Phillips USA, Inc. v. Allflex USA, Inc.

150 F.R.D. 198, 1993 U.S. Dist. LEXIS 10793, 1993 WL 294436
CourtDistrict Court, D. Kansas
DecidedJuly 30, 1993
DocketNo. 92-2405-JWL
StatusPublished
Cited by2 cases

This text of 150 F.R.D. 198 (Phillips USA, Inc. v. Allflex USA, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Phillips USA, Inc. v. Allflex USA, Inc., 150 F.R.D. 198, 1993 U.S. Dist. LEXIS 10793, 1993 WL 294436 (D. Kan. 1993).

Opinion

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

I. Introduction

This matter comes before the court on defendant N.J. Phillips, PTY, Ltd.’s motion to dismiss counts V and VI for failure to state a claim (Doc. # 131). The court held a hearing on this motion on July 29, 1993. As set forth below, the court has determined that it must treat the motion to dismiss as a motion for summary judgment and the parties are given an opportunity under Federal Rule of Civil Procedure 12(b) to provide additional filings before the court determines the outcome.

This case involves a United States distributor, plaintiff Phillips USA Inc. (“PUSA”), of veterinary supplies manufactured by an Australian company, defendant N.J. Phillips PTY. Ltd. (“NJP”), which alleges that it was squeezed out of its position as the exclusive distributor of NJP’s products in the United States when NJP raised its prices to PUSA, thereby forcing PUSA to release its subdistributor, defendant Allflex USA, Inc. (“All-flex”), and soon thereafter NJP contracted with Allflex to distribute NJP’s products in the United States in competition with PUSA.

PUSA, in this case, brings claims against NJP (1) for tortious interference with PUSA’s contract with Allflex and (2) for conspiracy to cause PUSA economic damage by driving it from the marketplace. NJP, in its motion to dismiss, alleges, and has attached to its motion to dismiss additional documents in support, that PUSA is barred from bringing these claims because it has already sued NJP and obtained a judgment in an Australian court for the same cause of action.

II. Res Judicata

As a threshold matter, the court finds that federal law controls the issue of whether the two claims in this action by PUSA against NJP are barred by res judicata as a result of the Australian action. “As a general rule [federal courts] apply federal law to the res judicata issue in successive diversity actions ...” Lowell Staats Min. Co., Inc. v. [200]*200Philadelphia Elec. Co., 878 F.2d 1271, 1274 (10th Cir.1989). The court believes that this principle applies here, even though, strictly speaking, we are dealing with a diversity .action following a foreign action rather than “successive diversity actions.”

The Tenth Circuit stated its view of res judicata in Clark v. Haas Group, Inc.:

Res judicata generally applies where there is an identity of parties and of claims and a final judgment on the merits. It is designed to ensure the finality of judicial decisions. 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. 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.

953 F.2d 1235, 1237-38 (10th Cir.1992) (citations omitted).1

A. Identity of Parties and Final Judgment on the Merits

Defendant NJP alleges (1) that both PUSA and NJP were parties to the Australian action and thus there was an identity of parties between the two actions and (2) that there was a final judgment on the merits in the Australian action. These are legal issues but their, determination must be based on facts outside the scope of the pleadings and therefore are not subject to a motion to dismiss. As is discussed below, the court will treat this motion to dismiss as a motion for summary judgment and give the parties a reasonable period to file additional papers.

B. Same Cause of Action

Defendant NJP also alleges that the claims against NJP in the present action and those in the Australian action are based on the same cause of action. The Tenth Circuit has adopted the transactional approach of Restatement (Second) of Judgments § 24 (1982) in order to determine what constitutes a single cause of action in a given case. Clark, 953 F.2d at 1238. The Restatement provides as follows:

(1) When a valid and final judgment rendered in an action extinguishes the plaintiffs claim pursuant to the rules of merger or bar (see §§ 18,19), the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.
(2) What factual grouping constitutes a ‘transaction’, and what groupings constitute a ‘series’, are to be determined pragmatically, giving weight to such considerations as 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.

Id.

NJP alleges that PUSA’s claims in the Australian action against NJP were for breach of its contract with PUSA and for conspiracy to defraud PUSA. These claims are not based on the same legal theories as the claims in the present action, however, “[ijnasmuch 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.” Id. The appropriate inquiry, then, is not whether the claims in both actions bear the same legal titles but whether they arose from the same “transaction” or “series of connected transactions.”

NJP argues that all of PUSA’s claims against NJP arise from the connected transactions of NJP raising its prices to force PUSA to let Allflex go and then contracting with Allflex to represent NJP directly. PUSA argues that the claims in the Australian action relate to the contract between PUSA and NJP while the claims in the pres[201]*201ent action relate to the separate contract, and thus separate and unconnected transaction, between PUSA and Allflex. Whether or not the claims in both actions arose out of the same transaction or series of connected transactions is a legal question the determination of which requires consideration of facts outside the pleadings and is appropriately resolved by summary judgment.

III. Comity

Because the Australian action which NJP argues supports res judicata is a judgment of a court in a foreign country, whether or not the courts of Kansas would give effect to that judgment for purposes of res judicata is a question of comity. The enforceability of judgments rendered by courts of foreign nations is to be determined under the law of the state, here Kansas, in which enforcement is sought. Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3rd Cir.1971), cert. denied, 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479 (1972).

Kansas courts recognize principles of comity. Head v. Platte County, Mo., 242 Kan.

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Related

Phillips USA, Inc. v. Allflex USA, Inc.
878 F. Supp. 175 (D. Kansas, 1995)
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838 F. Supp. 1437 (D. Kansas, 1993)

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Bluebook (online)
150 F.R.D. 198, 1993 U.S. Dist. LEXIS 10793, 1993 WL 294436, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phillips-usa-inc-v-allflex-usa-inc-ksd-1993.