John P. Pavone and Signature Management Group, L.L.C. Vs. Gerald M. Kirke and Wild Rose Clinton, L.L.C.

IN THE SUPREME COURT OF IOWA
No. 09–0222
Filed December 9, 2011
JOHN P. PAVONE and SIGNATURE
MANAGEMENT GROUP, L.L.C.,
Appellants,
vs.
GERALD M. KIRKE and WILD ROSE
CLINTON, L.L.C.,
Appellees.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Eliza J.
Ovrom, Judge.
A party to a contract appeals an adverse ruling on a motion for
summary judgment. DECISION OF COURT OF APPEALS AND
JUDGMENT OF DISTRICT COURT AFFIRMED.
Timothy S. Bottaro and Amanda Van Wyhe of Vriezelaar, Tigges,
Edgington, Bottaro, Boden & Ross, L.L.P., Sioux City, for appellants.
Mark McCormick, David M. Swinton, and Margaret C. Callahan of
Belin McCormick, P.C., Des Moines, and Brent B. Green and Mariclare
Thinnes Culver of Duncan, Green, Brown & Langeness, Des Moines, for
appellees.
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WIGGINS, Justice.
In this appeal, the parties to a contract contend the district court
erred when it granted the opposing parties’ motion for summary
judgment by finding the opposing parties repudiated the contract and
claim preclusion barred the bringing of this action. We transferred the
case to the court of appeals. The court of appeals affirmed the district
court’s ruling. We then granted further review. On further review, we
find the district court was correct in dismissing the action. Therefore, we
affirm the decision of the court of appeals and the judgment of the
district court.
I. Background Facts and Proceedings.
On October 22, 2004, John Pavone and Signature Management
Group, L.L.C. (hereinafter collectively referred to as SMG) and Gerald M.
Kirke and Wild Rose Entertainment, L.L.C. (hereinafter collectively
referred to as Wild Rose) executed a document entitled “Agreement,”
which, in part, attempted to delineate the parties’ relationship with
regard to future casino projects in Iowa. Paragraph five of the agreement
deals with future management opportunities and provides:
5. Future Casino Development Opportunities.
A. First Look and Good Faith Negotiation as to Future
Casino Development and Management Opportunities.
i. If Wild Rose has the opportunity to develop or
operate any other casino in Iowa, Wild Rose will use
good faith best efforts to involve SMG when the
opportunity is first known, and to negotiate in good
faith a Management Agreement consistent with the
terms outlined in Wild Rose’s gaming development
agreement with the City of Ottumwa, Iowa. It being
understood that the award of any management
agreement must also be satisfactory to third party
community and non-profit organizations. And it being
further understood that any casino in the Central Iowa
area will likely require the involvement of a
management company, other than SMG.
3
(Emphasis added.)
On May 11, 2005, the Iowa Racing and Gaming Commission
(IRGC) awarded Wild Rose a gaming license to develop a casino in
Emmetsburg. On May 24 Wild Rose sent a letter to SMG (hereinafter
referred to as the “termination letter”) allegedly terminating the October
agreement and any future relationship between the parties. This letter
stated:
This letter is to formally notify you that the Agreement dated
October 22, 2004 (the “Agreement”) between Signature
Management Group, L.L.C. (“Signature”) and Wild Rose
Entertainment, L.L.C., terminated pursuant to its terms
effective May 11, 2005. Upon receipt of a final invoice from
Signature, Wild Rose will pay the agreed consulting fees and
expenses through May 11, 2005.
Since the Iowa Racing and Gaming Commission did not
award a license to Wild Rose for the Ottumwa project, and
the referendums were defeated in Warren, Madison and
Dallas counties last November, the contingencies set forth in
the Agreement unfortunately were not satisfied.
We thank you for the consulting services Signature provided
to Wild Rose and sincerely regret we were unable to realize
our respective expectations under the Agreement.
The attorney for Wild Rose, Jim Krambeck, also e-mailed a copy of the
termination letter to SMG’s attorney, Ryan Ross, that same day. Ross
responded via e-mail asking Krambeck, “Does this mean Wild Rose has
ended negotiations as to the Management Agreement/Buy-out, or are
you still waiting to talk with your client later this week? Please let me
know so that I can advise Signature accordingly.” Krambeck responded:
Ryan, As reported in my e-mail message earlier today I will
meet with my clients as soon as they are available to discuss
their thoughts concerning the future relationship, if any,
with John Pavone. Following that meeting I will be in
contact with you.
In response to your 12:10 p.m. e-mail, I strongly disagree
with your characterization of the facts, the issues & the
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position of Wild Rose in this matter. A point by point
rebuttal is not appropriate at this time, however, to claim
that Wild Rose “walked out of the negotiations” is simply not
true. The fact is that we thought we were close to an
agreement on the Ottumwa project when your client refused
to agree after you told me you thought we had a deal & then
sought to revisit issues that had been previously resolved.
Unfortunately, the parties simply were unable to reach
agreement. I am still willing to work on finding common
ground but if this dispute is to be resolved, your adversarial
& inflammatory e-mail messages will need to be curtailed.
The next day, Ross e-mailed Krambeck stating,
Jim: Thank you for clarifying that negotiations continue. I
will wait to hear back from you after you speak with your
clients. Signature remains prepared to continue negotiating
the terms of the Management Agreement as required by the
October 22, 2004 agreement.
There is no evidence Wild Rose responded to this last e-mail or
that any further negotiations occurred. On July 12, 2005, SMG sent a
proposed management agreement for the Emmetsburg casino to Wild
Rose, requesting that Wild Rose execute the agreement and return it to
SMG. There is no evidence Wild Rose responded, and the parties never
executed a management agreement for the Emmetsburg casino.
On March 31, 2006, SMG filed a civil action against Wild Rose
(hereinafter referred to as the “Emmetsburg action”) alleging, in part,
Wild Rose breached the management agreement contained in paragraph
3A of the October agreement for the Emmetsburg casino and failed to
negotiate in good faith a management agreement for the Emmetsburg
casino in violation of paragraph 5A. On August 20, 2007, a jury trial
commenced, which resulted in a jury verdict finding Wild Rose breached
paragraphs 3A and 5A of the October agreement. The jury awarded SMG
$10 million in damages. In Pavone v. Kirke, 801 N.W.2d 477 (Iowa 2011)
(Pavone I), we affirmed the verdict.
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During the course of the Emmetsburg action, on June 8, 2006, the
IRGC awarded Wild Rose a gaming license to develop a casino in Clinton.
Wild Rose did not contact or negotiate a management agreement with
SMG regarding management of the Clinton casino. On August 15, 2008,
SMG filed a separate action against Wild Rose Clinton, L.L.C., a wholly
owned subsidiary of Wild Rose Entertainment, L.L.C. (hereinafter
referred to as the “Clinton action”). 1 SMG alleged Wild Rose breached
paragraph 5A of the October agreement by failing to negotiate in good
faith with SMG for the management of the Clinton casino. Paragraph 5A
of the October agreement was litigated in the Emmetsburg action. Wild
Rose denied the allegations in the petition and asserted a number of
affirmative defenses.
Wild Rose filed a motion for summary judgment, arguing the
doctrine of claim preclusion barred SMG’s current claim as a matter of
law. The district court granted Wild Rose’s motion for summary
judgment, concluding the doctrine of claim preclusion barred SMG’s
current claim because both actions involved the same agreement and
provision, the parties were the same in both actions, and there was
ample time for SMG to seek damages relating to the Clinton casino in the
Emmetsburg action. Thus, the district court held, “Plaintiffs have split
their claim for breach of the agreement; therefore, this case is barred by
the doctrine of claim preclusion.”
SMG filed a notice of appeal. We transferred the case to the court
of appeals. The court of appeals affirmed the district court’s entry of
summary judgment in favor of Wild Rose. The court of appeals
1At the district court, the parties agreed the fact that Wild Rose Clinton, L.L.C. is
technically a different entity from Wild Rose Entertainment, L.L.C. was not relevant to
the issues pertaining to Wild Rose’s summary judgment motion.
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concluded the termination letter was a definite and unequivocal
repudiation of the entire October agreement, which Wild Rose never
nullified or retracted. Thus, “the repudiation constituted a total breach
and required SMG to seek damages for all remaining rights of
performance under the contract in the first lawsuit.” Accordingly, the
court of appeals held that because SMG had already brought the
Emmetsburg action, it was precluded from seeking damages for any
remaining rights of performance under the October agreement.
Subsequently, SMG filed an application for further review, which we
granted.
II. Scope of Review.
“We review a district court decision granting or denying a motion
for summary judgment for correction of errors at law.” Wallace v.
Des Moines Indep. Cmty. Sch. Dist. Bd. of Dirs., 754 N.W.2d 854, 857
(Iowa 2008) (citing Iowa R. App. P. 6.4, now rule 6.907). If there is no
genuine issue of material fact after a review of the entire record,
summary judgment is appropriate. Stew-Mc Dev., Inc. v. Fischer, 770
N.W.2d 839, 844 (Iowa 2009). Accordingly, “[t]his court reviews a
summary judgment to determine whether the moving party
demonstrated the absence of any genuine issues of material fact and
established entitlement to judgment on the merits as a matter of law.”
C & J Vantage Leasing Co. v. Outlook Farm Golf Club, LLC, 784 N.W.2d
753, 756 (Iowa 2010). In performing this review, we examine the record
in a light most favorable to the nonmoving party to determine if the
moving party has met its burden. Id.; accord Wallace, 754 N.W.2d at 857
(stating the nonmoving party is afforded the benefit of every legitimate
inference that can be reasonably deduced from the record).
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III. Discussion and Analysis.
A. Repudiation. SMG claims a genuine issue of material fact
exists as to whether Wild Rose repudiated the October agreement. It
further claims if there is no genuine issue of fact as to repudiation, a
genuine issue of fact exists as to whether Wild Rose retracted its
repudiation.
1. Repudiations generally. The Restatement (Second) of Contracts
defines a contractual repudiation as:
(a) a statement by the obligor to the obligee indicating
that the obligor will commit a breach that would of itself give
the obligee a claim for damages for total breach under § 243,
or
(b) a voluntary affirmative act which renders the
obligor unable or apparently unable to perform without such
a breach.
Restatement (Second) of Contracts § 250, at 272 (1981). The
Restatement further explains that “[i]n order to constitute a repudiation,
a party’s language must be sufficiently positive to be reasonably
interpreted to mean that the party will not or cannot perform.” Id. § 250
cmt. b, at 273.
Iowa law is consistent with section 250 of the Restatement. See,
e.g., Conrad Bros. v. John Deere Ins. Co., 640 N.W.2d 231, 241 (Iowa
2001) (recognizing, to constitute a repudiation, “[t]he statement must be
sufficiently positive to be reasonably understood . . . that the breach will
actually occur” (internal quotation marks omitted)); Lane v. Crescent
Beach Lodge & Resort, Inc., 199 N.W.2d 78, 82 (Iowa 1972) (“Anticipatory
breach requires a definite and unequivocal repudiation of the contract.”).
A repudiation is accomplished by words or acts before the time of
performance evidencing an intention to refuse to perform in the future.
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Lane, 199 N.W.2d at 82. Moreover, we have recognized a party does not
prove a repudiation by simply showing a party’s negative attitude, a
party’s attitude indicating more negotiations are sought, or that a party
may finally perform. Id.
2. Repudiation analysis. SMG argues the termination letter does
not amount to a total repudiation of the October agreement because it is
ambiguous. In response, Wild Rose argues the termination letter
unambiguously communicated Wild Rose’s intent not to perform further
under the October agreement and, therefore, constituted a total
repudiation of the October agreement.
The termination letter definitely and unequivocally declared Wild
Rose’s belief that the October agreement “terminated pursuant to its
terms effective May 11, 2005.” Wild Rose then thanked SMG for its
consulting services and expressed its regret that the parties’ expectations
under the October agreement were not realized.
SMG argues the letter is ambiguous because it is unclear whether
the termination letter only applies to the counties specifically mentioned
in the letter (i.e., Warren, Madison, and Dallas, but not Clinton) or all
projects the parties were working on at the time (i.e., including Clinton).
However, the termination letter explicitly evinces Wild Rose’s intent to
terminate the entirety of the October agreement. Moreover, Wild Rose’s
expression of regret that the parties’ expectations under the October
agreement were not realized clearly indicates a total repudiation of any
obligations it had under the agreement, including any expectations the
parties had about any future projects, including Clinton.
SMG also contends the October agreement required 120 days
written notice to terminate “pursuant to its terms.” Therefore, because
the termination letter attempted to terminate the October agreement
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retroactively, its intended effect is ambiguous. Simply because Wild Rose
failed to abide by the termination provisions of the October agreement
does not mean the termination letter was not an unequivocal
repudiation. Wild Rose correctly notes that “[t]he letter by definition
would not have been a ‘repudiation’ if Wild Rose had invoked the
voluntary termination provision and purported to give 120 days notice.”
The fact that Wild Rose did not give 120 days written notice before
terminating the October agreement reinforces that Wild Rose was in
breach of the October agreement due to its unequivocal repudiation.
Additionally, SMG argues the termination letter was not an
unambiguous repudiation because SMG did not elect to treat it as such.
After the termination letter, SMG’s attorney appeared to believe
negotiations for the Emmetsburg management agreement were to
continue pursuant to the October agreement. Moreover, a few months
later, SMG sent Wild Rose a proposed management agreement for the
Emmetsburg casino to be executed between the parties. However, the
record does not contain any evidence that Wild Rose responded to the
proposed management agreement or participated in any further
negotiations. “The injured party does not change the effect of a
repudiation by urging the repudiator to perform in spite of his
repudiation or to retract his repudiation.” Restatement (Second) of
Contracts § 257, at 296. Therefore, SMG’s mistaken belief about the
effect of the termination letter and its urging of Wild Rose to execute a
management agreement pursuant to the October agreement cannot
change the effect of Wild Rose’s unequivocal repudiation of its obligations
under the October agreement.
Finally, SMG knew Wild Rose repudiated the October agreement
because it filed suit in the Emmetsburg action to enforce the agreement.
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There would have been no reason for SMG to file the Emmetsburg action
if Wild Rose had not repudiated the October agreement.
Accordingly, we hold the termination letter was sufficiently positive
to be reasonably interpreted to mean that Wild Rose intended not to
perform any more obligations it may have had under the October
agreement. Therefore, as a matter of law, the termination letter
constituted a total repudiation of the October agreement. Consequently,
there is no genuine issue of material fact that the language of the
termination letter met this requirement.
3. Retraction of the repudiation. SMG argues, even if there was an
unambiguous repudiation of the October agreement, Wild Rose nullified
the repudiation by e-mailing SMG after the termination letter and stating
that it was “still willing to work on finding common ground.” In
response, Wild Rose argues this e-mail did not express a willingness by
Wild Rose to engage in further negotiations under the October
agreement. According to Wild Rose, the statement, “I am still willing to
work on finding common ground,” merely represented that its attorney
would see whether Wild Rose had any interest in dealing with SMG on
some other basis in the future, apart from the October agreement.
A repudiation may be retracted “if notification of the retraction
comes to the attention of the injured party before he materially changes
his position in reliance on the repudiation or indicates to the other party
that he considers the repudiation to be final.” Id. § 256, at 293.
However, as noted above, “[an] injured party does change the effect of a
repudiation by urging the repudiator to perform in spite of his
repudiation or to retract his repudiation.” Id. § 257, at 296.
Upon receipt of the termination letter, SMG’s attorney responded
by e-mail urging Wild Rose to continue to negotiate. After receiving the
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e-mail from SMG urging Wild Rose to continue to negotiate, Wild Rose’s
attorney replied with a two-paragraph e-mail. The first paragraph
responded directly to SMG’s request that Wild Rose continue to negotiate
a management agreement. This paragraph stated the attorney for Wild
Rose would meet with Wild Rose and discuss “the future relationship, if
any, with John Pavone.” The use of the phrase “if any” is consistent with
Wild Rose’s prior repudiation. The first paragraph of the e-mail makes it
clear that there will not be a future between the parties unless Wild Rose
agrees to continue to negotiate.
The second paragraph of the e-mail responds to a 12:10 p.m. e-
mail not contained in the record. This paragraph refers to the
negotiations prior to the receipt of the letter by Wild Rose repudiating the
contract. It contains the statement, “I am still willing to work on finding
common ground but if this dispute is to be resolved, your adversarial &
inflammatory e-mail messages will need to be curtailed.” This sentence
does not retract Wild Rose’s repudiation. The sentence only indicates
that Wild Rose’s attorney will continue to negotiate as long as SMG’s
attorney curtails the tone of his e-mails.
A further fact indicating Wild Rose did not retract the repudiation
is that Wild Rose did not communicate or negotiate further with SMG
after the exchange of e-mails on May 24. Even though SMG sent Wild
Rose a proposed management agreement for the Emmetsburg casino on
July 12, Wild Rose never responded to the proposal. SMG’s filing of the
Emmetsburg action confirmed SMG knew of Wild Rose’s repudiation.
Wild Rose’s failure to get back to SMG after the exchange of e-
mails on May 24 and its failure to respond to the proposed management
agreement showed Wild Rose’s clear intent not to retract its repudiation.
SMG cannot claim Wild Rose retracted its repudiation by its unilateral
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acts urging Wild Rose to continue to perform. Id. SMG’s filing of the
Emmetsburg action shows SMG understood Wild Rose repudiated the
October agreement.
Therefore, we agree with the district court that there is no genuine
issue of material fact as to whether Wild Rose retracted the repudiation.
B. Claim Preclusion. Because there is no genuine issue of fact
concerning total repudiation of the October agreement, we must
determine if the repudiation required SMG to bring a single claim for
damages based on its remaining rights to performance under the October
agreement.
1. Claim preclusion generally. The doctrine of res judicata
includes both claim preclusion and issue preclusion. Bennett v. MC
#619, Inc., 586 N.W.2d 512, 516 (Iowa 1998). This case involves claim
preclusion. See, e.g., Iowa Coal Mining Co. v. Monroe Cnty., 555 N.W.2d
418, 441 (Iowa 1996) (“Res judicata in the sense of claim preclusion
means that further litigation on the claim is barred.”). The general rule
of claim preclusion holds that a valid and final judgment on a claim bars
a second action on the adjudicated claim or any part thereof. Arnevik v.
Univ. of Minn. Bd. of Regents, 642 N.W.2d 315, 319 (Iowa 2002).
“Therefore, a party must litigate all matters growing out of the claim, and
claim preclusion will apply ‘not only to matters actually determined in an
earlier action but to all relevant matters that could have been
determined.’ ” Penn v. Iowa State Bd. of Regents, 577 N.W.2d 393, 398
(Iowa 1998) (quoting Shumaker v. Iowa Dep’t of Transp., 541 N.W.2d 850,
852 (Iowa 1995)); accord Leuchtenmacher v. Farm Bureau Mut. Ins. Co.,
460 N.W.2d 858, 860 (Iowa 1990). Claim preclusion may preclude
litigation on matters the parties never litigated in the first claim.
Arnevik, 642 N.W.2d at 319.
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The policy of the law underlying claim preclusion is that a
claim cannot be split or tried piecemeal. Thus, a party must
try all issues growing out of the claim at one time and not in
separate actions. An adjudication in a prior action between
the same parties on the same claim is final as to all issues
that could have been presented to the court for
determination. Simply put, a party is not entitled to a
“second bite” simply by alleging a new theory of recovery for
the same wrong.
Bennett, 586 N.W.2d at 516–17 (emphasis and citation omitted); accord
Arnevik, 642 N.W.2d at 319; Penn, 577 N.W.2d at 398; Iowa Coal Mining
Co., 555 N.W.2d at 441; Barron G. Collier, Inc. v. Rawson, 202 Iowa 1159,
1161, 211 N.W. 704, 704 (1927).
Claim preclusion does not apply “unless the party against whom
preclusion is asserted had a ‘full and fair opportunity’ to litigate the
claim or issue in the first action.” Arnevik, 642 N.W.2d at 319 (quoting
Whalen v. Connelly, 621 N.W.2d 681, 685 (Iowa 2000)). “A second claim
is likely to be barred by claim preclusion where the ‘acts complained of,
and the recovery demanded are the same or where the same evidence will
support both actions.’ ” Id. (quoting Whalen, 621 N.W.2d at 685
(citations omitted)). To establish claim preclusion a party must show:
(1) the parties in the first and second action are the same parties or
parties in privity, (2) there was a final judgment on the merits in the first
action, and (3) the claim in the second suit could have been fully and
fairly adjudicated in the prior case (i.e., both suits involve the same
cause of action). Arnevik, 642 N.W.2d at 319; see also Bennett, 586
N.W.2d at 516; Iowa Coal Mining Co., 555 N.W.2d at 440. “The absence
of any one of these elements is fatal to a defense of claim preclusion.”
Arnevik, 642 N.W.2d at 319.
2. Claim preclusion analysis. In this case, there is no dispute the
parties are the same or in privity. See, e.g., Arnevik, 642 N.W.2d at 319.
In the Emmetsburg action, SMG filed suit against Gerald Kirke and Wild
14
Rose Entertainment, L.L.C. In the present action, SMG filed suit against
Gerald Kirke and Wild Rose Clinton, L.L.C. Clearly, both actions involve
SMG and Gerald Kirke. Moreover, Wild Rose Clinton, L.L.C. is a wholly
owned subsidiary of Wild Rose Entertainment, L.L.C. The parties
apparently agreed during the summary judgment hearing that the fact
Wild Rose Clinton is a different entity from Wild Rose Entertainment was
not relevant to Wild Rose’s summary judgment motion, which raised the
issue of claim preclusion. SMG also failed to raise any lack of privity
arguments on appeal. Accordingly, SMG has not preserved any
arguments with regard to lack of privity between Wild Rose Clinton and
Wild Rose Entertainment for our review.
Likewise, it is undisputed there was a final judgment on the merits
in the Emmetsburg action. Arnevik, 642 N.W.2d at 319. In the
Emmetsburg action, the jury returned a verdict finding Wild Rose
Entertainment breached both paragraph 3A and paragraph 5A of the
October agreement and awarded SMG $10 million in damages.
Accordingly, the district court entered judgment on the jury verdict for
$10 million.
Finally, to establish claim preclusion, Wild Rose must establish the
claim in the second suit could have been fully and fairly adjudicated in
the prior case (i.e., both suits involve the same cause of action). Arnevik,
642 N.W.2d at 319. SMG argues Wild Rose has failed to establish the
defense of claim preclusion because it failed to show the Clinton action is
for the same cause of action as the Emmetsburg action.
To determine whether the claim in the second suit could have been
fully and fairly adjudicated in the prior case, that is, whether both suits
involve the same cause of action, this court must examine: “(1) the
protected right, (2) the alleged wrong, and (3) the relevant evidence.”
15
Iowa Coal Mining Co., 555 N.W.2d at 441; accord Arnevik, 642 N.W.2d at
319; B & B Asphalt Co. v. T.S. McShane Co., 242 N.W.2d 279, 287 (Iowa
1976) (stating the “identity of cause of action is established when the
same evidence will maintain both actions”). However, we carefully
distinguish between two cases involving the same cause of action—where
claim preclusion bars initiation of the second suit—and two cases
involving related causes of action—where claim preclusion does not bar
initiation of the second suit. Iowa Coal Mining Co., 555 N.W.2d at 442.
The Restatement (Second) of Judgments explains that a single cause of
action
connotes a natural grouping or common nucleus of operative
facts. Among the factors relevant to a determination
whether the facts are so woven together as to constitute a
single claim are their relatedness in time, space, origin, or
motivation, and whether, taken together, they form a
convenient unit for trial purposes. Though no single factor
is determinative, the relevance of trial convenience makes it
appropriate to ask how far the witnesses or proofs in the
second action would tend to overlap the witnesses or proofs
relevant to the first. If there is a substantial overlap, the
second action should ordinarily be held precluded. But the
opposite does not hold true; even when there is not a
substantial overlap, the second action may be precluded if it
stems from the same transaction or series.
Restatement (Second) of Judgments § 24 cmt. b, at 199 (1982).
The Restatement (Second) of Contracts states that “a breach by
non-performance accompanied or followed by a repudiation gives rise to
a claim for damages for total breach.” Restatement (Second) of Contracts
§ 243(2), at 250. The Restatement further explains that “a claim for
damages for total breach is one for damages based on all of the injured
party’s remaining rights to performance.” Id. § 243 cmt. a, at 251
(emphasis added). Thus,
[a]n injured party who has a claim for damages for total
breach as a result of a repudiation, and who asserts a claim
16
merely for damages for partial breach, runs the risk that if
he prevails he will be barred under the doctrine of merger
from further recovery, even in the event of a subsequent
breach, because he has “split a cause of action.”
Id. § 243 cmt. b, at 252. The Restatement (Second) of Judgments
similarly states,
[I]f the initial breach is accompanied or followed by a
“repudiation” . . . and the plaintiff thereafter commences an
action for damages, he is obliged in order to avoid “splitting,”
to claim all his damages with respect to the contract,
prospective as well as past, and judgment in the action
precludes any further action by the plaintiff for damages
arising from the contract.
Restatement (Second) of Judgments § 26 cmt. g, at 240 (emphasis
added).
On March 31, 2006, SMG filed the Emmetsburg action alleging
Wild Rose breached paragraph 5A of the October agreement by failing to
negotiate in good faith a management agreement for the Emmetsburg
casino. The breach alleged in the Clinton action occurred on May 24,
2005, when Wild Rose repudiated the agreement and subsequently did
not perform. This alleged breach created a single cause of action for all
claims for damages based on its remaining rights to performance under
the October agreement. See Restatement (Second) of Contracts § 243
cmt. a, at 251.
On June 8, 2006, a little over two months after filing the
Emmetsburg action, SMG learned the IRGC awarded Wild Rose a second
gaming license to develop and operate a casino in Clinton. SMG did not
contact Wild Rose and Wild Rose did not contact SMG to attempt to
negotiate a management agreement for the Clinton casino. Wild Rose
had long since repudiated all of its obligations under the October
agreement with its termination letter of May 24, 2005. However, SMG
did not amend its pleadings in the Emmetsburg action to include any
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potential Clinton allegations or attempt to introduce evidence of damage
resulting from Wild Rose’s failure to negotiate a management agreement
for the Clinton casino. SMG waited until August 15, 2008, eleven
months after the court entered judgment in the Emmetsburg action, to
file the Clinton action seeking to recover additional damages.
The Clinton action involved the same protected right—to enter into
good faith negotiations with Wild Rose for the management of “any other
casino in Iowa” Wild Rose “had the opportunity to develop or operate”—
as the Emmetsburg action. See Iowa Coal Mining Co., 555 N.W.2d at
441. This second action involves the same alleged wrong—Wild Rose’s
failure to negotiate such an agreement in good faith pursuant to
paragraph 5A of the October agreement—as the Emmetsburg action. See
id. Finally, this second action would involve much of the same relevant
evidence as was offered in the original Emmetsburg action, such as the
parties’ relationship, the terms of the October agreement, Wild Rose’s
alleged paragraph 5A breach, and its repudiation of the October
agreement. See id. Moreover, both the Emmetsburg and Clinton actions
share a common nucleus of operative facts and are closely related in
time, space, origin, and motivation. See Restatement (Second) of
Judgments § 24 cmt. b, at 198–99. Thus, the Emmetsburg and Clinton
actions involve the same cause of action, meaning they could have been
fully and fairly adjudicated in the original Emmetsburg action. See
Arnevik, 642 N.W.2d at 319.
Finally, SMG argues claim preclusion is not a bar to its Clinton
action because the Clinton action developed after the filing of the
Emmetsburg claim. In support of this argument, SMG cites Iowa Code
section 611.19, which provides that “[s]uccessive actions may be
18
maintained upon the same contract or transaction whenever, after the
former action, a new cause of action has arisen thereon or therefrom.”
Iowa Code § 611.19 (2007) (emphasis added).
Wild Rose breached the October agreement when it first failed to
perform under paragraphs 3A and 5A of the October agreement and
thereafter repudiated the agreement. See Pavone I, 801 N.W.2d at 494–
95. SMG became aware of the underlying facts supporting its Clinton
action when the IRGC awarded the Clinton license and Wild Rose did not
name SMG as manager. SMG learned of these facts shortly after SMG
filed the Emmetsburg action, but well before the court entered the
judgment in the Emmetsburg action. SMG had sufficient time and
opportunity to amend its Emmetsburg action to seek additional damages
due to the breach of paragraph 5A of the October agreement in regards to
the Clinton casino. SMG, in a single cause of action and within the
statute of limitations, was required to bring all claims for damages based
on its remaining rights to performance under the October agreement.
Section 611.19 applies to new causes of action and does not apply if the
accrual of additional damages stem from a breach of the original
contract. Russell & Co. v. Polk Cnty. Abstract Co., 87 Iowa 233, 244, 54
N.W. 212, 215 (1893). Because a new cause of action has not arisen, we
find section 611.19 inapplicable.
Accordingly, the court of appeals and district court correctly held
the doctrine of claim preclusion barred SMG from bringing the Clinton
action.
IV. Disposition.
We find no genuine issue of material fact exists as to whether Wild
Rose repudiated the October agreement. We also hold the doctrine of
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claim preclusion bars this action. Therefore, we affirm the decision of
the court of appeals and the judgment of the district court.
DECISION OF COURT OF APPEALS AND JUDGMENT OF
DISTRICT COURT AFFIRMED.
All justices concur except Appel, Waterman, and Mansfield, JJ.,
who take no part.