Dresser v. Backus

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
DARRELL A. DRESSER,
Plaintiff-Appellant,
v.
W. MERIL BACKUS, JR.; RICHARD
No. 99-1924
BACKUS; BACKUS & ASSOCIATES,
INCORPORATED, a Maryland
Corporation; CHARLES W. FOSTER,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, Chief District Judge.
(CA-99-296-JFM)
Argued: June 8, 2000
Decided: August 4, 2000
Before WILKINSON, Chief Judge, and WIDENER and
TRAXLER, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Gove L. Allen, GOVE L. ALLEN, P.C., Mesa, Arizona,
for Appellant. George Brian Huckaby, ORTMAN, LOVE & HUCK-
ABY, Bethesda, Maryland, for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Appellant Darrell A. Dresser ("Dresser") appeals the order of the
district court granting summary judgment to appellees W. Meril
Backus, Jr., Richard S. Backus, and Backus & Associates, Inc. (col-
lectively "the Backus defendants"), and Charles W. Foster. We affirm.
I.
The claims in this case arise from the operation of an insurance
marketing business in which Dresser and Meril Backus were engaged.
The underlying facts are set forth in detail in a previous opinion of
this court. See Dresser v. Backus, 139 F.3d 888, 1998 WL 119987(4th Cir. 1998) (per curiam) (unpublished table decision) (Dresser I).
For purposes of this appeal, the relevant facts are these:
In December 1982, Dresser joined W. Meril Backus in an
insurance marketing effort designed to recruit insurance
agents and brokers to sell life insurance products for particu-
lar insurance companies . . . .
Dresser became ill in 1986, and Backus incorporated Uni-
versal Life Associates of Maryland ("ULA/MD") in August
1987. ULA/MD issued 300 shares of stock each to Dresser
and Backus. In early 1989, Dresser assigned and transferred
his 300 shares of ULA/MD stock to Marie Arient. Dresser
and Arient married in Arizona the following month. After
the couple separated in 1991, Dresser filed suit in Arizona
state court seeking a divorce from Arient and the return of
the ULA/MD stock. The suit also named ULA/MD and
Backus, among others, as additional respondents.
In early 1992, Arient transferred her 300 shares of
ULA/MD stock to Backus. In July 1992, Dresser obtained
2
a default judgment against Arient in the divorce proceeding.
However, the order dismissed with prejudice the claims
against ULA/MD and Backus for lack of personal jurisdic-
tion. Nevertheless, the Arizona state court awarded Dresser
fifty percent of the stock in ULA/MD and all dividends or
benefits paid thereon since September 1, 1991. The court's
order was based on Dresser's allegation that he had not
transferred the stock to Arient; but rather that he had placed
title of the stock in Arient's name solely for estate planning
purposes and that Arient had agreed to return the stock if the
parties ever separated. At the time the underlying action was
filed, Arient's motion for relief from the default judgment
was pending in the Arizona state court. ULA/MD was dis-
solved in April 1992.
Id. at *1 (footnotes omitted).
In 1994, Dresser filed an action (Dresser I) against the Backus
defendants, asserting claims for breach of fiduciary duty, misrepre-
sentation, and conspiracy to defraud Dresser in connection with
ULA/MD. A panel of this court affirmed the district court's grant of
summary judgment to the Backus defendants "based on the conclu-
sion that Dresser had unconditionally transferred his interest in the
stock to Arient in 1989 and, therefore, lacked standing to bring [that]
action." Id. This court also affirmed the district court's alternative
conclusion, based on the district court's finding that Dresser made
misrepresentations under oath during the Arizona state court proceed-
ings, that the doctrine of unclean hands also barred Dresser from
relief. See id. at *2.
In February 1999, Dresser filed this action based on essentially the
same set of facts as Dresser I. In addition to naming the Backus
defendants again, Dresser also sought relief against Foster, who
served as counsel for the Backus defendants during Dresser I. In the
second action, Dresser alleged that the Backus defendants and Foster
engaged in a racketeering conspiracy designed to deprive him of the
value of his shares and his dividends from ULA/MD in violation of
the Racketeer Influenced and Corrupt Organizations Act ("RICO").
See 18 U.S.C.A. §§ 1961-1968 (West 1984 & Supp. 2000).
3
Foster and the Backus defendants filed what they styled "Defen-
dants' motion to dismiss for failure to state a claim upon which relief
can be granted; motion for judgment on the pleadings; and/or motion
for summary judgment." J.A. 29. The district court treated the motion
as one for summary judgment and granted it, finding that "as to [the
Backus defendants], who were parties to the prior litigation, Dresser's
claims are barred by the doctrine of res judicata." J.A. 163. With
respect to Foster, the court found that "[a]lthough defendant Foster
was not a party to that litigation, this court's findings, including its
finding of `unclean hands' against Dresser, would, through the doc-
trine of collateral estoppel, bar any claim Dresser might have against
Foster as well." J.A. 163.
II.
A.
Dresser contends that because the district court entered summary
judgment in Dresser I based on its conclusion that Dresser lacked
standing, its dismissal was for lack of subject matter jurisdiction and
was not a decision on the merits. And, because the doctrine of res
judicata requires that the prior decision be a final one upon the merits,
Dresser argues that the doctrine of res judicata cannot apply, and that
if Dresser I is to have any preclusive effect, it must come via the doc-
trine of collateral estoppel.
We begin by noting that federal, not state, principles guide our
determination of whether we will grant preclusive effect to a prior
federal judgment. See Shoup v. Bell & Howell Co. , 872 F.2d 1178,
1179 (4th Cir. 1989). Thus, in considering Dresser's contentions, we
look to federal law regarding the doctrines of res judicata and collat-
eral estoppel.
Res judicata, generally speaking, "bar[s] a second attempt to reliti-
gate the same cause of action between the parties" to an earlier action,
as well as any other claim or issue that could have been raised in the
earlier action. United States v. Tatum, 943 F.2d 370, 381 (4th Cir.
1991); see also Adkins v. Allstate Ins. Co., 729 F.2d 974, 976 (4th Cir.
1984) (Res judicata operates to bind a party to the prior suit "not only
as to every matter which was offered and received to sustain or defeat
4
the claim or demand, but as to any other admissible matter which
might have been offered for that purpose." (internal quotation marks
omitted)). The second action filed by Dresser against the Backus
defendants is premised upon operative facts identical to those in
Dresser I, and thus Dresser's RICO claims could have been raised in
Dresser I. If res judicata applies, Dresser's action is barred as to the
Backus defendants, but not necessarily Foster because the purpose of
res judicata is to prevent the same parties-- or their privies -- to a
prior action from rehashing claims that were (or could have been)
resolved. See, e.g., Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326,
n.5 (1979) ("Under the doctrine of res judicata, a judgment on the
merits in a prior suit bars a second suit involving the same parties or
their privies based on the same cause of action."). Res judicata applies
when there is "(1) a judgment on the merits in a prior suit resolving
(2) claims by the same parties or their privies, and (3) a subsequent
suit based on the same cause of action." Coyne & Delany Co. v. Sel-
man, 98 F.3d 1457, 1473 (4th Cir. 1996) (internal quotation marks
omitted). The only real issue here is whether the summary judgment
order entered in Dresser I culminated in a judgment on the merits. We
have recognized that, "[f]or purposes of res judicata, a summary
judgment has always been considered a final disposition on the mer-
its." Adkins, 729 F.2d at 976 n.3. In Dresser I, however, the district
court disposed of the action based on the conclusion that Dresser
lacked standing, which some courts view as akin to a dismissal for
lack of jurisdiction and therefore not a judgment on the merits for pur-
poses of res judicata. See, e.g., St. Pierre v. Dyer, 208 F.3d 394, 400
(2nd Cir. 2000) ("Our principal difficulty [with the district court's
application of res judicata] is that the St. Pierre I summary judgment
dismissed St. Pierre's original claims not on their merits but only for
lack of Article III standing."). Dresser seizes on this logic, and argues
that because the district court dismissed his original claims in Dresser
I for lack of standing, Dresser I did not end in a judgment on the mer-
its. Therefore, he contends that he should be permitted to bring the
current action even though it is founded upon precisely the same set
of facts.
However, even if Dresser is correct that Dresser I did not culmi-
nate in a judgment on the merits, rendering the doctrine of res judicata
inapplicable, collateral estoppel may still apply."[A] jurisdictional
dismissal that does not constitute a judgment on the merits so as to
5
completely bar further transactionally-related claims still operates to
bar relitigation of issues actually decided by that former judgment."
Goldsmith v. Mayor & City Council of Baltimore, 987 F.2d 1064,
1069 (4th Cir. 1993). Because we agree with Foster and the Backus
defendants that collateral estoppel applies and ultimately bars this
action, we need not determine whether the entry of summary judg-
ment based upon a lack of standing prevents the operation of res judi-
cata.
Dresser contends that collateral estoppel is inapplicable for two
reasons: (1) the issues raised in Dresser I are unlike any of the issues
raised in this action; and (2) he did not have a full and fair opportunity
to litigate the issues in Dresser I. We disagree with both contentions.
Collateral estoppel, broadly speaking, prevents the relitigation of
an issue of fact or law that was settled in a previous case. See Allen
v. McCurry, 449 U.S. 90, 94 (1980). It is related to the doctrine of res
judicata, but it "can be applied to narrower portions of an action than
is the case for res judicata." Tatum, 943 F.2d at 382. Collateral estop-
pel "precludes relitigation of issues of fact or law that are identical to
issues which have been actually determined and necessarily decided
in prior litigation in which the party against whom collateral estoppel
is asserted had a full and fair opportunity to litigate." Virginia Hosp.
Ass'n v. Baliles, 830 F.2d 1308, 1311 (4th Cir. 1987). In order to
establish the applicability of collateral estoppel:
the proponent must establish that: (1) the issue sought to be
precluded is identical to one previously litigated; (2) the
issue must have been actually determined in the prior pro-
ceeding; (3) determination of the issue must have been a
critical and necessary part of the decision in the prior pro-
ceeding; (4) the prior judgment must be final and valid; and
(5) the party against whom estoppel is asserted must have
had a full and fair opportunity to litigate the issue in the pre-
vious forum.
Sedlack v. Braswell Servs. Group, Inc., 134 F.3d 219, 224 (4th Cir.
1998); see also Ramsay v. INS, 14 F.3d 206, 210 (4th Cir. 1994). Fos-
ter does not need to demonstrate that he is a "privy" to the Backus
defendants to take advantage of the doctrine of collateral estoppel, as
6
he would if he were asserting res judicata. Rather, Foster must only
demonstrate that Dresser "had a full and fair opportunity to litigate the
issue in the previous forum." Sedlack, 134 F.3d at 224. If so, and as
long as the other elements of collateral estoppel are met, Dresser will
be bound by the previously determined issue regardless of whether
Foster was a party to the case or not.
Dresser's first contention appears to be that Dresser I involved dif-
ferent issues than the case at bar because Dresser I addressed Dress-
er's standing to bring a host of state law tort claims while this action
raises only the issue of Dresser's standing to pursue claims under var-
ious RICO provisions. Because Dresser I and the case at bar clearly
involve common factual issues, we must reject this contention. In
Dresser I, the district court determined that Dresser did not own any
ULA/MD stock, either legally or equitably. As the district court
explained:
[Dresser] transferred this stock to Marie Arient by all
facts as they appeared to any third party at that time. It was
an unconditional transfer.
[Dresser] alleges that he had some side agreement with
Ms. Arient. Be that as it may, the fact of the matter is there
was an outright transfer. The transfer was made on the cor-
porate books. There is no question that [it] was absolute, and
that is the way it stood.
J.A. 112-13. On appeal, we specifically determined that "the district
court properly concluded that Dresser unconditionally transferred his
interest in the ULA/MD stock on March 1, 1989" based upon the "un-
refuted documentary evidence" Backus submitted to the district court.
Dresser I, 139 F.3d 888, 1998 WL 119987 at *2. Dresser's ownership
interest in the shares of ULA/MD was a disputed issue of fact. The
district court resolved the issue, and we affirmed this determination
in light of the "unrefuted" evidentiary submissions. Moreover, the
determination that Dresser unconditionally transferred his ULA/MD
shares was critical to the entry of summary judgment in favor of the
Backus defendants in Dresser I. Thus, we conclude that Dresser is
bound by the determination in Dresser I that, as of March 1, 1989,
7
Dresser no longer enjoyed any interest, legal or equitable, in the ULA
stock.
Next, Dresser argues that he did not have a full and fair opportunity
to litigate this factual finding, and that it should not be given preclu-
sive effect for that reason. Essentially, Dresser's argument amounts
to little more than an assertion that Dresser I was wrongly decided.
According to Dresser, his evidentiary submissions in Dresser I on the
issue of stock ownership were "improperly ignored," Reply Brief of
Appellant at 11, and the court "misconstru[ed] the divorce decree,"
Reply Brief of Appellant at 17. These issues were raised, contested,
and resolved against Dresser in Dresser I. We reject his contention
that collateral estoppel does not apply.
B.
Having concluded that Dresser is bound by the previous determina-
tion that, as of March 1, 1989, Dresser did not own any interest in the
shares of ULA/MD, we turn briefly to consider the effect of this con-
clusion on Dresser's RICO claims in the action currently before us.
A claim may be brought under RICO by "[a]ny person injured in his
business or property." 18 U.S.C.A. § 1964(c) (West Supp. 2000).
Dresser's theory of recovery under RICO is premised on his conten-
tion that "he was always the equitable owner of the ULA/MD stock."
Reply Brief of Appellant at 11. His complaint seeks damages based
on "the conversion of dividends due him" as well as "the loss of the
value of his interest in ULA." J.A. 23. Accordingly, his RICO claims
are premised, as they must be, on his ownership of the shares that he
transferred to Arient. Because Dresser I previously determined that
Dresser unconditionally transferred the shares and, consequently, that
he enjoyed no interest in the shares, the shares do not qualify as his
"property." See 18 U.S.C.A. § 1964(c). We conclude that judgment
was properly entered against Dresser.
III.
For the foregoing reasons, we affirm the decision of the district
court.
AFFIRMED
8