October 19, 2017

Colorado Supreme Court: Mutuality is Necessary Element of Defensive Claim Preclusion

The Colorado Supreme Court issued its opinion in Foster v. Plock on Monday, May 15, 2017.

Claim Preclusion—Issue Preclusion—Mutuality.

In this case, the supreme court considered whether mutuality is a necessary element of defensive claim preclusion. Although multiple divisions of the court of appeals have concluded that mutuality need not be established for the defensive use of claim preclusion, the supreme court disagrees. Instead, the court concluded that mutuality is a necessary element of defensive claim preclusion. The court also concluded that mutuality existed in this case, as did the remaining elements of claim preclusion, and therefore affirmed the judgment of the court of appeals on other grounds.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Claim Preclusion Bars Relitigation of Attorney Fee Issue in CDARA Case

The Colorado Court of Appeals issued its opinion in Layton Construction Co., Inc. v. Shaw Contract Flooring Services, Inc. on Thursday, October 20, 2016.

Summary Judgment—Claim Preclusion.

Layton Construction Co., Inc. (Layton) hired Shaw Contract Flooring Services, Inc. (Shaw) to perform work on a project for BCRE, the property owner. BCRE subsequently terminated its contract with Layton and gave Layton notice of numerous construction defects, a few of which related to Shaw’s work. Layton sued BCRE, alleging BCRE had failed to pay for work and seeking damages. BCRE counterclaimed for defective workmanship. Layton then added claims against various subcontractors, including Shaw.

Pursuant to a clause in the subcontract, Layton sought indemnification from Shaw for all damages and costs arising from any liability it might have to BCRE, including Shaw’s failure to provide a defense or pay Layton’s costs. Later, after BCRE specifically identified Shaw’s allegedly defective work, Layton moved to dismiss its indemnification claim against Shaw with prejudice. Layton’s motion stated the dismissal would include “those claims that have been or could have been asserted in this lawsuit.” The district court dismissed Layton’s claims with prejudice.

After a subsequent bench trial, the court entered an award for Layton on its claims against BCRE. The subcontractors remaining in the case were found liable to Layton under the indemnification provisions in their subcontracts.

Layton then filed this case against Shaw and other subcontractors, asserting claims for contractual and common law indemnity and declaratory judgment seeking an award of attorney fees, costs, and expenses it had incurred in defending BCRE’s claims in the prior case. Layton asserted the indemnification claim against Shaw under C.R.S. § 13-80-104 of the Construction Defect Action Reform Act (CDARA). Shaw moved for summary judgment, arguing Layton’s indemnification claims were barred by claim preclusion because they had been dismissed with prejudice. The district court granted the motion.

On appeal, the Court of Appeals noted that for a judicial proceeding to be precluded by a previous judgment, there must exist finality of the first judgment, identity of subject matter, identity of claims for relief, and identity or privity between parties to the actions.

Layton argued that its claims were not identical to those asserted against Shaw in the prior case. Because Layton could have asserted an indemnity claim for attorney fees and costs in the prior case there is identity of claims.

Layton also argued that CDARA modifies the doctrine of claim preclusion in the construction defect context by requiring splitting of indemnification claims. The Court found nothing in CDARA that abrogates the doctrine of claim preclusion in this case.

Layton further argued that various exceptions to the claim preclusion doctrine applied. The Court found that the exceptions to the doctrine of claim preclusion do not apply to this case.

Shaw requested attorney fees incurred on appeal, arguing that Layton’s appeal was substantially frivolous and vexatious. The Court agreed that the appeal was substantially frivolous and found that Layton’s assertion that it raised “novel” issues was “nothing more than a reflection of their futility.”

The judgment was affirmed and the case was remanded for the district court to determine the reasonable amount of Shaw’s attorney fees incurred on appeal.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Issue Preclusion Does Not Bar Inquiry Into Post-Decree Historical Consumptive Use of Water Right

The Colorado Supreme Court issued its opinion in Concerning the Application for Water Rights of Sedalia Water and Sanitation District in Douglas County: Wolfe v. Sedalia Water and Sanitation District on Monday, February 9, 2015.

Historical Beneficial Consumptive Use Calculation—Change of Water Right and Augmentation Plan Decree—Claim and Issue Preclusion—Prolonged Unjustified Period of Nonuse.

The Supreme Court examined whether, in a successive change of the Stephan Sump No.1/Ball Ditch water right, its historical use based on average annual historical use in Case No. 83CW364 should be re-quantified to take into account twenty-four years of nonuse. The Court affirmed the water court’s determination that issue preclusion applies here to bar the State and Division Engineers from contesting the amount of historical beneficial consumptive use allocated to the Stephan Sump No.1/Ball Ditch water right for the 1872 to 1986 period. It reversed the water court’s ruling applying issue preclusion to the post-decree period following entry of the 1986 decree. The Court directed that, on remand from this decision in finalizing its decree, the water court should take any evidence and legal argument offered by the parties on the issue of the alleged period of post-1986 nonuse. If the water court finds there has been prolonged unjustified nonuse of the water right between entry of the prior change decree and the pending decree application, it may conclude that this constitutes a changed circumstance calling for the selection of a revised representative period of time for calculating the annual average annual consumptive use amount available for Sedalia Water and Sanitation District’s change of water right and augmentation decree.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Allowing Recovery for Lost Horses Would Effectively Nullify State Forfeiture Proceeding

The Tenth Circuit Court of Appeals issued its opinion in Campbell v. City of Spencer on Tuesday, December 16, 2014.

The City of Spencer, Oklahoma, along with the Town of Forest Park and Blaze Equine Rescue seized 44 emaciated and malnourished horses from Ann Campbell’s three properties pursuant to a search warrant issued for one of the properties. The City and Town filed a joint petition in Oklahoma County District Court for forfeiture of the horses as a remedy for animal abuse. During the forfeiture proceeding, Campbell did not raise any argument regarding the scope of the search warrant. The court granted the forfeiture petition, the Oklahoma Court of Civil Appeals affirmed, and the Oklahoma Supreme Court denied certiorari.

Campbell subsequently filed a § 1983 action in the U.S. District Court for the Western District of Oklahoma, claiming that the municipalities and Blaze had violated the Fourth Amendment in two ways: (1) by withholding from the search warrant information about Campbell’s plan to reduce the number of horses, and (2) by searching the two locations not listed on the warrant. The municipalities filed motions to dismiss on preclusion grounds, since Campbell did not raise her arguments in the state forfeiture proceeding. Blaze filed a motion for summary judgment on preclusion grounds. The district court granted the motions. Campbell appealed.

The Tenth Circuit affirmed the district court, finding the exclusionary rule applied in Oklahoma state forfeiture proceedings and Campbell could have raised her claims in that proceeding. Campbell asserted that the state court judge refused to consider the legality of the evidence, but the Tenth Circuit reviewed the record and  found no evidence of such refusal. Campbell also suggested that suppression issues could not be raised in state court proceedings, which was an incorrect understanding of the law. Because of its conclusion that Campbell could have raised her claims in state court, the Tenth Circuit next considered whether allowing her to pursue the claims in federal court would nullify the original proceeding. The Tenth Circuit could not state with certainty whether barring the suppression would nullify the forfeiture proceeding, but found that allowing Campbell to pursue her claims would impermissibly impair the municipalities’ rights as established in the state court. The Tenth Circuit noted that allowing Campbell to recover the value of the lost horses would suggest the invalidity of the state court’s forfeiture order, and declined to allow recovery.

The Tenth Circuit affirmed the district court’s dismissal as to the municipalities and grant of summary judgment as to Blaze.

Tenth Circuit: Lawsuit Properly Dismissed for Untimeliness, Failure to State a Claim, and Issue Preclusion

The Tenth Circuit Court of Appeals issued its opinion in Knight v. Mooring Capital Fund, LLC on Tuesday, April 22, 2014.

In 2010, the Tenth Circuit decided two appeals involving claims and cross-claims between, on one side, Judy Knight and her company Phoenix Central Inc., and, on the other side, Mooring Capital Fund, LLC. Two years later, Knight filed a new suit in Oklahoma state court on behalf of herself, Phoenix, and another of her companies, Mini Malls of America. The defendants were Capital and Financial and individuals associated with them, including Financial’s Chief Executive Officer, John Jacquemin, and unnamed “Counsels and Agents of Defendants.” Capital, Financial, and Mr. Jacquemin removed the litigation to federal district court, and moved to dismiss with prejudice. Knight responded and filed a first amended complaint that named as additional defendants the law firm and individual lawyers who represented Capital and Financial in the earlier proceedings. Capital, Financial, and Mr. Jacquemin then moved to dismiss the first amended complaint with prejudice, and the court granted the motion, citing claim preclusion, the statute of limitations, and F.R.C.P. 12(b)(6). The next day, Knight filed a motion to remand to state court, which was denied as moot; next, she filed an F.R.C.P. 59 motion to vacate, alter, or amend the district court’s motion, which was also denied; thereafter, she sent an email seeking the district court judge’s recusal. The court ordered the email to be filed and denied the recusal.

The Tenth Circuit affirmed, noting that the removal of the case to federal court was proper, some of Knight’s claims were untimely, others failed to state a claim or were barred by issue preclusion (not claim preclusion), and her request for recusal was untimely.

Tenth Circuit: Utah Supreme Court’s Dismissal on Laches Grounds Constitutes a Decision on the Merits

The Tenth Circuit issued its opinion in Fundamentalist Church of Jesus Christ of Latter-Day Saints v. Horne on Monday, November 5, 2012.

The Fundamentalist Church of Jesus Christ of Latter-Day Saints (“FLDS”)  filed a complaint in federal district court seeking declaratory and injunctive relief regarding the Utah probate court’s reformation and administration of a religious charitable trust (“Trust”). FLDS also moved for a temporary restraining order and a preliminary injunction against the probate court’s administration of the trust. This federal suit was stayed pending settlement negotiations.

While the federal case was pending, FLDS filed a petition for extraordinary writ with the Utah Supreme Court raising substantially the same claims as the federal complaint. The Utah Supreme Court dismissed the petition finding that FLDS’s claims regarding the trust were barred by the equitable doctrine of laches. FLDS then renewed its motion for temporary restraining order and preliminary injunction in federal court. The district court entered a temporary restraining order and also granted FLDS’s motion for a preliminary injunction, finding there was no basis for laches. The district court also found that the Utah Supreme Court’s finding of laches was not a judgment on the merits for res judicata purposes.

Defendants appealed the district court’s order granting FLDS a preliminary injunction. The Tenth Circuit certified the following question to the Utah Supreme Court:

Under Utah preclusion law, is the Utah Supreme Court’s discretionary review of a petition for extraordinary writ and subsequent dismissal on laches grounds a decision “on the merits” when it is accompanied by a written opinion, such that later adjudication of the same claim is barred?

In its answer to the Tenth Circuit’s certified question, the Utah Supreme Court concluded that such a decision is a decision on the merits for res judicata purposes that would preclude a subsequent action on the same claims between the same parties.

Having received the Utah Supreme Court’s answer, the Tenth Circuit concluded that FLDS was precluded from pursuing its claims in federal court.  The district court erred in granting a preliminary injunction, and specifically erred in holding that the Utah Supreme Court’s finding of laches was not a judgment on the merits for res judicata purposes.

Accordingly, the Tenth Circuit VACATED the district court’s grant of preliminary injunction and REMANDED with directions to dismiss the claims filed by the FLDS Association as barred by res judicata.