Appendix — Costantini v. Trans World Airlines, Inc.

41

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

A.V. COSTANTINI,

Plaintiff-Appellant,

No. 80-4239

OPINION

vs.

TRANS WORLD AIRLINES and

DOES I through XC,

)

)

Defendants -Appellee.

Appeal from the United States District

Court for the District of Northern Calif-

ornia William W Schwarzer, District Judge,

ah acane Argued and Submitted October

*

Before: WALLACE and PREGERSON, Circuit

Judges, and BYRNE*, District

Judge.

PREGERSON, Circuit Judge:

*The Honorable William Matthew Byrne, Jr.,

United States District Judge, Central

District of California, sitting by

designation.

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Appellant Costantini appeals from the

district court's judgment dismissing his

complaint as barred by res judicata. Be-

cause we agree that res judicata bars the

instant lawsuit, we affirm.

Appellant operates a travel agency

business in the San Francisco bay area.

In 1972, he entered into a license agree-

ment with Montgomeray Ward & Co. ["Ward"']

that permitted him to open branch offices

in Ward stores nationwide. He opened one

such branch office in June 1972 and se-

cured approvals from the Air Traffic Con-

ference of America Arc“ ], a division of

the Air Transport Association of America

["ATA"], and from the International Air

Transport Association ["IATA"]. These

approvals are a prerequisite for a branch

office to issue interstate and internat-

ional airline tickets.

In March 1973, appellant opened a

second Ward branch office, and shortly

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thereafter a third. ATC and IATA refused

to approve these offices. In April 1973,

Ward informed appellant that it would not

allow him to open more Ward branches

until he could secure ATC and IATA

approval. In April 1974, Ward cancelled

the license agreement altocether,

effective June 15, 1974.

In February 1974, appellant and his

wife filed suit in the United States

District Court for the Northern District

of California against numerous defend-

ants,including TWA as well as other air-

lines and ATA. The complaint was dismiss-

ed without prejudice, pursuant to a

stipulation of the parties, in Septemb-

er 1974.

In October 1975, appellant and his

wife filed a new complaint against ATA,

ATC, TWA, and various other airlines.

This complaint ["the 1975 complaint"]

stated several federal counts and some

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pendent state claims. The district

court dismissed the 1975 complaint in

July 1977 and entered judgment against

appellant and his wife on September 1.

The Ninth Circuit affirmed on appeal.

In 1978, appellant made a FOIA re-

quest to the Civil Aeronautics Board and

was sent a copy of a June 1973 letter

from TWA to the CAB in which TWA said

appellant was suspected of selling as

franchises what he was representing as

branch offices. This charge, if true,

would be grounds for disapproval of the

“branch offices" by ATC and IATA. In a

follow-up FOIA request in 1979, appell-

ant obtained an August 1972 letter from

TWA to ATA containing the same allega-

tion. According to appellant, he had

never known that TWA was spreading this

particular charge against him, because

TWA had assured him in a May 1973 letter

that the only adverse information it had

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heard about his bus iness concerned

allegations of illegal ticket sales and

unqualified branch managers.

Appellant began the instant lawsuit

in February 1980. His amended complaint

{"the 1980 complaint"] named TWA and

ninety Does as defendants, alleged

diversity jurisdiction, and pleaded a

single cause of action. It alleged that

the defendants conspired to prevent

appellant from opening his planned Ward

branch offices, and did so by "secretive-

ly submitting to ATC and IATA false

statements that the branch offices of

plaintiff's United Travel Service were

being sold as franchises and were under

a different ownership than the parent

offices."

The 198C complaint was dismissed by

Judge Schwarzer in April 1980 on the

ground that it was barred by res

judicata. It is from this judgment that

appellant appeals. Appellate jurisdiction

is based on 28 U.S.C. Section 1291.

DISCUSSION

Appellant has mistakenly contended

that res judicata applies only to

"questions essential to and actually

litigated in the first action." Actually,

the doctrine of res judicata [or claim

preclusion) bar la]! all grounds for

recovery which could have been asserted,

whether they were or not, in a prior

suit between the same parties . on

634 F.2d 453, 457 (9th Cir. 1980)

(emphasis added). Hence, appellant's

contention that the question involved

in his present action was never actually

litigated in the prior action is simply

irrelevant.

In the district court, appellant

pointed to two differences between the

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1975 suit and the instant suit which, he

argued, made res judicata inapplicable.

First, he has alleged new facts--that TWA

falsely told ATC and IATA that appellant's

branch offices were actually franchises.

Second, he has changed his legal theory

from interference with his relationship

with his employees to interference with

his relationship with ATC and IATA.

This court has held that a federal

court sitting in diversity must apply

the res judicata law of the state in

which it sits. Gramm v. Lincoln, 247 F.

2d 250, 255 n.6 (9th Cir. 1958). We have

applied that rule even where the prior

action was in federal court and involved

federal questions. See St. Paul Fire 8

Marine Ins. Co. v. Weiner, 606 F.2d 864,

868 (9th Cir. 1979)(collateral estoppel

rules of forum state applied where prior

judgments were federal criminal convic-

tions). Hence California's law of res

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judicata dictates what preclusive effect

is to be accorded to the prior judgment

against appellant. That California law,

however, determines the res judicata

effect of a prior federal court judgment

by applying federal standards. 3 There-

fore, those federal standards are applic-

able here to determine the preclusive

effect of the prior judgment.

Under federal law, appellant does not

avoid the bar of res judicata merely

because he now alleges conduct by TWA not

alleged in his prior suit,“ nor because

he has pleaded a new legal theory.

Rather, the crucial question is whether

appellant has stated in the instant suit

a cause of action different from those

raised in his first suit.”

This circuit approaches that crucial

question by applying several criteria to

determine whether successive lawsuits

involve a single cause of action:

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(1) whether rights or interests

established in the prior judgment

would be destroyed or impaired by

prosecution of the second action;

(2) whether substantially the same

evidence is presented in the two

actions; (3) whether the two suits

involve infringement of the same

right; and (4) whether the two suits

—— out of the same transactional

nucleus of facts.

Harris v. Jacobs, 621 F.2d 341, 343

(9th Cir. 1980). The last of these

criteria is the most important. 1d.

Both of appellant's lawsuits did

“arise out of the same transactional

nucleus of facts": TWA's alleged partici-

pation in efforts to ensure the collapse

of appellant's license agreement with

Montgomery Ward. Both lawsuits charge

TWA with spreading falsehoods about

appellant's business practices so as to

ensure that ATC and IATA would disapprove

the branch-office arrangement. 8 The only

significant difference is that appellant

Claims to have unearthed one additional

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falsehood communicated by TWA. The 1975

suit alleged that falsehoods concerning

illegal ticket sales and unqualified

branch managers were spread, whereas the

instant suit charges false stories that

appellant's branch offices were actually

franchises. This evidentiary detail is

scarcely enough to establish that the

instant lawsuit arises out of a different

"transactional nucleus of facts" than

thatwhich generated the 1975 suit.

The other criteria for finding a

single cause of action are also met.

Clearly, TWA's freedom from liability

for the loss of appellant's license

agreement, established by the 1975

action, could be impaired by this instant

action. The evidence in the instant

action would apparently be virtually

identical with evidence offered in the

1975 action, except for the 1972 TWA

letter to ATA that appellant claims

411

revealed an additional rumor that TWA

had spread. Finally, the two suits do

involve infringement of the same right:

the current suit seeks damages for

violation of appellant's right to

advantageous business relations with

Montgomery Ward, just as the 1975 suit

did.”

Thus the cause of action involved in

the instant lawsuit is identical to one

raised in appellant's 1975 suit, so that

res judicata was properly invoked by the

district court.

Appellant seeks to escape this conclu-

sion by arguing that TWA fraudulently

concealed the facts upon which his

current cause of action is based. We need

not decide whether there is a fraudulent

concealment excention to the law of res

judicata because no fraudulent conceal-

ment has been properly presented.

Appellant bases his argument on a letter

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TWA send him in May 1973, in reply to

his inquiry as to what adverse informa-

tion TWA possessed about his business.

The letter referred to charges that

appellant had used illegal tickets and

unqualified branch managers, and then

added that a TWAsales representative had

"ma[dje available to your personnel any

information regarding your offices that

was in our possession." Appellant insists

that this constituted a fraudulent con-

cealment of the fact that TWA had itself

communicated an entirely different charge

against appellant to aA. 10

Even assuming that the letter was a

deliberate misrepresentation--which is

far from clear--appellant has not made

out a claim of fraudulent concealment

because he has not pleaded with particu-

larity facts establishing that he dili-

gently attempted to uncover the inform-

ation that he says was concealed. 11

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Appellant filed his first (1974) lawsuit

nine months after receiving the supposed-

ly deceptive letter, and alleged, inter

alia, that TWA had conspired to cause ATC

to disapprove his branch offices. Certain

ly he should have made discovery request

for any communications about his business

that TWA and ATC might have exchanged.

Appellant's contention that he had "no

rational basis for suspecting" that the

May 1973 letter might not have given him

all the adverse information TWA possessed

about his business is simply not credible.

Appellant had every reason, when he filed

the original suit, to be suspicious of a

party he was alleging had “communicated

false and fraudulent information.

resulting in baseless charges" against

him. 1975 Complaint, Section 42(c).

Appellant insists that he did resort

to discovery procedures in his 1975 suit

and indeed made "ceaseless efforts to

A-14

discover the truth." 1980 Complaint,

Section 34. But he gives no details of

those efforts and never explains what

discovery requests he mad in the 1975

lawsuit, nor why those requests failed to

unearth TWA's August 1972 letter charging

him with selling franchises. Hence he

has not adequately alleged that he acted

with reasonable diligence in trying to

discover the allegedly concealed inform-

ation.12

Thus, the district court properly con-

cluded that the instant lawsuit is barred

by res judicata. Appellant has not shown

the existence of any "fraudulent conceal -

ment", even if such a showing would permit

him to avoid the bar of res judicata.

AFFIRMED.

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FOOTNOTES

Count II of the 1975 complaint alleg-

ed a conspiarcy to monopolize trade,

pursuant to which defendants had

agreed that plaintiff's proposed Ward

branch offices would be disapproved.

Count IV alleged unfair competition

under California law, charging that

defendants communicated false inform-

ation about plaintiff's business that

resulted in "baseless charges"

against plaintiffs by the ATC. Count

V alleged interference with business

relations and incorporated the

earlier factual allegations.

Appellant has apparently confused res

judicata with the related but

distinct doctrine of collateral

estoppel, which does apply only when

"an issue is actually and necessarily

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determined." Montana v. United

States, 440 U.S. 147, 153 (1979).

Younger . Jensen, 26 Cal. 3d 397,

411, 161 Cal. Rptr. 905, 914 (1980);

Levy v. Cohen, 19 Cal. 3d 165, 172-

73, 137 Cal. Rptr. 162, 167 (1977):

4 B Witkin, California Procedure,

Judgment, Section 156(b) (2d ed.1971)

Lester v. NBC,217 F.2d 399, 400 (9th

Circ 1954), cert. denied, 348 U.S.

954 (1955) ("a judgment's finality

applies to facts which might have

been pleaded with reference to the

same event as well as to those actu-

ally pleaded").

. Scoggin v. Schrunk, 522 F. d 436, 437

(9th Cir. 1975), cert. denied, 423

U.S. 1066 (1976) (res judicata bars

"assertion of every legal theory

that might have been raised" in first

action).

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6. Harris v. Jacobs, 621 F. 2d 341, 343

(9th Cir. 1980) ([rles judicata pre-

clusion extends only to claims that

arise out of the same ‘cause of

actiom' asserted in the prior

action").

7. No single criterion can decide every

res judicata question: identity of

causes of action "cannot be determin-

ed precisely by mechanistic applicat-

ion of a simple test. Abramson v.

University of Hawaii, 594 F.2d 202,

206 (9th Cir. 1979).

8. See note 1 supra.

9. Paragraph 38 of the 1980 complaint

seeks damages for the loss of the op-

portunity to open branch offices in

Ward stores, just as Section 106 of

the 1975 complaint had done. It is

true that appellant sought those

damages in his 1975 action under a

Sherman Act monopolization theory,

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whereas he now claims interference

with ATC and IATA. But, as mentioned

above, a mere change of legal theory

does not imply a new cause of action.

See page 2 supra.

. Such pleading is a requirement of

federal law.Rutledge v. Woven ‘lose

§ Rubber Co., 576 2d 248, 250 )9th

Cir. 1978).

. Moreover, the cases in which fraud

exception to res judicata was applied

differ crucially from the instant

case in that they involve situations

where defendant's misconduct prevent-

ed plaintiff from knowing, at the

time of the first suit, either that

he had a certain claim or else the

extent of his injury. See, e.g.,

Christian v. American Home Assurance

Co., 577 P.2d 899 (Oakla. 1978)

(plaintiff discovered cause

of action for bad-faith refusal to

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satisfy his claim only when breach-

of-contract case went to jury);

United States Rubber Co. v. Lucky

Nine, Inc., 159 So 2d 874 (Fla. App.

1964) (defendant's deceitful testimony

at the first trial concealed from

plaintiff the true amount it was

owed); Hyyti v. Smith, 272 N.W. 747

(N. D. 1937) (deception by an attorney

connected with defendant's law firm

kept plaintiff from learning that she

could seek compensation for loss of

support as well as out-of-pocket

expenses in her wrongful death

action). Here, however, appellant

knew when he brought his original

suit that he had a claim against TWA

for attempting to block his license

agreement with Montgomery Ward by

having ATC and IATA disapprove it.

That was the gist of Count Two of the

1975 complaint. Amd he knew what

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injury TWA had allegedly inflicted on

him: loss of the opportunity to open

branch offices in the Ward stores.

Thus even if defendant's May 1973

letter can be termed "fraudulent," it

did not prevent appellant from

realizing what cause of action he

had against TWA nor what his damages

were.

B-1

APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

A.V. COSTANTINI

dba UNITED TRAVEL SERVICE

dba WARD'S TRAVEL SERVICE, C 80 0333 s

Plaintiff, ORDER GRANT-

ING MOTION TC

v. DISMISS AND

) JUDGMENT OF

TRANS WORLD AIRLINES,INC., ; DISMISSAL

DOES I THROUGH XC,

Defendants. )

The motion of defendant Trans World

Airlines, Inc. for an order dismissing

the action for failure to state a claim

on which relief can be granted pursuant tc

Rule 12(b)(6) of the Federal Rules of

Civil Procedure came on regularly for

hearing on April 11, 1980. Stephen C.

Tausz, Esq. Bronson, Bronson § McKinnon

appeared for defendant Trans World Air-

lines, Inc. A.V. Costantini, plaintiff,

appeared in propria persona. The Court,

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having taken judicial notice of the plead-

ings, records, and files in Civil Action

Nos. C 74 0365 SAW and C 75 2221 WHO

previously pending in this court, and

good cause appearing therefor,

IT IS ORDERED that the motion of

defendant Trans World Airlines, Inc. to

dismiss for failure to state a claim on

which relief can be granted is hereby

granted on the ground that the action is

barred under the doctrine of res judicata.

IT IS FURTHER ORDERED, ADJUDGED, AND

DECREED that judgment be, and hereby is,

entered in favor of defendant Trans World

Airlines, Inc. and against plaintiff.

A.V. Costantini.

Dated April 16, 1980

WILLIAM W.SCHWARZER

JUDGE, UNITED STATES DISTRICT COURT

C-1

UNITED STATES DISTRICT COURT OF THE

NORTHERN DISTRICT OF CALIFORNIA

LOCAL RULES-

-220-2 . . . Each notice of

motion shall be accompanied

by affidavits or declarations

under penalty of perjury....

-220-8 .. Factual contentions

made in support of any motion

shall be supported by affidavits

or declarations....*

Revised March 1, 1981: Rule 220-8

is now designated as 220-7

PROOF OF SERVICE

I, the undersigned, certify that I

caused three copies of the foregoing

PETITION FOR WRIT OF CERTIORARI, to be

mailed this date, first-class postage

prepaid, to all persons required to be

served, who are as follows:

Stephen C. Tausz

Henry Lerner

Bronson, Bronson § McKinnon

555 California Street

San Francisco, Ca 94104

I declare under penalty of perjury

that the above is true and correct.

Executed at Daly City, California on

October 18, 1982

A.V. Costantini