Knight v. Mooring Capital Fund, LLC

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 22, 2014
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
JUDY KNIGHT,
Plaintiff - Appellant,
and
PHOENIX CENTRAL, INC.; MINI
MALLS OF AMERICA; JOHN DOE,
unknown investors in Mooring #1 thru
xx; JANE DOE, unknown investors in
Mooring #1 thru xx,
Plaintiffs,
v. No. 13-6112
MOORING CAPITAL FUND, LLC;
MOORING FINANCIAL
CORPORATION; JOHN JACQUEMIN,
Defendants - Appellees,
and
DAVID NALLS; JOHN DOE; JANE
DOE; COUNSELS AND AGENTS OF
DEFENDANTS,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. No. 5:13-CV-00129-HE)
Submitted on the briefs:*
Judy Knight, filed a brief pro se.
Leif E. Swedlow, Andrews Davis, P.C., Oklahoma City, Oklahoma, for
Defendants - Appellees.
Before HARTZ, McKAY, and BALDOCK, Circuit Judges.
HARTZ, Circuit Judge.
Judy Knight appeals from the dismissal of her lawsuit on the grounds of
untimeliness, failure to state a claim, and claim preclusion (res judicata). We affirm
the judgment below. Most of our reasons for affirmance are routine. But this appeal
does raise interesting questions regarding claims under the federal Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68, based on
alleged misconduct in prior litigation.
I. Background
In 2010 this court decided two appeals involving claims and cross-claims
between, on one side, Ms. Knight and her company Phoenix Central Inc. (Phoenix),
an Oklahoma corporation, and, on the other side, Mooring Capital Fund, LLC
(Capital) and Mooring Financial Corporation (Financial). See Mooring Capital
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
-2-
Fund, LLC v. Knight, 388 F. App’x 814 (10th Cir. 2010) (Mooring I). Two years
later, Ms. Knight filed a new suit in Oklahoma state court on behalf of herself,
Phoenix, and another of her companies, Mini Malls of America, also an Oklahoma
corporation. The defendants were Capital and Financial and individuals associated
with them, including Financial’s Chief Executive Officer, John Jacquemin, and
unnamed “Counsels and Agents of Defendants.” R. at 15. Capital, Financial, and
Mr. Jacquemin removed the litigation to federal district court.
The removing defendants moved to dismiss with prejudice. In addition to
filing a response, Ms. Knight filed a first amended complaint that named as
additional defendants the law firm and individual lawyers who represented Capital
and Financial in Mooring I (the Counsel Defendants). Capital, Financial, and
Mr. Jacquemin then moved to dismiss the first amended complaint with prejudice.
Citing claim preclusion, the statute of limitations, and Fed. R. Civ. P. 12(b)(6), the
court granted the motion the next day. In the same order, the court sua sponte
dismissed the claims against the other defendants.
The day after the district court filed its judgment dismissing the action with
prejudice, Ms. Knight filed a motion to remand the case to state court, which the
district court denied as moot. Ms. Knight then filed a Fed. R. Civ. P. 59 motion to
vacate, alter, or amend the dismissal order, which the district court also denied.
Shortly thereafter, Ms. Knight sent an e-mail message seeking the district judge’s
recusal. The court ordered the e-mail to be filed and denied the request for recusal.
-3-
Ms. Knight has appealed.1 We affirm. The removal of the case to federal court was
proper. Some of Ms. Knight’s claims were untimely and the others fail to state a
claim or are barred by issue preclusion (collateral estoppel). And her request for
recusal was untimely.
II. Analysis
A. Issues Concerning Removal
1. District Court’s Jurisdiction
We first consider Ms. Knight’s challenge to the district court’s jurisdiction,
reviewing the issue de novo, see Australian Gold, Inc. v. Hatfield, 436 F.3d 1228,
1234 (10th Cir. 2006). The district court may exercise removal jurisdiction over
“any civil action brought in a State court of which the district courts of the United
States have original jurisdiction.” 28 U.S.C. § 1441(a). In removing the action,
defendants primarily relied upon diversity jurisdiction, but they also cited
federal-question jurisdiction. We need not consider the arguments regarding
diversity jurisdiction because Ms. Knight’s assertion of federal-law claims under
RICO supports federal-question jurisdiction. See Caterpillar Inc. v. Williams,
482 U.S. 386, 392 (1987). On appeal Ms. Knight appears to argue that she did not
1
Ms. Knight filed notices of appeal naming as appellants herself and her two
corporations. We have previously explained to Ms. Knight that as a nonattorney she
cannot represent a corporation in federal court. See Mooring I, 388 F. App’x at 823.
No counsel has filed a notice of appeal or appeared for the entities. Consequently,
Ms. Knight is the only appellant, and we do not consider any arguments regarding the
entities’ claims.
-4-
assert any federal-law claims. That argument is undermined, however, by the plain
text of both her original and first amended complaints.
2. Counsel Defendants’ Consent to Removal
The case was removed to federal court by Capital, Financial, and
Mr. Jacquemin. Ms. Knight argues that removal was improper because the Counsel
Defendants did not join in or consent to the removal, as required by 28 U.S.C.
§ 1446(b)(2)(A). But consent is required only of “defendants who have been
properly joined and served,” id., and Ms. Knight, although asserting that she mailed a
summons and complaint to the Counsel Defendants, has failed to demonstrate that
they had been properly served at the time of removal.
Because the action was in Oklahoma state court before removal, we examine
Oklahoma’s service requirements. Oklahoma allows service by mail on individuals
and entities. See Okla. Stat. Ann. tit. 12, § 2004(C)(2)(a). It is not clear, however,
that Oklahoma would allow a pro se party to mail service. Section 2004(C)(2)(a)
implies the contrary by specifying that service by mail can be accomplished “by the
plaintiff’s attorney, any person authorized to serve process pursuant to subparagraph
a of paragraph 1 of this section [listing sheriff or deputy sheriff, licensed process
server, or person specially appointed to serve process], or by the court clerk.”
But even assuming that pro se plaintiffs can accomplish service by mail under
Oklahoma law, the record in this case contains no evidence that service was so
accomplished, much less that it was accomplished before the filing of the notice of
-5-
removal. For service by mail in Oklahoma, one must “mail[] a copy of the summons
and petition by certified mail, return receipt requested and delivery restricted to the
addressee.” Id. § 2004(C)(2)(b). “Service by mail shall be effective on the date of
receipt or if refused, on the date of refusal of the summons and petition by the
defendant.” Id. § 2004(C)(2)(a). Although Ms. Knight states that she mailed a
summons and complaint via registered mail, return receipt requested, to one lawyer
and the law firm, her unsupported assertions are insufficient to show that she
complied with the relevant service requirements. The record does not contain any
return receipts showing the date of delivery or any other evidence that the documents
actually were properly addressed, were deposited in the mail, and were delivered or
refused. See Chester v. Green, 120 F.3d 1091, 1091 (10th Cir. 1997) (plaintiff failed
to show service because there was “no authenticating post office stamp on any receipt
showing they actually passed through the mails, nor [was] there a receipt or
acknowledgment showing actual delivery of the complaint to the purported
defendants”); Colclazier & Assocs. v. Stephens, 277 P.3d 1285, 1290 (Okla. Civ.
App. 2012) (“[A]bsent any documentary evidence supporting the Law Firm’s claim
of attempted mailings, the district court could not have determined that service by
mail had been made.”). Since Ms. Knight has failed to establish that the Counsel
Defendants were served before the date of removal, their consent to removal was not
required.
-6-
B. Dismissal of Claims
Ms. Knight challenges the district court’s application of statutes of limitations,
Rule 12(b)(6), and claim preclusion. For ease of analysis, we divide her claims into
two categories—first, claims concerning events that occurred before the Mooring I
litigation (Phase 1 claims), and, second, claims concerning events that occurred
during the Mooring I proceedings (Phase 2 claims). We address each category
separately. Our review is de novo. See Wallace v. Microsoft Corp., 596 F.3d 703,
705 (10th Cir. 2010) (statute of limitations); Gee v. Pacheco, 627 F.3d 1178, 1183
(10th Cir. 2010) (Rule 12(b)(6)); Valley View Angus Ranch, Inc. v. Duke Energy
Field Servs., Inc., 497 F.3d 1096, 1100 (10th Cir. 2007) (preclusion).
1. Phase 1 Claims
The Phase 1 claims are claims based on events before Mooring I. They
include claims that were asserted but failed in Mooring I and claims that could have
been asserted but were not. It was proper for the district court to dismiss these
claims on the ground that any applicable limitations period had expired.
The Phase 1 claims predate Mooring I, which began in state court in
September 2005 and was removed to federal court in January 2006. The present
action was not filed until July 2012. By then, any Phase 1 claims clearly were
untimely. See Okla. Stat. Ann. tit. 12, § 95(A)(1) (five-year limitations period for
actions upon written contracts, agreements, and promises); id. § 95(A)(2) (three-year
limitations period for oral contracts and liabilities created by statute); id. § 95(A)(3)
-7-
(two-year limitations period for torts and fraud); Dummar v. Lummis, 543 F.3d 614,
621 (10th Cir. 2008) (four-year limitations period for federal RICO claims); Okla.
Stat. tit. 22, § 1409(E) (five-year limitations period for Oklahoma RICO claims).
2. Phase 2 Claims
The Phase 2 claims are those claims concerning events that occurred during
Mooring I. They include claims that the defendants committed fraud and deceit in
their filings and testimony and that their litigation conduct was tortious. It was
proper for the district court to dismiss the Phase 2 claims under Rule 12(b)(6) and on
the ground of preclusion (although the appropriate preclusion doctrine is issue
preclusion, not claim preclusion).
a. Claims Under Oklahoma Law
The majority of the Phase 2 claims are claims under Oklahoma law.
Oklahoma, however, has afforded participants in judicial proceedings an absolute
immunity against later civil suits grounded in litigation conduct. See Patel v. OMH
Med. Ctr., Inc., 987 P.2d 1185, 1202 (Okla. 1999) (“To the extent [plaintiff’s]
petition relies on perjurious testimony as the basis of her claim for damages, whether
denominated perjury, fraud, deceit, or ‘prima facie tort’, the petition fails to state a
claim.”); id. at 1202-03 (remedies for litigation-related misconduct must be pursued
in the litigated case, or by criminal or bar-discipline proceedings); Cooper v.
Parker-Hughey, 894 P.2d 1096, 1098-1101 (Okla. 1995) (absolute immunity for
witness testimony; no civil cause of action for perjury); Kirschstein v. Haynes,
-8-
788 P.2d 941, 945, 954 (Okla. 1990) (barring claim of defamation or intentional
infliction of emotional distress against attorneys, parties, or witnesses founded on
communications made in preparation for contemplated judicial proceeding);
Hartley v. Williamson, 18 P.3d 355, 358 (Okla. Civ. App. 2000) (barring claims for
negligence, deceit, and conspiracy founded on testimony at judicial proceeding);
see also Briscoe v. LaHue, 460 U.S. 325, 330-35 (1983) (immunity of parties and
witnesses); Miller v. Glanz, 948 F.2d 1562, 1570-71 (10th Cir. 1991) (Briscoe
immunity extends to alleged conspiracies to commit perjury).
Further, Ms. Knight cannot bring suit under the Oklahoma RICO statute,
Okla. Stat. tit. 22, §§ 1401-1419. That statute restricts standing to bring “any
proceedings, civil or criminal” to “the Attorney General, any district attorney or any
[specially appointed] district attorney.” Id. § 1404(C); see also id. § 1409(A) (“The
Attorney General, any district attorney or any [special] district attorney . . . may
institute civil proceedings . . . .”); id. § 1419 (construction of Oklahoma RICO may
follow construction of federal RICO, “provided that nothing in this section shall be
deemed to provide for any private right of action or confer any civil remedy except as
specifically set out in this act”).
Accordingly, the Oklahoma-law Phase 2 claims failed to state a claim upon
which relief can be granted.
-9-
b. RICO Claims
The remaining Phase 2 claims are the federal RICO claims. For these claims,
Ms. Knight asserts that defendants made misrepresentations to the district court,
through pleadings and testimony, that increased the cost of litigating Mooring I and
caused the district court to rule against her on her individual claims in Mooring I.
She alleges that this activity violated the federal wire-fraud and mail-fraud statutes,
and thereby constituted a pattern of racketeering in violation of RICO. See 18 U.S.C.
§ 1962(c). In light of the Mooring I judgment, however, she is barred from bringing
these claims.
An essential element of a RICO claim is that the plaintiff was injured in her
business or property by the RICO violation. See 18 U.S.C. § 1964(c) (creating a civil
cause of action for “[a]ny person injured in his business or property by reason of a
violation of section 1962”); Deck v. Engineered Laminates, 349 F.3d 1253, 1257
(10th Cir. 2003) (“[A] plaintiff has standing to bring a RICO claim only if he was
injured in his business or property by reason of the defendant’s violation of
§ 1962.”). But, as explained below, the damages Ms. Knight alleges from Phase 2
conduct—increased litigation costs and lost claims—were matters resolved by
Mooring I. Further litigation of these issues is therefore precluded, and the Phase 2
RICO claims cannot proceed unless and until Ms. Knight obtains relief from the
judgment in Mooring I. See Robinson v. Volkswagenwerk AG, 56 F.3d 1268,
1272-73 (10th Cir. 1995) (plaintiffs could not pursue fraud claims based on litigation
- 10 -
misconduct without first obtaining relief from prior judgment because their claims of
damages from fraud were incompatible with facts necessarily decided in the prior
action).
Because Mooring I is a federal judgment in a diversity action applying
Oklahoma law, Oklahoma’s preclusion law applies. See Semtek Int’l Inc. v.
Lockheed Martin Corp., 531 U.S. 497, 508 (2001). In this case the appropriate
preclusion doctrine is issue preclusion. We recognize that the district court relied on
claim preclusion rather than issue preclusion, but we may affirm on any ground
supported by the record. See Bixler v. Foster, 596 F.3d 751, 760 (10th Cir. 2010).
And the defendants raised both claim preclusion and issue preclusion in the district
court, so Ms. Knight had an opportunity to address both doctrines. See id.
“Issue preclusion prevents relitigation of facts and issues actually litigated and
necessarily determined in an earlier proceeding between the same parties or their
privies.” Durham v. McDonald’s Rests. Of Okla., Inc., 256 P.3d 64, 66 (Okla. 2011)
(emphasis omitted).
To establish issue preclusion, a party must prove: 1) that the party
against whom it is being asserted was either a party to or a privy of a
party to the prior action; 2) that the issue subject to preclusion has
actually been adjudicated in the prior case; 3) that the adjudicated issue
was necessary and essential to the outcome of that prior case; and 4) the
party against whom it is interposed had a full and fair opportunity to
litigate the claim or critical issue.
Id. at 66-67 (emphasis omitted). “The principle of issue preclusion operates to bar
from relitigation both correct and erroneous resolutions of jurisdictional and
- 11 -
nonjurisdictional challenges.” Okla. Dep’t of Pub. Safety v. McCrady, 176 P.3d
1194, 1199 (Okla. 2007). “An issue is actually litigated and necessarily determined
if it is properly raised in the pleadings, or otherwise submitted for determination, and
judgment would not have been rendered but for the determination of that issue.” Id.
Before examining the applicability of issue preclusion to the two types of
damage alleged by Ms. Knight—increased litigation costs in Mooring I and her loss
on the merits in Mooring I—we address three potential grounds for not applying
preclusion doctrine to her federal RICO claims. First, Ms. Knight asserts that the
defendants other than Capital and Financial (namely, the individual defendants and
the law firm) cannot rely on preclusion because they were not parties in Mooring I.
Those other defendants, however, are in privity with Capital and Financial.
See Plotner v. AT & T Corp., 224 F.3d 1161, 1169 (10th Cir. 2000) (“The law firm
defendants appear by virtue of their activities as representatives of [other
defendants], also creating privity.”); Fox v. Maulding, 112 F.3d 453, 459-60
(10th Cir. 1997) (officers and directors of bank were privies of bank for purposes of
RICO claims because allegations related to actions taken in their capacities as
officers and directors). “In light of the circumstances of this case, including the
alleged relationship between the defendants in this and the previous trial, we think
that Oklahoma would not prohibit the defensive assertion of collateral estoppel on the
sole grounds that the defendants here were not parties to the previous action.”
Robinson, 56 F.3d at 1272 n.3.
- 12 -
Second, Ms. Knight complains that the defendants did not submit the entire
record from Mooring I in support of their preclusion argument. The district court,
however, could take judicial notice of its own records to evaluate preclusion. See
Gee, 627 F.3d at 1194.
Third, we consider the possibility that issue preclusion does not apply here
because Ms. Knight’s complaint enables her to set aside the judgment in Mooring I,
eliminating any preclusive effect that it may have. We reject the possibility for the
following reasons.
To begin with, the remedies under RICO do not include setting aside a prior
judgment or undermining its preclusive effect by a collateral attack. The circuits to
consider the matter have rejected such relief. See Hendrick v. H.E. Avent, 891 F.2d
583, 585-87 (5th Cir. 1990) (collateral attack on judgment through RICO claim is
barred by res judicata); Gekas v. Pipin (In re Met-L-Wood Corp.), 861 F.2d 1012,
1016 (7th Cir. 1988) (“RICO is many things, but it is not an exception to res
judicata.”); see also Gulf Petro Trading Co. v. Nigerian Nat’l Petroleum Corp.,
512 F.3d 742, 747, 749-50 (5th Cir. 2008) (RICO suit was impermissible collateral
attack on foreign arbitration award); Regions Bank v. J.R. Oil Co., LLC, 387 F.3d
721, 731-32 (8th Cir. 2004) (RICO claims by nonparty to bankruptcy action were
impermissible collateral attack on bankruptcy judgment that was good against the
world).
- 13 -
Moreover, Ms. Knight’s complaint does not support a direct attack on the
Mooring I judgment under either Fed. R. Civ. P. 60(b)(3) (court may relieve a party
of a judgment for “fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party”) or an action based on fraud
on the court, see Fed. R. Civ. P. 60(d)(3) (Rule 60 “does not limit a court’s power to
. . . set aside a judgment for fraud on the court”). If construed as a motion under
Rule 60(b)(3) (which would need to have been filed in Mooring I in any event), the
motion was untimely under Fed. R. Civ. P. 60(c)(1) (one-year time limit for Rule
60(b)(3) motions). And the complaint’s allegations regarding defendants’ litigation
misconduct fail to rise to the level of a claim for fraud on the court. See Plotner,
224 F.3d at 1170 (fraud on the court “refers to misrepresentation direct[ly] affecting
the judicial process, not simply the non-disclosure to one party of facts known by
another”); Weese v. Schukman, 98 F.3d 542, 553 (10th Cir. 1996) (allegations of
“material misrepresentations or omitted information needed to make . . . answers
fully truthful . . . simply do not rise to the level necessary to constitute ‘fraud on the
court’”); Bulloch v. United States, 763 F.2d 1115, 1121 (10th Cir. 1985) (en banc)
(“Fraud on the court . . . is fraud which is directed to the judicial machinery itself and
is not fraud between the parties or fraudulent documents, false statements or perjury.
. . . It is thus fraud where the court or a member is corrupted or influenced or
influence is attempted or where the judge has not performed his judicial function—
thus where the impartial functions of the court have been directly corrupted.”).
- 14 -
We now examine the elements of issue preclusion with respect to Ms. Knight’s
two categories of alleged damages.
i. Increased Costs in Mooring I
As one item of damages, Ms. Knight asserts that defendants’ fraud
unnecessarily increased the costs of litigating Mooring I. But the parties’ conduct,
and its relation to the fees and costs incurred, were issues in Mooring I.
After the trial, both sides moved for awards of attorney fees. Phoenix
requested an award of $224,392.17 against Capital and Financial, and Capital and
Financial requested an award of $306,644.34 against Ms. Knight. See Mooring I,
388 F. App’x at 818. The district court granted the motions in part, awarding
Phoenix $49,000 and awarding Capital and Financial $88,000. Id. As part of its
determination, “the district court declined to find that Capital and Financial acted in
bad faith [and] assessed blame for the protracted litigation on all parties, not just
Capital and Financial.” Id. at 828; see also id. at 826 (district court “observed that
both parties’ fees were unreasonable [and] that both parties contributed to the
excessive fees”). Phoenix appealed the amount of the fees awarded to it, and
Ms. Knight appealed the award in favor of Capital and Financial against her. See id.
at 818, 825-28.
On appeal Ms. Knight argued “that Capital and Financial do not deserve an
award of fees because of their bad faith and misconduct” and that the district court
“did not properly weigh that Capital and Financial created the situation that led to
- 15 -
increased fees.” Id. at 827. This court held, however, that the district court
“thoughtfully reviewed the case, taking into account” the proper factors in
determining a fee award. Id. Further, this court held that the district court did not
abuse its discretion in declining to find that Capital and Financial acted in bad faith
and in assessing blame for increased costs on all the parties. See id. at 828.
All the elements of issue preclusion are met as to Ms. Knight’s claim of RICO
damages from the increased costs of litigating Mooring I. Ms. Knight, individually,
was a party in Mooring I. As discussed above, the district court actually adjudicated
the parties’ responsibility for the fees and costs incurred in litigating the action. The
district court considered Ms. Knight’s allegations of misconduct, but it specifically
declined to find that Capital and Financial acted in bad faith. If they did not act in
bad faith, they could not have acted fraudulently; therefore, Ms. Knight’s current
claim of damage would require her to establish facts that are incompatible with
Mooring I. Further, the adjudication was necessary and essential to the court’s
determination of the parties’ motions for fees and costs.
As to the final element of issue preclusion, Ms. Knight argues that because of
defendants’ fraudulent conduct, she did not have a full and fair opportunity to litigate
her claims in Mooring I. We disagree. In large part, “full and fair opportunity”
focuses on procedural due process and fundamental fairness. The Oklahoma
Supreme Court has stated:
Issue preclusion . . . is an equitable doctrine. Where the parties’
alignment and the raised legal and factual issues warrant and fairness to
- 16 -
the parties is not compromised by the process, its application is
appropriate. It is indeed the proceeding’s substance and the degree of
due process inherent in it, rather than its form, which is the court’s
bellwether for the doctrine’s application.
Cities Serv. Co. v. Gulf Oil Corp., 980 P.2d 116, 126 (Okla. 1999) (internal quotation
marks omitted). And in a case arising from Oklahoma, this court wrote, “The
requirement that the party against whom the prior judgment is asserted had a full and
fair opportunity to be heard centers on the fundamental fairness of preventing the
party from relitigating an issue he has lost in a prior proceeding.” Sil-Flo, Inc. v.
SFHC, Inc., 917 F.2d 1507, 1521 (10th Cir. 1990).
The Oklahoma Supreme Court has identified several relevant factors in
evaluating this element:
(1) whether the [party] had ample incentive to litigate the issue fully in
the earlier proceeding; (2) whether the judgment or order for which
preclusive effect is sought is itself inconsistent with one or more earlier
judgments in the [party’s] favor; . . . (3) whether the second action
affords the [party] procedural opportunities unavailable in the first that
could readily produce a different result; . . . [(4)] whether the current
litigation’s legal demands are closely aligned in time and subject matter
to those in the earlier proceedings; [(5)] whether the present litigation
was clearly foreseeable . . . at the time of the earlier proceedings; and
[(6)] whether in the first proceeding the [party] had sufficient
opportunity to be heard on the issue.
Cities Serv. Co., 980 P.2d at 125 (footnotes omitted); see also Sil-Flo, 917 F.2d at
1521 (“Often, the inquiry will focus on whether there were significant procedural
limitations in the prior proceeding, whether the party had the incentive to litigate
fully the issue, or whether effective litigation was limited by the nature or
- 17 -
relationship of the parties.”); Restatement (2d) of Judgments §§ 28, 29 (listing factors
that may justify not applying preclusion).2
Nothing in this appeal indicates that applying issue preclusion would be
fundamentally unfair to Ms. Knight. She had the opportunity to be heard in
Mooring I, including the opportunity to appeal to this court, and she had ample
incentive to litigate the issue fully, given that Capital and Financial sought an award
exceeding $300,000. We recognize that preclusion may not be appropriate when “the
party sought to be precluded, as a result of the conduct of his adversary or other
special circumstances, did not have an adequate opportunity or incentive to obtain a
full and fair adjudication in the initial action.” Restatement (2d) of Judgments
§ 28(5)(c). But Ms. Knight does not identify any arguments she would have made
regarding fees and costs in Mooring I had it not been for defendants’ alleged fraud,
does not offer any specific explanation of how defendants’ litigation misconduct
affected her ability to litigate the issue of fees and costs in Mooring I, and does not
allege that there is evidence of litigation misconduct that was unavailable while
Mooring I was pending.
2
The Oklahoma Supreme Court has relied on the Restatement (Second) of
Judgments as authority. See, e.g., Johnson v. State ex rel. Dep’t of Pub. Safety,
2 P.3d 334, 337 (Okla. 2000); Kirkpatrick v. Chrysler Corp., 920 P.2d 122, 132
(Okla. 1996).
- 18 -
ii. Lost Claims in Mooring I
As another item of damages, Ms. Knight asserts that the defendants’ conduct
caused the district court to rule against her on her individual claims in Mooring I.
This court has recognized that a cause of action is a form of property for purposes of
RICO. See Deck, 349 F.3d at 1259. But we decline to recognize a conclusively
meritless claim as property under RICO, and Ms. Knight’s individual claims in
Mooring I were declared to be meritless. See 388 F. App’x at 818, 823-25. As with
her litigation-costs argument, unless and until the Mooring I judgment is vacated,
issue preclusion establishes conclusively that her claims in Mooring I lacked merit.
Each element of issue preclusion is satisfied with regard to Ms. Knight’s
individual claims. She presented her individual claims to the court, and judgment
was rendered against her. Id. at 818, 827. The adjudication of her claims was
necessary and essential to the outcome of Mooring I. And Ms. Knight alleges no
facts indicating that she lacked a full and fair opportunity to litigate her individual
claims in Mooring I. Rather than offering any specific explanation of how
defendants’ litigation misconduct prevented her from adequately presenting her
individual claims, she makes only conclusory allegations that defendants’ misconduct
caused the court to rule against her unjustly.
As long as the Mooring I judgment stands, Ms. Knight cannot plead an
essential element of her Phase 2 RICO claim—namely, injury to a colorable cause of
action. Dismissal of the claim is required under the doctrine of issue preclusion.
- 19 -
3. Remaining Arguments
Ms. Knight asserts that the dismissal decision was premature because the
district court granted defendants’ motion to dismiss before her deadline to file a
motion to remand to state court and before her response period expired. She also
complains that the district court granted judgment for some defendants sua sponte, it
did not give her the opportunity to amend, and it dismissed her claims with prejudice.
We see no reversible error. First, Ms. Knight was not prejudiced by the court’s
taking action before she could move to remand, because such a motion would have
failed. Second, although we disfavor (1) sua sponte dismissals and (2) dismissals
before the losing party has an opportunity to respond, this court has held that such a
“dismissal under Rule 12(b)(6) is not reversible error when it is patently obvious that
the plaintiff could not prevail on the facts alleged and allowing [her] an opportunity
to amend [her] complaint would be futile.” McKinney v. Okla. Dep’t of Human
Servs., 925 F.2d 363, 365 (10th Cir. 1991) (citation and internal quotation marks
omitted). Similarly, even though pro se parties generally should be given leave to
amend, it is appropriate to dismiss without allowing amendment “where it is obvious
that the plaintiff cannot prevail on the facts [s]he has alleged and it would be futile to
give [her] an opportunity to amend.” Gee, 627 F.3d at 1195 (internal quotation
marks omitted). And finally, “[a] dismissal with prejudice is appropriate where a
complaint fails to state a claim under Rule 12(b)(6) and granting leave to amend
would be futile,” Brereton v. Bountiful City Corp., 434 F.3d 1213, 1219 (10th Cir.
- 20 -
2006); see also Gee, 627 F.3d at 1181, 1195 (affirming dismissal with prejudice of
claims barred by statute of limitations and claim preclusion). For the reasons
discussed, it is patently obvious that Ms. Knight cannot proceed with her claims, and
any further opportunity to amend would be futile because her claims would still be
barred. Therefore, the district court did not err in dismissing claims sua sponte, in
dismissing without affording Ms. Knight an opportunity to amend, or in dismissing
the claims with prejudice.
Finally, Ms. Knight asserts that the district judge should have recused himself.
But she did not request recusal until after the district court dismissed her action and
denied her Rule 59 motion. That was too late. “We have held that under either
28 U.S.C. § 144 or § 455, the party seeking recusal must act in a timely fashion to
request recusal.” United States v. Stenzel, 49 F.3d 658, 661 (10th Cir. 1995).
C. Rule 59 Motion
We review the denial of a Rule 59 motion for abuse of discretion. See Price v.
Wolford, 608 F.3d 698, 706 (10th Cir. 2010). Because we have found no reversible
error, we also find no abuse of discretion in denying the Rule 59 motion.
III. Conclusion
The judgment of the district court is affirmed.
- 21 -