Huck v. Dawson , 106 F.3d 45 ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
2-6-1997
Huck v. Dawson
Precedential or Non-Precedential:
Docket 96-7341,96-7342,96-7444
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"Huck v. Dawson" (1997). 1997 Decisions. Paper 31.
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THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
No. 96-7341
No. 96-7342
No. 96-7444
__________
LEWIS F. HUCK, derivatively on behalf of
SEA AIR SHUTTLE CORPORATION,
v.
ERIC DAWSON; ROSALIE SIMMONDS BALLENTINE; RHUDEL GEORGE; LEO
FRANCIS; ROBERT O’CONNOR, JR.; WILLIAM QUETEL; GEORGE GOODWIN;
LUIS SOTOMAYOR; EARL ROEBUCK; MEMBERS OF THE BOARD OF DIRECTORS;
GORDON A. FINCH, EXECUTIVE DIRECTOR; LT. GOV. DEREK M. HODGE;
ALEXANDER A. FARRELLY, Governor; GOVERNOR OF THE VIRGIN ISLANDS,
(D.C. No. 94-cv-00001)
LEWIS F. HUCK, derivatively on behalf of
SEA AIR SHUTTLE CORPORATION,
v.
VIRGIN ISLANDS PORT AUTHORITY;
SEA AIR SHUTTLE CORPORATION,
(D.C. No. 94-cv-00018)
Lewis F. Huck, derivatively on behalf of
Sea Air Shuttle Corporation,
Appellant
ON APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. THOMAS AND ST. JOHN
__________
Argued December 13, 1996
Before: SCIRICA, NYGAARD and McKEE, Circuit Judges
(Opinion Filed February 6, 1997)
Lawrence E. Duffy, Esq. (Argued)
Martinez-Alvarez, Fernandez-Paoli,
1
Menendez-Monroig
Centro De Seguros Building
Suite 407
701 Ponce De Leon Avenue
Miramar
San Juan, Puerto Rico, 00907
Counsel for Appellant
Frederick G. Watts, Esq. (Argued)
John H. Benham, III, Esq.
Watts and Benham
No. 1. Frederiksberg Gade
P.O. Box 11720
Charlotte Amalie, Saint Thomas
USVI, 00801
Counsel for Appellees Dawson,
Ballentine, George, Francis,
O’Connor, Quetel, Goodwin,
Sotomayor, Roebuck, Finch, the
Virgin Islands Port Authority and
Sea Air Shuttle Corporation
Maureen P. Cormier
Carol Moore
Office of the Attorney General of
The Virgin Islands
Department of Justice
48B-50 Kronprindsens Gade
Charlotte Amalie, St. Thomas
USVI, 00802
Counsel for Appellees Hodge and
Farrelly
2
Nygaard, Circuit Judge:
The appellant, Lewis F. Huck, suing derivatively on behalf
of Sea Air Shuttle Corporation, appeals separate orders of the
district court dismissing his suit and awarding costs and
attorneys’ fees to the appellees. Huck argues that the district
court erred first by applying the res judicata doctrine, and
second, by awarding costs and attorneys’ fees to the appellees.
We conclude that Huck’s arguments, and indeed this appeal, are
frivolous and will affirm the orders of the district court.
I.
This appeal arises from the Virgin Islands Port Authority’s
(VIPA) refusal to allow Sea Air to use VIPA owned seaplane ramps
in St. Thomas and St. Croix. As a result of Hurricane Hugo in
September 1989, the seaplane service that operated between St.
Croix and St. Thomas and used VIPA’s seaplane ramps went out of
business. In early 1990, VIPA issued a request for proposals to
lease the seaplane ramps. In the course of the bidding process,
VIPA considered the joint proposal of Sea Air and an affiliated
company, Caribbean Airline Services, Inc. After investigating
the operations of Sea Air and Caribbean, their joint proposal was
rejected in favor of another bidder.
In response to being rejected, Sea Air sued VIPA and the
successful bidder. In its various amended complaints, Sea Air
alleged that VIPA’s choice of bidders was unlawful because it
violated VIPA’s bidding statute; violated the due process and
equal protection clauses of the Constitution; violated local and
federal antitrust laws; violated Title 29, Section 543 of the
3
V.I. Code (defining the powers of VIPA); violated the Commerce
Clause; and, violated federal law under the Federal Aviation Act.
The district court dismissed the antitrust claims on federal and
state action immunity grounds, and the Commerce Clause and FAA
claims because they were included in Sea Air’s third amended
complaint, filed just two weeks before trial was scheduled to
begin. The district court then entered summary judgment in favor
of the defendants on the balance of the claims. Significantly,
Sea Air did not appeal these orders.
Later, however, Huck recycled Sea Air’s claims and sued as a
shareholder, derivatively on behalf of Sea Air, against VIPA and
various Virgin Islands government and VIPA officials. The
gravamen of his complaint was the same as that of the earlier
dismissed action. Huck acknowledges the identity of the two
actions, but defends his right to file the second by contending
that VIPA, in continuing to deny Sea Air access to the ramps,
drove his company into bankruptcy. Moreover, Huck contends that
the final and unappealed judgment entered against Sea Air in the
earlier case did not bar his lawsuit because the earlier decision
was “fraudulently obtained,” since the defendants in that action
did not reveal that federal funds had been used or that federal
law arguably prohibited the granting of exclusive leases for use
of air navigation facilities.
The district court found Huck’s claims barred by res
judicata, holding that Huck’s claims on behalf of Sea Air arose
out of the same transaction and events that gave rise to the
earlier lawsuit, and that the same had been earlier adjudicated.
4
Huck, the court held, could not avoid the effects of res
judicata simply because he was now asserting that a different
degree or extent of damage than earlier alleged. The fact that
he continued to suffer from the effects of the earlier judgment
did not render the claims to be not fully litigated. Moreover,
it concluded that the parties were in privity, a conclusion that
Huck has never challenged. Further, the court found that Huck’s
allegations of fraud were meritless and “[could] be characterized
as nothing other than frivolous.” Accordingly, the district
court dismissed Huck’s claims and entered judgment in favor of
the defendants. The district court then, upon motion of the
defendants and without opposition from Huck, awarded attorneys’
fees to the defendants. In its memorandum explaining the award
of attorneys’ fees, the district court stated that Huck’s
lawsuits “were frivolous and groundless, lacking any factual or
legal basis . . . .” Huck now appeals those orders.
II.
On appeal, Huck offers an array of arguments why he believes
the res judicata doctrine should not have barred his claims in
the district court, including: (1) his claims are for damages
incurred after the first judgment, and thus constitute a
different cause of action; (2) his claims were not fully
litigated in the first lawsuit; (3) his claims are premised on a
different set of facts; (4) his claims seek a different remedy
than the claims in the first lawsuit; (5) res judicata should be
used only sparingly in civil rights cases; (6) res judicata
should not be applied if the first judgment was erroneous; and,
5
(7) res judicata should not be applied where it would result in
"injustice." In addition, and although he did not oppose the fee
motion below, Huck now contends that the district court erred by
awarding attorneys’ fees to the appellees.
We have jurisdiction over these appeals under 28 U.S.C. §§
1291, 1294(3). We review the district court’s application of res
judicata to bar the appellant’s claims under a plenary standard.
O’Leary v. Liberty Mutual Ins. Co., 923 F.2d 1062, 1064-65 (3d
Cir. 1991). The district court’s award of attorneys’ fees to the
appellees will stand “unless [the court] has erred legally, or
the facts on which the determination rests are clearly
erroneous.” Commonwealth v. Flaherty, 40 F.3d 57, 60 (3d Cir.
1994) (citation and internal quotations omitted).
III.
In determining whether Huck’s suits were barred by the res
judicata doctrine (claim preclusion), we look to the law of the
adjudicating state. O’Leary, 923 F.2d at 1064 (citing Gregory v.
Chehi, 843 F.2d 111, 116 (3d Cir. 1988)). Absent local law or
precedent to the contrary, the Restatement (Second) of Judgments
provides the applicable law. 1 V.I.C. § 4;1 Miller v. Christian,
958 F.2d 1234, 1237 (3d Cir. 1992) (citation omitted) (applying
the Restatement (Second) of Property to settle a landlord-tenant
1
1 V.I.C. § 4 (1988) reads in its entirety:
The rules of the common law, as expressed in the restatements of
the law approved by the American Law
Institute, and to the extent not so expressed, as generally
understood and applied in the United States, shall be the rules
of decision in the courts of the Virgin Islands in cases to which
they apply, in the absence of local laws to the contrary.
6
dispute).
The doctrine has been properly defined by the District Court
of the Virgin Islands as “the legal principle that a final
judgment, rendered upon the merits, without fraud or collusion,
by a court which had jurisdiction over the parties and the
subject matter, is conclusive in a subsequent action between the
parties or their privies based upon the same cause of action.”
Julien v. Committee of Bar Examiners, 923 F. Supp. 707, 716
(D.V.I. 1996) (quoting Bank of Nova Scotia v. Bloch, 533 F. Supp.
1356, 1359 (D.V.I.), aff’d, 707 F.2d 1388 (3d Cir. 1982)).
Applying this doctrine, plaintiff’s claims will be barred by the
application of res judicata if: (1) the earlier judgment is final
and on the merits; (2) the claims asserted by the plaintiff are
the same as those asserted in the earlier action; and, (3) the
parties are the same as, or in privity with, the parties from the
earlier action. Julien, 923 F. Supp. at 716. This interpretation
is consistent with Section 24 of the Restatement (Second) of
Judgments (1982) which describes the scope of res judicata as
follows:
(1) When a valid and final judgment rendered in an action
extinguishes the plaintiff’s claim pursuant to the rules of
merger or bar (see §§ 18, 19), the claim extinguished
includes 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.
(2) 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 convenient trial unit, and
whether their treatment as a unit conforms to the parties’
expectations or business understanding or usage.
7
Significantly, “it is well established that res judicata
precludes a party both from relitigating matters already
litigated and decided and from litigating matters that have never
been litigated, yet should have been advanced in an earlier
suit.” Julien, 923 F. Supp. at 717-18 (citing 18 Charles A.
Wright, et al., Federal Practice and Procedure § 4406 (1981));
accord Bloch, 533 F. Supp. at 1359; Lawaetz v. Bank of Nova
Scotia, 23 V.I. 132, 141 (D.V.I. 1987) (citation omitted).
Here, there is no doubt that the prerequisites -- finality
of judgment, identity of claims, and privity of parties -- are
met. Huck’s claims on behalf of Sea Air clearly: (1) arise out
of the same transaction and events that gave rise to the earlier
lawsuit; (2) mirror the claims and causes of actions asserted in
the first lawsuit; and, (3) involve parties in privity.
Accordingly, we find that the district court properly applied the
doctrine of res judicata to bar Huck’s claims. Huck’s litany of
arguments to the contrary do not raise even a colorable challenge
to this conclusion.
Huck’s first contention is that after the district court
entered its first judgment against Sea Air, VIPA continued to
deny Sea Air access to the sea ramps and, as a result, Sea Air
was forced to file for bankruptcy. Accordingly, Huck seeks
compensation “for damages suffered subsequent to the decisions in
the prior lawsuit, as a consequence of the continuing denial of
access to the seaplane ramps, based on Defendants/Appellants'
conduct being violative of federal law and depriving Sea Air of
constitutionally protected rights.” In other words, Huck asserts
8
that the continued denial of access to the ramps, although fully
in compliance with the court's judgment, creates a new cause of
action for liability, and thus res judicata is inappropriate.
Huck’s contention is absurd. First, Huck’s argument ignores
the fact that in the initial judgment the district court
determined that VIPA had a right to deny Sea Air access to the
sea ramps, thereby settling the question of whether Sea Air was
being deprived of its constitutional rights.2 Second, the
conduct of which Huck complains, i.e., the denial of access to
the sea ramps, is precisely the same conduct challenged in the
earlier suit. Finally, it is difficult to understand how Huck
can conclude that VIPA, by acting upon authority of and in
accordance with the final judgment of the district court, created
a new cause of action that was not barred by res judicata. This
is not a case where there has been a change of circumstances
concerning material operative facts that would serve to make the
application of res judicata improper, nor does Huck argue so.
See Restatement (Second) of Judgments § 24 comment f. Instead,
he argues that the same facts that resulted in the earlier
judgment have caused continued damage.
Huck’s second argument against the application of res
judicata is that the district court, by denying Sea Air leave to
amend its complaint in the earlier action, prevented all claims
from being fully litigated, and thus he should be allowed to
bring those claims now. This argument was foreclosed when
2
We note that neither Sea Air, nor Huck, in a derivative
capacity, appealed this finding.
9
neither Sea Air nor Huck, derivatively, appealed the first
judgment. The issues that Huck contends were not fully litigated
in the earlier action -- the Commerce Clause and FAA claims --
could have been properly raised and litigated by Sea Air, but
were not. As such, the application of res judicata to bar the
assertion of those claims in this action is appropriate.
Julien, 923 F. Supp. at 717-18 (citation omitted); Lawaetz, 23
V.I. at 141. Indeed, the Restatement offers a complete response
to Huck’s argument:
The rule of § 24 applies to extinguish a claim by the plaintiff
against the defendant even though the plaintiff is prepared
in the second action
(1) To present evidence or grounds or theories of the case not
presented in the first action, or
(2) To seek remedies or forms of relief not demanded in the first
action.
Restatement (Second) of Judgments § 25; see also Restatement
(Second) of Judgments § 25, Comment a (“The rule of § 24 puts
some pressure on the plaintiff to present all his material
relevant to the claim in the first action . . . . The material
to be brought forward comprises, roughly, `evidence’ -- connoting
facts; `grounds’ -- facts grouped under a legal characterization;
`theories of the case’ -- premises drawn from the substantive
law; `remedies or forms of relief’ -- measures or kinds of
recovery.”). The trial court’s decision to deny Sea Air’s motion
to amend its complaint does not change this outcome. Restatement
(Second) of Judgments § 25 comment b (“It is immaterial that the
plaintiff in the first action sought to prove the acts relied on
in the second action and was not permitted to do so because they
10
were not alleged in the complaint and an application to amend the
complaint came too late.”). Moreover, neither Sea Air nor Huck,
in a derivative capacity, ever appealed the trial court’s denial
of the motion to amend the complaint, which would have been the
proper recourse to preserve the right to litigate the claims.
See, e.g., Sendi v. NCR Comten, Inc., 624 F. Supp. 1205, 1207
(E.D.Pa. 1986) (holding that “the fact that plaintiff was denied
leave to amend does not give him the right to file a second
lawsuit based on the same facts”).3
Huck’s third argument is also frivolous. Huck maintains
that since he is alleging a cause of action for harm that
occurred after the first judgment, he may prove different facts,
and thus res judicata is inapplicable. This, however, is an
incorrect statement of the law, and, as we noted earlier, there
is no merit to Huck’s claim that he suffered a separate injury as
the result of the continued losses from denial of access to the
sea ramps. See Restatement (Second) of Judgments § 25 comment b.
The remainder of Huck’s contentions are likewise without
merit. Huck argues that since he is pursuing a different remedy
3
We note also that, despite its decision to deny Sea
Air’s motion to amend its complaint, the trial court’s opinion
clearly indicates that it was aware of the substance of the
Commerce Clause and FAA claims and found them to be unpersuasive.
In addition, insofar as one of the “unlitigated” claims Huck
wishes to bring is for damages resulting from violations of
federal law under the FAA, we note that he has no standing from
which to assert this claim. Montauk-Caribbean Airways, Inc. v.
Hope, 784 F.2d 91, 97-98 (2d Cir.) (holding that Congress created
no express or implied private right of action under the Federal
Aviation Act), cert. denied, 479 U.S. 872 (1986); accord Air
Transport Ass’n v. Public Utilities Commission, 833 F.2d 200,
207-08 (9th Cir. 1987), cert. denied, 487 U.S. 1236 (1988).
11
in his action (monetary damages in contrast to the injunctive
relief sought by Sea Air), res judicata cannot be applied. This
assertion is again contrary to the law. Restatement (Second) of
Judgments § 25 comment f (“[a]fter judgment for or against the
plaintiff, the claim is ordinarily exhausted so that the
plaintiff is precluded from seeking any other remedies deriving
from the same grouping of facts . . . .”). In addition, Huck
declares without support that res judicata should be used only
sparingly in civil rights cases. He further insists that res
judicata cannot be applied where “it is based on a prior decision
which is clearly erroneous.” These arguments amount to little
more than a demand that the decision of the trial court be
redecided on the merits -- an option Sea Air and Huck waived when
they failed to appeal the initial judgment against Sea Air.
Finally, Huck maintains that res judicata should not be applied
where it would result in injustice. We find no injustice when
the doctrine of res judicata is properly applied to prevent
appellees from being subjected to “endless relitigation of issues
already decided.” Bloch, 533 F. Supp. at 1359. This is
especially so here, when even a cursory review of the doctrine's
basic principles should have alerted counsel that Huck’s
derivative suit was repetitious and without colorable legal or
factual support.
In summary, we find no merit to any of Huck’s arguments that
the district court inappropriately applied res judicata to bar
his claims against the appellees. It is clear that Huck’s
derivative actions arose from the same core of operative facts
12
and circumstances as the earlier Sea Air suit. It is also
undisputed that there was privity between the parties in Huck’s
suits and the earlier Sea Air action. Given that there was an
identity of facts, claims, and parties between the Sea Air suit
and Huck’s derivative actions we conclude that the application of
res judicata to bar Huck’s action was proper. Accordingly, we
will affirm the district court’s order granting the appellees’
motions for summary judgment and dismissing Huck’s suits.
IV.
Huck also challenges the order of the district court
awarding costs and attorneys’ fees to the appellees. At the
outset, we note that Huck failed to oppose the appellees’ motion
for costs and attorneys’ fees and thus cannot raise the issue for
the first time on appeal. See Kiewit Eastern Co., Inc. v. L & R
Construction Co., Inc., 44 F.3d 1194, 1203-04 (3d Cir. 1995)
(affirming district court’s finding that party waived right to
attorneys’ fees and costs because issue was not adequately raised
before the court); McDonald v. McCarthy, 966 F.2d 112, 119 (3d
Cir. 1992) (holding that defendants who had an opportunity to
contest the accuracy and reasonableness of requested attorneys’
fees, but failed to do so, waived their right to raise objections
on appeal); accord Chicago v. Matchmaker Real Estate Sales
Center, 982 F.2d 1086, 1101 (7th Cir. 1992) (“By challenging the
attorneys’ fees award for the first time on appeal, the
defendants have waived the issue.”), cert. denied, 508 U.S. 972
(1993); accord Pope v. MCI Telecommunications Corp., 937 F.2d
258, 266-67 (5th Cir. 1991), cert. denied, 504 U.S. 916 (1992).
13
Huck has offered no explanation for his failure to oppose the
appellees’ motion.
Notwithstanding his waiver, we will briefly consider Huck’s
challenges to the district court’s award of attorneys’ fees.
Huck’s first contention is that the award of attorneys’ fees
cannot be sustained if “the lower court erred in dismissing the
suit on res judicata grounds.” Since we have already held that
the application of res judicata was appropriate, Huck’s
contention is meritless and cannot serve as the basis for
reversing the award.
Huck next asserts that the award of was erroneous because
the district court opinion did not explicitly find that Huck’s
suits were frivolous or groundless. Essentially, Huck argues
that because “[t]here is only one mention of the word `frivolous’
in [the] memorandum and it is with respect to a very limited part
of the cases,” attorneys’ fees cannot be imposed as a matter of
law. Huck’s contention, however, is patently wrong. The
district court, in its order supporting the award of attorneys’
fees, expressly found that “both of these lawsuits were frivolous
and groundless, lacking any factual or legal basis . . . .”
Moreover, the fact that Huck’s claims were dismissed based on the
application of res judicata further supports the district court’s
conclusion that there was no basis upon which to bring these
suits and thus they were frivolous.
Finally, Huck stands logic on its head and asserts that
because the claims made by Sea Air in the earlier suit were not
frivolous, his reassertion of those claims in his suits cannot be
14
considered frivolous or groundless. We infer from his argument
that Huck would have this court adopt the position that once
particular claims are deemed not to be frivolous, they are not,
and cannot be, frivolous no matter how many times and in what
context they are reasserted. As with his other “legal arguments”
challenging the award of attorneys’ fees, Huck offers no support
for his position and we find it to be without merit.
It is clear that a court may award attorneys’ fees to a
prevailing defendant in a civil rights action if the court finds
that the action was frivolous. Flaherty, 40 F.3d at 60. Here,
the district court expressly held that Huck’s suits “were
frivolous and groundless, lacking any factual or legal basis . .
. .” Based on our review of the record and our disposition of
the present appeal, we agree with the district court’s assessment
of the substance of Huck’s actions. Accordingly, we will affirm
the order of the district court awarding costs and attorneys’
fees to the appellees.
V.
One final matter: we observe that the appellees have not yet
sought costs or damages under Federal Rule of Appellate Procedure
38.4 Although we do not usually raise the issue of Rule 38
damages sua sponte, and do not do so now, given our decision on
the merits herein, the history of the case, and that appellees
4
Rule 38 reads in its entirety:
If a court of appeals determines that an appeal is frivolous, it
may, after a separately filed motion or notice from the
court and reasonable opportunity to respond, award just
damages and single or double costs to the appellee.
15
may anticipate recovering attorneys’ fees herein, we feel it
advisable to offer a note of instruction.
The purpose of an award of attorneys’ fees under Rule 38 is
“to compensate appellees who are forced to defend judgments
awarded them in the trial court from appeals that are wholly
without merit, and to preserve the appellate court calendar for
cases worthy of consideration.” Nagle v. Alspach, 8 F.3d 141,
145 (3d Cir. 1993) (citations and internal quotations omitted),
cert. denied, 510 U.S. 1215 (1994). We note that this appeal was
wholly without merit. Indeed, the district court’s decision to
award costs and attorneys’ fees to the appellees because it found
Huck’s suits to be frivolous should have urged upon him and his
counsel some extra caution, and given him pause to devote
additional examination to the legal validity and factual merit of
his contentions. Moreover, instead of producing strong legal
arguments to convince us that his appeals were meritorious,
Huck's counsel has offered unsupportable legal and factual
conclusions and merely reargued the already-litigated claims.
Hence, the predicate for an award under Rule 38 is met.
Rule 38, however, is not just a sanctions provision,
arguably raising an obligation upon the court to act to protect
its own integrity or that of a party. Instead, when the court
determines that an appeal is frivolous, it is given the option of
awarding damages upon "notice from the court," or, alternatively,
awaiting a motion from the injured party. Because, however, the
remedy this rule offers an injured party is more in the nature of
an award upon a finding of liability in tort, we believe in this
16
case the more sound jurisprudential approach is to stay our hand
and await a request for redress, if appellees feel strongly
enough, and consider themselves injured sufficiently by the
action of appellant or its counsel on appeal. This permits the
usual opportunities and procedures that attend a claim upon
injury -- i.e., demand, discussion, settlement, alternate dispute
resolution, etc. -- to function before we are called upon to act.
VI.
In sum, we will affirm the orders of the district court
dismissing the appellant’s suits and awarding costs and
attorneys’ fees to the appellees.
17
TO THE CLERK:
Please file the foregoing opinion
Circuit Judge
DATED:
18