# Opposition Brief — Horn & Hardart Co. v. National Railroad Passenger Corp.

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1989%3A3

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1988
- **Citation:** 488 U.S. 849

## Text

Supreme Court, WS
EI LED

AUG 8 1988
SPAMOL, ai

‘
(>/

No. 88-30

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

THE HoRN & HARDART COMPANY,
Petitioner,
v.

NATIONAL RAILROAD PASSENGER CORPORATION,

Respondent.

On Petition for Writ of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit

RESPONDENT'S BRIEF IN OPPOSITION

CHARLES F. LETTOW *

MATTHEW D. SLATER

MICHAEL J. SUSSMAN
CLEARY, GOTTLIEB,

STEEN & HAMILTON
1752 N Street, N.W.
Washington, D.C. 20036
(202) 728-2700
* Counsel of Record Counsel for Respondent

August 8, 1988

a =
WILSON - EPEs PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether the Court of Appeals correctly concluded
that a prior appeal upholding a declaratory judgment did
not prevent the District Court from exercising jurisdiction
over a motion for further relief filed by defendant-
respondent under the Declaratory Judgment Act, 28
U.S.C. $$ 2201, 2202, based on that declaratory judgment?

2. Whether the Court of Appeals correctly concluded
that the relief granted by the District Court constitutes
proper “further relief” within the meaning of 28 U.S.C.
§ 2202?

3. Whether the Court of Appeals correctly determined
that further relief was not barred by the doctrine of res
judicata?

(i)

il
PARTIES TO THE PROCEEDINGS
The parties to the proceedings are set forth in the pe-
tition for writ of certiorari in this case. Pursuant to
S. Ct. Rule 28.1, respondent states that it has no publicly-
owned parents, subsidiaries, or affiliates.

TABLE OF CONTENTS

Page
QUESTIONS PRESENTED _.. 7 i
PARTIES TO THE PROCEEDINGS... ii
Sg 8) gd | iv
OPINIONS BELOW .... Ne ease. ane 1
Neen ee eT en. sccacsuncelcccussensecece 2
STATUTES ............ eae eo arches civwens aL See Pp 2
Daeeeueemeee Gee eee, CASE ........................................ 2
REASONS FOR DENYING THE WRIT. weet 5

I. The District Court Properly Exercised Jurisdic-
ean a STARE A 6

II. Relief Was Properly Granted Under 28 U.S.C.
en Set St OC : 11

III. The Doctrine of Res Judicata Does Not Bar Am-
Ne os ccacennansaceces oe: 15
CONCLUSION ........... Sei = 21

Appendix of Excerpts from the Restatement (Second)
of Judgments ............ 1 JR a Pr hess la

(iii)

iv

TABLE OF AUTHORITIES

Cases: Page
Aetna Casualty & Surety Co. v. Quarles, 92 F.2d
SE CO Ge FI ons tedacsicteereneis cities ees 15
Aetna Life Insurance Co. v. Haworth, 300 U.S. 227
CI bane vars racine acct tucsieneetintanasectaiennos 10
Alevander & Alexander, Inc. v. Van Impe, 787 F.2d
BE UI Ge, ee cinders eenancredinteoeceas 12
Banco Nacional de Cuba v. Farr, 383 F.2d 166 (24
Cir. 1967), cert. denied, 390 U.S. 956 (1968) . x
Bankers Trust Co. v. Bethlehem Steel Corp., 761
F.2d 943 (3d Cir. 1985) _....... Rae as te te leds ee 8
Resler v. U.S. Department of Agriculture, 639 F.2d
SER Cas: Ge. Re eects... 11
Brigas v. Pennsylvania Railroad Co. 334 U. S. 304
PRI son d cccrsccetatlncnnccecsaatadeohadnanaeees 7

Central States, Southeast & Southwest Areas Pen-
sion Fund v. Commercial Cartage Co., No. 86C

3268, slip op. (N.D. Ill. Apr. 24, 1987) -................ 17
County Fuel Co. v. Equitable Bank Corp., 332 F.2d

SR Ee Ee: oe eerie _ 16,17
County of Cook v. Midcon Corp., 773 F.2d 892

I es te cin endiiinrisionn stncnesetaranansetiasecotnnins 17
Doe v. Gallinot, 687 F.2d 1017 (9th Cir. 1981) . 14

Edward B. Marks Music Corp. v. Charles K. Harris
Music Publishing Co., 255 F.2d 518 (2d Cir.

1958), cert. denied, 358 U.S. 831 (1958) ..__....6, 12, 13
Griggs v. Provident Consumer Discount Co., 459

ee a oe aheeer seameuoaseeens 7
Henry v. Farmer City State Bank, 808 F.2d 1228

Pn 6 so ee eee 8, 9,17

Kaspar Wire Works, Inc. v. Leco Engineering &

Machine, Ine., 575 F.2d 530 (5th Cir. 1978) —...... 19
Kyle Enaineering Co. v. Kleppe, 600 F.2d 226 (9th

UE: ies ee 9
Lawhorn v. Atlantie Refining Co., 299 F.2d 353

Fa a. Se coe a ep nteacenecnnels 17, 20
Martino ». McDonald’s System, Ine., 598 F.2d 1079

(7th Cir.), cert. denied, 441 U.S. 966 (1979) - 17
McCann v. Kerner, 436 F.2d 1342 (7th Cir. 1971)

CU IN: iinet nvtsetetentin pitacpatoniomsdnacatncnncadacionse 12

a a a ee

y

TABLE OF AUTHORITIES—Continued

Page
McNally v. American States Ins. Co., 339 F.2d 186
RI. I hse a a Fa 10
Montana v. United States, 440 U.S. 147 (1979). 19
National Railroad Passenger Corp. v. The Horn &
Hardart Co., L and T Index Nos. 3687685,
36877/85, 36878/85 (N.Y. Civ. Ct., part 52)
(consolidated) 0.000.000... Siacabishatededideitident eee 4
National Research Bureau, Ine. , Bartholomew,
482 F.2d 386 (3d Cir. 1973) _........... )
National Union Fire Ins. Co. of Pittsburgh, PA: ”,
Jett, 118 F.R.D. 336 (S.D.N.Y. 1988) 17, 20
Oklahoma Alcoholic Beverage Control Bd. v. Cen-
tral Liquor Co., 421 P.2d 244 (Okla. 1966) . 14
Overnite Transportation Co. v. Chicago Industrial
Tire Co., 697 F.2d 789 (7th Cir. 1983) . ame 9
Potter v. Carvel Stores of New York, Inc., 202 F.
Supp. 462 (D. Md. 1962), aff'd, 314 F.2d 45 (4th
| eRe eR Oe, ELSIE et HANS RAE sereseernct ANCOR 17
Powell v. McCormack, 395 U.S. 486 (1969) . 12
Quern v. Jordan, 440 U.S. 332 (1979)... 8
Rincon Band of Mission Indians v. Harris, 618 F. 2d
569 (9th Cir. 1980) . ineeese Ku ow
Rudell v. Comprehensive Aeceustinn Core. 802
F.2d 926 (7th Cir. 1986), cert. denied, 107 S. Ct.
Es SNL et ee aT TI 17
Sakezzie v. Utah State Indian Affairs Comm’n, 215 )
F. Supp. 12 (D. Utah 1963) 12
Skelly Oil Co. v. Phillips Petroleum Co., 339 U. s.
NE WOO onde See oe ne 10
Sprague v. Ticonie National Bank, 307 U.S. 16]
(1939) . wah as 9
Stephenson v. . Equitable Life Assur. ‘Soc’y y, 92 F. 2d
EE TE I IEE aint csi bce ieee 15
Switzer Brothers, Inc. v. Chicago Cardboard Co.
252 F.2d 407 (7th Cir. 1958) - 9
Teas v. Twentieth Century-Fox Film Corp., 413
F.2d 1263 (5th Cir. eo rr elN 1
United States v. Snider, 779 F.2d 1151 (6th Cir.
| See tin (hacaiae can CE Ae RS ON BEL W ION, 17

vi

TABLE OF AUTHORITIES—Continued

I age
United States v. Thompson, 262 F. Supp. 310 (S.D.
Tex. 1966) 17
Windmoller v. Laquerre, 281 F. Supp. 568 (D.D.C.
1968) 10
Statutes and Rules:
28 U.S.C. § 1254 (1) 2
28 U.S.C. § 13832 (a) (1) 2,7, 10
28 U.S.C. § 2201 2, 10,11
28 U.S.C. § 2202 passim
15 U.S.C. § 54 6(m) 7
Fed. R. Civ. P. 7 (a) 16
Fed. R. Civ. P. 13(a) 16, 17, 18
Fed. R. Civ. P. 12(a) 18
Fed. R. Civ. P. 12(b) (6) 18
Fed. R. Civ. P. 54(¢) 3
Miscellaneous:
E. Borchard, Declaratory Jvudqments (28-11 (2d
ed. 1941) 12
H. Rep. 1264, 73d Cone., 2d Sess. 2 (1931) 5
Restatement (Second) of Judaments 16, 19, 20
Restatement (Second) of Judaqments § 21 »()
Restatement (Second) of Judaments § 22 5, 16, 18, 19
Restatement (Second) of Judaments § 22(2) (b) 17
Restatement (Second) of Judaments §& 22 comments
a, b,d 20
Restatement (Second) of Judaments § 33 5
Restatement (Second) of Judaments & 23 comment
c (1982) 18
c. Wright, A. Miller & E Cooper, Federal Practice
and Procedure (1981) 19

IN THE
Supreme Court of the United States
OCTOBER TERM, 1988

No. 88-30

THE Horn & HARDART COMPANY,
Petitions r.
We

NATIONAL RAILROAD PASSENGER CORPORATION.

Responde i f.

On Petition for Writ of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit

RESPONDENT'S BRIEF IN OPPOSITION

Respondent National Railroad Passenger Corporation
(“Amtrak”) respectfully requests that this Court de ny
the petition for writ of certiorari seeking review of the
judgment and opinion of the United States Court of
Appeals for the District of Columbia Circuit in this case.
That court's opinion is reported at 843 F.2d 546.

OPINIONS BELOW

Citations to the opinions below are set forth in the
Petition.

9

JURISDICTION

Discretionary jurisdiction of this Court to review the
judgment of the United States Court of Appeals for the
District of Columbia Circuit (the “Court of Appeals”)
entered on April 8, 1988. rests on 28 U.S.C. § 1254/1).

Petitioner, The Horn & Hardart Company (“Horn &
Hardart”), commenced this action in the United States
District Court for the District of Columbia ‘the “Dis-
trict Court”), on the basis of federal diversity juriedic-
tion, 28 U.S.C. § 1332(a! (1); diversity of the parties has
continued to this day. Horn & Hardart sought a declara-
tory judgment, but the District Court granted summary
judgment in favor of defendant Amtrak on May 30,
1985. Pet. App. 50a. On June 17, 1986, that decision
was affirmed on appeal by the Court of Appeals. Pet.
App. 37a; 793 F.2d 356. Thereafter on April 23, 1987,
in accord with 28 U.S.C. § 2202, authorizing the grant
of “necessary or proper” further relief based on a prior
declaratory judgment issued under 28 U.S.C. § 2201,
the District Court granted a petition by Amtrak for fur-
ther relief. Pet. App. 12a; 659 F. Supp. 1258. It is the
Court of Appeals’ affirmance of that judgment (Pet. App.
la: 843 F.2d 546). which is the subject of the Petition.

STATUTES

Pertinent statutes are contained in the Petition.

STATEMENT OF THE CASE

This case concerns a leasing dispute which was brought
before the District Court by Horn & Hardart on the
basis of diversity jurisdiction. The ensuing judgments in
Amtrak’s favor enforced the lease terms, with the Court
of Appeals agreeing with the District Court that “none
of Horn & Hardart’s procedural or substantive argu-
ments will permit that corporation to escape its con-
tractual liability te Amtrak.” Pet. App. 10a; 843 F.2d

550.

——Se_a—aoe"as=a"_—

“*
~~

The three negotiated leases enforced by the District
Court were entered into on June 1, 1980, by Horn &
Hardart and Amtrak for restaurant and cocktail-lounge
space in Amtrak’s Pennsylvania Station in New York
City. Each of the leases contained a Notice of Termina-
tion Clause that gave Amtrak the right to terminate the
lease on ninety days’ notice “in the event that | Amtrak]
shall require the demised premises for its Corporate pur-
poses.” Pet. App. 38a; 793 F.2d 356-57. One lease in-
cluded a cancellation-premium clause requiring Amtrak
to reimburse Horn & Hardart up to $300,000 in the
event of early termination of the lease. Pet. App.
46a; 793 F.2d 360. In addition, each of the leases
contained identical End-of-Term Holdover clauses pro-
viding for liquidated damages, measured as triple
rent, Pet. App. 2a n.2; 843 F.2d 547 n.2; and identical
provisions for the payment by Horn & Hardart of costs
and expenses, including attorneys’ fees, incurred by Am-
trak due to a “default in the observance or performance
of any term or covenant on |Horn & Hardart’s| part.”
ld.

On November 29, 1984, Amtrak sent Horn & Hardart
timely ninety-day notices of termination for all three
leases. Pet. App. 5la. Amtrak intended to use the
premises for a new ticket facility and expanded waiting
room areas, as part of an overall redevelopment plan for
the station. Pet. App. 5la-52a. The construction schedule
for implementing the plan was dependent upon the avail-
ability of these spaces. Pet. App. 30a; 659 F. Supp.
1267; Pet. App. 5la.

Horn & Hardart refused to vacate the premises as
required on February 28, 1985. Instead, on March 12,
1985, nearly four months after it was notified of the
termination of its leases, Horn & Hardart instituted this
action—based on diversity of citizenship and the Declara-
tory Judgment Act—-seeking a declaration that the termi-
nations were unlawful and viclated the lease provisions,

4

as well as an injunction and $2.5 million in damages.
Pet. App. 3a; 843 F.2d 547. Amtrak promptly responded
vith a Motion to Dismiss or, in the Alternative, for
Summary Judgment.

The District Court found that Amtrak had the legal
right to terminate the leases “|bJased on the plain
language of the leases.” Pet. App. 58a. The Court of
Appeals affirmed, concluding that the District Court’s
“interpretation of the language, based upon its plain
meaning, is unimpeachable.” Pet. App. 44a; 793 F.2d at
399,'

On August 19, 1986, shortly after the Court of Appeals’
ofirmance of the District Court’s decision,” Amtrak filed
a Motion for Further Relief, pursuant to 28 U.S.C.

2202. Pet. App. 3a; 843 F.2d 547. Based on the
determination by the District Court and the Court of
Appeals that the leases were properly terminated, Amtrak
sought to enforce the liquidated damages-for-holdover and
cost-on-default provisions of the leases. Horn & Hardairt
responded with a “Motion to Dismiss Defendant’s Motion
for Further Relief.” Pet. App. 14a; 659 F. Supp. 1260.
The District Court granted Amtrak’s Motion for Further
Relief and denied Horn & Hardart’s responsive Motion

' As of the District Court’s ruling on May 30, 1985, Horn &
Hardart had not yet vacated the premises, and in consequence
Amtrak had brought and pursued three actions in New York courts
to obtain possession, Pet. App. 3a; 843 F.2d 547; National Railroad
Passenacy Corp. v. The Horn & Hardart Co., L and T Index Nos.
36876 85, B6877 8&5, 3687885 (N.Y. Civ. Ct., part 52) (consoli-
dated). Horn & Hardart subsequently agreed to the entry in the
New York courts of an order of possession; it ultimately vacated
the premises on August 5, 1985. Pet. App. 3a; 843 F.2d 547. Con-
currently in August 1985, Amtrak paid Horn & Hardart £180,000 in
compensation for the early termination in accordance with the can-
cellation-premium clause. Id.

- The Court of Appeals’ decision was rendered on June 17, 1986.
The clerk of the District Court received a certified copy of the
judgment on September 5, 1986.

>

to Dismiss, enforcing the lease terms and rejecting Horn
& Hardart’s arguments that Amtrak was precluded by
the prior proceedings in the case from obtaining any
relief on its claims under the leases.

On appeal lodged by Horn & Hardart, the Court of
Appeals agreed that Horn & Hardart’s arguments would
not allow it to “escape its contractual obligations.” Pet.
App. 10a; 843 F.2d 550. The Court of Appeals held that
the District Court never lost jurisdiction over claims based
on the lease provisions regarding liquidated damages and
costs and that Section 2202 provided a_ procedural
mechanism through which to make an award. The
court also concluded that the District Court’s award
under Section 2202 was properly based on its prior ruling
since the leases “specified that a valid notice of termina-
tion was the only factual and legal predicate necessary
for recovery of liquidated damages and costs.” Pet. App.
6a; 845 F.2d 549. The Court of Appeals then held that the
normal rules of claim preclusion—enunciated in Restate-
ment (Second) of Judgments $$ 22 and 33 and applied
consistently by the federal courts—do not bar Amtrak’s
claims here. Pet. App. 8a; 843 F.2d 549-50. On the merits,
the Court of Appeals agreed with the District Court that
the holdover liquidated-damages clauses and the cost-on-
default clauses in the leases were applicable and enforce-
able under District of Columbia law. Pet. App. 9a-10a;
843 F.2d 550.

Horn & Hardart’s Petition seeks this Court’s review
of the Court of Appeals’ affirmance of the District Court’s
award of further relief.

REASONS FOR DENYING THE WRIT

The issues posed by Horn & Hardart were correctly de-
cided by the District Court and Court of Appeals and
there are no special circumstances which suggest that
the issues are appropriate subjects for this Court’s ple-
nary consideration.

Section 2202 of Title 28 U.S.C. provides that a federal
district court with appropriate subject matter jurisdiction

.
possesses statutory authority to grant to a party—
whether a plaintiff or defendant—prevailing on a final
declaratory judgment “|f{urther necessary or proper re-
lief based on |the] declaratory judgment.” Such further
relief is a subsequent corollary to the declaratory judg-
ment; it need not have been sought, pleaded, or proven
prior to entry of the declaratory judgment. See Edward
B. Marks Music Corp. v. Charles K. Harris Music Pub-
lishing Co., 255 F.2d 518, 522 (2d Cir. 1958), cert.
denied, 358 U.S. 831 (1958). The instant action is sup-
ported squarely by the terms of the statute and by
governing case law. Amtrak’s entitlement to contractual
liquidated-damages and costs-on-default was based on a
factual and legal predicate that was conclusively deter-
mined in the final declaratory order of the District
Court—that Amtrak properly terminated its leases with
Horn & Hardart.

Both the District Court and Court of Appeals recog-
nized that Horn & Hardart has completely misstated the
jurisdictional significance of an appeal as to matters not
appealed. The first appeal of the declaratory judgment
did not affect the District Court’s power to entertain sub-
sequent proceedings “based on” that judgment because
Section 2202 “clearly anticipates] ancillary or subsequent
coercion to make an original declaratory judgment effec-
tive,” as the Court of Appeals observed. Pet. App. 4a;
843 F.2d 548. Similarly, it is Horn & Hardart, not
Amtrak, which seeks to carve out exceptions to the
doctrine of res judicata in order to bar Amtrak’s claims.
Both the District Court and the Court of Appeals agreed
that there is no support in the statute or case law for any
bar to the further relief that Amtrak was granted en-
forcing lease terms. Accordingly, there is no reason for
this Court to grant the petition.

I. The District Court Properly Exercised Jurisdiction

In upholding the District Court’s exercise of jurisdic-
tion over Amtrak’s motion for further relief, the Court
of Appeals acted in accord with long-established federal

7

law. The prior declaratory judgment in Amtrak’s favor
established the basis for further relief under Section
2202. The appeal of that judgment in no way affected
adversely the District Court’s jurisdiction to grant further
relief. Instead, it confirmed the very judgment that
established the foundation for the further relief.

The subject matter jurisdiction of the District Court
properly was invoked by Horn & Hardart’s complaint
under 28 U.S.C. § 1332(a) (1) based upon diversity of
citizenship.” Diversity of citizenship continued through
the pendency of this case in the District Court, and its
subject matter jurisdiction likewise continued.

The jurisdictional doctrine which Horn & Hardart mis-
takenly seeks to invoke provides that during the pend-
ency of an appeal, a federal district court is divested
“of its control over those aspects of the case involved in
the appeal.” Griggs v. Provident Consumer Discount Co.,
459 U.S. 56, 58 (1982) (per curiam) ‘emphasis added}.
Such divestiture operates with a determinate scope both
nas to subject matter and time. Under Griggs, the Dis-
trict Court was barred from acting only with respect to
“those aspects of the case involved in the appeal,” 7d.,
and then only during the pendency of the appeal.t As
this Court noted in Griggs, id., this rule is a prudential

* Horn & Hardart is a Nevada corporation with its principal place
of business in Las Vegas. Pet. App. 2a; 843 F.2d 547. Amtrak is
a citizen of the District of Columbia for the purpose of determining
diversity jurisdiction. 45 U.S.C. $546(m). Those circumstances
have remained unchanged since the complaint was filed.

4 Following the first appeal in this case, the Court of Appeals’
affirmance became the law of the case, precluding the District Court
from reconsidering and revising any issue resolved by the Court of
Appeals. See Briggs v. Pennsylvania Railroad Co., 234 U.S. 304
(1948), cited in the Petition at 13 n.4. As discussed infra, however.
in the initial proceedings the District Court and the Court of Ap-
peals had addressed only the question of the propriety of the notice
of termination, not the further question of entitlement to liquidated
damages and costs. :

oO
o

doctrine intended to avoid the concurrent exercise of ju-
risdiction by two courts over the same subject matter.
It does not prescribe or govern the powers of a district
court following an appeal or concerning matters not
involved in the appeal.”

Amtrak’s motion for further relief was filed after the
Court of Appeals affirmed the declaratory judgment and
relied on that effirmance to raise consequent matters that
were not involved in the appeal. The matter initially
declared by the District Court was limited specifically
and solely to a “ruling on Amtrak’s right to terminate
the leases in question for corporate purposes.” Pet. App.
58a n.6. On appeal of the declaratory judgment, the issue
was similarly limited. As the Court of Appeals stated,
the appeal was “taken from the District Court’s grant
of summary judgement in favor of |Amtrak!,” and “[t]he
issue presented |was| whether the trial court erred in
its interpretation of termination provisions contained in
the 1980 leases between Amtrak... and [Horn & Hard-
art].” Pet. App. 37a-38a; 793 F.2d at 356 ‘emphasis
added). The Griggs rule is simply inapposite.°

5 The rule that a trial court is bound to follow the mandate of
an appellate court is an aspect of the “law of the case” doctrine,
whereby trial courts are bound by determinations made by appel-
late courts unless the appellate court’s mandate explicitly leaves
open a question which has been addressed. See, e.g., Banco Nacional
de Cuba v. Farr, 383 F.2d 166, 177-78 (2d Cir. 1967), cert. denied,
390 U.S. 956 (1968). The doctrine does not strip a district court
of “subject matter” jurisdiction; it simply forecloses inquiry into
matters already decided. New matters, over which ‘subject matter”
jurisdiction continues, can be considered. See, e.g., Quern v. Jordan,
440 U.S. 332, 346 n.18 (1979) (doctrine of law of the case comes
into play only with aspect to issues previously determined; lower
court is free to decide matters left open by mandate of superior
court); Bankers Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943,
950 (3d Cir. 1985) (‘A trial court is... free to make any order or
direction in further progress of the case, not inconsistent with the
decision of the appellate court, as to any question not settled by the
decision.’’).

6 Tllustrative is Henry v. Farmer City State Bank, 808 F.2d 1228
(7th Cir. 1986), relied upon by Horn & Hardart in its Petition at

Horn & Hardart nevertlieless persists in urging an
erroneous and materially misleading position regarding
the effect of an appeal on the jurisdiction of the district
court. Following disposition of an appeal, and, in limited
instances, even during pendency of an appeal, a district
court may retain authority to exercise jurisdiction over
certain matters where that authority is provided by
statute, by express reservation in the judgment or man-
date, or when the matters are collateral to or independent
of those on appeal. See, e.¢., Sprague v. Ticonic National
Bank, 307 U.S. 161, 168-69 (1939); Overnite Transpor-
tation Co. v. Chicago Industrial Tire Co., 697 F.2d 789,
792 (7th Cir. 1983).

In this case, Section 2202 of the Declaratory Jude-
ment Act constitutes express statutory authority for the
district court’s retention of jurisdiction with respect to
the matters presented in the motion for further relief.
Subject matter jurisdiction exists in this case under 28
11. In Henry, the Seventh Circuit affirmed the dismissal of a com-
plaint but nonetheless reversed the entry of an injunction against
the nlaintiff’s continued prosecution of a parallel suit in state court.
Following Griggs, the court held that the district court lacked
inrisdiction over the defendants’ motion for the injunction because
a notice of appeal had been filed. Jd. at 1240. The Seventh Circuit
continued, however, that “the defendants may refile their motion
for injunction with the district court, which will again have juris-
diction over the case after our decision is final,” ‘d. at 1240 n.8, even
though the final decision was a dismissal of the plaintiff's claims,
as here.

7 Other avenues to relief could have been pursued by Amtrak.
A more cumbersome and less cfficient procedural option would have
heen to file a separate suit for further relief based on the prior
judgment. Correlatively, Amtrak could have responded initial!y to
Horn & Hardart’s complaint by answering and raising counter-
claims based upon the lease terms. See Kyle Enaireerina Co, v.
Kleppe, 600 F.2d 226, 232 (9th Cir. 1979); National Research Bu-
reanu, Inc. v. Bartholomew, 482 F.2d 386, 388-89 (3d Cir. 1973)
(per curiam): Saitzer Brothers, Inc. v. Chicago Cardbourd Co., 252
F.2d 407, 410 (7th Cir. 1958). Federal diversity jurisdiction would
exist in respect of each of these options.

10

U.S.C. § 13382(a)(1), and should not be confused with
the authority provided by the Declaratory Judgment Act
for the federal courts to grant an enlarged range of
remedies. See Skelly Oil Co. v. Phillips Petroleum Co.,
339 U.S. 667, 671 (1950); Aetna Life Insurance Co. v.
Haworth, 300 U.S. 227, 240 (1937). See also Wind-
moller v. Laqguerre, 284 F. Supp. 563, 564 (D.D.C. 1968).
In that context, Section 2202 established a mechanism
whereby all aspects of an action brought before a district
court on a complaint for declaratory relief could be
resolved in the same forum.

The intervening appeal by Horn & Hardart does not
diminish the district court’s explicit statutory authority
for further relief set out in 28 U.S.C. §§ 2201 and 2202,
nor does it eliminate the basis for diversity jurisdiction
with respect to matters not involved in the appeal. See
McNally v. American States Ins. Co., 339 F.2d 186, 187
(6th Cir. 1964) (per curiam) (plaintiff properly sought
further relief after prior declaratory judgment affirmed
by appellate court). See also, e.g., Rincon Band of Mis-
sion Indians v. Harris, 618 F.2d 569, 575 (9th Cir.
1980) (dictum) (district court has inherent power and
is empowered by the Declaratory Judgment Act to grant
supplemental relief after appeal is decided). Horn &
Hardart is thus wrong to suggest that the Court of Ap-
peals permitted the Declaratory Judgment Act to “alter
the jurisdiction of the federal courts.” Petition at 13.
The prior disposition of the claim for declaratory relief
poses no jurisdictional bar to consideration on the merits
of Amtrak’s claim for further relief based on that judg-
ment. Indeed, Section 2202 explicitly makes the declara-
tory judgment the basis of, not a bar to, further relief. As
the Court of Appeals recognized, to find such a bar in the
declaratory judgment context “would allow the party
against whom a declaratory judgment is rendered to
nullify her adversary’s right to $ 2202 relief merely by
lodging an appeal.” Pet. App. 5a; 843 F.2d 548.

11

II. Relief Was Properly Granted Under 28 U.S.C. § 2202

Under Section 2202, a district court is authorized, af-
ter reasonable notice and a hearing, to order “|f|urther
necessary or proper relief based on a declaratory judg-
ment or decree” entered under Section 2201, and may
order the relief “against any adverse party whose rights
have been determined” by the prior judgment. 28 U.S.C.
$ 2202 (emphasis added). The District Court faithfully
followed the dictates of the Declaratory Judgment Act
and concluded that its prior declaratory judgment in
Amtrak’s favor was an affirmative basis for further
relief. The District Court found Horn & Hardart’s lia-
bility for holdover-liquidated-damages and cost-on-default
to flow directly from its prior declaration that the leases
were properly terminated. Pet. App. 19a; 659 F. Supp.
1262.

In affirming the District Court, the Court of Appeals
was convinced that “Amtrak’s request for further relief
in the form of triple rent and attorney’s fees follows
absolutely from, and is based on, the District Court’s
decision in Horn & Hardart I confirming Amtrak’s right
to terminate the leasehold.” Pet. App. 6a: 843 F.2d 548.
In addition, it found that “|f]lurther relief is certainly
proper in this case because the leasehold arrangement be-
tween Amtrak and Horn & Hardart specified that a valid
notice of termination was the only factual and legal predi-
cate necessary for recovery of liquidated damages and
costs.” Pet. App. 6a; 843 F.2d 549.

Rejecting Horn & Hartdart’s argument, the Court of
Appeals found that the plain language of the Declaratory
Judgment Act does not require thet the further relief
based on the judgment “‘be ‘necessary’ to effectuate the
lease termination ruling,” but only that it be proper.
Id. The language of Section 2202 has been similarly ap-
plied by the courts and commended by the commentators.*

8 See, e.g., Besler v. U.S. Department of Agriculture, 629 F.2d
458, 454-55 (8th Cir. 1981) (per curiam) (where government pre-

36
12

As both the Court of Appeals and the District Court
explicitly recognized, this case is on all fours with Fed-
ward B. Marks Music Corp. v. Charles K. Harris Music
Publishing Co., 255 F.2d 518 (2d Cir.). cert. denied, 358
U.S. 831 11958), where a plaintiff who prevailed in a
declaratory judgment action regarding ownership of copy-
rights was subsequently allowed to seek further relief
based on the separate but related claims for infringe-
ment and an accounting. See Pet. App. 6a; 843 F.2d at
548; Pet. App. 18a-19a: 659 F. Supp. at 1262." As the

vailed as defendant in prior declaratory action aimed at preventing
it from recovering payments improperly made to ranchers, district
court erred in failing to grant government’s later motion for further
relief seeking money judgments against the original plaintiffs) :
Sakezzie v. Utah State Indian Affairs Comm'n, 215 F. Supp. 12, 21-
22 (PD. Utah 1963) (grant of request for further relief under See-
tion 2202, including attorney’s fees and costs for litigating the
original declaratory action more than two years before and for
fees and costs for pursuing the supplemental relief, is “clearly
within the power and duty of the court”): E. Borchard, Declaratory
Judgments 438-41 (2d ed. 1941). See also Powell v. McCormack.
395 U.S. 486, 499 (1969) (“A court may grant declaratory relief
even though it chooses not to issue an injunction or mandamus.
A declaratory judgment can then be used as a predicate for fur-
ther relief... .” (citations omitted)); Alexander & Alexander,
Inc. v. Van Impe, 787 F.2d 163, 166 (3d Cir. 1986) (“The prevailing
party in a declaratory judgment action subsequently may seek
further relief; such ‘further relief’ can include damages,” (em-
phasis in original; citation omitted) ): McCann v. Kerner, 436 F.2d
1342, 1244 (7th Cir. 1971) (per curiam) (Section 2202 “contem-
plates that subsequent to the issuance of a declaratory judgment,”
a court may grant further relief).

“Horn & Hardart suggests that Marks Musie is distinguishable
on the grounds that further relief in that case was sought in the
original complaint, Petition at 21 1.14, but carefully ignores the
fact that the Marks Music court explicitly rejected the argument
that a failure to allege infringement and damages in the orisinal
complaint would prevent such further relief:

[T\his argument is specious. If plaintiff had proved infringe-
ment on the trial it would have been entitled to damages under

13

Second Circuit concluded, Section 2202 ‘authorizes fur-
ther or new relief based on the declaratory judgment,
and any additional facts which might be necessary to
support such relief can be proved on the hearing pro-
vided in the section or in an ancillary proceeding if that
is necessary.” 255 F.2d at 522 (citation omitted). Just
as the declaratory judgment that Marks Musie owned
the copyrights established its right to seek damages for
infringement, the declaratory judgment that Amtrak had
lawfully exercised its right to terminate the leases on
ninety days’ notice established its entitlement to liqui-
dated damages and costs for Horn & Hardart’s holding
over beyond the ninety days."

Despite the plain language of the statute and the con-
sistent precedent. Horn & Hardar* again argues that the
further relief provision is “limited to further relief to
effectuate the underlying declaratory judgment.” Peti-
tion at 22. Although Horn & Hardart has cited a num-
Fed. R. Civ. Proc.. rule 54(e): but under the declaratory iude-

ment statute it was not compelled to take this course.
255 F.2d at 522.

© Horn & Flardart is thus wrong to suggest that Amtrak's right
to further relief was any less established by the declaratory jude-
ment here than was the plaintiff’s in Marks Music. Petition at 21
n.14. For the same reason, it is beside the point that “Horn &
Hardart vigorously disputes .\mtrak’s entitlement on the merits to
the relief it seeks.” Jd. at 20. Horn & Hardart lost on the merits
in both the District Court and the Court of Appeals and has not
sought review of the merits in this Court.

Similarly, Horn & Hardart wrongly asserts that “the final judg-
ment confirming Amtrak’s right to the premiscs was already fully
implemented, since Tforn & Hardart had vacated the premises.” /d.
at 12. See id. at 20. Horn & Hardart did not vacate until more than
five months after the leases’ terms ended, and, as both the District
Court and Court of Appeals held, Amtrak is entitled to damages
and costs resulting from the holdover. Horn & Hardart has not
challenged that holding.

ber of cases in which further relief was found necessary
to effectuate the prior judgment, Petition at 19-20 &
n.13, there is no suggestion in any of those cases that a
court may not grant further relief that is proper based
on the prior judgment. Horn & Hardart has not cited
a single federal precedent which construes Section 2202
to authorize only relief which is necessary and not relief
that is proper but not necessary.'' There is good reason
for this failure, since such a reading would elide the
word “proper” from the statute. Nor is Horn & Hardart’s
attempt to conjure up a conflict in the reported decisions
advanced by its citation to non-binding state court de-
cisions under the Uniform Declaratory Judgment Act.
The state cases do not support its position. The principal
such decision on which Horn & Hardart relies, Oklahoma
Alcoholic Beverage Control Bd. v. Central Liquor Co..
421 P.2d 244 (Okla. 1966), is entirely inapposite. The
case involved a declaratory judgment that the Board’s
“minimum price regulation” was void. A second action,
brought over two years later, involved the authority of
the Board—under an entirely different statute—to regu-
late price discounts. The second determination was in
no way predicated on the first, and the Oklahema court
treated the plaintiff’s second suit as constituting a second
cause of action rather than a request for further relief
based on the prior declaratory judgment. /d. at 247.

When Horn & Hardart complains that in following
the plain language of Section 2202, the Court of Appeals
and District Court issued “an invitation deliberately to

! The cases Horn & Hardart cites are contrary to the proposition
it seeks to establish. See Doe v. Gallinot, 687 F.2d 1017, 1025 (9th
Cir. 1981) (court may order further necessary or proper relief) ;
Rincon Band of Mission Indians v. Harris, 618 F.2d 569, 575 (oth
Cir. 1980) (Section 2202 authorizes “supplemental relief"): Teas
v. Twenticth Century-For Film Corp., 413 F.2d 1262, 1267 (Sth
Cir. 1969) (Section 2202 “authorizes necessary or proper relief”).

15

partition a case,” Petition at 23, it only exhibits its
failure to appreciate the remedial and procedural changes
wrought by adoption of the Declaratory Judgment Act.
The Act intentionally allows a greater measure of claim
splitting than in other types of cases. The structure of
the Act explicitly contemplates, and the case law con-
firms, that a plaintiff may initially seek solely a declara-
tory judgment and then, if necessary or proper, subse-
quently follow up with claims for damages or an injune-
tion that flow from the prior declaration. See, e.g., Judge
Parker’s elucidation of the purpose of the Act and of its
use as an additional remedy in two leading cases decided
on the same day shortly after its enactment. Stephenson
v. Equitable Life Assur. Soc’y, 92 F.2d 406, 409 (4th
Cir. 1937); Aetna Casualty & Surety Co. v. Quarles, 92
F.2d 321, 325 (4th Cir. 1937). To narrow the scope of
the Act as Horn & Hardart urges would not only conflict
with the plain language of the Act, but would also un-
necessarily limit the savings of judicial resources that the
Act was specifically intended to provide. See H. Rep.
1264, 73d Cong. 2d Sess. 2 (1934)."

Ill. The Doctrine Of Res Judicata Does Not Bar Amtrak’s
Claims

Application of the traditional doctrine of res judicata
does not bar Amtrak’s claims but rather confirms that the
District Court properly exercised jurisdiction under Sec-

'2 In an effort to spark the interest of the Court in the Petition,
llorn & Hardart refers for the first time to “serious due process”
concerns it alleges are raised by Section 2202’s “reasonable notice
and hearing” procedure for the grant of further necessary or proper
relief. Petition at 23. The concerns are specious; Horn & Hardart
does not (and could not) claim that it did not have ample, let alone
constitutionally adequate, notice of Amtrak’s claims. It had, and
actually invoked, every opportunity to defend against them—at
each level of the federal judiciary.

16

tion 2202. No unique or novel theories are required or
were employed by the Court of Appeals."

in this action, Amtrak as defendant moved to dismiss
or in the alternative for summary judgment on the
decloratery claim before it filed or was required to file
an answer.’ Consequently, by virtue of Fed. R. Civ. P.
(3ta), Amtrak was not required to assert any counter-
cinims. As the Court of Appeals held, where, as here, “a
defendant neither asserts, nor is required to assert, a
counterclaim, Restatement ‘Second) of Judgments § 22
explains that the previously unlitigated issues will not
later be estopped by the earlier action.” Pet. App. 8a;
843 F.2d 549 ‘citation omitted). Horn & Hardart’s ana-
lyticz! premise thus evaporates; it does net dispute this
propesiiion—it simply ignores it.

The doctrines reflected by this fundamental portion of
the Restetement have been readily applied by the federal
courts. Generally, a defendant who is not required to
bring a counterclzim under Fed. R. Civ. P. 13¢a) is not
precluded by any res judicata principles from prosecuting
its own claims in a separate subsequent suit. See County
Fuc! Co. v. Equitable Bank Corp., 832 F.2d 290, 292

' Horn & Hardart misstates “the usual prerequisites for applica-
tion of res judicata.” Petition at 24. To facilitate the Court's re-
view, relevant portions of the Restatement (Second) of Judgments
are reproduced in an Appendix to this brief.

"Thus Amtrak did not file a “pleading” within the meaning
of Fed. R. Civ. P. 7(a). Rule 13a) of the Federal Rules of Civil
Procedure states, in pertinent part:

Compulsory Counterclaims. A pleading shall state as a counter-
claim any claim which at the time of serving the pleading
the pleader has against any opposing party. if it arises out of
the transaction or occurrence that is the subject matter of the
opposing party’s claim and does not require for its adjudication
the presence of third parties of whom the court cannot acquire
jurisdiction.

(4th Cir. 1987). The courts of appeals and district
courts have uniformly held that until a responsive plead-
ing is required of a party, Rule 13(a) does not apply and
the party thus need not raise its counterclaims in order
to preserve the right to plead them subsequently or to
bring them as claims in a subsequent action."*

% The only exception to this rule is the situation where “|t!he
relationship between the counterclaim and the plaintiff's claim is
such that the successful prosecution of the second action would
nullify the initial judgment or would impair rights established
in the initial action.” Restatement (Second) of Judaments §$ 22
(2)(b). See Henry v. Farmer City State Bank, 808 F.2d 1228, 1232
(7th Cir. 1986) (quoting §22(2)(b)): Rudell v. Comprehensive
Accountina Corp., 802 F.2d° 926, 928 (7th Cir. 1986) ‘citing § 22
(2)(b)), cert. denied, 107 S. Ct. 1351 (1987); County of Cook v.
Midcon Corp., 77% F.2d 892, 908 & n.10 (7th Cir. 1985) (quoting
$ 22(2)(b)): Martino v. McDonald's Sustem, Ine.. 598 F.2d 1079,
1084-85 (7th Cir.) (where facts form basis of both defense and
counterclaim, defendant's failure to allege does not preclude use of
facts in subsequent proceeding against plaintiff; exception to rule
is that counterclaim is barred where “its prosecution would nullify
rights established by the prior action.”), cert. denied, 444 U.S. 966
(1979).

See United States v. Snider, 779 F.2d 1151, 1157 (6th Cir.
1985); Martino v. MeDonald’s System, Inc., 598 F.2d 1079, 1082
(7th Cir.), cert. denied, 444 U.S. 966 (1979): Lawhorn v. Atlantic
Refinina Co., 299 F.2d 353, 356 (Sth Cir. 1962): Central States,
Southeast & Southwest Areas Pension Fund v. Commercial Cartage
Ca., No. 86C 3268, slip op. (N.D. Il Apr. 24, 1987) (available on
Westlaw); United States v. Thompson, 262 F. Supp. 340, 342-43
(S.D. Tex. 1966): Potter v. Carvel Stores of New York, Ine., 20%
F. Supp. 462, 464-€5 (D. Md. 1962), aff'd, 314 F.2d 45 (4th Cir.
1963). In National Union Fire Ins. Co. of Pittsburgh, PA v. Jett,
118 F.R.D. 336 (S.D.N.Y. 1988), the defendant had filed in an
earlier action, as in this case, a motion to dismiss, or in the alterna-
tive for summary judgment prior to being required to file its
answer. The court granted summary judgment, or in the alternative
the motion to dismiss. The defendant later sought to pursue its
counterclaims, and the court held that where no responsive pleading
was required in the prior action, the defendant was not barred
from bringing the new action. 7d. at 337-38.

18

In the instant case Amtrak never filed a responsive
pleading because Horn & Hardart’s claim received a sum-
mary disposition before any answer by Amtrak was re-
quired.'"* Since Amtrak was not required to file an
answer, Rule 13(a) does not apply, and under longstand-
ing principles of res judicata as explicated in Section 22
of the Restatement (Second), Amtrak was not precluded
from seeking further relief.

ven if Amtrak had been plaintiff, not defendant, res
judicata would not bar the claims for liquidated damages
and costs. In the case of a plaintiff who brings an action
seeking only declaratory relief, the Restatement (Second)
provides that

‘tlhe effect of such a declaration, under this ap-
proach, is not to merge a claim in the judgment or to
bar it. Accordingly, regardless of outcome, the plain-
tiff or defendant may pursue further declaratory or
injunctive relief in a subsequent action . .. in-
clud/ing] damages which had accrued at the time
the declaratory relief was sought .

Restatement (Second) of Judgments § 33 comment ec

Ifszi. As a result, the Court of Appeals did not need
to consider whether Section 2202 “might actually enlarge
the declaratory judgment exception to claim preclusion to
permit a supplemental action even where the original
action involved more than declaratory relief.” Pet. App.
saon.6; 843 F.2d 549 n.6."% Horn & Hardart is wrong to

* This situation is entirely within the contemplation of Rules
a’ and 12(b)(6) that a motion to dismiss for failure to state
a claim tolls the requirement of filing an answer, even if it is treated
as a summary judgment motion because matters outside the com-
plaint are considered.

~The tssue was raised because the District Court missed the
mark in stating that “if applicable, traditional res judicata bars
\mtrak’s petition for further relief.” Pet. App. 24a; 659 F. Supp.
1264. Traditional! res judicata principles do not bar the defendant’s
non-compulsory counterclaims except where their prosecution would

Pe

19

insist, therefore, that ‘“[{t]he court below’ extended the
declaratory judgment exception.” Petition at 25.

Horn & Hardart’s arguments for preclusion contra-
vene fundamental principles governing the effects of a
former adjudication. In considering the non-compulsory
counterclaims of a defendant involuntarily brought into
court to respond to a complaint by an adverse party,
there is no basis to apply preclusion rules with the force
applicable to the claims of a plaintiff which have been
fully adjudicated on the merits. Under the Restatement
(Second) of Judgments and consistent judicial precedent,
defendants should not normally be required to assert their
non-compulsory counterclaims to plaintiffs’ claims at the
time and place of plaintiffs’ choosing.”

implicate the repose of the original judgment, as explained supra.
The District Court’s citation to Montana v. United States, 440 US.
147 (1979), Pet. App. 23a; 659 F. Supp. at 1264, is inapposite be-
cause that case describes general res judicata principles, 440 U.S.
at 153, in the context of the attempt by the privy of a non-prevailing
plaintiff in a prior adjudication to avoid the collateral estoppel effect
of the prior adjudication. Similarly, the treatise cited by the Dis-
trict Court, C. Wright, A. Miller & E. Cooper, Fede-al Prectice and
Procedure (1981), Pet. App. 23a, 659 F. Supp. at 1264, does not
suggest that res judicata applies broadly to defendants with non-
compulsory counterclaims. In fact, the authors state explicitly that
“(flailure to advance a merely permissive counterclaim . . . ordi-
narily does not preclude a later action,” id. § 4414 at 109, except in
the case of counterclaims that involve “direct attacks on the origi-
nal judgment based on defenses or claims that could have been ad-
vaneed in the first action,” id. at 110, or where the repose of the
first judgment is otherwise threatened with “effective destruction in
a later action by the former defendant,” id. at 111. The rule that
emerges thus is fully congruent with that enunciated in Restatement
(Second) of Judgments § 22.

19 See Kaspar Wire Works, Inc. v. Leco Engineering & Machine,
Inc., 575 F.2d 530, 536 (5th Cir. 1978) (if defendant’s claims merged
in unsuccessful declaratory action by plaintiff, impermissible result
would be that plaintiff could extinguish defendant's claims by suing
for declaratory relief and voluntarily dismissing the suit with

a= \

Apocalyptically, Horn and Hardart has asserted over
and over again before this Court, as it did before the
District Court and the Court of Appeals, that a failure
to preclude Amtrak’s claims means that a court could
never know whether its declaratory judgment would or
would not finally settle and determine the controversy
between the parties. This assertion is fallacious. Under
the principles enunciated in Restatement (Second) of
Judgments § 21, see App. la, a subsequent presentation
of counterclaims by a prior defendant would implicate
thereafter the full panoply of rules of issue and claim
preclusion as to those claims.

The instant case provides a good example of the effi-
cacy and efficiency of the preclusion rules set out in the
Restatement Second and applied by federal courts. In
this ease, the District Court exercised its discretion—at
Horn & Hardart’s insistence—to hear Horn & Hardart’s
claim for declaratory, coercive, and monetary relief and
found that claim to be invalid before any answer was
filed, or required to be filed, by Amtrak. Thereafter, by
way of a motion for further relief in the forum of the
plaintiff's choice, Amtrak chose to raise its claims for
holdover liquidated-damages and costs-on-default based
on the prior judgment. Depending upon the outcome of
this petition, the determination of these claims by the
District Court will be a final adjudication. The entire
matter has been handled in a careful and expeditious
manner with minimal taxation of judicial—or litigants’
~~resources,

prejudice); Leawhorn v. Atlantic Refining Co., 299 F.2d 353, 357
(Sth Cir, 1962); National Union Fire, 118 F.R.D. at 337-38: Restate
ment (Second) of Judgments § 22 comments a. b, d.

21
CONCLUSION

For the foregoing reasons, this Court should deny the
petition for writ of certiorari.

Respectfully submitted,

CHARLES F. LETTow *
MATTHEW D. SLATER
MICHAEL J. SUSSMAN
CLEARY, GOTTLIEB,
STEEN & HAMILTON
1752 N Street, N.W.
Washington, D.C. 20056
(202) 728-2700
* Counsel of Record Counsel for Respondent

August 8, 1988

la
APPENDIX

Restatement (Second) of Judgments $18 (1982) pro-
vides:

$18. Judgment for Plaintiff—The General Rule of
Merger

When a valid and final personal judgment is ren-
dered in favor of the plaintiff:

(1) The plaintiff cannot thereafter maintain an
action on the original claim or any part thereof,
although he may be able to maintain an action upon
the judgment; and

(2) In an action upon the judgment, the defendant
cannot avail himself of defenses he might have inter-
posed, or did interpose, in the first action.

Restatement (Second) of Judgment § 21 provides:

$21. Judgment for Defendant on His
Counterclaim

(1) Where the defendant interposes a counterclaim
on which judgment is rendered in his favor, the rules
of merger are applicable to the claim. stated in the
counterclaim, except as stated in Subsection (2).

(2) Where judgment on a counterclaim is rendered
in favor of the defendant, but he is unable to obtain
full recovery in the action because of the inability of
the court to render such a judgment and the unavail-
ability of such devices as removal to another court or
consolidation with another action in the same court,
the defendant is not precluded from subsequently
maintaining an action for the balance due on the
claim stated in the counterclaim.

2a

testatement ‘Second! of Judgment § 22 (1982) pro-
vides:

$22. [effect of Failure to Interpose Counterclaim

(1) Where the defendant may interpose a claim as
a counterclaim but he fails to do so, he is not thereby
precluded from subsequently maintaining an action
on that claim, except as stated in Subsection (2).

(2) A defendant who may interpose a claim as a
counterclaim in an action but fails to do so is pre-
cluded, after the rendition of judgment in that ac-
tion, from maintaining an action on the claim if:

‘a’ The counterclaim is required to be inter-
posed by a compulsory counterclaim statute or
rule of court, or

‘b) The relationship between the counter-
claim and the plaintiff’s claim is such that sue-
cessful prosecution of the second action would
nullify the initial judgment or would impair
rights established in the initial action.

Comment d to Section 22 explains the application of these
rules to a situation where, as here. the same facts con-
stitute a defense to plaintiff's claim and a ground for
counterclaim:

d. Defense and counterclaim—Judqment for defend-
ant; splitting claims. Where the same facts consti-
tute a defense to the plaintiff's claim and a ground
for counterclaim, and the defendant sets up these
facts as a defense but not as a counterclaim, and
after litigation of the defense judgment is given for
re defendant, the defendant is not precluded by the
rule of merger from maintaining a subsequent ac-
tion against the plaintiff based upon these facts.
See Hlustration 5. In the subsequent action, the

3a

rules of issue preclusion (see $$ 27, 28) will apply
to issues litigated and determined in the first action.

Illustration 5 to Section 22 is directly pertinent to the
instant case.

5. A brings an action against B for the negligent
driving of an automobile by B resulting in a collision
with an automobile driven by A. B in his answer
denies that he was negligent and alleges that the col-
lision was due to A’s negligence. After trial of these
issues judgment is given for B. B is not precluded
by the doctrine of merger from thereafter maintain-
ing an action against A for the damage done to him
by the collision.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1989%3A3. Public record. Not legal advice.