Sheldon Co. Profit Sharing Plan and Trust v. Smith

858 F. Supp. 663, 1994 U.S. Dist. LEXIS 8429, 1994 WL 396140
CourtDistrict Court, W.D. Michigan
DecidedApril 21, 1994
Docket1:92-cv-00189
StatusPublished
Cited by9 cases

This text of 858 F. Supp. 663 (Sheldon Co. Profit Sharing Plan and Trust v. Smith) is published on Counsel Stack Legal Research, covering District Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sheldon Co. Profit Sharing Plan and Trust v. Smith, 858 F. Supp. 663, 1994 U.S. Dist. LEXIS 8429, 1994 WL 396140 (W.D. Mich. 1994).

Opinion

OPINION RE PENDING MOTIONS

HILLMAN, Senior District Judge.

I. INTRODUCTION

Presently before the court is a motion by defendants Oppenheimer & Altman to enjoin, dismiss or stay arbitration claims presently pending before a National Association of Securities Dealers, Inc. (“NASD”) arbitration panel (“arbitrators”).

Plaintiffs had previously sued in this court Oppenheimer & Atman, along with others, seeking damages for embezzlement and federal securities fraud. Since Oppenheimer & Atman, along with plaintiffs, were subject to an arbitration agreement, I dismissed the state common law and statutory claims against Oppenheimer & Atman and referred them to the NASD panel. Meanwhile, the federal securities claims against the remaining defendants were tried in this court and ultimately resolved.

Oppenheimer & Atman now claim in their motion to enjoin the arbitration that in light of my July 2, 1993, opinion in this case, resolving plaintiffs’ federal claims against Oppenheimer and Atman, the issues now pending before the arbitration panel are barred under the doctrines of collateral es-toppel and res judicata. See, Sheldon Co. Profit Sharing Plan & Trust, et al. v. Michael K. Smith, et al., 828 F.Supp. 1262 (W.D.Mich.1993) (“Sheldon”).

Aso before the court are plaintiffs’ cross motions 1) to compel Michael Smith to attend NASD arbitration, and 2) to order Oppenheimer, Atman and their attorneys to refrain from interfering with plaintiffs’ witnesses. Finally, defendants Dolinka, Smith & VanN-oord (individuals and partnership), already dismissed from this case, have requested that if the arbitration claims against Oppenheimer and Atman are dismissed or enjoined, the court’s order be effected in such a way as not to prejudice Dolinka, Smith and VanNoord’s *667 anticipated claim for contribution against Oppenheimer.

II.

OPPENHEIMER AND ALTMAN’S MOTION TO ENJOIN, DISMISS OR STAY ARBITRATION

Oppenheimer and Altman assert that under the res judicata and/or collateral estoppel doctrines, plaintiffs’ state law claims currently pending at the NASD arbitration are barred conclusively by the findings in this court’s July 2, 1993, opinion. In response, plaintiffs allege that res judicata does not bar their state claims, because none of the state claims now pending were litigated, nor could they have been litigated, in the federal court case. They further claim that collateral es-toppel does not apply because the issues decided by this court under federal law are not precisely the same issues that arise in the state law claims now being made.

A. Jurisdiction and Elements of Injunc-tive Relief

I no longer have jurisdiction over the state law claims presently before the arbitrators in this case, because they were dismissed from this court in October 1992 pursuant to an arbitration agreement between the parties, as explained above. Under the All-Writs Act, 28 U.S.C. § 1651, however, a federal court has broad injunctive powers to protect its own judgments, including the power to enjoin arbitration in the interests of preventing relitigation of claims and issues it has already decided. Kelly v. Merrill Lynch, Pierce, Fenner & Smith, 985 F.2d 1067, 1069 (11th Cir.), cert. denied, — U.S. -, 114 S.Ct. 600, 126 L.Ed.2d 565 (1993). Having issued an injunction, the court additionally has authority to reach and decide a res judicata question where relit-igation would threaten its judgment. Id.

For the reasons that follow, arbitration of all but one of plaintiffs’ state law claims is enjoined.

B. Res Judicata

Defendants’ first claim is that plaintiffs’ arbitration claims are barred by res judicata. They maintain that res judicata bars plaintiffs from pursuing before the NASD panel their state law claims of churning. The parties concede that no explicit statutory prohibition on “churning” exists in either federal or state law. It is claimed by defendants that because plaintiffs’ federal churning claim, which alleged a violation of section 10(b) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 10(b)(5), promulgated thereunder, was dismissed on summary judgment, no further churning claims may be brought.

For a claim to be barred by res judi-cata, it must be preceded by another action in which (1) the parties were the same, (2) a judgment was rendered on the merits, and (3) the claim at issue was brought or could have been brought. White v. Colgan, 781 F.2d 1214, 1216 (6th Cir.1986).

The first two requirements for res judicata are met in this case. The parties to the federal claims on which defendants’ res judi-cata defense is based were plaintiffs and defendants Oppenheimer and Altman. In addition, my decision of those claims on summary judgment was a final decision on the merits for res judicata purposes. Mayer v. Distel Tool and Machine Co., 556 F.2d 798 (6th Cir.1977).

Whether or not plaintiffs’ churning claims are barred depends on whether they were or could have been litigated in the previous federal court action. As stated above, the parties had agreed to arbitrate any state law claims, and in October, 1992, the court granted Oppenheimer and Altman’s motion to compel arbitration with respect to all state law claims. Therefore, the claims were not brought in the federal action. District judges are obliged under the federal Arbitration Act, 9 U.S.C. § 1, et seq., “to compel arbitration of pendent arbitrable claims when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 105 S.Ct. 1238, 1241, 84 L.Ed.2d 158 (1985). For these reasons, plaintiffs’ churning claims now pending before the NASD *668 arbitration panel were neither litigated nor could they have been litigated in the previous federal court action. As the third requirement of res judicata has not been met, the defense does not apply in this case.

C. Issue Preclusion

Defendants’ second defense is that plaintiffs’ arbitration claims are barred by collateral estoppel, or issue preclusion. Collateral estoppel bars relitigation of an issue of fact or law that has already been actually litigated and necessarily decided in a previous action between the same parties where a final judgment on the merits was reached. Guzowski v. Hartman,

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Camper v. Lyft Tennessee, Inc.
M.D. Tennessee, 2019
McCurdie v. Strozewski (In Re Strozewski)
458 B.R. 397 (W.D. Michigan, 2011)
Kasishke v. Frank (In Re Frank)
425 B.R. 435 (W.D. Michigan, 2010)
Beaver v. John Q. Hammons Hotels, L.P.
138 S.W.3d 664 (Supreme Court of Arkansas, 2003)
Eagle Trim, Inc. v. Eagle-Picher Industries, Inc.
205 F. Supp. 2d 746 (E.D. Michigan, 2002)
Glidden Co. v. Jandernoa
5 F. Supp. 2d 541 (W.D. Michigan, 1998)
Sheldon Co. Profit Sharing Plan & Trust v. Smith
891 F. Supp. 404 (W.D. Michigan, 1995)

Cite This Page — Counsel Stack

Bluebook (online)
858 F. Supp. 663, 1994 U.S. Dist. LEXIS 8429, 1994 WL 396140, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sheldon-co-profit-sharing-plan-and-trust-v-smith-miwd-1994.