 935, 937 (5th Cir. 2000). If
P&G I and P&G II, “the only claims these conditions are satisfied, all claims or de-
current ly before the district court relate to fenses arising from a “common nucleus of op-
spreading the Satanism and Crest toothpaste erative facts” are merged or extinguished. Ag-
rumors.” P&G II, 280 F.3d at 524. rilectric Power Partners, Ltd. v. Gen. Elec.
Co., 20 F.3d 663 (5th Cir. 1994).
On remand from the Tenth Circuit, the
Utah court dismissed all of P&G’s claims. In P&G I, 242 F.3d at 544, we noted that
Procter & Gamble Co. v. Haugen, 158 F. “[t]his suit is based on the same transactions,
Supp. 2d 1286 (N.D.Utah 2001), aff’d, 317 and involves substantially the same parties, as
F.3d 1121 (10th Cir. 2003). Shortly after the does the Utah suit.” Having already decided
Tenth Circuit’s affirmance, the Texas district that res judicata based on the Utah court’s
court granted Amway’s motion for summary judgment in Haugen I would have been
judgment, dismissing P&G’s remaining claims. appropriate but for the fact that the judgment
P&G filed a timely notice of appeal, and the had been reversed and remanded, we now
district court subsequently entered judgment conclude that res judicata was appropriate
pursuant to FED. R. CIV. P. 54(b), thus based on the Utah court’s affirmed judgment
assuring our jurisdiction over this appeal. on the merits in Haugen II.1
II.
1
We review a summary judgment de novo, P&G was not permitted to amend its Utah
using the same standards as did the district complaint to include claims for disparagement of
court. BP Oil Int’l, Ltd. v. Empresa Estatal Crest toothpaste. This leaves open the possibility
that the events giving rise to the Crest disparage-
Petoleos de Ecuador, 332 F.3d 333 (5th Cir.
ment claim were not a part of the common nucleus
2003). The res judicata effect of the Utah of operative facts giving rise to the Satanism
judgment is a question of law that we also re- claims, which would make res judicata inapplic-
view de novo. P&G I, 242 F.3d at 546. able to the Crest claims.
A. P&G, however, has waived this argument by
Under the law of this circuit, “[c]laim pre- failing to raise it in its opening brief, which men-
(continued...)
3
P&G contends that the district court erred consider and affirm the Utah court’s decision
in according the Utah court’s judgment res on the merits. This, highlights a flaw in P&G’s
judicata effect, alleging (1) that it was argument: The proper remedy for an allegedly
improperly based on the res judicata effect of erroneous judgment is direct appeal to the
the later-reversed opinion of the Texas court in proper court, not an attempt to avoid the res
P&G I, (2) that it was based on incorrect legal judicata effect of that judgment in another suit
conclusions, contrary to those established in against the same party for the same cause of
P&G I, and (3) that it was entered without action.
giving P&G fair opportunity to be heard.
P&G’s arguments amount to the contention All the issues P&G raises assert errors of
that the Utah court decided the case wrongly, law that would undermine the correctness of
or at least differently from how the Texas the Utah court’s judgment. The question
court would have done so under this circuit’s whether that judgment on the merits was cor-
law. rect, however, does not enter into our inquiry
on the subject of res judicata, for even an in-
P&G’s first allegation is faulty, inasmuch as correct judgment is entitled to res judicata ef-
the Tenth Circuit recognized the potential fect. See Parsons Steel, Inc. v. First Ala.
difficulty of the Utah court’s basing its Bank, 474 U.S. 518, 525 (1986).
decision on res judicata and proceeded to
“The general rule [of res judicata] stated in
this Section requires that errors underlying a
1
judgment be corrected on appeal or other
(...continued)
available proceedings to modify the judgment
tions only that Amway should be estopped from
or to set it aside, and not made the basis for a
asserting that the Crest claim does arise from the
common nucleus of operative facts, but does not second action on the same claim.
provide contentions, facts, legal citations, argu- RESTATEMENT (SECOND) OF JUDGMENTS §19
ments, or analysis to allow us to conclude that it cmt. a (1982). As a learned treatise puts it,
the Crest disparagement claim survives the res jud- “[r]es judicata applies even if the next court
icata effect of the Utah judgment. Failure ade- to visit the dispute believes that the second
quately to brief an issue on appeal constitutes court’s res judicata ruling was wrong.” 18
waiver of that argument. See FED R. APP . P. WRIGHT, MILLER & COOPER, FEDERAL
28(a)(9)(A); United States v. Martinez, 263 F.3d PRACTICE AND PROCEDURE: JURISDICTION 2D
436 (5th Cir. 2001) (noting the rule); State v. § 4404 (2d ed. 2002). Even where the second
Thames, 214 F.3d 608, 611 n.3 (5th Cir. 2000) court incorrectly gives preclusive effect to the
(waiver for failure to include argument in statement first court’s judgment, the first court is bound
of issue or body of brief); L&A Contracting Co. v. by the res judicata effect of the second court’s
S. Concrete Servs., 17 F.3d 106 (5th Cir. 1994)
judgment. In re Brady, Tex., Mun. Gas Corp.,
(waiver for failure to cite authority); United States
v. Beaumont, 972 F.2d 553, 563 (5th Cir. 1992)
936 F.2d 212 (5th Cir. 1991).
(failure to argue issue adequately); United States v.
Torres-Aguilar, 352 F.3d 934, 936 n.2 (5th Cir. When two suits proceed simultaneously, as
2003) (argument deemed abandoned by appellant in this case, res judicata effect is given to the
“only briefly mentioning it in a footnote of his first judgment rendered. Chicago, Rock Island
opening brief without providing any legal citation & Pac. R.R. v. Schendel, 270 U.S. 611 (1926);
or analysis”).
4
see also 18 WRIGHT, MILLER & COOPER, court and Tenth Circuit on particular issues
supra, JURISDICTION 2D § 4404 (citing Jones may conflict with our holdings on those issues,
v. Sheehan, Young & Culp, 82 F.3d 1334, P&G has identified a potential source of
1338-39 n.3. (5th Cir. 1996); In re Hansler, conflict between the application of collateral
988 F.2d 35, 38-39 (5th Cir. 1993)). estoppel based on the Utah judgments and the
Maintaining such a litigation strategy almost law of the case or mandate of the Texas case.
assures that at some point one of the cases will This difficulty does not arise, however, where
become barred by a judgment in the other; the res judicata operates not to determine issues
successful party will find that all its claims and within a case but to extinguish the case as a
defenses have merged into the judgment, while whole.
the unsuccessful party will find that its have
been extinguished. “There is no reason why Although law of the case and res judicata
defendants should be required to defend, or are somewhat related preclusive doctrines,
courts to hear, additional or multiple cases, “the law of the case doctrine is merely a rule of
free from the protections of res judicata, simp- practice, based upon sound policy,” while
ly because the plaintiff chose to file them “[r]es judicata . . . is categoric and requires
piecemeal at the same time rather than in suc- that respect be accorded the prior judgment.”
cession.” Sidag Aktiengesellschaft v. Smoked Loumar, Inc. v. Smith, 698 F.2d 759, 762 (5th
Foods Prods. Co., 776 F.2d 1270 (5th Cir. Cir. 1983). In discussing the relationship be-
1985). A party gets only “one bite at the tween the doctrines of law of the case and res
apple” and is not allowed to take two bites judicata, the Supreme Court noted that “there
simply because it attempts to take both at is a difference between such adherence [to law
once rather than seriatim. of the case] and res judicata; one directs
discretion, the other supersedes it and compels
B. judgment. In other words, in one it is a
P&G contends that, in according the Utah question of power, in the other of submission.”
judgment res judicata effect, the district court S. R.R. v. Clift, 260 U.S. 316, 319 (1922).
improperly disregarded the law of the case as The application of res judicata in this case
established by this court and slighted the man- does not conflict with this court’s rulings or
date in P&G I. This objection is misguided. mandates on the merits of P&G’s claims.
Nothing in our prior rulings has established Rather, it bars them a priori.
that a valid judgment from the Utah court
should not be given res judicata effect by the The district court properly dismissed
Texas court; quite to the contrary, we stated P&G’s claims. The judgment, accordingly, is
that the Texas court’s invocation of res AFFIRMED.
judicata in P&G I was proper but for the fact
that the Utah court’s decision was later
reversed and remanded. It did not, therefore,
run afoul of our mandate for the district court
to accord the Utah judgment res judicata
effect.
To the degree that the decisions of the Utah
5