McLaughlin v. City Bank
U.S. Court of Appeals for the First Circuit
McLaughlin v. City Bank
Opinion
USCA1 Opinion
September 22, 1992
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 92-1041
RICHARD McLAUGHLIN, ET AL.,
Plaintiffs, Appellants,
v.
JOHN MORTON, ETC., ET AL.,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Shane Devine, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Campbell, Senior Circuit Judge,
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and Torruella, Circuit Judge.
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Edwin Paul Gale with whom Stephen R. Fine & Associates was on
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brief for appellants.
Peter W. Mosseau with whom Peter G. Beeson and Nelson, Kinder
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Mosseau & Gordon, P.C. were on brief for appellee John Morton.
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Mark H. Gardner for appellees Edward Reichert and Berlin City
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Bank.
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Per Curiam. Appellants, McLaughlin Chevrolet-
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Buick, Inc. (the "corporation"), and its sole shareholder,
Richard McLaughlin, appeal from a district court order
dismissing, on grounds of res judicata, the second of two
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actions brought under 42 U.S.C. 1983 and various state laws
for an allegedly illegal attachment of the corporation's
inventory. In its opinion dated December 6, 1991, the
district court ruled that the second action was precluded
because the district court had already determined in the
prior litigation that McLaughlin lacked standing and because
it had accepted, for purposes of ruling on a motion by
plaintiff to alter judgment, that the corporation lacked the
capacity to sue. We affirm for substantially the reasons
stated in the district court order dated December 6, 1991.
We write only to add the following.
At argument before us, plaintiffs' counsel
suggested that the corporation was not bound by the earlier
suit brought by McLaughlin individually because no privity
existed between McLaughlin and the corporation. We find no
merit to this contention. It is well-settled that a nonparty
is bound by a prior adjudication where there is sufficient
legal identity between the nonparty and the prior litigant.
E.g., Explosives Corp. of America v. Garlam Enterprises
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Corp., 817 F.2d 894, 906-07 (1st Cir.) (majority stockholder
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that financed and controlled initial litigation brought
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against corporation is bound by judgment against
corporation), cert. denied, 484 U.S. 925 (1987); Aetna Cas. &
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Sur. Co. of Hartford, Connecticut v. Kerr-McGee Chem. Corp.,
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875 F.2d 1252, 1258 (7th Cir. 1989) (judgment in action
brought by shareholder of closely held corporation is binding
on corporation in later litigation, absent evidence of harm
to another shareholder or creditor); Restatement (Second) of
Judgments 59 (3)(b) (1982). Here, there was virtually
total identity between Richard McLaughlin, plaintiff in the
first suit, who was the sole shareholder of the corporation,
and the corporation itself. McLaughlin, indeed, sought to
represent the corporation's interests in the initial action
by seeking damages for the allegedly illegal attachment of
the corporation's inventory. Under these circumstances, the
corporation as well as McLaughlin personally are bound by the
prior adverse judgment.
We are also unpersuaded by plaintiffs' argument
that the district court's dismissal of the original
litigation was not a decision on the merits and cannot,
therefore, be given preclusive effect. While dismissal for
lack of jurisdiction is not an adjudication that reaches the
merits of an underlying claim, it precludes relitigation of
the same issue of jurisdiction in a second action on the same
claim. E.g., Boone v. Kurtz, 617 F.2d 435, 436 (5th Cir.
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1980); 18 Wright, Miller and Cooper, Federal Practice and
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Procedure: Jurisdiction 4402 at 11 (1981). The district
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court properly held that its prior rulings with respect to
jurisdiction, including its refusal to allow substitution of
the corporation, precluded relitigation of the same issues in
the subsequent action.
Finally, we find no merit in plaintiffs' contention
that the district court's application of the doctrine of res
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judicata was improper because the district court's prior
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ruling with respect to the corporation's capacity to sue was
erroneous. Even assuming arguendo that the district court's
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prior ruling was erroneous, plaintiffs' remedy lay in taking
a direct appeal from that allegedly erroneous ruling, not in
filing a new law suit raising the same issue. E.g.,
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Federated Department Stores, Inc. v. Moite, 452 U.S. 394, 398
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(1980) ("the res judicata consequences of a final, unappealed
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judgment on the merits [are not] altered by the fact that the
judgment may have been wrong"); Rose v. Town of Harwich, 778
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F.2d 77, 82 (1st Cir. 1985) ("if courts relaxed the
principles of claim preclusion every time it appeared that a
litigant had a strong claim 'on the equities,' the doctrine
would fail to serve its purposes of promoting judicial
economy and repose"), cert. denied, 476 U.S. 1159 (1986).
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When McLaughlin chose not to appeal, the district court's
ruling denying party status to the corporation ripened into
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finality and, whether or not based on erroneous reasoning,
acquired preclusive effect.
Affirmed.
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Reference
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