Joseph v. Linehaul Logistics 337

RES JUDICATA/SANCTIONS: Attempt to amend to add wrongful termination under FLSA for reporting unpaid wages barred by jury rejection of FLSA wage claim (jury awarded $68,456 under WDA)… 11(b)(2) sanctions imposed against attorney… Molloy.

Linehaul Logistics fired Arlene Joseph 4/27/11 immediately after she complained about unpaid overtime. She sued in State Court alleging, inter alia, that she was fired in response to her reports of a hostile environment and wage/hour violations. She did not identify any specific statutes, but generically claimed she was discharged without good cause, on account of retaliation, and in violation of wage & hour laws. Linehaul removed to this Court. The 1st 2 counts were presumably brought under MCA 39-2-901-915 and the 3rd under FLSA §207. The pretrial order and instructions clarified that her wrongful discharge claims were based on violations of Montana’s WDA and her wage & hour claim was brought under the FLSA. The Missoula jury awarded Joseph $68,456 on her wrongful discharge claim but nothing on her wage & hour claim. Prior to judgment she moved to amend to add wrongful termination under FLSA §215(a)(3), which makes it unlawful to terminate an employee for reporting or complaining about unpaid wages. Stacey Weldele-Wade never explained why she could not have pled this in her complaint or otherwise raised it before trial, and expressly recognized that if she were to raise it in a separate suit (like this one) she would run into res judicata problems. Magistrate Lynch denied her motion to amend. Joseph appealed to the 9th Circuit, but then filed a new suit in State Court alleging the 215(a)(3) claim and a tortious interference claim. Linehaul again removed to this Court and requests summary judgment based on res judicata and Rule 11 sanctions.

Claim preclusion applies when there is an identity of claims, a final judgment on the merits, and identity or privity between the parties. Cell Therapeutics (9th Cir. 2009); Tahoe-Sierra (9th Cir. 2003). (Taylor (US 2008) suggests that “privity” may be outmoded and instead referred to 6 exceptions to the “rule against non-party preclusion,” but the 9th Circuit has continued to refer to privity in the context of claim preclusion.) There is no dispute that the parties in this case are the same as in the previous litigation. Joseph argues that there is no identity of claims because she did not specifically raise a claim under 215(a)(3) in the previous litigation, but made a claim under the WDA. That argument is a nonstarter. She argued in the previous litigation that Linehaul wrongfully discharged her because her termination was based on “retaliation” for reporting “a violation of employment conditions [hostile environment and wage/hour laws].” She claims in this case that she was wrongfully discharged under the FLSA because her termination was based on retaliation for her complaint about “non-payment of her overtime compensation.” The only difference is that this claim is under the FLSA and the previous was under the WDA; the factual basis of the claims and substance of the arguments are identical. Whether she attempted to vindicate her claim in the previous litigation under precisely the same statute or theory is not the relevant inquiry; the question is whether she could have brought the claims in this case in her previous litigation. Tahoe; see also Stratosphere (9th Cir. 2002) (identity of claims exists when 2 suits arise from the same transactional nucleus of facts). Joseph’s 215(a)(3) claim, by her own admission, arises out of the precise facts that were at issue in her previous litigation, and she has offered no explanation for why she was unable to timely bring it in the previous litigation. She knew res judicata would be a very serious issue if she brought this claim, and indeed it is. The undisputed facts show that she could have timely alleged the 215(a)(3) claim. As to the 2nd element, Lynch entered a final judgment in the previous litigation 9/28/12. As Defendants correctly argue, the fact that the previous case is being appealed does not alter finality for res judicata purposes. Tripati (9th Cir. 1988).

Issue preclusion “`can apply to preclude relitigation of both issues of law and issues of fact if those issues were conclusively determined in a prior action.”’Wolfson (9th Cir. 2010); Stauffer (US 1984). A party is precluded from relitigating issues of fact or law if there was a full & fair opportunity to litigate the issues in the previous action, the issue was actually litigated, there was a final judgment on the merits, and the person against whom issue preclusion is asserted was a party to or in privity with a party in the previous action. Id. Joseph claims the 215(a)(3) claim was not “actually litigated” in the previous action. Again, she is wrong. Whether she specifically articulated it is irrelevant; what matters is that she could have raised it. Her 215(a)(3) claim is merely a guise of the same claim she pursued previously.

Joseph’s untimely 215(a)(3) claim is frivolous. It is legally baseless from an objective perspective. No reasonable attorney could have concluded that it is not barred by res judicata. Had a reasonable attorney conducted a reasonable & competent inquiry before signing & filing her complaint, he or she would have learned that the claim is barred. The thrust of counsel’s argument as to why it is not barred is that she did not specifically plead a 215(a)(3) claim in the previous litigation. That misses the point and ignores well-established case law; what matters is whether she could have pled that claim. Paulo; Adam (9th Cir. 2010);Tahoe; Restatement of Judgments §27. (Her argument that the prior judgment is not final for purposes of res judicata fails on its face. Tripati.)

Even though Weldele-Wade did not run afoul of Rule 11(b)(1) (improper purpose), her violation of 11(b)(2) warrants sanctions. There was no good reason for filing the 215(a)(3) claim except perhaps the self-interest of potential attorney fees. A reasonable sanction is to have her — not Joseph — pay Linehaul’s attorney fees incurred in bringing its motion for partial summary judgment.

Joseph v. Linehaul Logistics, 40 MFR 337, 5/14/13.

Stacey Weldele-Wade (Antonioli & Wade), Missoula, for Joseph; Cory Laird & Fred Simpson (Reep, Bell & Laird), Missoula, for Linehaul.