Opinion
No. C 00-2465 MMC
June 26, 2002
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Before the Court is defendant The Scotts Company's ("Scotts") Motion for Summary Judgment Based on Res Judicata, filed May 17, 2002. Having considered the papers filed in support of and in opposition to the motion, the Court finds the matter appropriate for decision on the papers, VACATES the hearing scheduled for June 21, 2002, and rules as follows.
BACKGROUND
In June 2000, Scotts filed a diversity action against Central Garden Pet Company ("Central") in the United States District for the Southern District of Ohio ("Ohio action"), in which Scotts sought to recover money Central allegedly owed for goods sold and delivered to Central. (See Request for Judicial Notice ("RJ N") Ex. 1.) On April 13, 2001, Central filed an Answer and Counterclaim in the Ohio action. In its counterclaim, Central alleged against Scotts, inter alia, claims for breach of contract, fraudulent misrepresentation, and promissory estoppel. (See RJN Ex. 3.) Specifically, Central alleged that Scotts and Central had entered into an oral "acquisition sharing agreement" in April 1998, by which Scotts and Central agreed that, if either Scotts or Central entered into any "business integration" agreement with Monsanto Company ("Monsanto"), then Central and Scotts would form a joint venture and split the business according to certain agreed-upon percentages. (See.id. ¶ 9.) Central also alleged that Scotts promised it would maintain Central as the exclusive distributor for certain Monsanto products if Scotts entered into an agreement with Monsanto. (See id. ¶ 9.) According to Central's counterclaims, Scotts had no intention of performing the acquisition sharing agreement and thereafter repudiated the acquisition sharing agreement by entering into various "integration" agreements with Monsanto and refusing to split the business with Central. In particular, Central alleged that "[i]n August 1998, Scotts signed leffers of intent to enter into a business integration with Monsanto . . . whereby Scotts would acquire the Ortho product line assets, and be a partner with Monsanto in the sales and marketing of Consumer RoundUp products in the United States ("the Scotts/Monsanto Integration")." (See id. ¶¶ 12, 25.) Central alleged that Scotts entered into the "Consumer Roundup part of the Scotts/Monsanto Integration" on September 30, 1998 ("Consumer Roundup Agreement") and entered into the "Ortho asset purchase part" of the Scotts/Monsanto Integration ("Ortho Purchase Agreement") on or about November 11, 1998. (See id. ¶¶ 15, 16.)
On January 11, 2002, the Ohio court dismissed Central's breach of contract and promissory estoppel claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. On April 3, 2002, the Ohio court granted summary judgment in favor of Scotts on Central's fraudulent misrepresentation claim. All three claims were based on the acquisition sharing agreement. Thereafter, during the month of April 2002, Scotts claims for money owed and Central's counterclaims for offsets unrelated to the acquisition sharing agreement were tried to a jury. On April 26, 2002, Scotts obtained a jury verdict in its favor and, on May 16, 2002, the Ohio court entered judgment thereon. (See RJN Ex. 14.)
On July 7, 2000, while the Ohio action was pending, Central initiated the instant action against both Scotts and Monsanto, alleging that Scotts and Monsanto violated various antitrust laws by entering into the Consumer Roundup Agreement and the Ortho Purchase Agreement, the same agreements at issue in the Ohio action. (See Compl. ¶ 1.) Specifically, Central alleges that it brought the instant action "to undo the excessive market concentration and substantial injury to competition caused by" the Consumer Roundup Agreement and the Ortho Purchase Agreement. (See Compl. ¶ 1; FAC ¶ 1.)
DISCUSSION
Scotts asserts that the instant action is barred by the doctrine of res iudicata because a final judgment has been reached with respect to the claims in the Ohio action. The parties agree that the question of the res iudicata effect of the cihio judgment is governed by Ohio law. See Semtek Int'l v. Lockheed Martin Corp., 531 U.S. 497, 508-09 (2001).
Under Ohio law, "a valid, final judgment rendered upon the merits bars all subsequent actions based on any claim arising out of the transaction or occurrence that was the subject maffer of the previous action." See Grava v. Parkman Township, 653 N.E.2d 226, 229 (Ohio 1995) (adopting "the modern application of the doctrine of res iudicata, as stated in I Restatement of the Law 2d, Judgments (1982), Sections 24-25"). "An existing final judgment or decree between the parties to litigation is conclusive as to all claims which were or might have been litigated in a first lawsuit." See Holzemer v. Urbanski, 712 N.E.2d 713, 716 (Ohio 1999). Once a valid and final judgment is rendered, "all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose" are "extinguished." See Restatement (Second) of Judgments § 24(1) (1982). Under Ohio law, where the defense of res iudicata is based on claim preclusion, there are four requisite elements: "(1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject maffer of the previous action." See Hapgood v. City of Warren, 127 F.3d 490, 493 (6th Cir. 1997).
A. Prior Judgment
The Ohio court has entered a final judgment with respect to Central's breach of contract, fraudulent misrepresentation and promissory estoppel claims. Although the Ohio judgment did not expressly reference Central's previously adjudicated claims, which were based on the acquisition sharing agreement, Scotts represents, and Central does not dispute, that the judgment was intended to encompass all adjudicated claims and counterclaims. (See Def. Mot. at 9; Status Report at 3.) Moreover, the Court's prior dismissal and summary adjudication constitute valid, final judgments on the merits. See Federated Dept. Stores. Inc. v. Moitie, 452 U.S. 394, 399 n. 3 (1981)("The dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is a `judgment on the merits.'"); Hapgood, 127 F.3d at 493-94 ("[Wlhen the Ohio court granted defendant summary judgment on plaintiffs initial lawsuit, that court rendered a valid, final judgment on the merits of plaintiffs claims.").
B. Same Parties
Scotts and Central, the parties in the Ohio action, are the same parties litigating the instant action. Although Central initially filed the instant action against Monsanto as well, the defense of res iudicata is available even where additional defendants are included in the subsequent action. See Massachuseffs School of Law v. American Bar Association, 142 F.3d 26, 32 (1st Cir. 1998) (applying doctrine of res iudicata to bar plaintiffs subsequent suit where subsequent suit alleged claims against three additional defendants).
C. Ability to Litigate Claims in Prior Action
Central could have litigated its antitrust claims in the Ohio action, as the Ohio court is a federal district court with jurisdiction to hear Central's antitrust claims. See Hapwood, 127 F.3d at 494 (holding plaintiff had ability to litigate federal claims in prior state court action where state court had concurrent jurisdiction over such claims).
D. Same Transaction or Series of Connected Transactions
As noted, once a valid and final judgment is rendered, the doctrine of res iudicata extinguishes all rights of the plaintiff to remedies against the defendant with respectto all of any part of "the transaction, or series of connected transactions," out of which the action arose. See Restatement (Second) of Judgments § 24(1) (1982); Grava, 653 N.E.2d at 229. "What factual grouping constitutes a `transaction,' and what groupings constitute a `series,' are 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 convement trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage." See Restatement (Second) of Judgments § 24 (1982). "This boils down to whether the causes of action arise out of a common nucleus of operative facts." See Massachuseffs School of Law, 142 F.3d at 38; see also Grava, 653 N.E.2d at 229. "Whether the original claim explored all the possible theories of relief is not relevant." See Brown v. City of Dayton, 730 N.E.2d 958, 962 (Ohio 2000). Where claims in a second action arise out of the same transaction or occurrence as claims that were already litigated, claims raised in the second action are barred even where "the plaintiff is prepared in the second action (1) [t]o present evidence or grounds or theories of the case not presented in the first action, or (2) [t]o seek remedies or forms of relief not demanded in the first action." See Grava, 653 N.E.2d at 229 (quoting Restatement (Second) of Judgments § 25.)
Scotts asserts that the instant action arises from the same transaction or series of transactions as the Ohio action. Applying the factors described in the Restatement (Second) of Judgments, the Court agrees.
First, the pleadings and evidence offered to support Central's counterclaims in the Ohio action and Central's claims in the instant action demonstrate that the facts at issue in both actions are related in time, space, origin, and motivation. See Restatement (Second) of Judgments § 24 (1982). In the Ohio action, Central alleged that Scotts breached its agreement with Central by entering into the Consumer Roundup Agreement and Ortho Purchase Agreement with Monsanto in the Fall of 1998 and excluding Central from any participation therein. According to Central, Scotts did so in order to drive Central out of business and prevent Central from engaging in "blistering competition" with Scotts. (See RJN Ex. 15 at 9 fn. 3.) In the instant action, Central alleges that Scotts violated antitrust laws by entering into the same Consumer Roundup Agreement and Ortho Purchase Agreement in the Fall of 1998, and again, according to Central, those two agreements were designed to harm Central's business and eliminate competition. (See FAC ¶¶ 1, 18, 30, 31; Pl. Motion for Sum. J. at 8-9.) Central's claims in the Ohio action and the instant action both depend upon the same agreements between Scotts and Monsanto, and allege an identical motive for Scotts' behavior.
Further, Central's claims in the two actions are related in time, as both involve the same time period in 1998. Central argues that its claims in the instant action are not barred because the acquisition sharing agreement was entered into in April 1998, while "the events that constitute the antitrust violations in this case began in May 1998, and are continuing today." (See Opp'n at 13.) According to Central, the Ohio judgment was based on events that occurred prior to the events, at issue herein and, therefore, the claims litigated in Ohio arise from a different transaction. This argument is not persuasive. The claims pleaded in the Ohio action were not based on the acquisition sharing agreement in the abstract but, rather, on the breach of that agreement by Scotts' and Monsanto's entering into the agreements at issue herein. Additionally, in support of its fraud claim, Central relied in great part on evidence of Scotts' and Monsanto's alleged anticompetitive activities from 1998 to 2000. (See RJN Ex. 9 at 39, 4243; Ex. 10 at 34; Ex. 16 at 10-12.) Central's Ohio action, therefore, was not limited in time to events occurring in April 1998, but rather encompassed the time period and behavior at issue in the instant action.
Moreover, Central's claims in both actions form "a convement trial unit." See Restatement (Second) of Judgments § 24 (1982). There is a significant overlap in the evidence offered in the two actions, not only as to liability but as to damages as well. Where there is substantial overlap in the evidence, the second action ordinarily is precluded. See Massachuseffs School of Law, 142 F.3d at 38 ("It is seffled "that where the witnesses or proof needed in the second action overlap substantially with those used in the first action, the second action should ordinarily be precluded."'); Restatement (Second) of Judgments § 24 cmt (1982) ("[TIhe relevance of trial convenience makes it appropriate to ask how far the witnesses or proofs in the second action would tend to overlap the witnesses or proofs relevant to the first. If there is a substantial overlap, the second action should ordinarily be held precluded.") Here, Central has relied heavily on evidence of Scotts' and Monsanto's alleged anticompetitive activities in both actions. (See RJN Ex. 9 at 39, 4243; Ex. 10 at 34; Ex. 16 at 10-12.) Further, Central does not dispute that the "vast majority" of the witnesses deposed in the Ohio action with respect to Central's fraud claim were also deposed in the instant action or that "in excess of 200 of the documents designated on Central's Designation of exhibits for trial in the Ohio Action were also used as deposition exhibits in the instant case." (See Bullard Decl. ¶¶ 3, 4.) As Central argued before the Ohio District Court, "the record evidence in the California antitrust case [I is a substantial portion of the record evidence in the [Ohio action]." (See RJN Ex. 15 at 4.) Moreover, the damages Central sought in the Ohio action are sought again in the instant action. lndeed, Central relies on the same damages expert report in both actions. (See RJN Ex. 15 at 5.)
Although Central argues that the claims would not have made a convement trial because Monsanto "likely would have raised an objection to having Central's fraud claims against Scotts tried together with Central's antitrust claims against Monsanto and Scotts," see Opp'n at 13), Central cannot defend its decision to split its claims based on a hypothetical objection. Moreover, lack of symmetry as to the parties does not preclude application of the bar of res iudicata. See Massachuseffs School of Law, 142 F.3d at 32 (applying doctrine of res iudicata to bar plaintiffs subsequent suit where subsequent suit alleged claims against three additional defendants).
The designation was filed prior to the Ohio court's order granting summary Judgment on Central's remaining claim relating to the Scotts/Monsanto Integration agreements. The total number of exhibits so designated was 620 and presumably included exhibits relevant only to Scott's initial claims for goods sold and delivered as well as Central's counterclaims for offsets thereto.
Indeed, in the Ohio action, in response to an objection that its damages expert was only familiar with the instant action and not the Ohio action, Central represented that "[t]he underlying facts are the same." (See RJN Ex. 15 at 8.) Although Central now argues that this statement referred only to facts relevant to calculation of damages, the facts listed by Central were not so limited. (See RJN Ex. 15 fn 3.)
These damages are in excess of $300 million. In the instant action, Central seeks additional damages, representing approximately 5% of the total claimed.
Central argues, nonetheless, that the actions arise from a different nucleus of operative facts because the Ohio action "focused" on the alleged acquisition sharing agreement between Scotts and Central and the instant action focuses on the Consumer Roundup and Ortho Purchase Agreements between Scotts and Monsanto in the Fall of 1998. (See Opp'n at 8.) A prior judgment, however, is given preclusive effect even where the subsequently litigated claims "depend on different shadings of the facts, or would emphasize different elements of the facts." See Grava, 653 N.E. at 229. Here, despite Central's efforts to distinguish the two actions on the basis of "focus," Central cannot escape the fact that each is dependent upon, and would not have been brought in the absence of, Scotts' entering into the Consumer Roundup and Ortho Purchase Agreements. In the Ohio action, those agreements constituted the alleged breach of the "acquisition sharing agreement." In the instant action, they constitute the alleged antitrust violation. In short, in both actions Central claims it was harmed by Scotts' entering into the Scotts/Monsanto Integration agreements. The propriety of Scotts doing so is at issue in both actions. The chief difference is with respect to the theory of liability on which Central relies.
Finally, Central argues that, because it relies on different theories of liability and the evidence as to each is not identical, the doctrine of res iudicata is inapplicable. (See Opp'n at 8.) As noted, however, where the requisite elements of claim preclusion are present, the subsequent action is barred irrespective of the plaintiffs intent to offer evidence or theories not presented in the first action, or to seek other forms of relief See Grava, 653 N.E.2d at 229. To be sure, it might have been awkward to present both theories of liability to the same trier of fact. Nevertheless, Central cannot avoid the bar of res iudicata and try the issues sequentially, simply because it chose to assert alternative theories of liability that are difficult to reconcile.
Accordingly, as the facts underlying the two actions are related in time, origin-and motive and form a convement trial unit, Central's claims in the instant action, in the absence of waiver or other grounds for relief therefrom, are barred by the doctrine of res iudicata.
E. Waiver
Central asserts that Scotts' failure to object to Central's alleged claim spliffing at an earlier date constitutes a waiver of "any rights Scott may have had to a single trial." (See Opp'n at 15.)
The defense of res iudicata may be waived "where the parties have agreed in terms or in effect that the plaintiff may split his claims, or the defendant has acquiesced therein." See Davis v. Sun Oil Company, 148 F.3d 606, 616 (6th Cir. 1998). "Where the plaintiff is simultaneously maintaining separate actions based upon parts of the same claim, and in neither action does the defendant make the objection that another action is pending based on the same claim, judgment in one of the actions does not preclude the plaintiff from proceeding and obtaining judgment in the other action. The failure of the defendant to object to the splitting of the plaintiffs claims is effective as an acquiescence in the spliffing of the claim." See Restatement (Second) of Judgments § 26 cmt.a.
Here, Scotts did not acquiesce in the splitting of the claims at issue. To the contrary, Scotts asserted the defense of res iudicata in its answer to Central's counterclaims in the Ohio action. (See RJN Ex. 7 at 12 ("Central's claims are barred in whole or in part under the doctrine of res judicata and/or collateral estoppel").) Although Central contends that the assertion of this defense was too "bare bones and conclusory" to constitute an objection to claim splitting, Central fails to explain what addition information should have been required. Similar objections have been found to be sufficient to put plaintiff on notice of defendants' res iudicata defense. See Davis, 148 F.3d at 612-13 (holding defendant provided adequate notice by stating in its answer "[p]laintiff's claims are barred by the doctrine of res iudicata"); Wilkins v. Jakeway, 993 F. Supp. 635, 651 (S.D. Ohio 1998) (holding that assertion of defense of "res iudicata" in first case decided was sufficient to put plaintiffs on notice).
As noted, although the Ohio action was filed before the instant action, Central's counterclaims in the Ohio action, and, consequently, Scotts' answer thereto, were filed after Central filed the instant action.
Moreover, in a motion to dismiss the counterclaims, Scotts expressly noted that Central was seeking in that action to share in the same transactions that it contended were illegal in another. See RJN Ex. 4 at 5 n. 2.)
Nor did Scotts acquiesce in Central's claim splitting by opposing Central's motion, filed in the Ohio action, to transfer that action to this Court. Central's motion, and Scotts' opposition, were filed before Central asserted its counterclaims in the Ohio action. (See Opp'n at 16.) Consequently, the grounds for Scotts' res iudicata defense had not arisen at the time Scotts' objected to Central's motion.
Finally, Scotts did not waive its right to object to Central's claim splitting by not raising its objections at an earlier time in the instant action. The potential for the defense of res iudicata did not arise in the instant action until Central filed its counterclaims. Thus, Scotts could not have included the defense of res iudicata in its answer to the complaint herein. See Musa v. Gilleff Communications. Inc., 119 Ohio App.3d 673, 687 (1997) ("Where, as here, the basis for employing the doctrine of res iudicata does not exist by the time an answer must be filed, the defense may be raised by motion.") In any event, the doctrine of waiver is applicable only where the defendant fails to object to claim splitting in either action. See Restatement (Second) Judgments § 26 cmt a. Here, as noted, Scotts raised its objection in the Ohio action at its earliest opportunity.
Accordingly, Scotts did not waive its objections to claim splitting and may rely on the doctrine of res iudicata.
CONCLUSION
For the reasons stated, Scotts is entitled to summary judgment on the issue of res iudicata and, accordingly, Scotts' motion for Summary Judgment Based on Res Judicata is hereby GRANTED.
This order terminates Docket No. 249.
The Clerk shall close the file and terminate all pending motions.