Joan Kearney v. Foley & Lardner, LLP ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 24 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOAN BROWN KEARNEY, No. 16-56593
Plaintiff-Appellant, D.C. No.
3:05-cv-02112-AJB-JLB
v.
FOLEY & LARDNER, LLP; et al., MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of California
Anthony J. Battaglia, District Judge, Presiding
Argued and Submitted March 8, 2018
Pasadena, California
Before: WALLACE and NGUYEN, Circuit Judges, and SIMON,** District Judge.
Joan Kearney (“Kearney”) appeals from the district court’s summary
judgment. We have jurisdiction under 28 U.S.C. § 1291. We review a district
court’s summary judgment de novo, Branch Banking & Tr. Co. v. D.M.S.I., LLC,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Michael H. Simon, United States District Judge for the
District of Oregon, sitting by designation.
871 F.3d 751, 759 (9th Cir. 2017), and may affirm on any ground supported by the
record. Campidoglio LLC v. Wells Fargo & Co., 870 F.3d 963, 973 (9th Cir.
2017). We affirm.1
Kearney owned land in California (the “Property”). A local school district
exercised eminent domain. When Kearney and the school district were unable to
agree upon fair compensation, a California state court jury resolved the valuation
dispute. Defendant Foley & Lardner, LLP and two of its then-partners represented
the school district in the state court valuation trial. Defendant McCarty is the
former business manager of the school district who supervised the condemnation.
Before trial, McCarty commissioned an engineering firm to assess the
Property’s suitability for a septic system, including percolation testing. The school
district’s architect, however, directed the firm to suspend its work after the school
district decided to connect to a sewer system, rather than install a septic system.
McCarty testified in deposition that he thought that testing had been done but no
results were produced. At the state court trial, Kearney’s valuation expert opined
that the Property had a fair market value of $1.4 million based on its ability to
support a certain number of residential lots. The school district’s expert appraised
1
This is Kearney’s third appeal in this case. See Kearney v. Foley &
Lardner, LLP, 590 F.3d 639 (9th Cir. 2009) (reversing dismissal under Noerr-
Pennington); Kearney v. Foley & Lardner, LLP, 607 F. App’x 757 (9th Cir. 2015)
(reversing judgment on the pleadings).
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the Property at $850,000 based on an assumption of fewer lots. The jury awarded
Kearney $953,000.
After the state court trial, Kearney learned that percolation testing had been
completed, but not disclosed. Kearney filed several motions for a new trial, which
were denied by the trial court. Kearney appealed. The California Court of Appeal
affirmed, holding that Kearney failed to show she had been denied a fair trial. The
California Court of Appeal also noted that Kearney should have more timely and
thoroughly pursued discovering the test results before trial.
Having received no relief in state court, Kearney sued the school district’s
former business manager and outside law firm and lawyers (the Defendants in the
present action) in federal court. Invoking 42 U.S.C. § 1983, Kearney alleged
unlawful taking of property in violation of the Fifth Amendment. Kearney also
alleged violation of the Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C. §§ 1961, et seq. (“RICO”).2 The district court granted summary judgment,
and Kearney appealed.
We affirm based on collateral estoppel (also known as “issue preclusion”),
which applies “(1) after final adjudication (2) of an identical issue (3) actually
litigated and necessarily decided in the first suit and (4) asserted against one who
2
Kearney also alleged state law claims that were dismissed by district court.
Those claims are not at issue in this appeal.
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was a party in the first suit or one in privity with that party.” DKN Holdings LLC v.
Faerber, 61 Cal. 4th 813, 825 (2015). Federal courts must “give preclusive effect
to state-court judgments whenever the courts of the State from which the
judgments emerged would do so.” Kremer v. Chem. Constr. Corp., 456 U.S. 461,
482 (1982) (quoting Allen v. McCurry, 449 U.S. 90, 96 (1980)) (internal quotation
marks omitted). “The State must, however, satisfy the applicable requirements of
the Due Process Clause. . . . [F]ederal courts are not required to accord full faith
and credit to [a constitutionally infirm] judgment.” Id. Thus, we must consider
whether California would give preclusive effect to the previously-conducted state
court valuation trial and whether due process was provided.
California gives preclusive effect to earlier proceedings, even when the
suppression of evidence or other discovery misconduct is alleged.
Fraud by a party will not undermine the conclusiveness of a
judgment unless the fraud was extrinsic, i.e., it deprived the
opposing party of the opportunity to appear and present his
case. The suppression of evidence is intrinsic fraud. Therefore,
a judgment does not lose its res judicata effect because it was
entered while evidence was being suppressed.
Eichman v. Fotomat Corp., 147 Cal. App. 3d 1170, 1175-76 (Ct. App. 1983)
(internal citation omitted). Relatedly, California does not permit victims of
judgments procured by false testimony or suppressed evidence to bring a separate
action for damages. Cedars-Sinai Med. Ctr. v. Superior Court, 18 Cal. 4th 1, 9-10
(1998). In Cedars-Sinai, the California Supreme Court considered the doctrines of
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res judicata and collateral estoppel and concluded that “a judgment may not be
collaterally attacked on the ground that evidence was falsified or destroyed.” Id.
at 10. As the court explained, to allow an action for damages based on litigation
misconduct “would be productive of endless litigation.” Id. at 9-10 (quoting Smith
v. Lewis, 3 Johns. Cas. 157, 168 (N.Y. Sup. Ct. 1808) (Kent, C.J.)).
As found by the California trial and appellate courts, Kearney did not
diligently pursue discovery before her state court trial. Moreover, even if Kearney
had diligently pursued discovery and Defendants had willfully suppressed such
evidence, California law is firm that such intrinsic fraud does not upset the finality
of an earlier judgment. The state court trial and post-trial motions were Kearney’s
“opportunity for making the truth appear.” Pico v. Cohn, 91 Cal. 129, 134 (1981).
If a litigant is “overborne by perjured testimony” or, as alleged in this case, by
suppressed evidence “and if he likewise fails to show the injustice that has been
done him[,] on motion for a new trial, and the judgment is affirmed on appeal, he is
without remedy.” Id. Because Kearney does not challenge the state court
procedures that were available to her and because there is no indication in the
record that the state proceeding was constitutionally deficient, Kearney was
afforded a full and fair opportunity to litigate the value of the Property. Thus, the
earlier judgment regarding value must be given preclusive effect. See Kremer, 456
U.S. at 485.
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Because Kearney cannot relitigate the value of the Property, her claims
under Section 1983 and RICO fail. If Kearney received fair compensation for the
Property, there is no unlawful taking. Horne v. Dep’t of Agric., 135 S. Ct. 2419,
2431 (2015) (“[A] taking does not violate the Fifth Amendment unless there is no
just compensation[.]”). In addition, injury to “business or property” is a necessary
element of every civil RICO claim. Living Designs, Inc. v. E.I. DuPont de
Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (holding that the elements of a
civil RICO claim include causal injury to a plaintiff’s “business or property”).
Kearney also argues that her claims survive even if she cannot relitigate the
value of the Property because she is also seeking damages for emotional distress
and attorney’s fees.3 To permit such a theory of recovery, however, would upend
California’s policy against recognizing claims in a later and collateral lawsuit for
damages based on misconduct occurring in earlier litigation. In Kachig v. Boothe,
the California Court of Appeal refused to recognize a claim for intentional
infliction of emotional distress based on litigation misconduct in an earlier
proceeding, despite evidence that the plaintiff had suffered a wrong. 22 Cal. App.
3d 626, 642 n.2 (1971). The court in Kachig recognized that the plaintiff’s
emotional distress claim was different from a claim for fraud or malicious
3
Emotional distress damages are personal injuries that are not compensable
under RICO. See Diaz v. Gates, 420 F.3d 897, 899-900 (9th Cir. 2005) (en banc)
(per curiam).
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prosecution because it could be proven without relitigating the earlier judgment
and thus was not necessarily barred by principles of collateral estoppel or res
judicata. Id. at 640. Nevertheless, the court concluded that recognition of such a
cause of action “would largely subvert the notion that false evidence must be
discovered and exposed in the first trial to avoid multiplicity of litigation.” Id.
at 640-41.
Kearney’s claims for emotional distress damages and attorney’s fees fail for
the same reason, even though she brings her claims under federal law and not state
law. Were we to hold otherwise, a dissatisfied litigant could circumvent the
California doctrine on the finality of judgments by seeking emotional distress
damages or attorney’s fees for alleged litigation misconduct committed in an
earlier state court proceeding simply by asserting a federal claim in federal court.
Such a result would be contrary to Congress’s mandate that federal courts give full
faith and credit to the judgments of state courts. See 28 U.S.C. § 1738; Kremer,
456 U.S. at 485. Thus, when a litigant’s federal claim essentially is an attempt to
relitigate a final state court judgment, all theories of damage under the federal
claim must be disallowed.
AFFIRMED.
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