UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
February 25, 2010
EUGENE GENCHEV, PLAINTIFF,
DETROIT DIESEL CORPORATION, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge
ORDER DENYING MOTION FOR RULE 11 SANCTIONS (DOC. 38)
Pending before the Court is Defendant Detroit Diesel Corporation's ("DDC") motion for sanctions under Federal Rule of Civil Procedure 11. Plaintiff Eugene Genchev opposes.
The Court decides the matter on the papers submitted and without oral argument. See S.D. Cal Civ. R. 7.1(d.1). For the reasons stated below, the Court DENIES the motion. (Doc. 38.)
The factual background has been addressed in the Court's previous orders, and thus need not be repeated here. It is sufficient to state that this lawsuit arises out of mechanical problems with two Freightliner tractors that Plaintiff Eugene Genchev purchased in 2004 and 2005.
After attempts to repair the tractors, Genchev eventually filed a lawsuit against Freightliner, LLC, for failing to disclose known non-conformities with the tractors, and for failing to pay for certain warrantied repairs (the "Freightliner Action"). Freightliner's warranties expressly excluded problems with the tractors' engines. Accordingly, after prevailing at trial and settling with Freightliner, Genchev filed this lawsuit against DDC, who manufactured and warrantied the tractors' engines.
DDC now seeks Rule 11 sanctions against Genchev. DDC's two primary grounds for sanctions are: (1) Genchev is attempting to relitigate claims and items of damages that were raised in the Freightliner Action; and (2) Genchev continues to ignore controlling Ninth Circuit precedent. The Court will address each issue separately.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 11 provides that "[e]very pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney's name...." Fed.R.Civ.P 11(a). In signing the document, the attorney certifies that the pleading, written motion or other paper, to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfirvolous argument for extending, modifying, or reversing existing law or for establishing new law.
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.
Id. 11(b). Upon a determination that Rule 11(b) has been violated, the court "may impose an appropriate sanction on any attorney, law firm, or party that violated the rule...." Id. 11(c)(1).
A. DDC Has Not Established That Genchev's Claims And Damages Are Barred By Collateral Estoppel
DDC's primary basis for Rule 11 sanctions is Genchev's alleged improper relitigation of "claims and damages he previously litigated in his action against Freightliner." (Reply, 1:10--12.) DDC has unsuccessfully advanced this argument in two previous motions, and the Court is again unimpressed with this theory.
The central problem with DDC's argument is that it appears to be based on the wrong legal doctrine. Issue preclusion, or collateral estoppel, bars "successive litigation of an issue of fact or law...." Taylor v. Sturgell, 128 S.Ct. 2161, 2171 (2008)(quoting New Hampshire v. Maine, 532 U.S. 742, 748 (2001)). In contrast, claim preclusion bars "lawsuits on 'any claims that were raised or could have been raised' in a prior action." Stewart v. U.S. Bancorp, 297 F.3d 953, 956 (9th Cir.2002). Moore's Federal Practice describes the differences in the two doctrines as follows:
...the application and effect of these two doctrines is quite different. Claim preclusion prevents a party from suing on a claim which has been previously litigated to a final judgment by that party or such party's privies and precludes the assertion by such parties of any legal theory, cause of action, or defense which could have been asserted in that action. Issue preclusion prevents relitigation of issues actually litigated and necessary for the outcome of the prior suit, even if the current action involves different claims. 18 Moore's Federal Practice, §131.10[a] (Matthew Bender 3d ed.) (emphasis in bold added).
The two doctrines also differ in their applicable elements. Issue preclusion requires the moving party to establish: (1) the issue necessarily decided in the previous lawsuit is identical to the one sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding. Reyn's Pasta Bella, LLC v. Visa USA, Inc.,442 F.3d 74, 746 (9th Cir. 2006). Claim preclusion, on the other hand, requires the moving party to prove:
(1) an identity of the claims, (2) the previous action resulted in a final judgment on the merits, and (3) the present action must involve the same parties or persons in privity of interest. Providence Health Plan v. McDowell, 385 F.3d 1168, 1173--1174 (9th Cir. 2004).
Here, DDC's Rule 11 motion, and its most recent summary-judgment motion, argue that Genchev's claims are barred by issue preclusion. (DDC's P&A, 8:3--10.) However, DDC failed to identify the issue Genchev is seeking to relitigate, instead repeatedly contending that Genchev is pursuing the same "claims" and "damages." Relitigation of claims and damages, however, would be barred by claim preclusion: "A court should have little difficulty in applying claim preclusion to an action asserting identical legal theories, seeking the same damages, or asserting the same defenses as a prior action involving the same parties and based on the same factual allegations." See 18 Moore's Federal Practice, § 131.20 (emphasis added). Thus, by failing to rely on the correct legal doctrine, DDC--who was undisputably not a party in the Freightliner Action--has failed to demonstrate that it is in privity with the defendant from the previous case.
For this reason, collateral estoppel does not support DDC's request for Rule 11 sanctions.
B. Genchev's Alleged Failure To Acknowledge Ninth Circuit Precedent
DDC also argues that Genchev and his counsel should be sanctioned for continually ignoring "the impact of Clemens v. DaimlerChrysler Corp., 530 F.3d 852 (9th Cir. 2008), controlling Ninth Circuit authority, on his breach of implied warranty claims." (DDC P&A, 3:23--25.) The Court disagrees.
Genchev filed this lawsuit on April 18, 2008. (Not. Removal, ¶1, Ex. 2.) Clemens was published on June 19, 2008, and on July 24, 2008 the decision was amended and superseded by Clemens v. DaimlerCHrysler Corp., 534 F.3d 1017 (9th Cir. 2008). Accordingly, at the time Genchev and his counsel filed (and signed) the operative Complaint, Clemens was not controlling law. For this reason alone, DDC's argument fails.
Moreover, the claim DDC contends ignores Clemens is Genchev's breach of implied warranty theory. According to DDC, this claim lacks merit because "Plaintiff has no grounds to challenge the lack of privity, required for his breach of implied warranty claims...." (Reply, 4:24--25.)
However, the Complaint includes only one cause of action for breach of warranties, which is based on both implied and express warranties. And this Court has recently determined that Genchev's claim for breach of express warranties is valid. 92/23/10 Order [Doc. 55], 4:2-23.) Thus, even assuming DDC's privity argument is correct, Clemens would not require dismissal of Genchev's sole cause of action for breach of warranties.
Under these circumstance--and particularly given that Clemens was published after the Complaint was filed--the Court finds Genchev's pursuit of the breach of warranties cause of action does not violate Rule 11.
IV. CONCLUSION &ORDER
For the reasons stated above, the Court DENIES DDC's motion for Rule 11 sanctions. (Doc. 38.)
IT IS SO ORDERED.
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