Opinion
Civil Action No. 3:97-CV-3102-L, Consolidated With, Civil Action No. 3:97-CV-3176-L, Civil Action No. 3:98-CV-0264-L
September 30, 2003
ORDER
Before the court are Defendant Physicians Resource Group, Inc.'s ("PRG") Motion to Strike the Amended Complaint, and Motion to Dismiss the Original Complaint, filed April 9, 2002 [deemed filed March 20, 2002]; and Defendant Emmett E. Moore's ("Moore") Motion to Strike and/or Dismiss Lead Plaintiffs' Amended Complaint, filed April 15, 2002. Upon consideration of the parties' written submissions and the applicable authority, the court grants Defendant PRG's Motion to Strike the Amended Complaint; denies as moot Defendant PRG's Motion to Dismiss the Original Complaint; grants Defendant Moore's Motion to Strike Lead Plaintiffs' Amended Complaint; and denies as moot Defendant Moore's Motion to Dismiss Lead Plaintiffs' Amended Complaint. I. Background
On February 2, 2000, PRG filed a Suggestion of Bankruptcy, stating that it had filed a petition seeking relief pursuant to Chapter 11 of the United States Bankruptcy Code. Pursuant to 11 U.S.C. § 362, an automatic stay is in effect as to this defendant. PRG files this motion subject the automatic stay provided by United States Bankruptcy Code Section 362.
This is a putative class action on behalf of all persons who purchased or otherwise acquired the stock of Defendant PRG between September 15, 1995, and November 19, 1997, inclusive (the "Class Period"). PRG is a publicly traded corporation that acquired the assets of, and provided management services to, ophthalmic and optometric practices. During the class period, Defendant Moore was PRG's Chief Executive Officer, President and Chairman of the Board of Directors.
The court refers to PRG and Moore collectively as "Defendants," unless otherwise stated.
Plaintiffs allege that Defendants violated § 10(b) of the Securities and Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.1 Ob-5, promulgated thereunder, by engaging in a scheme or course of business that operated as a fraud on the putative class. On February 26, 2002, the court issued a Memorandum Opinion and Order in a related case styled, Schiller v. Physicians Resource Group, Inc., No. Civ.A.3:97-CV-3158-L, 2002 WL 318441 (N.D. Tex. Feb. 26, 2002), aff'd, F.3d ___, 2003 WL 21946821 (5th Cir. Aug. 29, 2003), and set forth the underlying facts from which Plaintiffs' claims arise. It is unnecessary to repeat those facts here; however, the court believes that a recitation of the procedural history involving both cases, Longman and Schiller, is appropriate to fully understand the current posture of this case.
Beginning in late 1997 and early 1998, various persons or entities filed in the Northern District of Texas, Dallas Division, several putative class actions against PRG and one or more of its officers, including Moore, asserting claims under the federal securities laws. Six of those actions, all of which were subsequently assigned to this court, were eventually consolidated into two separate groups, coined by the parties as the "Longman Actions" and the "Schiller Actions." The Longman Actions are a consolidation of three lawsuits filed between December 1997, and February 1998, namely: Howard Longman, On Behalf of Himself and all Others Similarly Situated v. Physicians Resource Group, Inc. and Emmett E. Moore, Civil Action No. 3:97-3102-L, filed December 17, 1997; Regina Peltz, On Behalf of Herself and All Others Similarly Situated v. Physicians Resource Group, Inc. and Emmett E. Moore, Civil Action No. 3:97-CV-3176-L, filed December 29, 1997; and Bob E. Hall, On Behalf of Himself and All Others Similarly Situated v. Physicians Resource Group, Inc. and Emmett E. Moore, Civil Action No. 3:98-CV-0264-L, filed February 3, 1998. As originally pled, the putative class in the Longman Actions included purchasers of PRO securities between June 17, 1997, and November 19, 1997.
The Longman, Peltz and Hall actions were treated as consolidated soon after they were filed; however, the actions were not formally consolidated until December 21, 1998, when the court granted Plaintiff Howard Longman's motion for consolidation.
The Schiller Actions are also a consolidation of three separate cases, namely: (1) Jeffrey Schiller and Diversified Investment Holdings LP, On Behalf of Themselves and all Others Similarly Situated v. Physicians Resource Group, Inc., Emmett E. Moore, Richard M. Owen, Richard J. D'Amico and John Bingham, Civil Action No. 3:97-CV-3158-L, filed December 23, 1997; (2) William J. Rutherford, On Behalf of Himself and all Others Similarly Situated v. Physicians Resource Group, Inc., Emmett E. Moore, Richard M. Owen, Richard J. D `Amico and John Bingham, Civil Action No. 3:98-CV-0395-P, filed February 13, 1998; and (3) City of Philadelphia, by and through its Board of Pensions and Retirement, On Behalf of Itself and all Others Similarly Situated v. Physicians Resource Group, Inc., Emmett E. Moore, Richard M. Owen, Richard J. D' Amico and John Bingham, Civil Action No. 3:98-CV-0459-P, filed February 20, 1998. As originally pled, the putative class in the Schiller Actions included purchasers of PRO securities between September 15, 1995, and March 27, 1997.
On February 25, 1998, PRG moved to consolidate the Longman Actions and the Schiller Actions into a single consolidated action, hi May 1998, Defendants moved to extend the time to respond to the individual complaints filed in Longman, which the court granted on May 21, 1998. Pursuant to the court's order, Defendants' time to answer, move or otherwise respond to the complaints in Longman was extended to 45 calendar days after the later of (1) the appointment of lead plaintiff(s), or (2) the filing of an amended consolidated complaint.
On July 7, 1998, the court denied PRG's motion to consolidate Longman and Schiller, finding that consolidation for all purposes would be inappropriate; however, it did consolidate the cases for purposes of discovery and all pretrial matters, other than dispositive motions. See Court's Order Denying Consolidation, filed July 7, 1998. On July 20, 1998, an amended complaint was filed in Schiller which expanded the class period pled in that case to include purchasers of PRG stock through the end of the Longman class period, that is, November 19, 1997. Thereafter, on July 22, 1998. PRG moved the court to reconsider consolidating the Longman and Schiller actions. The Schiller plaintiffs joined in the motion to reconsider, which the court ultimately denied on April 26, 1999.
In ruling against consolidation, the court relied on several factors, including, the significant differences between the two actions. First, the two actions initially had differing putative class periods. The Longman plaintiffs initially asserted a five-month class period, beginning June 17, 1997 and running through November 19, 1997. The Schiller plaintiffs, on the other hand, initially alleged a class period of over a year and half, from September 15, 1995 through March 27, 1997. Thus, as initially pled, the scope of the two actions differed greatly, and did not overlap. In addition, the Schiller complaint was based upon a large number of allegedly false statements and reports issued in conjunction with several different acquisitions that PRG made during the Schiller class period, while the Longman complaint revolved around alleged false statements and reports issued concerning a single PRG acquisition, namely, EquiMed, Inc. Although the plaintiffs in Schiller also alleged that Defendants made false statements with respect to the EquiMed acquisition, Schiller was broader in both its scope and allegations than Longman.
The court also sought to prevent the potential confusion likely to result from consolidation of the two actions. Because the putative class periods did not overlap, the Schiller Plaintiffs and the Longman Plaintiffs initially disputed at what point in time Defendants disclosed PRG's true financial condition. While the Schiller Plaintiffs contended that Defendants began to truthfully reveal the company's financial condition on June 17, 1997, the Longman Plaintiffs maintained that PRG failed to make such disclosures prior to November 17, 1997. The court, therefore, concluded that, if consolidated, the Longman subclass and the Schiller subclass would be required to proffer conflicting evidence regarding both the time PRG allegedly revealed its true financial condition, and the time when Defendants allegedly began making false statements. The court determined that consolidation of the two actions would likely be unwieldy and confusing to the fact finder, and add a level of complexity to an already complex litigation. See Court's Order Denying Consolidation, filed July 7, 1998, at 4-8.
While the issue of consolidation was pending, certain plaintiffs in Longman and Schiller filed motions for the appointment of lead plaintiffs and lead counsel. Ultimately, the Alpert Group (a group of outside shareholders of PRG having the largest financial interest in the relief sought by the putative class) was named as Lead Plaintiffs in both Longman and Schiller, and the law firms of Milberg Weiss Bershad Hynes Lerach LLP, Berger Montague, P.C., and Stanley, Mandel lola, L.L.P. were approved as lead counsel for the putative class.
On June 7, 1999, Lead Plaintiffs in Schiller submitted a proposed Second Amended Complaint, which added a new plaintiff and an additional defendant to the litigation. Two months later, in August 1999, the parties executed an Amended Stipulation and Proposed Agreed Order Regarding Scheduling Responses to Operative Complaint ("Amended Stipulation"), which this court approved and signed on August 11, 1999. The Amended Stipulation states in relevant part: "The parties stipulate and agree that the Defendants are not required to answer, move or otherwise respon[d] to the Longman Complaint (which has been subsumed in the above-styled and numbered cause)." Amended Stipulation at 2, ¶ 2. Thereafter, all litigation in Longman ceased.
Meanwhile, litigation in Schiller progressed. Defendants moved to dismiss Plaintiffs Amended Complaint; however, before the court ruled on that motion to dismiss, Plaintiffs moved for leave to file their Second Amended Complaint, which the court granted on September 29, 2000. Soon thereafter, Plaintiffs sought leave to file a Third Amended Complaint, which the court granted on December 21, 2000. Defendants subsequently moved to dismiss the Third Amended Complaint on February 5, 2001 for failure to state a claim upon which relief could be granted. On February 26, 2002. the court issued an order in Schiller, dismissing with prejudice all claims asserted in Lead Plaintiffs' Third Amended Complaint for failure to state a claim, because it failed to satisfy the applicable pleading standards. Thereafter, on March 12, 2002, Lead Plaintiffs filed a motion to vacate the court's judgment and to modify its order to allow them an opportunity to file their proposed fourth amended complaint. The court denied that motion on August 15, 2002. Lead Plaintiffs subsequently appealed the court's decision, which the Fifth Circuit affirmed on August 29, 2003.
With the filing of Plaintiffs' Second Amended Complaint, Defendants' motion to dismiss Plaintiffs' Amended Complaint was rendered moot, and accordingly denied on September 29, 2000.
One week after Lead Plaintiffs filed their motion to vacate in Schiller, they filed in Longman their Amended Complaint Alleging Federal Securities Violations ("Amended Complaint"). Defendants now move to either strike, or to dismiss, Lead Plaintiffs' Amended Complaint, and to dismiss Plaintiffs' Original Complaint pursuant to Fed.R.Civ.P. 12(b)(6), (9), and 12(f). II. Defendants' Motions
PRG moves to strike Lead Plaintiffs' Amended Complaint pursuant to Fed.R.Civ.P. 12(f), and also adopts the arguments asserted by Moore in his motion to strike, namely, judicial estoppel and res judicata, as additional bases in which to strike the complaint. See Reply at 3 n. 4. The court also notes that Moore joins and adopts the arguments asserted in PRG's motion to strike.
Pursuant to Rule 12(f), "the court may order stricken from any pleading any . . . redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). Defendants seek to strike Plaintiffs' entire amended pleading under Rule 12(f); however, they do not cite any Fifth Circuit authority which holds that a party's entire pleading may be stricken under this rule. Although Defendants designate their respective submissions as a "motion to strike," they are more akin to a motion to dismiss, because they seek to dismiss the entire complaint and lawsuit based on the doctrines of judicial estoppel and res judicata. Since Defendants' "motions to strike" seek the same relief as a motion to dismiss, that is, dismissal of the entire action, they will be treated together as a motion to dismiss. For purposes of this order, the court's ruling herein applies equally to both Defendants.
A. Motion to Strike Lead Plaintiffs' Amended Complaint
Defendants urge the court to strike Lead Plaintiffs' Amended Complaint because (1) the Longman Actions were subsumed into the Schiller action, and (2) the doctrine of judicial estoppel precludes Lead Plaintiffs from now taking the position that its claims were not subsumed into Schiller, hi the alternative, Defendants contend that Lead Plaintiffs' Amended Complaint should be dismissed pursuant to the doctrine of res judicata. Plaintiffs respond that it would be inappropriate to strike their Amended Complaint for two reasons. First, Plaintiffs contend that because Defendants never filed an answer or responsive pleading in Longman, they are allowed, as a matter of law, to amend their pleadings once as a matter of course pursuant Fed.R.Civ.P. 15(a). Second, Plaintiffs contend that Rule 12(f) does not authorize the court to strike a party's entire pleading, only those portions of the pleading that are redundant, immaterial, impertinent, or scandalous. Plaintiffs, therefore, contend that there is no basis for striking their Amended Complaint. For the reasons that follow, the court finds that judicial estoppel is appropriate, and that Plaintiffs are estopped from pursuing this litigation.
1. Plaintiffs' Contentions
Plaintiffs contend that they are entitled, as a matter of law, to file an amended pleading pursuant to Fed.R.Civ.P. 15(a). As a general rule:
A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served, or if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend at any time within 20 days after it is served. Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.
Fed.R.Civ.P. 15(a). Although Rule 15(a) contemplates a party filing an amended pleading "once as a matter of course," in this case, there was no complaint to amend, because the Longman complaint had been subsumed in the Schiller action. In other words, after the parties' Amended Stipulation, the Longman complaint no longer existed as a separate complaint; therefore, there was nothing to amend or revive. Accordingly, Plaintiffs' reliance on Rule 15(a) is insupportable.
The court allowed the Amended Complaint to be filed because an order of the judge who was previously assigned the case indicated that Plaintiffs would be allowed to amend their complaint. In actuality, the Amended Stipulation rendered the amendment moot because there was nothing to amend since the Longman complaint had been subsumed in another action. In hindsight, which is always twenty-twenty, the court should never have allowed the Amended Complaint to be filed, since it clearly was filed to make an end run around the court's adverse ruling in Schiller. The court's thinking at that time was to proceed with the Amended Complaint and allow dispositive matters to be addressed and resolved at a later time. Now that the court has sorted through the procedural morass, it is in a much better position to address the merits and the wisdom of allowing Plaintiffs to file an amended complaint.
Plaintiffs second argument that Rule 12(f) does not authorize the striking of Plaintiffs' entire complaint is rendered moot by the court's recharacterization of Defendants' motions. As stated before, the court has determined that Defendants' motions to strike are in effect motions to dismiss and, therefore, will be treated as such.
2. Defendants' Contentions a. Judicial Estoppel
Defendants seek to dismiss Plaintiffs' Amended Complaint pursuant to the doctrine of judicial estoppel. Judicial estoppel is an equitable doctrine, see In re Coastal Plains, Inc., 179 F.3d 197, 205 (5th Cir. 1999), which "prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding." Hall v. GE Plastic Pacific PTE Ltd., 327 F.3d 391, 396 (5th Cir. 2003) (quoting Ergo Science Inc. v. Martin, 73 F.3d 595, 598 (5th Cir. 1996). Stated another way:
[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.New Hampshire v. Maine, 532 U.S. 742, 749 (2001). The doctrine was created to protect the integrity of the judicial process, see id., and designed to prevent litigants from "playing fast and loose" with the courts. Hall, 327 F.3d at 396. The doctrine of judicial estoppel maybe applied based on the assertion of a party or a party's legal counsel. See Hall, 327 F.3d at 396 ("Statements made in a previous suit by an attorney before the court can be imputed to a party and subject to judicial estoppel."). Thus, a position taken or a representation made by counsel in a judicial proceeding may provide a basis for estoppel. The decision whether to invoke judicial estoppel is within the sound discretion of the court. Ahrens v. Perot Sys. Corp., 205 F.3d 831, 833 (5th Cir. 2000); In re Coastal Plains, Inc., 179 F.3d at 205 (5th Cir. 1999).
Before a party can be estopped, it must be shown that (1) the position of the party to be estopped is clearly inconsistent with its previous position and (2) that party must have convinced the court to accept that previous position. Hall, 327 F.3d at 396; Ahrens, 205 F.3d at 833. hi this case, each criterion is satisfied.
First, Lead Plaintiffs' position in Longman is inconsistent with the position they took in Schiller. Lead Plaintiffs acknowledge that in both Schiller and Longman, the putative plaintiffs' class was represented by the same lead-plaintiff group (the Alpert Group) and counsel, hi Schiller, Lead Plaintiffs took the position that the claims in Longman were subsumed into the Schiller action. Specifically, in August 1999, Lead Plaintiffs, through their counsel, agreed and stipulated that Defendants did not have to respond to the Longman complaint, and that the Longman complaint was subsumed into the Schiller action. See Amended Stipulation and Proposed Agreed Order Regarding Scheduling Responses to Operative Complaint at 2, f 2. At the time of the Amended Stipulation, all of the Longman Actions had been consolidated into a single action, see Longman, Court's Order of December 21, 1998 (Court Docket # 32); the Alpert Group had been appointed to serve as Lead Plaintiffs in both Longman and Schiller, see Longman, Court's Order of April 27, 1999 (Court Docket # 36), and Schiller, Court's Order of April 27, 1999 (Court Docket # 65), and their selection of lead counsel had been approved. See Longman, Court's Order of June 10, 1999 (Court Docket # 39), and Schiller, Court's Order of June 10, 1999 (Court Docket # 69). After the court signed the parties' Amended Stipulation in Schiller, all litigation in Longman ceased.
Lead Plaintiffs argue that the Amended Stipulation cannot be interpreted to suggest that Longman was consolidated into Schiller in light of the court's order denying consolidation of the two cases and its order denying reconsideration of that decision, or that Longman was abandoned or would not eventually be prosecuted by Plaintiffs. Instead, Plaintiffs contend that the Amended Stipulation was intended to provide only that "motion practice in Longman would be postponed while the parties in the Schiller action litigated a motion to dismiss." The court rejects Plaintiffs' argument.
First, Plaintiffs make much of the earlier court's decision to deny consolidation and this court's order denying Defendants' motion to reconsider. As the parties may recall, the two actions were consolidated for purposes of discovery and pretrial matters, but not dispositive motions. Thus, the cases were consolidated to some extent, prior to the Amended Stipulation.
Second, contrary to Plaintiffs' assertion that the stipulation provided motion practice in Longman would be postponed while the parties in the Schiller action litigated a motion to dismiss, the stipulation and order signed by the court does not say anything about motion practice. Second, the parties' Amended Stipulation does not involve a matter of interpretation; it only involves the application of the plain meaning of the word "subsume." There is no ambiguity. The word "subsume" means "to include or place within something larger or more comprehensive. . . ." Merriam Webster's Tenth Collegiate Dictionary 1174 (10th ed. 1997). This is precisely what happened in this case. The parties stipulated and agreed that the Longman complaint would be included the more expansive Schiller action.
That Plaintiffs now contend that they never intended to abandon the Longman action is contrary to the plain language in the parties' Amended Stipulation, which does not state, or otherwise indicate, that the stipulation was limited to the "timing of motion practice." Four months after the court denied PRG's motion to reconsider its ruling denying consolidation of Longman and Schiller, the parties submitted (for the court's approval) their Amended Stipulation in which they agreed and stipulated that the Longman complaint had been subsumed into the Schiller action. The effect of the Amended Stipulation was to make an end run around the court's order and to, for all intents and purposes, consolidate Longman and Schiller into a single action. As a result of the Amended Stipulation, Defendants did not answer, or otherwise respond to the Longman complaint. If Plaintiffs intended to maintain Longman as a separate lawsuit, the proper thing to do would have been to move to stay the Longman action; this never occurred. It would be fatuous to believe that Defendants would enter into an agreement that would not protect them from an entry of default, or that would subject them to multiple rounds of motions to dismiss in both Schiller and Longman. Plaintiffs agreed and stipulated that the Longman complaint was subsumed into the Schiller action. Having made an end run around the court's order denying consolidation, Plaintiffs now contend that they never intended to abandon Longman. That dog simply will not hunt. Plaintiffs are in no position to complain about the current posture of this case, especially in light of the gamesmanship employed to ensure that litigation in Schiller and Longman be conducted in a single action.
Plaintiffs also point out that during the litigation in Schiller, they engaged in an ongoing investigation of their claims. They contend that the court dismissed Schiller without giving them an opportunity to amend their complaint to incorporate new investigative information. Plaintiffs contend that their Amended Complaint incorporates new facts and is also more detailed with respect to Defendants' alleged misconduct in misrepresenting PRG's operations, financial results, management expertise, accounting and operations controls, and infrastructure. They further contend that the Amended Complaint has never been litigated through a motion to dismiss or otherwise subsumed by the court's disposition of the Third Amended Complaint in Schiller, and that no Defendant has ever answered or moved against either the original or the Amended Complaint in Longman. The court is unpersuaded. What happened was that the parties accomplished through the Amended Stipulation what they had been attempting to accomplish for some time. Having discovered that their journey has come to an end, Plaintiffs now seek to retrace their steps and start anew. Now that the court has fully realized what has occurred in this case, it will not allow Plaintiffs to do this, especially since they voluntarily chose the path they now seek to abandon. The court attempts to accommodate the parties to litigation and did so by approving the Amended Stipulation; however, once it does so, it expects the parties to be fully bound by their agreements and stipulations. The court will not allow one party to undo a stipulation or agreement that such party voluntarily undertook.
The second requirement for judicial estoppel is also satisfied — that the party must have convinced the court to accept its previous position. The court approved and signed the parties' Amended Stipulation on August 11, 1999. Based on the parties' Amended Stipulation, the court was convinced that the Longman action had been subsumed into Schiller. In light of the Amended Stipulation, the court should have dismissed and closed Longman in 1999, because there was no legal reason for it to remain open. Indeed, all litigation in Longman ceased. The court did not issue a scheduling order in the case, and as previously stated, the action remained dormant for four and a half years, until Lead Plaintiffs filed their Amended Complaint, two months after the court dismissed Schiller with prejudice. The second requirement is met.
Not until after Schiller was dismissed with prejudice did Lead Plaintiffs seek to continue this securities fraud litigation by filing their Amended Complaint in Longman, which is essentially identical to the proposed fourth amended complaint for which they were denied leave to file in Schiller. General principles of judicial estoppel dictate that "a party cannot advance one argument and then, for convenience or gamesmanship after that argument has served its purpose, advance a different and inconsistent argument." Hall, 327 F.3d at 397. Lead Plaintiffs made a strategic decision to pursue all of their securities fraud claims in Schiller. Their legal legerdemain and gamesmanship did not work. For the reasons previously stated, the court determines that Lead Plaintiffs are judicially estopped from pursuing this litigation. Accordingly, the court grants Defendants' Motion to Strike Lead Plaintiffs' Amended Complaint.
Although the Plaintiffs in Schiller contended that the proposed fourth amended complaint was more detailed and stated a cause of action for securities fraud, the Fifth Circuit determined that it was insufficient and did not allege facts demonstrating a strong inference of scienter. Schiller, 2003 WL 21946821, at *4.
b. Res Judicata
Even if it is determined that Plaintiffs are not judicially estopped from pursuing this litigation, to allow them to proceed with their amended complaint would be futile because the claims asserted therein are barred by res Judicata. "Res judicata is a judicially-created doctrine designed to avoid repeated litigation of the same claims by the same parties." United Home Rentals v. Texas Real Estate Comm'n, 716 F.2d 324, 328 (5th Cir. 1983). Read in its broadest sense, the doctrine embraces two district preclusion concepts: claim preclusion (commonly referred to as simply "res judicata or "true" or "pure" res judicata") and issue preclusion (often termed "collateral estoppel"). See St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 436 (5th Cir. 2000); United States v. Shanbaum, 10 F.3d 305, 310 (5th Cir. 1994). Claim preclusion "bars the litigation of claims that either have been litigated or should have been raised in an earlier suit." In re Southmark Corp., 163 F.3d 925, 934 (5th Cir.), cert. denied, 527 U.S. 1004 (1999). Claim preclusion is appropriate if four conditions are satisfied: (1) the parties in the subsequent action are identical to, or in privity with, the parties in the prior action; (2) the judgment in the prior case was rendered by a court of competent jurisdiction; (3) the prior action concluded with a final judgment on the merits; and (4) the same claim or cause of action is involved in both suits. See Ellis v. Amex Life Insurance Co., 211 F.3d 935, 937 (5th Cir. 2000); In re Southmark, 163 F.3d at 934; Shanbaum, 10 F.3d at 310; Eubanks v. Federal Deposit Ins. Corp., 977 F.2d 166, 169 (5th Cir. 1992). If these conditions are met, "claim preclusion prohibits either party from raising any claim or defense in the later action that was or could have been raised in support of or in opposition to the cause of action asserted in the prior action." Shanbaum, 10 F.3d at 310. Each of the conditions for claim preclusion is satisfied.
Although filed after Longman, the parties proceeded with litigation in Schiller, and it was in that case that judgment was rendered. Lead Plaintiffs and Defendants in Longman were also Lead Plaintiffs and Defendants in Schiller. The judgment in Schiller was rendered by this court, and there has never been a challenge to the court's jurisdiction over the litigation or the parties. Schiller concluded with a final judgment on the merits.
With respect to the final condition, whether the same claim or cause of action is involved in both suits, the Fifth Circuit applies a transactional test of the Restatement § 24. B.R. Eubanks, M.D. v. Federal Deposit Ins. Corp., 977 F.2d 166, 171 (5th Cir. 1992). Under this approach, the critical issue is whether the two actions are based on the "same nucleus of operative facts." Id. This inquiry requires the court to look at the factual predicate of the claims asserted, not the legal theories upon which a plaintiff relies. Id. Here, the claims asserted in Longman arise out of the same nucleus of operative facts as Schiller, that is, Defendants' alleged securities fraud during the period between September 15, 1995, and November 19, 1997. Accordingly, res judicata applies, and the claims asserted in the amended complaint are barred by res judicata and, therefore, are subject to dismissal.
Moreover, as previously stated, the Amended Complaint is essentially identical to the proposed fourth amended complaint Plaintiffs sought to file in Schiller, and the Fifth Circuit has already determined that such allegations are inadequate to allege scienter. Thus, even if the claims were not barred by res judicata, the Amended Complaint would be subject to dismissal, for the same reasons enunciated in Schiller, pursuant to Fed.R.Civ.P. 12(b)(6).
B. Motion to Dismiss Lead Plaintiffs' Original and Amended Complaint
Defendants move to dismiss Lead Plaintiffs' Original Complaint or, in the alternative, to dismiss Lead Plaintiffs' Amended Complaint. As Lead Plaintiffs' Original Complaint was subsumed into the Schiller action, it no longer exists. Defendants' motion to dismiss the original complaint is therefore denied as moot. In light of the court's ruling on Defendants' motions to strike, Defendants' motions to dismiss the Amended Complaint is moot, and is accordingly denied.
III. Conclusion
The doctrines of res judicata and judicial estoppel were created to prevent litigants from relitigating matters already decided, and from playing fast and loose with the judicial process through gamesmanship. A common purpose of both is to eliminate unnecessary costs of litigation and expenditure of resources. Plaintiffs had ample opportunity to litigate this matter and did so by way of the Schiller action. The results in Schiller were not suitable to them; however, the jig is up.
For the reasons herein stated, the court grants Defendant Physicians Resource Group, Inc.' s Motion to Strike the Amended Complaint; denies as moot Defendant Physician Resource Group, Inc.'s Motion to Dismiss the Original Complaint; grants Defendant Emmett E. Moore's Motion to Strike Lead Plaintiffs' Amended Complaint; and denies as moot Defendant Emmett E. Moore's Motion Dismiss Lead Plaintiffs' Amended Complaint. In light of striking Lead Plaintiffs' Amended Complaint this action is hereby dismissed with prejudice. Judgment will issue by separate document as required by Fed.R.Civ.P. 58.