Petition for Writ of Certiorari — Clark v. Haas Group, Inc.

Court, &S.

FILED

91-2076

|

| dUR 26 39?

In the r

Supreme Court of the United Skies” OM

October Term 1991

SHIRLEY CLARK,

Petitioner,

v.

HAAS GROUP, INC.,

Respondent.

ON PETTTION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Paul Alan Levy

(Counsel of Record)

Alan B. Morrison

Public Citizen Litigation Group

2000 P Street, N.W., Suite 700

Washington, D.C. 20036

(202) 833-3000

Richard C. LaFond

Jay R. Khandke

1756 Gilpin Street

Denver, Colorado 80218

(303) 388-4551

June 26, 1992 Attorneys for Petitioner

QUESTIONS PRESENTED”

1. Do principles of res judicata require that, in every case

involving an employment relationship, each party must assert

every claim that is available against the other party, or be forever

barred from asserting it?

2. Where an employee sued her employer for failure to pay

her overtime, and then enters into a settlement agreement that a

releases her employer only from claims for “overtime and mini- “an

mum wages,” may a subsequent action for discriminatory dis- ~~

charge be dismissed as res judicata without considering proffered

evidence of the parties’ intent to limit the scope of the settlement? ~

* All parties below are listed in the caption. However, when the action was filed,

respondent was called Haas Publishing Company.

TABLE OF CONTENTS

Page

ee a gS TOT EA ET i

SEES See ene em ee iv

I Sa ah 1

Jurisdiction ....... CE TEE AARP Ce Ee 2

ITT srcsaivinsbsonslis. sestieasiniedanetsrinsneaiiaiasnacaccaaaccesiiassd oak 2

II aieethaanenisiilibisacindinsnintisasastiicidaiahce ec eteiea ti 2

He —- MPRNOCIN I BRN oan nsecsnanescsanvesenconcecesncecasansecoscceees. 3

REASONS FOR GRANTING THE WRIT coccccccccccccccoseeccseeccs... 6

The Decision of the Court of Appeals Conflicts with

Decisions of Several Other Circuits, and Raises

Important Questions of the Law of Res Judicata as

Well as the Ability of Parties to Settle Cases on

Terms Agreeable to Themselves.

I eect nitaseleneh ine locostnicepsngscenissriantencecss capeeec a...

TT

.

iv

TABLE OF AUTHORITIES

CASES Page:

Alexander v. Gardner-Denver Co..,

a le ee iiaicniaicenarissisannnaeincantenninsinnmnneemineintaiinn 15

.

Bormann v. AT&T Communications,

eee ee I Gee ads ID casitcicnssintinininrenicnntsisianiiennincenamiansniion 14

Brantley v. Surles, ~

Ge SN Cs BOI D sertiinnscnsnsennininsnnecnaiionennetntinininss 38

Burlington Northern R. Co. v. Strong,

ee ee Fe Ce a BE iiiniinitntirnemnemnncnnntasntsicinavenionen 9,10

Calderon Rosado v. General Electric Circuit Breakers,

Re ee Be Ce rs POD eicescisiscnnininrnnssnccsensinnnines 13, 14

Car Carriers v. Ford Motor Co.,

Fe Fe CE COED inicinncnisnciinisenisinninniaenintasnniinnsin 6

Citibank, N.A. v. Data Lease Financial Corp.,

906 F.2d 1496 (112GR Car. 19DD) nnn. ncccrarcessecsssesercaseees 13, 15

Coventry v. U.S. Steel Corp.,

RS FE SOG COG, BOGE) issnnsecnsnvnsnnssnssensscissceterensinaniennnnsn 14

DelCostello v. Teamsters,

ek re ED eeteientttiresennenerenmennnennennessnneasinennmnnnnisinnin 17

EEOC v. First National Bank of Jackson,

ee N 10

Evans v. Jeff D..,

GEER Is. FE ID sentcgrenisicensennttsntrinnnneniitinsesanennnniantinnpinitainiile 17

Fleming v. Travenol Laboratories,

Fe ee Ee FED ierieictcicennriiennnsininianis ve)

Frank v. Bloomcraft Inc.,

52 FEP Cases 1742 (S.D.N.Y. i) Oe ETD 11

Giles v. Roadway Express,

529 F. Supp,37 ee | anne ee Ne 10

Imperial Construction Mgmt. Corp. v. Laborers,

729 F. Supp. 1199 (N.D. Il. HEE itasaedslauiedatuumuadans 14

Keith v. Aldridge,

900 F.2d 736 (4th Cir. 1990) ooo. eecccccccssscssssssssssescseseccseeeceesn. 13

Kirk v. Board of Education of Bremen School District,

811 F.2d 347 (7th Cir. 1987) ooo. cccceccscsscsssssssssseescseecosseeses.. 11

Kolta v. Tuck Industries,

11 FEP Cases 142 (S.D.NLY. ROTTED iessuinsikieaiubbadnolpaamicatae 11

Lewis v. Louisville & Nashville R. Co.,

758 F.2d 219 (7th Cir. Oe OER Se WaT: 12

Machinists National Pension Fund v. Industrial Gear

Manufacturing Co.,

723 F.2d 944 (D.C. Cir. 1983) o...ccecccsssssssssssssssssssescssoseesccsss., 5

Mahroom v. Hook,

563 F.2d 1369 (9th Cir. OE We citinketnlaceuteieaRutace mite reas 7

May v. Morganelli-Heumann & Associates,

618 F.2d 1363 (9th Cir. 1980) oooceeccceccccsscsscssssscssseccseeeecccccce. 8

May v. Parker-Abbott Transfer & Storage,

899 F.2d 1007 (10th Cir. 1990) oooieeecccccccccsssesscsssseeccsseseocee 4,5

Medina v. Wood River Pipeline Co.,

809 F.2d 531 (8th Cir. INTE cclttttatiananinsuickeeinlater eee 14

Meding v. Hurd,

607 F. Supp. 1088 (D. Del. PD erininiciesnsidicbediadeiala eas 7

Vi

Nemaizer v. Baker,

Fe Fe ae Ce CD, DOE) cisisiccsnremeiniscscctsineisinsionanianans 15

Nesbitt v. Bun Basket,

780 F. Supp. 1151 (W.D. Mich. 1991) .............cccsssssssssseees 12,

Nilsen v. City of Moss Point,

701 F.2d 556 (Sth Cir. 1983) (€7t DAN) .......ecesesesesesesesesesees 6

Petromanagement Corp. v. Acme-Thomas Joint Venture,

GS FBG EB CR Ce. BBD insetnsensiaasiniensnreninnlnmenninashcnnin 4

Poe v. John Deere Co.,

GEG FB TA CAG. CTD aceneceeniensssonsansensicineorntntinscnntsiatiin 6

Riley v. American Family Mutual Insurance Co.,

RE a Ee Cy DD withcinsintinnnsnictesnsintnsnnnesnnsiistannnts 15

Ruple v. City of Vermillion,

FE Fe i Ce Ge ND cieicseisantininctitnicesinsincnnnptinsesanti 9

Shaver v. F. W. Woolworth Co.,

OGD Fe SORE CHU Ge, TD ccecnestennisiicesinsennsicrsennintnennstsiete )

Torres v. Rebarchak,

SIE POE RIP CAA CI. NOPD vcccitsccdinnc cee

UMW v. Gibbs,

DES WIE. FES CRIGG) vcccencerercensnniensnsensteansienainisaniieintinnnttnanios 11

Wu v. Thomas,

DGS FOG 1543 (1 2ete Cole. BORG) aeeicecsncsienenssseenmninnisnnevinsicnatinas 7

Young-Henderson v. Spartanburg Area Mental Health Center,

94S FOG THO (Os CO. BODE) sescerieseienananconrnsrnsntinseilsiitsannini 13

arcana

Vii

STATUTES, LEGISLATIVE MATERIALS, AND RULES

Statutes

er DTA csckacssssvsntienascriiosdbaieaminonsiamnmloseinetaieca cin ea

PI TE iuitinsiclnps ancnicceisécuedee eee ae 3

Pn REE wicnnintnidaisncpibineealealege ae ae 3

ie rN RO hsbc Shalciap ia easel Ue 3

Be ar SONNE ielsersentcoutncnistuencaidnseddsaseun ns eee 11

cg kn, | na SESW Ne ser co herp 12

Fs MEE nities cisiedateedecca atc nee 12

Age Discrimination in Employment Act

ZF US.C. $5 G1 68 200. ..naccseessscrvecsccsesesceeseseseseocsss...... Passim

Civil Rights Act of 1871,

Pie A MI dit i cictiaidacensbicterasconseanncslcsioes oe 8

Civil Rights Act of 1964, Title VII

Section 706, 42 U.S.C. § 2000€-5 ooecceccccccceccccc... 11, 15, 17

Employee Retirement Income Security Act,

29 U.S.C. $§ 1001 et Sq. ..eeeeeessssssssssssssssssssssissssssseesseseeeeececccce., 5

Equal Pay Act,

SF Aan OID scrcrtnisenwenideancodnetncbinsiitaminddasdotinsil 3

Fair Labor Standards Act (“F LSA”),

29 U.S.C. §$§ 201 Ct 50. ceeseesssccssssessssssssssssssssssescsssseecccess, passim

SRN BO, PET DUG ainsscnctesssnccersnnssesscnsee, 17

Federal Employers Liability Act,

OP I G8 IID sicincsansessesisansntnasisraistnssantssensrcces 9, 12

Vili

Older Workers Protection Act,

ra ie NU INI saccades 15

RI hy, BO WE, GIES) ions secs scccncnscssesnnnvinrenientnte 15

Rules

Federal Rules of Civil Procedure

a ah 5

Nt a ed eo ee 7

tesa NE IE I es ee ee ee ee aE ee ORE i)

____ Eee ene nee nea tae oe eo mm 7

Legislative Materials

Senate Report No. 263, 101st Cong,

2d Sess. 31-35, 61-62 (1990), reprinted in

1990 U.S. Code Cong. and Admin. News 1509 ................ 15

MISCELLANEOUS

ee IE ID essctscccencecninincctinivonssaniiaviiznsepin 11

Restatement (Second) of Judgments (1982) ..........:0-+0+ 6, 9, 11, 13

In the

Supreme Court of the United States

October Term 1991

No. 91-

SHIRLEY CLARK,

Petitioner,

v.

HAAS GROUP, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Shirley Clark petitions the Court to grant a writ of certiorari

to review the judgment of the United States Court of Appeals in

this matter.

OPINIONS BELOW

The district court denied the motion of respondent Haas

Group for summary judgment based on res judicata in an unre-

ported opinion that is set forth at pages 11a to 13a of the Appendix

(“App. 11ato 13a”). The court of appeals reversed the jury verdict

in favor of petitioner, on grounds of res judicata, in an opinion that

is reported at 953 F.2d 1235, and that is set forth at App. 1a to 9a.

JURISDICTION

The opinion and judgment of the court of appeals was

entered on January 15, 1992. App. 1a-9a. The court of appeals

denied a petition for rehearing on February 27, 1992. Jd. 10a. On

May 19, 1992, Justice White extended the time for filing a petition

for a writ of certiorari until June 26, 1992. The Court has

jurisdiction under 28 U.S.C. § 1254(1).

STATEMENT

A. Facts.

Petitioner Shirley Clark was employed by respondent Haas

Group, Inc., a publisher of apartment guides that it distributed in

approximately forty cities across the country. After she was hired

in January, 1984, Clark received glowing evaluations and rapid

promotions. She worked twelve hour days, and received seven

pay increases, bringing her annual salary to $20,500.

In 1986, Haas undertook to revamp both its organization and

its image in light of the company’s rapid growth. It promoted a

company slogan of “Haas Pizazz,” which, according to Clark’s evi-

dence that was apparently credited by the jury, placed an empha-

sis on youth. There were a number of other pieces of evidence that

also suggested that the company had a preference for younger

workers.

On October 31, 1986, petitioner was fired, at age 51, and her

duties were reassigned to a 30-year-old woman. Respondent gave

a number of reasons that would have justified her discharge, but

petitioner challenged them almost immediately by filing a charge

with, the Equal Employment Opportunity Commission, alleging

that respondent had discriminated against her because of her age

and gender.

While that claim was pending, in May, 1987, petitioner sued

respondent in the United States District Court for the District of

Colorado, seeking to recover unpaid overtime compensation

under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201

et seq. Petitioner’s claim against respondent was based solely on

an alleged company-wide policy of refusing to pay overtime;

petitioner did not raise any claim regarding her discharge, nor

allege any type of discrimination. Eventually the parties agreed

to settle the suit, and respondent sent petitioner a broad stipula-

tion of dismissal that would have released any claims of any kind

that petitioner might have against respondent “from the begin-

ning of the world” to the date of her signature on the document.

Petitioner refused to settle on that basis, and instead agreed only

to release claims for unpaid overtime compensation or minimum

wages under the FLSA and any similar state law. Respondent

agreed to modify the settlement agreement accordingly. The

parties then signed the settlement agreement on J uly 18, 1988, and

the district court entered a stipulated order of dismissal, pursuant

to the settlement agreement. Meanwhile, on October 26, 1987,

after the FLSA claim was filed, but before it was resolved, the

EEOC issued its right to sue letter. App. 12a.

B. Proceedings Below.

On October 31, 1988, petitioner sued respondent in the Uni-

ted States District Court for the District of Colorado, under the

Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. §§

601 etseq., alleging that she had been fired because of her age, and

under the Equal Pay Act, alleging that she had received less pay

than similarly situated men.! The Equal Pay Act claim was

voluntarily dismissed, and respondent moved for summary judg-

ment on the ground that the ADEA claim was barred by res

judicata. Respondent’s theory was that petitioner. could have

raised her discrimination claims against it in her previous action,

and that she could not split the claims arising out of her employ-

ment relationship with respondent into separate suits for over-

time pay and for discriminatory discharge. Petitioner quoted the

relevant language of the settlement agreement and provided an

affidavit from her counsel in the FLSA action, explaining the

negotiations that had produced that language. Based on that

history, she argued that the parties had limited their settlement to

| Phe district court had jurisdiction under 28 US.C. §§ 1331, 1337, and 1343.

eT

petitioner’s overtime claims, and that, in any event, the FLSA

action had not resolved her discrimination claims.2

The district court denied summary judgment, App. 1 1a-13a,

and the case proceeded to trial before a jury. The jury rendered

a verdict in favor of petitioner for back pay and front pay, and the

district court awarded petitioner her attorney fees. Respondent

appealed, raising a number of objections to the verdict, including

the amount of the verdict and whether front pay was a question for

the court or the jury. It also contended that the FLSA settlement

was res judicata of the discriminatory discharge claim. In this

regard, respondent relied on a previous decision of the Tenth

Circuit, Petromanagement Corp. v. Acme-Thomas Joint Venture,

835 F.2d 1329 (10th Cir. 1988), which had adopted the rule that all

claims arising out of a single contractual relationship must be

raised in a single action. In addition, respondent argued that,

because the ADEA provides for enforcement by the same proce-

dures as the FLSA, a settlement of overtime claims under the

FLSA necessarily includes ADEA claims as well.

Petitioner argued, however, that respondent had acquiesced

in the splitting of her claims, if indeed that was what had hap-

pened, when it agreed to eliminate the release of all claims “from

the beginning of the world” and substituted a narrow release of

overtime compensation and minimum wage claims. Because the

rule against claim splitting is intended to protect defendants

against being harassed by repetitive actions, a defendant should

not be heard to complain when it consents to the splitting. And,

_ in any event, petitioner argued that she had not split her claims

_ because not ail claims arising out of a single employment relation-

_ ship were part of the same transaction for purposes of res judicata.

The court of appeals reversed on res judicata grounds, thus

finding it unnecessary to reach the remaining grounds for respon-

dent’s appeal. It invoked its own decision in May v. Parker-Abbott

Transfer & Storage, 899 F.2d 1007 (10th Cir. 1990), which had

2 The settlement agreement was not introduced in the district court because it

contained a non-disclosure provision that respondent refused to waive.

extended Petromanagement to hold that the resolution of a claim

under the Employee Retirement Income Security Act (“ERISA”),

which sought to enforce provisions in a pension trust agreement

requiring an employer to make certain contributions, barred a

subsequent ERISA action to enforce another provision of the

trust agreement requiring an audit of employer records to evalu-

ate the adequacy of those contributions. Thus, actions arising

under the same contract were barred, even if the second action

arose under a statute rather than the common law. In adopting

the rule of May, the Tenth Circuit had acknowledged, 899 F.2d at

1010, that its decision conflicted with the decision of the D.C.

Circuit in Machinists National Pension Fund v. Industrial Gear

Mfg. Co., 723 F.2d 944 (1983).

In the decision below, the Tenth Circuit extended the rule in

May still further, holding that all claims -- whether or not they are

based on an employment contract -- that arise out of the same

employment relationship, necessarily arise out of a single trans-

action, and thus must be raised in a single action, or are barred.

App. 8a. This is true even when, as here, there were two legally

distinct claims with no overlap in the facts. Jd. 4a. After all, the

court reasoned, under Rule 8 of the Federal Rules, petitioner

could have included both claims in the same complaint against

respondent, id. 8a, and “res judicata precludes parties from

‘relitigating issues that were or could have been raised in the prior

action.’” Jd. 9a. The court ignored the limiting language of the

settlement agreement, in effect holding that parties may not agree

between themselves to limit the preclusive effect of a settlement.

Petitioner sought rehearing and rehearing en banc, which

were both denied.

REASONS FOR GRANTING THE WRIT

The Decision of the Court of Appeals

Conflicts with Decisions of Several Other Circuits,

and Raises Important Questions of the Law of

Res Judicata as Well as the Ability of Parties

to Settle Cases on Terms Agreeable to Themselves.

Under section 24 of the Restatement (Second) of Judgments,

which several lower federal courts, including the Tenth Circuit,

have adopted, a judgment precludes litigation of all claims am,

out of the same transaction or series of connected transactions.

Whether a factual grouping constitutes a single transaction or

series of transactions is, in turn, to be determined pragmatically,

considering whether they are related in time, space, origin or

motivation, whether they form a convenient trial unit, and whether

their treatment as a unit corresponds to the parties’ expectations

or business usages.

The decision below holds that, whenever an employee brings

a single claim against her employer, all claims arising out of the

employment relationship must be raised at the same time because

employment is a single transaction. That holding conflicts with

several different lines of authority from the other circuits. Infra,

7-12. The Tenth Circuit’s refusal to consider the parties’ intent in

applying their consent dismissal disregards both the holdings of

other circuits, and the important statutory policy regarding res

judicata generally, that waivers of rights under the ADEA --

including waivers through the settlement of litigation -- must be

voluntary and knowing. Infra, 13-15. And in both respects, the

decision below disregards both the limiting language of the Re-

statement, and the practical dangers that are posed to a continu-

ing employment relationship if, once the parties choose to air a

limited dispute, they must air or surrender all their grievances

against each other at the same time. Infra, 15-18.

3 E.g., Car Carriers v. Ford Motor Co., 789 F.2d 589, 593, 594 (7th Cir. 1986); Nilsen

v. City of Moss Point, 701 F.2d 556, 560 and n.4 (Sth Cir. 1983) (en banc); Poe v.John

Deere Co., 695 F.2d 1103, 1106 (8th Cir. 1982).

a e

It would force an employee, faced with the short limitations

period that is provided for many kinds of employment claims, to

include in her complaint every possible claim, despite the need for

careful investigation before filing as required by Rule 11; simi-

larly, because compulsory counterclaims under Rule 13(a) are

also determined based on the “same transaction,” it would force

employers to bring or waive any counterclaims arising out of the

employment relationship within the same short timeframe. And,

even worse, the parties could not decide to limit their dispute by

entering into settlement agreements that were intended to be

limited to one aspect of the employment relationship. Thus, once

a single lawsuit were initiated between an employer and em-

ployee, both sides would have to be committed to total war against

the other, in which every conceivable claim would have to be

joined and litigated.

Given these consequences, it is not surprising that no other

circuit has adopted the sweeping approach of the Tenth Circuit to

the application of res judicata to claims of employers and employ-

ees. Because of the conflict among the circuits, as well as the

dangers posed both to employment relations and to sensible

litigation of employment cases, the Court should grant certiorari.

1. The decision below is squarely contrary to the holdings of

other circuits that permit employees to raise claims arising out of

different aspects of the same employment relationship in succes-

sive actions. For example, in Wu v. Thomas, 863 F.2d 1543 (11th

Cir. 1989), a professor filed an action under various civil rights

statutes claiming that her university had discriminated against her

because of her gender in matters related to promotions and pay.

After these claims were lost at trial, she filed an action claiming

that she and her husband had been subjected to retaliation

because she claimed discrimination in the first place. The district

court held that the first action precluded the second, on the

ground that the claims in the second action could have been

included in the prior one, but the Eleventh Circuit reversed. It

noted that there was no indication that Wu had raised retaliation

claims in the gender discrimination action, and that res judicata

did not bar the prosecution of a second action against her em-

ployer based on this different claim. See also Meding v. Hurd, 607

F. Supp. 1088, 1097 (D. Del. 1985) (as originally pleaded, state suit

for unlawfully withheld benefits arose from different transaction

than improper termination alleged in federal suit under 42 U.S.C.

§ 1983, but amendment of state complaint to include claims over

termination made its disposition res judicata of part of federal

suit); Mahroom v. Hook, 563 F.2d 1369, 1377 (9th Cir. 1977)

(administrative dismissal of federal employee’s claim over al-

leged discrimination in 1971 promotion did not bar claim over

1973 promotion, because latter claim was new cause of action).

Similarly, in May v. Morganelli-Heumann & Associates, 618

F.2d 1363 (9th Cir. 1980), an architect sued a developer for failing

to make the payments required by a contract whereby the archi-

tect had been hired to design a project. After that action was

settled, May sued both the developer’s estate and a second

architect for having used his drawings in violation of the copyright

laws. The district court granted summary judgment on the ground

that the settlement of the first action precluded the second, but the

. Ninth Circuit reversed, holding that two separate claims could be

brought based on two separate causes of action involving the same

project.

And in Brantley v. Surles, 718 F.2d 1354 (Sth Cir. 1983), an

employee of a school district sued the district in state court for

having fired her for placing her son in a private, segregated school,

in violation of a state statute forbidding public schools from

requiring teachers to place their children in the same school

system in which the parent is employed. The state courts dis-

missed the action on the ground that the failure to attend the same

public school was not the sole reason for her discharge. The

employee then sued under 42 U.S.C. § 1983, alleging that, by

forcing her to choose between educating her child in the manner

she desired and her public employment, the school district had

invaded her constitutional right of family privacy. The Fifth

Circuit reversed the trial court’s grant of summary judgment on

res judicata grounds, holding that the two different claims arose

from two separate rights and involved determination of different

sets of facts, and thus the second action was not precluded by the

first. 718 F.2d at 1360.

Petitioner acknowledges that, when an employee who has

been discharged seeks judicial redress, other circuits have held

that any claims that employee had based on the same discharge

must be brought in a single action, despite the fact that they are

brought under different federal statutes, e.g., Fleming v. Travenol

Laboratories, 707 F.2d 829, 833-834 (Sth Cir. 1983), or even state

and federal laws. E.g., Shaver v. F. W. Woolworth Co., 840 F.2d

1361 (7th Cir. 1988); Ruple v. City of Vermillion, 714 F.2d 860 (8th

Cir. 1983). But all of these cases have treated the discharge as the

transaction that is involved in both cases. None has suggested that

the entire employment relationship is the transaction out of which

all the claims arose, and indeed we are aware of no other circuit

that has adopted the Tenth Circuit’s view that an employee must

bring all claims related to her employment relationship in the

same action. Indeed, one of the illustrations to the Restatement

(Second) of Judgments assumes that separate claims may be

brought pertaining to the same employment relationship. Jd. § 24,

Comment d and Illustration 8, at 201-202 (1982).

2. The Tenth Circuit’s decision is also contrary to the

consistent view of the other circuits that, for the purpose of

compulsory counterclaims, an employer’s employment-related

claims against an employee do not necessarily arise out of the

same transaction as the employee’s employment claims against

the employer. The question has repeatedly arisen under Rule 13

of the Federal Rules of Civil Procedure, which requires a defen-

dant to bring as a counterclaim all claims against the plaintiff that

arise out of the same transaction or series of transactions as the

plaintiff's claims. If all employment-related claims necessarily

arose out of the same transaction, then the compulsory counter-

claim rule, which is the mirror image of the Restatement’s rule on

res judicata, would obviously require employers to bring any

possible set-off, unfair competition, breach of loyalty, and similar

claims against the employee once the employee initiated litiga-

tion over any employment-related claim.

Yet the lower courts have repeatedly refused to do that. For

example, in Burlington Norther R. Co. v. Strong, 907 F.2d 707 (7th

Cir. 1990), an employee sued his employer under the Federal

Employers Liability Act (“FELA”) for injuries occurring during

10

his employment, and the employer tried, but failed, to have the

consequent judgment reduced by the amount of supplemental

sickness benefits that it had paid to the employee on account of

the injury. Rather than appealing the district court’s refusal to

allow a set-off, the employer sued the employee under the

collective bargaining agreement to recover the benefits, and the

employee argued that the claim was res judicata, because it arose

out of the same transaction as his employment-related injury

claim, and thus had to be pleaded as a compulsory counterclaim.

The Seventh Circuit rejected this argument, 907 F.2d at 710-712,

holding that the two claims did not arise out of the same transac-

tion, that they raised different legal and factual issues, and that

judicial economy would not be served by joining both claims in the

same action.4

Similarly, in EEOC v. First National Bank of Jackson, 614

F.2d 1004 (Sth Cir. 1980), the Commission sued an employer on

behalf of its black employees, alleging that it had discriminated

against them on the basis of their race, and the employer counter-

claimed for a set-off against those employees under the state tort

of “recoupment,” which was based on the allegation that the

EEOC’s proceedings were a conspiracy with the employee who

had brought the charge. The federal court, however, would have

had jurisdiction over the counterclaim, only if it was a compulsory

counterclaim because it arose out of the same transaction or

occurrence as the claim set forth in the complaint. The Fifth

Circuit held that the two claims did not arise out of the same

transaction. 614 F.2d at 1008. Subsequent to First National Bank,

the courts in the Fifth Circuit and elsewhere have generally held

that counterclaims do not arise out of the same transaction simply

because they arise out of the same employment relationship. E.g.,

Giles v. Roadway Express, 529 F. Supp. 37 (S.D. Miss. 1981)

(counterclaim for excess wages paid to employee who sued for

employment discrimination was not compulsory); Frank v.

4 The court also held, in the alternative, that the second claim did not exist until

the first one was resolved, and thus that res judicata was barred by the exception

for later maturing claims. Id., 907 F.2d at 712. The first holding, however,

consumed most of the court’s attention, and is squarely contrary to the Tenth

Circuit’s holding here.

|

11

Bloomcraft Inc., 52 FEP Cases 1742 (S.D.N.Y. 1990) (counter-

| claim for employee’s misconduct in tape-recording conversation

: not compulsory in ADEA action); see also Kirk v. Board of Educ.

) of Bremen School District, 811 F.2d 347, 352-355 (7th Cir. 1987)

) (teachers not precluded from suing under Title VII because of

) failure to raise counterclaim to earlier state action against them

by employer to enforce arbitrator’s decision); Kolta v. Tuck

Industries, 11 FEP Cases 142, 144 (S.D.N.Y. 1975) (counterclaim

that employee worked poorly did not arise out of same transaction

as discriminatory treatment claim).

3. The Tenth Circuit’s position that all employment-related

claims between an employer and employee arise out of the same

transaction flatly contradicts the analysis of other lower courts in

yet another area of the law, relating to the removal of pendent

state law claims where the complaint raises claims under both

state and federal law. Under 28 U.S.C. § 1441(c), ifa separate and

independent federal claim is joined with an otherwise non-

removable state claim, the federal courts have discretion either to

exercise pendent jurisdiction over all the claims, or to remand the

state claim to state court; the courts have broad discretion to

remand the separate and independent claim. But if the plaintiff

seeks recovery for a single wrong under various legal theories, the

two sets of claims are not separate and independent, and the court

will ordinarily hear both claims, especially if the federal claim goes

to trial. The question of whether the two claims are separate and

independent depends on whether they “derive from a common

nucleus of operative fact. ... [I]f... a plaintiff's claims are such

that he would ordinarily be expected to try them all in one judicial

proceeding,” then the federal courts will ordinarily try the state

law claims along with the federal ones. UMW v. Gibbs, 383 U.S.

715, 725 (1966). :

Although this is not precisely the same question as whether

one claim would be res judicata of the other, the courts have

tended to decide the question of jurisdiction under Gibbs by

deciding whether the two sets of claims arise out of the same

transaction. See 1B Moore’s Federal Practice 9 0.410, at 361 n.26

| (1992) (treating Restatement definition and Gibbs standard as

comparable, and citing Restatement (Second) of Judgments, Re-

12

porter’s Comment on § 24, Comment a, at 207 (1982)). In that

regard, the lower courts have consistently refused to treat all em-

ployment-related claims between the same employee and em-

ployer as necessarily arising out of the same transaction. For

example, in Lewis v. Louisville & Nashville R. Co., 758 F.2d219 (7th

Cir. 1985), an employee sued his employer in state court under the

FELA for injuries incurred during his employment, and amended

his complaint the following year to allege that the employer had

retaliated against him, in violation of state law, for pursuing his

FELA rights. The state court ultimately dismissed the FELA

claims, at which point the employer removed the remaining state

law claim to federal court, based on diversity jurisdiction. The

plaintiff moved to remand to state court, arguing that, under the

thirty-day limit of 28 U.S.C. § 1446(b), the employer had to

remove, if at all, as soon as the retaliation count was added to the

complaint. The employer argued that it could not have removed

at that time because the retaliation claim arose out of the same

facts and transactions as the FELA claims, which, under 28 U.S.C.

§ 1445(a), were not removable. The district court denied the

motion to remand, but the Seventh Circuit reversed. It expressly

disagreed with the employer’s argument that the retaliation claim

arose out of the same transaction as the injury claims, holding

rather that it alleged a different wrong and a different set of facts.

Therefore, the retaliation claim was separate and independent

from the FELA claim, and thus the failure to remove it within

thirty days of its inclusion in the complaint barred a later removal.

758 F.2d at 221-222.

Other lower courts have reached similar results involving

claims arising from the same employment relationship. For

example, in Nesbitt v. Bun Basket, 780 F. Supp. 1151 (W.D. Mich.

1991), an employee sued his employer in state court, alleging both

that it had fajled to pay him overtime, in violation of the FLSA,

and that he had been terminated without cause in violation of a

state law employment contract. The court held that the twoclaims

were separate and independent and that there was no need to try

them together. Accordingly, it retained jurisdiction over the

FLSA claim but remanded the state claim to state court. 780 F.

Supp. at 1153.

13

4. The decision below conflicts with the holdings of other

lower federal courts in yet another way. The court of appeals

refused to consider the evidence offered by petitioner regarding

the intent of the parties under the settlement agreement dismiss-

ing the FLSA complaint. Petitioner offered to show that the

parties intended to limit the effect of the dismissal to overtime and

minimum wage claims, and did not intend it to preclude claims

based on discriminatory discharge, but the Tenth Circuit ignored

this evidence in reversing the district court’s denial of summary

judgment on res judicata grounds. This refusal to consider the

Parties’ intent is consistent with Citibank, N.A. v. Data Lease

Financial Corp., 904 F.2d 1498, 1504-1505 (11th Cir. 1990), but

contrary to the holdings of most other lower courts.

Thus, under the Restatement (Second) of Judgments, § 26(1)(a),

ordinarily a stipulated dismissal is res judicata over other claims

.fising out of the same transaction, and thus precludes the

splitting of claims just as a litigated judgment does. However,

under the Restatement, the parties are free to agree to a splitting

of claims if that is what it takes to reach a settlement. This

Proposition logically follows from the fact that a consent judgment

is essentially a contract between the parties, whose intent governs

the interpretation of the judgment’s effect.

For example, the Fourth Circuit held in Keith v. Aldridge, 900

F.2d 736, 740 (1990), that “the preclusive effect of [a consent]

judgment is determined by the intent of the parties,” although it

then rejected the plaintiff's contention that the parties had in-

tended to carve out his second claim from the settlement of an

earlier claim. In Young-Henderson v. Spartanburg Area Mental

Health Center, 945 F.2d 770, 774-775 (4th Cir. 1991), the same

" court, while expressing doubt that an action based on a discharge

would be precluded by the settlement of an earlier action over the

failure to promote, and the subsequent suspension of, the same

employee, found it unnecessary to reach the issue because the

Parties did not intend to bar later claims, as evidenced, in part, by

the fact that the parties had not taken the later claims into account

in negotiating the consent order.

Similarly, in Calderon Rosado v. General Electric Circuit

14

Breakers, 805 F.2d 1085, 1087 (ist Cir. 1986), plaintiff brought

claims in state court for unpaid overtime compensation and for

“unjustified” discharge in violation of the law of Puerto Rico; the

state court granted summary judgment for defendant on the

overtime claim but, with the agreement of both sides, granted a

motion for voluntary dismissal of the discharge claim with preju-

dice so that the legality of the discharge could be litigated in

federal court under the ADEA, which had not been raised in the

state court. Once the ADEA action was filed, however, the

employer contended that the consent dismissal with prejudice on

the state law discharge claim was res judicata. The district court

agreed, but the First Circuit reversed, holding that, because the

rule against claim splitting is intended primarily to protect a

defendant against multiple litigation, the protection could be and

had been waived when the defendant failed to object, before entry

of the first judgment, to the plaintiff's expressed intention to

litigate an ADEA claim in a later suit. See also Torres v. Re-

barchak, 814 F.2d 1219, 1226 (7th Cir. 1987); Medina v. Wood

River Pipeline Co., 809 F.2d 531, 533-534 and n.1 (8th Cir. 1987);

Imperial Constr. Mgmt. Corp. v. Laborers, 729 F. Supp. 1199, 1205-

1206 (N.D. Ill. 1990).°

There is another body of law that also conflicts with the lower

court’s refusal to consider the parties’ intent. Under respondent’s

theory, adopted by the court of appeals, petitioner, in essence,

waived her ADEA claim when she settled her FLSA suit. But the

courts have been quite uniform in allowing waivers of ADEA

rights only when, based on a totality of the circumstances, it is

clear that the individual actually intended to release ADEA

claims and understood that he was accomplishing that goal by

entering into the agreement. E.g., Bormann v. AT&T Communi-

cations, 875 F.2d 399, 401-403 (2d Cir. 1989); Coventry v. U.S. Steel

Corp. 856 F.2d 514, 522-523 (3d Cir. 1988). In adopting this rule

5 Although the issue does not appear to have been raised in Calderon Rosado, we

note that there was no suggestion that the dismissal of the overtime claim

precluded litigation of the age discrimination claim; rather, only the dismissal of

the state law discharge claim, which sought substantially the same relief as the

ADEA claim, was said to have a preclusive effect on the ADEA claim. 805 F.2d

at 1086.

15

for the ADEA, the lower courts have reasoned that it follows from

this Court’s statement in Alexander v. Gardner-Denver Co., 415

U.S. 36, 52 n.15 (1974), that Title VII rights may be waived only

if “the employee’s consent to the settlement was voluntary and

knowing.” The Seventh Circuit has expressly applied the “know-

ing and voluntary” standard to determine whether the settlement

of a previous lawsuit included a waiver of rights under Title VII.

Riley v. American Family Mut. Ins. Co., 881 F.2d 368, 373-374

(1989). The Tenth Circuit’s refusal even to consider the parties’

intent in deciding whether petitioner surrendered her rights

under the ADEA thus conflicts with the analysis of this Seventh

Circuit decision as well.

In this case, although petitioner argued that the language

and circumstances of the settlement agreement showed that the

parties recognized that only minimum wage and overtime claims

were being resolved by the stipulated dismissal of the first action,

the Tenth Circuit declined to address her evidence of intent and

ruled solely on the fact that both actions involved the same em-

ployment relationship. Because its refusal to consider any evi-

dence bearing on the parties’ intent conflicts with the holdings of

most other federal courts, the Court should grant certiorari on

this issue as well. Although the Tenth Circuit did not expressly

address the issue, but simply ignored petitioner’s central argu-

ment below, the Eleventh Circuit has expressly disregarded the

parties’ intent in a reported opinion. Citibank, supra, 904 F.2d at

1504-1505, citing Nemaizer v. Baker, 793 F.2d 58 (2d Cir. 1986).

This case squarely presents the issue of the relevance of evidence

of the parties’ intent in dismissing the first action, on which there

is disagreement among the lower federal courts.

5. In addition to the foregoing conflicts among the circuits

that require this Court’s resolution, the decision below also

warrants review because of the damaging effect that the Tenth

© The Older Workers Protection Act amended the ADEA in 1990 to incorporate

the principle that waivers must be knowing and voluntary. 29 U.S.C. § 626(f);

see Senate Report No. 263, 101st Cong, 2d Sess. 31-35, 61-62 (1990), reprinted in

1990 U.S. Code Cong. and Admin. News 1509, 1537-1540, 1566-1567 (discussing

cases).

16

Circuit’s approach to res judicata will have on employment

. relationships and employment litigation. Although it is no doubt

harmful to the relationship between an employer and an em-

ployee to have to resolve any of their differences in court, rather

than by negotiation, there is a substantial difference between, on

the one hand, accusing the employer of maintaining an improper

policy on overtime compensation, based on a good-faith disagree-

ment about whether a particular position is managerial, and, on

the other, accusing the employer and individual supervisors of

racism, sexism, suborning perjury by punishing employees who

refuse to commit it, and the like. Similarly, there is a world of

difference between simply defending a claim over the proper

calculation of pay, and raising a counterclaim accusing the em-

ployee of running the business into the ground or stealing trade

secrets. It is scarcely conducive to good employment relations to

compel employers and employees who may have a discrete dis-

agreement that can be resolved through the courts, without ir-

reparably damaging their relationship, to include, or lose, every

possible claim that they may have against each other.

And yet, according to the Tenth Circuit, once an employee

brings a lawsuit against her employer on any claim relating to their

employment relationship, both sides are obligated to escalate the

litigation by asserting each and every one of the employment-

related claims that they have against each other. Indeed, they

must not only litigate those claims of which they are aware, and for

which they have sufficient factual basis, but they must think long

and hard about any claims they may only vaguely suspect that they

have, and for which they may be able to develop a factual basis

during the course of the litigation. And they must consider, not

only whether it would be unduly destructive of the course of the

employment relationship to bring all possible claims into the

action, but also whether they might eventually change their minds

about the desirability of preserving a civil relationship and come

to regret having waived the most egregious claim or counterclaim

by the failure to raise it at the outset.

Moreover, the employer and employee will have to raise all

of these claims even though the statute of limitations would

otherwise give them the option of waiting. Many employment-

17

related claims have a statute of limitations of only six months, e.g.,

DelCostello v. Teamsters, 462 U.S. 151 (1983); see also 42 U.S.C. §

2000e-5 (180 days to file claim with EEOC, and 90 days to sue after

receiving right to sue letter from EEOC). Other claims may be

brought three years or more after the cause of action accrues. E.g.,

29 U.S.C. § 216 (willful violations of the FLSA). If an employee

sues on any employment-related cause of action within the first

few months of its accrual, he must include all claims immediately

or risk a finding of res judicata.

The danger may be even worse from the perspective of an

employer-defendant. After all, the defendant has only twenty

days within which to file its answer and any compulsory counter-

claims, or it too risks waiver. If the Tenth Circuit is correct in

holding that the employment relationship is itself a single “trans-

action,” the employer must try to imagine all possible employ-

ment-related claims that it may eventually want to bring against

the employee, whether or not they relate to the specific claim in

the complaint, and decide whether to sue on them, all within this

brief period of time.

The adverse effects of the Tenth Circuit’s construction of the

“transaction” rule are magnified manyfold by the fact that the

parties cannot, at least in the Tenth and Eleventh Circuits, control

the preclusive effects of their own settlements. Rather, once the

lawsuit has begun, and the parties have been forced to level all of

their guns at one another, they must keep blasting away to a final

conclusion on every conceivable claim, because, even if they

intend to limit a settlement to a particular issue, while reserving

the right to disagree on the other issues, the courts will not honor

the parties’ expressed intentions, but will insist on deciding

whether there is res judicata based solely on the relationship

between the two actions. Like a rule that removes the subject of

attorney fees from bargaining, a rule that in effect forces all

possible claims into the bargaining, and makes it more difficult for

parties to negotiate limited settlements if that is the only matter

on which they can agree, runs counter to the important federal

policy encouraging negotiated settlements. See Evans v. Jeff D.,

475 US. 717, 733-738 (1986).

18

The doctrine of res judicata is intended te protect defen-

dants against excessive litigation and to reduce to workload of the

courts. It is hard to believe that a doctrine that pushes employees

and employers to bring more claims against each other, and then

prevents them from settling less than all of their disagreements,

will accomplish either of those objectives. Indeed, employment

law is one of the fastest growing legal specialties, in light of both

the increase in state and federal causes of action and the height-

ened public attention given to various issues of discrimination.

The Court should grant review now to consider the desirability of

an approach to res judicata that is likely to generate more

employment-related litigation and the animosity that inevitably

results from it.

The scope of claim preclusion, and the ability to limit the

effect of res judicata through the negotiation of a settlement

agreement, are questions on which all parties need to know the

answers in advance of their litigation and settlement decisions,

rather than learning in hindsight after the legal questions have

percolated among the lower courts. This is an area in which the

parties, at least to the extent that they are conscious of their

possible claims, can protect themselves by taking the proper steps.

Because the decision below threatens to frustrate the objectives

of the law of res judicata, as well as because of the specific conflicts

among the lower federal courts that are raised in this petition, the

Court should grant certiorari.

CONCLUSION

The writ of certiorari should be granted.

19

Respectfully submitted,

Paul Alan Levy

(Counsel of Record)

Alan B. Morrison

Public Citizen Litigation Group

Suite 700

2000 P Street, N.W.

Washington, D.C. 20036

(202) 833-3000

Richard C. LaFond

Jay R. Khandke

1756 Gilpin Street

Denver, Colorado 80218

(303) 388-4551

June 26, 1992 Attorneys for Petitioner”

* Counsel acknowledge the invaluable assistance of Jon Romberg, then a student

at the Northeastern University School of Law, in preparing this petition.

la

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

SHIRLEY CLARK, )

)

Plaintiff-Appellee, )

)

v. ) No. 90-1353

) No. 90-1362

HAAS GROUP, INC., )

)

Defendant-Appellant. )

APPEAL FROM THE UNITED STATES DISTRICT

COURT

FOR THE DISTRICT OF COLORADO

(D.C. No. 88-Z-1789)

SUBMITTED ON THE BRIEFS.

Richard C. LaFond and Jay R. Khandke of Denver, Colorado,

attorneys for Plaintiff-Appellee.

James J. Thomas, II and David L. Balser of Long, Aldridge &

Norman, Atlanta, Georgia, attorneys for Defendant-Appellant.

Before McKAY, Chief J udge, BARRETT and BRORBY,

Circuit Judges.

BARRETT, Senior Circuit J udge.

2a

Hass Group, Inc. (HGI) appeals from the judgmententered

in favor of Shirley Clark (Clark) and two orders of the district

court denying its motions for summary judgment and for judg-

ment notwithstanding the verdict, a new trial, or remittitur.

HGI is in the business of publishing and distributing apart-

ment guides in approximately forty cities. HGI sells advertising

in its guides to various apartment owners. The guides are

distributed free of charge to the public by placing them in various

retail outlets including supermarkets and convenience stores.

Clark, then age 49, was employed with HGI on January 11,

1984. She worked for HGI until October 31, 1986. During her

employment with HGI, Clark worked as a distribution co-man-

ager, distribution manager, and assistant regional distribution

supervisor. Clark’s work included, but was not limited to, delivery

of the guides, promotion of the guides, overseeing and imple-

menting all areas of distribution of the guides, and coordinating

with the home office.

HGI fired Clark, then fifty-one years of age, on October 31,

1986, citing nonperformance of job duties, refusal to do assigned

work, neglect in turning in travel reports, and failure to follow up

on correspondence with King Soopers, nearly resulting in the loss

of the account. Several months later, Clark went into the maga-

zine distribution business as self-employed until June, 1988.

Clark sued HGI in the federal district court for the District

of Colorado on May 18, 1987, under the Fair Labor Standards Act,

29 U.S.C. § 216(b), to recover unpaid overtime compensation,

liquidated damages, and attorney’s fees and costs. The parties

subsequently filed a stipulated motion to dismiss Clark’s action

with prejudice. On July 27, 1988, the court entered an order

dismissing the action with prejudice, directing the parties to bear

their own costs.

In July, 1988, Clark went to work as an assistant distribution

manager for HGI’S only competitor in Denver, Colorado, at a

salary of $18,000.00 per year. On November 1, 1988, Clark was

promoted to distribution manager at a salary of $25,000.00 per

year. She was terminated three and one-half months later.

On October 31, 1988, Clark filed the instant suit against HGI

in the same federal district court in which she had filed her first

suit. Her complaint was identical to her complaint in the first suit

insofar as it was predicated exclusively on her employment at HGI

3a

from January 11, 1984, through October 31, 1986. Clark asserted

two claims, i.e., (1) that HGI had deprived her of equal pay under

the Equal Pay Act, 29 U.S.C. § 206(d), and (2) that HGI had

discriminated against her because of her age in violation of the

Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§

621-634. She sought damages in the form of back pay, front pay,

liquidated damages, attorney fees and costs.

Within her complaint, Clark alleged that HGI had paid her

“at a rate less than the rate [HGI] paid males for work perform-

ance requiring equal skill, effort, and responsibility, and per-

formed under similar working conditions,” (Addendum, Part

One, Tab 4 at p. 6), and that HGI’s “acts, conduct, and practices

.. constituted age-based discrimination against [her] with respect

to her compensation, terms, conditions and/or privileges or

employment in violation of [ADEA].” Id. at p. 10.

HGI moved for summary judgment, alleging that the doc-

trine of res judicata barred Clark’s suit. In denying HGI’s motion,

the court found:

The doctrine of res judicata prohibits a party from

asserting in a second lawsuit any matter that might have

been asserted in the first lawsuit. Prospero Associates

v. Burroughs Corp., 714’ F.2d 1022, 1025 (10th Cir.

1983). In order for the doctrine to apply, three ele-

ments must be present: (1) the first suit must have

proceeded to a final judgment on the merits; (2) the

parties must be identical or in privity; and (3) the suits

must be based on the same cause of action.

Here the first two elements are present .... The

court concludes, however, that the two suits are not

based on the same cause of action.

The Tenth Circuit Court of Appeals in Petroman-

agement Corp. v. Acme-Thomas Joint Venture, 835

F.2d 1329 (10th Cir. 1988) adopted the transactional

approach, advocated by the Restatement (Second) of

Judgments § 24 (1982), to the third element. This

pragmatic approach requires the Court to take into

account three factors: ‘whether the facts are related in

4a

time, space, origin, or motivation, whether they form a

convenient trial unit, and whether their treatment as a

unit conforms to the parties’ expectations or business

understanding or usage,’ Restatement § 24(2). In

determining trial convenience, the court shall examine

to what extent the witnesses or proofs in the second

action tend to overlap the witnesses or proofs in the

first action. Restatement § 24, comment b.

In the first lawsuit, plaintiff sued only for unpaid

overtime compensation, However, in the case at bar,

the wrongasserted is the alleged discrimination against

plaintiff. In applying the factors of the Restatement, it

appears that the first factor is not met, since the facts

needed to prove a charge of discrimination are very

different in motivation and origin from the facts needed

to prove the overtime compensation charge. Further-

more, the second factor is not present. The proof, if not

the witnesses, in the second lawsuit will be quite difter-

ent from that in the first lawsuit. Plaintiff will have to

go through the more complex methods of proving sex

and age discrimination.

(Addendum, Part One, Tab 5 at pp. 2-3).

Prior to trial, the parties filed a stipulated motion to dismiss

Clark’s Equal Pay Act claim. The district court subsequently

entered an order dismissing the claim with prejudice, thereafter,

Clark’s case proceeded to trial solely on her ADEA claim. The

jury returned a verdict awarding Clark $65,533.00 in back pay and

$598,226.00 in front pay. The district court also awarded Clark

attorney fees of $33,019.50. HGI’s motions for judgment notwith-

standing the verdict, a new trial, or remittitur were denied.

On appeal, HGI contends that the court erred in: deciding

that Clark’s claim was not barred by res judicata; deciding that

front pay could be awarded even though Clark had obtained a

replacement job at a higher salary prior to trial; allowing the jury

to determine the amount of front pay to be awarded; instructing

the jury with respect to front pay.

HGI also contends that the amount of the jury’s front pay

Sa

award was not supported by the evidence; the jury’s back pay

award was not supported by the evidence; the court erred in

admitting Clark’s written calculations of purported lost wages; the

court erred in denying its motion for a new trial, or, in the

alternative, remittur; and the award of attorney fees should be

reversed. Because of its dispositive nature, our discussion will be

limited to HGI’s contention that Clark’s instant action was barred

by res judicata.

As set forth, supra, the district court denied HGI’s motion

for summary judgment based on res judicata after: finding that

“the two suits are not based on the same cause of action” and “the

facts needed to prove a charge of discrimination are very different

in motivation and origin from the facts needed to prove the

overtime compensation charge.”

In reviewing a grant of summary judgment we utilize the

me standard that the district court employs. Metro Oil v. Sun

Refining & Marketing Company 936 F.2d 501, 503 (10th Cir.

1991). We view the evidence most favorably to the nonmoving

party to ascertain whether a genuine issue of fact exists; we review

legal questions de novo. Merrick v. Northern Natural Gas Co.,

911 F.2d 426, 429 (10th Cir. 1990). We also review de novo a

district court’s order denying a motion for judgment notwith-

standing the verdict, applying the same standard applied by the

district court. Heyen v. United States, 945 F.2d 359, 362 (10th Cir.

1991). A district court’s conclusions as to res judicata are

conclusions of law and reviewable de novo. N.A.A.C.P. v. Hunt,

891 F.2d 1555, 1560 (11th Cir. 1990).

Res judicata generally applies where there is an identity of

parties and of claims and a final judgment on the merits. Sjl-Flo,

Inc. v. SFHC, Inc., 917 F.2d 1507, 1520 (10th Cir. 1990). It is

designed to ensure the finality of judicial decisions. Brown v.

Felsen, 442 U,S. 127, 131 (1979). Under the doctrine of res

judicata, a final judgment on the merits of an action precludes the

parties or their privies from relitigating issues that were or could

have been raised in that action. Federated Department Stores,

Inc. v. Moitie, 452 U.S. 394, 398 (1981); Allenv. McCurry, 449 U.S.

90, 94 (1980); Northern Natural Gas Company v. Grounds, 931

F.2d 678, 681 (10th Cir. 1991) (Under res judicata, or claim

preclusion, a final judgment on the merits of an action precludes

the parties or their privies from relitigating issues that were or

6a

could have been raised in the prior action); Sil-Flo, Inc. v. SFHC

Inc., supra. “Stated alternatively”, under the doctrine of res

judicata, a final judgment on the merits bars further claims by

parties or their privies based on the same cause of action. Mayv.

Parker-Abbott Transfer and Storage, Inc., 899 F.2d 1007, 1009

(10th Cir. 1990), quoting, Petromanagement Corp. v. Acme-

Thomas Joint Venture, 835 F.2d 1329, 1335 (10th Cir. 1988),

quoting, Brown v. Felsen, 442 U.S. 127, 131 (1979).

Here, there was an identity of parties; Clark and HGI were

the same, and only, parties in both suits. Moreover, the stipulated,

voluntary dismissal of Clark’s first suit, approved by the court with

prejudice, was a judgment on the merits. Brooks v. Barbour

Energy Corporation, 804 F.2d 1144, 1146 (10th Cir. 1986). Under

such circumstances, res judicata barred Clark’s instant suit to the

degree that it was based on the same cause of action as her first

suit.

Determining what constitutes a single cause of action has

long been a troublesome question. Petromanagement v. Acme-

Thomas Joint Venture, 935 F.2d at 1335. In Mayv. Parker-Abbott

Transfer and Storage, Inc., supra, we stated:

In order to determine what constitutes a single

‘cause of action’ in any given case, this circuit applies

the transactional approach of the Restatement (Sec-

ond) of Judgments § 24 (1982):

(1) When a valid and final judgment rendered in

an action extinguishes the plaintiff's claim pursuant to

the rules of merger or bar (see §§ 18, 19), the claim

extinguished includes all rights of the plaintiff to reme-

dies against the defendant with respect to ail or any part

of the transaction, or series of connected transactions,

out of which the action arose.

(2) What factual grouping constitutes a ‘transac-

tion’, and what groupings constitute a ‘series’, are to be

determined pragmatically, giving weight to such con-

siderations as to whether the facts are related in time,

space, origin or motivation, whether they form a con-

venient trial unit, and whether their treatment as a unit

oc date § Ria whe a . “

AOI ag oa >>

OPN SEAMEN Pe OR OA. en La EP. rE

Ta

conforms to the parties’ expectations or business under-

standing or usage. ,

... Under this approach, this circuit also recog-

nizes that ‘a “contract” is generally considered to be a

“transaction,” so that all claims of contractual breach

not brought in an original action would be subject to bar

of claim preclusion, so long as the breaches antedated

the original action’. . . .

899 F.2d at 1009-10.

In May v. Parker-Abbott Transfer and Storage, Inc., supra,

we applied res judicata to bar a second suit, holding that “[h]ere,

appellant has brought one suit to force the payment of delinquent

monthly contributions (late delivery), and now brings another

seeking an audit to ensure the accurate calculation of those

contributions ....” 899 F.2d at 1010.

Inasmuch as the doctrine of res judicata precludes parties

from relitigating issues that were or could have been raised,

parties cannot defeat its application by simply alleging new legal

theories. See: Bill’ 7 j iliti

887 F.2d 242 (10th Cir. 1989) (inasmuch as coal buyer had a full

opportunity to litigate its antitrust claims in earlier case involving

breach of contracts, res judicata barred subsequent suit attacking

termination clause as being unduly restrictive of competition

among coal suppliers); ing v. Ci V

Colorado, 790 F.2d 67 (10th Cir. 1986) (res judicata barred

plaintiff's 42 U.S.C. §§ 1981 and 1983 claims for wrongful termi-

nation because of sex and race where plaintiff failed to raise sex

and race discrimination in prior state action when she challenged

her employment termination based upon charges that she did not

perform her duties satisfactorily or follow supervision);

y. Travenol Laboratories. Inc., 707 F.2d 829, 833 (Sth Cir., 1983)

(quoting Nilsen v. City of Moss Point, 701 F.2d 556, 559 (Sth Cir.

1983) (en banc) (adverse judgment on the merits in a Title VII

action barred successive § 1983 claim where primary right and

duty asserted and the primary wrong complained of are the same

in each action); In Re Air Crash at Dallas/Fort Worth Airport,

861 F.2d 814, 816 (Sth Cir. 1988) (a legal theory or claim is part of

8a

the same cause of action asa prior claim if it arises from “the same

operative nucleus of fact’’); Smith v. City of Chicago, 820 F.2d 916,

918 (7th Cir. 1987), quoting Car Carriers, Inc. v. Ford Motor Co.,

789 F.2d 589, 593 (7th Cir. 1986 (even though one group of facts

may give rise to different claims for relief upon different theories

of recovery, there remains but a single cause of action); Mills v.

Des Arc Convalescent Home, 872 F.2d 823, 826-827 (8th Cir.

1989) (prior judgment in Title VII suit barred § 1981 suit based on

same transaction); Cemer v. Marathon, 583 F.2d 830 (6th Cir.

1978) (Where plaintiff, following his employment discharge, first

filed suit alleging that his termination violated the ADEA and that

action was dismissed, constituting a final adjudication on the

merits, plaintiff's subsequent suit in different court alleging a

breach of employment contract was barred by res judicata; both

suits sought to remedy a single alleged wrong - the plaintiff's

discharge).

Here, the “transaction” was Clark’s employment with HGI,

_ and her claims of breach of employment duties asserted against

HGI, in totality (the two lawsuits) involved (a) unpaid overtime,

(b) back pay and front pay damages under the ADEA, (c)

damages under the Equal Pay Act, and (d) attorney fees and costs.

Had each of these claims been asserted by Clark in her complaint

filed in the first suit, they would have been heard and determined.

There is no provision in the federal rules of civil procedure

requiring that a complaint state a “cause of action” or allege

“facts.” Rather, Fed. R. Civ. P. 8(a) provides that a pleading must

set forth certain criteria in order to constitute a “claim” for relief.

The code permits a plaintiff to plead alternatively and the court

is authorized to award the plaintiff such relief as the evidence

entitles. Thus, Rule 8(a) eliminates the “cause of action” concept,

and Rule 8(e)(2) permits a party to set forth two or more

statements of ““claim” alternatively or hypothetically. See also

Rule 8 (a)(3) (relief may be demanded in the alterative); Rule

18(a) (a party asserting in original claim may join as many claims,

legal, equitable, or maritime, as he has against an opposing party).

We hold that the district court erred in denying HGI’s

motion for summary judgment based on res judicata. As set forth,

supra, Clark filed the instant suit in the same federal district court

where she had filed her first suit, some eighteen months before.

The parties were identical. There was a single “transaction” in

9a

that the “claims” in each case were predicated on Clark’s employ-

ment with HGI from January il, 1984 through October 31, 1986,

The only distinction in the two suits involved the legal theories

Clark advanced. However, res judicata precludes parties from

“relitigating issues that were or could have been raised in the prior

action.” Northern Natural Gas Company v. Grounds, Supra, at

681.

Notwithstanding the district court’s finding to the contrary,

we must hold that the two actions were “related in time, space,

origin, or motivation.” e d d § 24

(1982), supra. Furthermore, the “claims” asserted in the two

cases formed a convenient trial unit,” id., particularly in that the

various “claims” and legal theories were predicated exclusively on

Clark’s employment relationship with HGI. By remitting the

instant case to proceed, the district court allowed “precisely the

sort of Piecemeal litigation, unnecessary expense, and waste of

judicial resources that the doctrine of res judicata is designed to

prevent.” May v. Parker- a d Stora c., 499

F.2d at 1010.

REVERSED AND REMANDED for further proceedings

consistent herewith.

10a

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

SHIRLEY CLARK,

Plaintitt - Appellee,

Nos. 90-1353

90-1362

\

HAAS GROUP, INC.,

ld dd

Defendant - Appellant.

ORDER

Entered February 27, 1992

Before McKAY, Chief Judge, BARRETT, HOLLOWAY,

LOGAN, SEYMOUR, MOORE, ANDERSON, TACHA,

BALDOCK, BRORBY, and EBEL, Circuit Judges.

This matter comes on for consideration of appellee’s amended

motion to supplement the record and appellee’s petition for

rehearing and suggestion for rehearing en banc.

Upon consideration whereof, the motion to supplement the

record is denied. The petition for rehearing is denied by the panel

that rendered the decision.

In accordance with Rule 35(b), Federal Rules of Appellate

Procedure, the suggestion for rehearing en banc was transmitted

to all of the judges of the court who are in regular active service.

No member of the panel and no judge in regular active service on

the court having requested that the court be polled on rehearing

en banc, Rule 35, Federal Rules of Appellate Procedure, the

suggestion for rehearing en banc is denied.

Entered for the Court

/s/

ROBERT L. HOECKER, Clerk

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 88-Z-1789

SHIRLEY J. CLARK,

Plaintiff,

v.

HAAS PUBLISHING COMPANY,

Defendant.

ORDER

This matter is before the Court on defendant’s Combined

Motion And Brief To Dismiss Or In The Alternative Motion And

Brief For Summary Judgment. Because the motion considers

matters outside the pleadings, the Court will consider the Motion

For Summary Judgment.

The Complaint asserts claims for relief under the Equal Pay

Act, 29 U.S.C. § 206(d), and the Age Discrimination And Employ-

ment Act of 1967, 29 U.S.C. §§ 621-639. This Court has jurisdic-

tion under 29 U.S.C. §§ 206(d), 216(b), 626(c)(1), and 633(a) and

28 U.S.C. § 1331, 1337, and 1343. The Court has read the briefs

and reviewed the applicable case law, and is fully informed. A

hearing would not materially assist the Court in deciding this

matter.

Defendant argues that the doctrine of res judicata, or claim

preclusion, bars this lawsuit. The Court disagrees and denies the

defendant’s Motion For Summary Judgment.

Defendant employed plaintiff in its business from January

1984 through late October 1986, when plaintiff was discharged. In

May 1987 plaintiff filed a Complaint in the United States District

Court for the District of Colorado, Civil Action No. 87-F-722,

l2a

alleging a cause of action for unpaid overtime compensation

under § 16(b) of the Fair Labor Standards Act, 29 U.S.C. §216(b).

That lawsuit was dismissed with prejedice pursuant to a settle-

mentagreement and stipulated motion to dismiss on July 27, 1988.

Plaintiff also filed two complaints with the Equal Employ-

ment Opportunity Commission (EEOC) in late 1986 alleging that

defendant discriminated against plaintiff on the basis of her sex

and/or her age. EEOC issued its right to sue letter on October 26,

1987, and this Complaint was filed on October 31, 1988.

The doctrine of res judicata prohibits a party from asserting

inasecond lawsuit any matter that might have been asserted in the

first lawsuit. Prospero Associates v. Burroughs Corp., 714 F.2d

1022, 1025 (10th Cir. 1983). In order for the doctrine to apply

three elements must be rpesent: (1) the first suit must have

proceeded to a final judgment on the merits; (2) the parties must

be identical or in privacy; and (3) the suits msut be based on the

Same cause of action.

Here the first two elements are present. The parties in the

two lawsuits are identical, and the first suit, a dismissal with

prejedice, is a final judgment on the merits. See e.g. Lawlor v.

National Screen Service Corp., 349 U.S. 322 (1955). The Court

concludes, however, that the two suits are not based on the same

cause of action.

The Tenth Circuit Court of Appeals in Petromanagement

Corp. v. Acme-Thomas Joint Venture, 835 F.2d 1329 (10th Cir.

1988), adopted the transactional approach, advocated by the

Restatement (Second) of Judgments § 24 (1982), to the third

element. This pragmatic approach requires the Court to take into

account three factors: “whether the facts are related in time,

space, origin, or motivation, whether they form a convenient trial

unit, and whether their treatment as a unit conforms to the

parties’ expectations or business understanding or usage.”

Restatement § 24(2). In determining trial convenience, the court

shall examine to what extent the witnesses or proofs in the second

action tend to overlap the witnesses or proofs in the first action.

Restatement § 24, comment b.

In the first lawsuit, plaintiff sued only for unpaid overtime

compensation. However, in the case at bar, the wrong asserted is

the alleged discrimination against plaintiff. In applying the

factors of the Restatement, it appears that the first factor is not

13a

met, since three facts needed to prove a charge of discrimination

are very different in motivation and origin from the facts needed

to prove the overtime compensation charge. Furthermore, the

second factor is not present. The proof, if not the witnesses, in the

second lawsuit will be quite different from that in the first lawsuit.

Plaintiff will have to go through the more complex mehods of

proving sex and age discrimination. Accordingly, it is

ORDERED that defendant’s Motion For Summary Judg-

ment is denied.

DATED at Denver, Colorado, this 12th day of December,

1989.

BY THE COURT:

/s/

ZITA L. WEINSHIENCK, Judge

United States District Court