Medina-Padilla v. United States Aviation Underwriters, Inc. , 815 F.3d 83 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1467
HERIBERTO MEDINA-PADILLA;
L & M CORP., d/b/a Emmanuel Travel and Tours,
Plaintiffs, Appellants,
v.
UNITED STATES AVIATION UNDERWRITERS, INC.;
UNITED STATES AIRCRAFT INSURANCE GROUP,
Defendants, Appellees,
PIEDMONT AVIATION SERVICES, INC.,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Lynch, Selya, and Lipez,
Circuit Judges.
Diana Lynn Pagán-Rosado on brief for appellants.
Tomás A. Román-Santos and Román Santos, LLC on brief for
appellees.
March 4, 2016
LYNCH, Circuit Judge. This is the second time the
plaintiffs have brought the same claims before the federal courts.
This time, they characterize the claims as sounding in tort rather
than sounding in contract, as they had claimed earlier. This they
cannot do.
In 2005, Lopez & Medina Corp. ("L & M") brought suit
against a number of insurers, claiming that the insurers were
liable for L & M's breach of contract claims against a company,
Patriot Air, LLC ("Patriot Air"), that had an insurance policy
with those insurers. In 2010, the district court dismissed the
case on the basis that the insurance policy did not provide
coverage for contract claims. Lopez & Medina Corp. v. Marsh USA,
Inc., 694 F. Supp. 2d 119, 121 (D.P.R. 2010). This court affirmed.
López & Medina Corp. v. Marsh USA, Inc., 667 F.3d 58, 69 (1st Cir.
2012).
L & M and its owner now bring tort-based claims arising
out of the same set of underlying facts. The district court
dismissed the action on the ground of res judicata. Medina-Padilla
v. Piedmont Aviation Servs., Inc., No. 3:14-cv-01048, 2015 WL
1033918 (D.P.R. Mar. 10, 2015). We affirm.
I.
The background facts and procedural history of this case
are recounted in detail in our previous opinion. López & Medina
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Corp., 667 F.3d at 60–63. We briefly recount the facts underlying
this appeal.
On June 3, 2005, L & M filed a diversity complaint in
the District of Puerto Rico against a number of insurers1 for
Patriot Air.2 The complaint alleged that L & M had entered into a
Passenger Aircraft Charter Agreement with Patriot Air and that
Patriot Air had breached that agreement in June and July 2002.
But Patriot Air had filed for bankruptcy in September 2002, and
L & M did not name Patriot Air as a defendant. Rather, the
complaint sought recovery from Patriot Air's insurers under Puerto
Rico's direct action statute, P.R. Laws Ann. tit. 26, § 2003, which
allows third parties to bring an action against an insurer for
claims covered under an insurance policy.
On March 8, 2010, the district court dismissed L & M's
complaint. Lopez & Medina Corp., 694 F. Supp. 2d at 121. The
district court held that the relevant insurance policy "clearly
and unambiguously covers only tort claims." Id. at 128. L & M's
1 Among the defendant co-insurers in that prior action
were United States Aviation Underwriters, Inc. ("USAUI") and
United States Aircraft Insurance Group ("USAIG"), the appellees in
this case. López & Medina Corp., 667 F.3d at 59 & n.1.
2 The named insured under the insurance policy was
Piedmont Aviation Services, Inc. ("Piedmont"). López & Medina
Corp., 667 F.3d at 60 & n.4. The insurance policy covered certain
risks assumed by Piedmont in its contractual arrangements with
other companies; one such contractual arrangement was Piedmont's
lease of aircraft to Patriot Air. Id.
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claims did not fall under the scope of the insurance policy because
of L & M's "admi[ssion] that the Complaint is premised only on a
breach of contract claim not involving any liability . . . for
torts." Id.
On March 18, 2010, L & M filed a motion to alter or amend
judgment. L & M argued that the district court erred in
understanding its complaint as advancing only a breach of contract
action and claimed that it was also seeking "concomitant tort
damages."
The district court denied the motion. Lopez & Medina
Corp. v. Marsh USA, Inc., No. 3:05-cv-01595, 2010 WL 1508502(D.P.R. Apr. 12, 2010). The district court noted that "the
Complaint does not once allege a tort violation and is entirely
based on the claim that the alleged breach of contract is a covered
insurable risk under the co-defendants' insurance policies." Id.
at *2.
On January 26, 2012, this court affirmed. López & Medina
Corp., 667 F.3d at 69. We first determined that "[t]here can be
no doubt that L & M's allegations here sound in contract." Id. at
66. We agreed with the district court that recovery by L & M
depended on whether the relevant insurance policy language, "which
usually covers only tort claims, also provides coverage for claims
in an underlying action arising out of and related to a contract
between the parties." Id. at 59. This was a question of first
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impression in our circuit, id., which we answered by concluding
that the insurance policy's "express terms . . . provide no
coverage for L & M's contract-based claims." Id. at 69.
On January 21, 2014, Heriberto Medina-Padilla and L & M,
undaunted, filed the complaint in this action. Medina-Padilla,
who was not a plaintiff in the first lawsuit, was a travel agent
and the sole owner and principal of L & M. The complaint sought
recovery in tort for Patriot Air's "negligent refusal and
withholding of transportation" arising from the same series of
events that underlay the previous suit's breach of contract claims.
USAUI and USAIG moved to dismiss on the grounds of res
judicata and statute of limitations. On March 10, 2015, the
district court granted the motion to dismiss on the ground of res
judicata. Medina-Padilla, 2015 WL 1033918, at *1.
This appeal followed.
II.
An affirmative defense such as res judicata may be raised
in a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) when the facts establishing the defense are clear on the
face of the plaintiff's pleadings. See Santana-Castro v. Toledo-
Dávila, 579 F.3d 109, 113 (1st Cir. 2009); Nisselson v. Lernout,
469 F.3d 143, 150 (1st Cir. 2006). Where a motion to dismiss is
premised on res judicata, we may take into account, in addition to
the well-pleaded facts in the complaint, the record in the original
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action. Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co.,
547 F.3d 48, 51 (1st Cir. 2008). Our review is de novo. García
Monagas v. de Arellano, 674 F.3d 45, 50 (1st Cir. 2012).
Under Semtek International Inc. v. Lockheed Martin
Corp., "federal common law governs the claim-preclusive effect of
a dismissal by a federal court sitting in diversity." 531 U.S.
497, 508 (2001). The appropriate rule under federal common law is
"the law that would be applied by state courts in the State in
which the federal diversity court sits," id., unless that rule
would be "incompatible with federal interests," id. at 509; see
also Hatch v. Trail King Indus., Inc., 699 F.3d 38, 44 (1st Cir.
2012). With no argument made that Puerto Rico law is incompatible
with federal interests, we proceed in applying Puerto Rico law.3
Under Puerto Rico's statutory definition of res
judicata, "it is necessary that, between the case decided by the
sentence and that in which the same is invoked, there be the most
perfect identity between the things, causes, and persons of the
litigants, and their capacity as such." P.R. Laws Ann. tit. 31,
§ 3343. This definition encompasses both claim preclusion and
issue preclusion, "albeit with slightly different requirements for
3 For the purpose of res judicata, Puerto Rico, despite
its commonwealth status, is "the functional equivalent of a state."
Cruz v. Melecio, 204 F.3d 14, 18 n.2 (1st Cir. 2000); see also
García Monagas, 674 F.3d at 50.
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each." R.G. Fin. Corp. v. Vergara-Nuñez, 446 F.3d 178, 183 (1st
Cir. 2006).
A party asserting claim preclusion under Puerto Rico law
must establish three elements: "(i) there exists a prior judgment
on the merits that is 'final and unappealable'; (ii) the prior and
current actions share a perfect identity of both 'thing' and
'cause'; and (iii) the prior and current actions share a perfect
identity of the parties and the capacities in which they acted."
García Monagas, 674 F.3d at 51.
All three elements are met here. First, the prior
district court decision, affirmed by this court, is a final
judgment on the merits.
Second, there is a perfect identity of "thing" and
"cause." Two actions share a perfect identity of "thing" if they
involve the same "object or matter." García Monagas, 674 F.3d at
51 (quoting Lausell Marxuach v. Díaz de Yáñez, 3 P.R. Offic. Trans.
742, 745 (1975)). Two actions share a perfect identity of "cause"
if "they flow from the same principal ground or origin," id.(citing Lausell Marxuach, 3 P.R. Offic. Trans. at 746), or they
"derive from a common nucleus of operative facts," id. (quoting
Silva v. City of New Bedford, 660 F.3d 76, 79 (1st Cir. 2011)).
These requirements are met. The complaint in this case and the
complaint in the prior action are based on the same factual
predicates. "[A] mere difference in the legal theories on which
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two causes of action are grounded does not destroy the identity of
thing or cause that otherwise exists between two suits arising out
of a common nucleus of operative fact." R.G. Fin. Corp., 446 F.3d
at 184.
Third, there is perfect identity of the parties. Under
Puerto Rico law, two actions share a perfect identity of the
parties "if either (1) the parties in the current action were also
parties in the prior action or (2) the parties in the current
action are in 'privity' with the parties in the prior action."
García Monagas, 674 F.3d at 51 (citing P.R. Laws Ann. tit. 31,
§ 3343). The prior suit was brought by L & M; this suit is brought
by L & M and Medina-Padilla, the sole owner and principal of L & M
who was not a named party in the prior suit. But L & M does not
contest that it and Medina-Padilla are in privity under "the
general rule that where one party acts for or stands in the place
of another in relation to a particular subject matter, those
parties are in privity for purposes of the Puerto Rico preclusion
statute." R.G. Fin. Corp., 446 F.3d at 187.
Rather than contesting that any of those three prongs
are met, L & M argues that its suit should be permitted to proceed
based on two supposed exceptions to res judicata.
First, L & M argues that the defendants took inconsistent
positions during the prior litigation that prevented the prior
action from being fully and fairly litigated. But the district
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court in the prior action, correctly, as we held, rejected L & M's
contract claim on the merits and rejected on the merits its
argument that a tort cause of action had also been pleaded. Lopez
& Medina Corp., 694 F. Supp. 2d at 128. Nothing about the
defendants' alleged "inconsistent procedural conduct" calls the
fairness of those decisions into doubt.4
Second, L & M argues that our 2012 decision changed the
applicable law so as to make available a tort cause of action that
had not been available when it initiated the prior lawsuit. That
is a misstatement of our decision. After all, our opinion
recognized that the insurance policy "usually covers only tort
claims" and went on to decide, as a matter of first impression,
whether the insurance policy also covered contract claims against
the insured. López & Medina Corp., 667 F.3d at 59. In other
words, our 2012 decision took as a given that tort actions were
covered by the insurance policy. Nothing prevented L & M from
pleading a tort cause of action in its 2005 complaint. Indeed,
L & M attempted to add a claim for recovery in tort to its complaint
in the previous action, but did so only belatedly, in its 2010
motion to alter or amend judgment. That action by L & M cuts
4L & M also labels this as a judicial estoppel argument.
However, we do not address judicial estoppel because L & M makes
no effort to develop the argument. See United States v. Zannino,
895 F.2d 1, 17 (1st Cir. 1990).
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against its argument that a tort cause of action was not available
until 2012.
Pouring old wine into a new bottle does not make the
wine into new wine. The district court correctly invoked res
judicata in dismissing the action.5
We affirm.
5 Having concluded as such, we need not address the
parties' arguments about whether this action is barred by the
statute of limitations.
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