Rocky Mountain Choppers, L.L.C v. Textron Financia ( 2013 )

Case: 13-10023 Document: 00512394523 Page: 1 Date Filed: 10/02/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 2, 2013
No. 13-10023 Lyle W. Cayce
Summary Calendar Clerk
SCOTT MEYERS, ET AL,
Plaintiffs
v.
TEXTRON, INCORPORATED, ET AL,
Defendants
-------------------------------------------------
ROCKY MOUNTAIN CHOPPERS L.L.C.,
Plaintiff-Appellant,
v.
TEXTRON FINANCIAL CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 4:12-CV-353
Before STEWART, Chief Judge, and KING and CLEMENT, Circuit Judges
Case: 13-10023 Document: 00512394523 Page: 2 Date Filed: 10/02/2013
No. 13-10023
PER CURIAM:*
Petitioner Rocky Mountain Choppers L.L.C. (“RMC”) filed this suit against
Textron Financial Corp (“Textron”) alleging claims of fraud associated with
RMC’s acquisition of the assets of American IronHorse Motorcycle Company, Inc.
(“AIMC”). Textron filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6), which
the district court granted. For the reasons stated herein, we AFFIRM.
I.
In early 2008, Scott and Susan Meyers formed AIH Aquisitions, L.L.C.
(“AIH”) to purchase assets from AIMC after it filed for bankruptcy. Textron was
AIMC’s pre-petition secured lender and post-petition debtor in possession lender.
On May 21, 2008—after negotiations between the Meyerses and Textron—AIH
and Textron finalized a sales transaction in which AIH acquired AIMC using
financing from Textron. By early 2009, however, AIH had defaulted under its
loan agreement with Textron.
Several proceedings arose from these events, involving state claims and
other adversary proceedings that were consolidated by the bankruptcy court. In
particular, on Dec. 7, 2010 the Meyerses filed a petition for intervention against
Textron in the bankruptcy court alleging fraudulent inducement and negligent
misrepresentation.1 The bankruptcy court dismissed those claims with
prejudice. On review, the district court found that the bankruptcy court did not
have the constitutional authority to dismiss the Meyerses claims with prejudice,
but went on to dismiss their claims with prejudice independently (hereinafter
“previously dismissed case”).
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
1
The Meyerses voluntarily abandoned their negligence misrepresentation claim.
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On June 1, 2012, RMC—an entity owned solely by the Meyerses—brought
the instant suit against Textron, alleging fraud in connection with the May 21,
2008 agreement. The district court dismissed the suit with prejudice on two
independent grounds: (1) res judicata based on the judgment in the previously
dismissed case; and, (2) failure to plead fraud with particularity under Fed. R.
Civ. P. 9(b). RMC timely appealed.
II.
This court reviews de novo a dismissal under Rule 12(b)(6) and the res
judicata effect of a prior judgment. Bass v. Stryker Corp., 669 F.3d 501, 506 (5th
Cir. 2012); Bowlby v. City of Aberdeen, Miss., 681 F.3d 215, 219 (5th Cir. 2012);
Highland Capital Mgmt. LP v. Bank of Am, Nat’l Ass’n, 698 F.3d 202, 205 (5th
Cir. 2012); Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir.
2005).
RMC argues that dismissal was improper for several reasons. First, RMC
maintains that res judicata is not an appropriate basis for a Rule 12(b)(6)
dismissal and that, even if it were, the district court should have denied the
motion because Textron did not show privity between RMC and the Meyerses.
Second, RMC argues that, contrary to the district court’s finding, the complaint
alleges fraud with sufficient specificity to satisfy Fed. R. Civ. P. 9(b). Its
arguments are unavailing.
Although a district court primarily looks to the allegations in the
complaint in determining whether to grant a Rule12(b)(6) motion, there are
other sources it may consider. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308, 322 (2007). For example, a district court may take into account
documents incorporated into the complaint by reference or integral to the claim,
items subject to judicial notice, matters of public record, orders, items appearing
in the record of the case, and exhibits attached to the complaint whose
authenticity is unquestioned. Id.; § 1357 Motions to Dismiss—Practice Under
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Rule 12(b)(6), 5B Fed. Prac. & Proc. Civ. § 1357 (3d ed.); see also Funk v. Stryker
Corp., 631 F.3d 777, 783 (5th Cir. 2011) (“[T]he district court took appropriate
judicial notice of publicly-available documents and transcripts . . . which were
matters of public record directly relevant to the issue at hand.”). Thus, while res
judicata is generally an affirmative defense to be pleaded in a defendant’s
answer (Test Masters Educ. Servs., Inc., 428 F.3d at 570 n. 2) there are times
when it may be raised on a Rule 12(b)(6) motion. This Court has found that res
judicata may be properly raised on a motion to dismiss when “the facts are
admitted or not controverted or are conclusively established.” Clifton v.
Warnaco, Inc., 53 F.3d 1280, at *6 n. 13 (5th Cir. 1995) (per curiam)
(unpublished) (internal citations omitted). “When all relevant facts are shown
by the court’s own records, of which the court takes notice, the defense [of res
judicata] may be upheld on a Rule 12(b)(6) motion without requiring an answer.”
Id.Here, besides the pleadings, the district court took into account public
records and prior court proceedings in deciding the Rule 12(b)(6) motion.
Accordingly—if the elements of res judicata were met—it appropriately
dismissed the RMC’s claims on this basis.
Four elements must be present to support a finding of res judicata: (1) the
parties are identical or in privity; (2) the prior action was rendered by a court of
competent jurisdiction; (3) the prior action was concluded by a final judgment on
the merits; and, (4) the same claim or cause of action was involved in both
actions. Proctor & Gamble Co. v. Amway Corp., 376 F.3d 496, 499 (5th Cir.
2004). The district court held that all four elements were established here.
RMC contests the district court’s finding on the first of those four
elements; namely, it argues that there is no privity between RMC and the
Meyerses. We disagree. Textron is the only defendant in both actions. As the
district court pointed out, it is undisputed that the Meyerses controlled the
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instant action as well as the dismissed case. RMC alleges that it is an entity
owned by the Meyerses; public records show that the Meyerses are the sole
managers or members of RMC; and RMC stipulated that the Meyerses owned
RMC and were RMC’s sole members and managers with “full authority to
exercise RMC’s powers and bring or defend claims on RMC’s behalf.” R. at 178.
To whatever extent RMC has a legitimate interest in the claims and causes of
action alleged in the instant action, RMC’s interests in those claims and causes
of action were adequately represented by the Meyerses in the previously
dismissed case. Thus, the record supports a finding of privity.
Because we affirm on the district court’s dismissal of RMC’s suit on
grounds of res judicata, we do not need to reach the Rule 9(b) issue. United
States v. Gonzalez, 592 F.3d 675, 681 (5th Cir. 2009) (“[A court of appeals] may
affirm for any reason supported by the record . . .”). Furthermore, in light of our
earlier finding that the claims were appropriately dismissed on res judicata, we
pretermit discussion of RMC’s argument that the district court should not have
dismissed its claims with prejudice. Allen v. McCurry, 449 U.S. 90, 94 (1980)
(“Under res judicata, a final judgment on the merits of an action precludes the
parties or their privies from relitigating issues that were or could have been
raised in that action.”); see also Wilder Corp. of Del., Inc. v. Rural Cmty. Ins.
Servs., 494 F. App’x 487, 490 (5th Cir. 2012) (per curiam) (unpublished)
(“Because [the party’s] counterclaim is conclusively barred by res judicata,
dismissal with prejudice was appropriate.”).
III.
For the foregoing reasons, we AFFIRM the judgment of the district court
dismissing RMC’s claims.
5