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Dunne v. Resource Converting, LLC

United States District Court, E.D. Missouri, Eastern Division

March 19, 2019

TOM DUNNE, JR., Plaintiff,



         This action is before the court on the motions of defendants Resource Converting, LLC; Tim Danley; and Rick Kersey to dismiss plaintiff's second amended complaint (Doc. 329); all defendants to strike plaintiff's prayer for relief for attorney fees (Doc. 337); defendant David Wolf to dismiss him from Counts 1 and 4 (Doc. 338); defendants Sebright Products, Inc.; Gary Brinkmann; NewWay Global Energy, LLC; David Wolf, Jerry Flickinger; and JWR, Inc., to dismiss Counts 1, 5, 6, 7, and 8 for failure to state a claim (Doc. 340); and defendant NewWay to dismiss Count 4. (Doc. 342). Plaintiff has opposed all motions. The Court heard oral arguments from the parties on February 1, 2019.

         The Counts remaining in this action are Count 1 for fraudulent misrepresentation/concealment against all defendants, Count 2 for fraudulent inducement/rescission against Resource, Count 4 for unjust enrichment against defendants Resource and NewWay, and Counts 5-8 for civil conspiracy against various groupings of all defendants. The Court will not repeat the background facts it has set forth in numerous memoranda and orders, but will address each motion to dismiss or strike in turn.


         A. Legal Standard

         Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss part or all of a case for the complaint's failure to state a claim upon which relief can be granted. Fed. R. Civ. Pro. 12(b)(6). A complaint “must include enough facts to state a claim to relief that is plausible on its face, ” providing more than just labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Such a complaint will “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and will state a claim for relief that rises above mere speculation. Twombly, 550 U.S. at 555.

         In reviewing the pleadings under this standard, the court accepts all of the plaintiff's factual allegations as true and draws all inferences in the plaintiff's favor, but the court is not required to accept the legal conclusions the plaintiff draws from the facts alleged. Retro Television Network, Inc. v. Luken Commc'ns, LLC, 696 F.3d 766, 768-69 (8th Cir. 2012).

         B. Motions to Dismiss

         Defendants Resource Converting, LLC; Tim Danley; and Rick Kersey have moved to dismiss the entire action based on the law of the case doctrine, res judicata, the rule against claim-splitting, and the first-filed rule. (Docs. 329, 330).[1] For the reasons discussed in its opinion denying similar motions over two years ago, the Court will not address the claim-splitting or first-filed rule arguments. (Doc. 97). However, the Court finds that res judicata applies to bar some of plaintiff's claims.

         The second amended complaint (Doc. 319) alleges the following. In August 2015, based on representations and negotiations between the parties to this lawsuit, plaintiff Dunne entered into a licensing agreement with defendant Resource Converting for a “PAD” system that would convert municipal solid waste into renewable fuel. (Doc. 319). Dunne made an initial payment of $400, 000, promising to make an additional payment of $600, 000 in November 2015. However, Dunne became convinced that the PAD system did not work as advertised, or at all, so he withheld the second payment. On December 1, 2015, Resource Converting demanded full payment from plaintiff. In June 2016, counsel for Dunne submitted a demand letter to defendants, asserting that the contract had been fraudulently procured and demanding return of the partial contractual sum already paid. Less than two weeks after sending that letter, defendant Resource Converting filed suit against Dunne in Iowa state court for breach of contract. On August 19, 2016, Dunne removed that case to the United States District Court for the Southern District of Iowa and also commenced the instant case in this District Court. See Resource Converting, LLC, v. Dunne, 4:16 CV 470 JAJ-SBJ (S.D. Iowa) (Doc. 1).

         In each action, the defendant(s) filed motions to transfer to the other court, where they had filed their cases as plaintiff. This Court denied defendants' motion to transfer this case to Iowa on December 6, 2019. One week later, on December 13, 2016, the Southern District of Iowa denied Dunne's corresponding motion to transfer to this Court. Accordingly, the cases proceeded simultaneously.

         In Iowa, Dunne filed a counterclaim for fraudulent misrepresentation. A jury trial was held in May 2018, and the jury returned a verdict for Dunne and against Resource Converting, awarding Dunne no compensatory damages but $200, 000 in punitive damages. (Id., Doc. 206) (May 29, 2018). The parties have filed post-trial briefs that are currently pending before that court.

         Res judicata, or claim preclusion, bars further claims by parties based on the same cause of action where there has already been a final determination on the merits. See In re Kapp, 611 F.2d 703, 707 (8th Cir. 1979) (citing Montana v. United States, 440 U.S. 147, 153 (1979)). “‘Res judicata prevents litigation of all grounds for, or defenses to, recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior proceeding.'” Kapp, 611 F.2d at 707 (quoting Chicot County Dist. v. Bank, 308 U.S. 371, 378 (1940)).

         However, claim preclusion will only bar a subsequent suit when: “(1) the first suit resulted in a final judgment on the merits; (2) the first suit was based on proper jurisdiction; (3) both suits involved the same cause of action; and (4) both suits involved the same parties or their privies.” Elbert v. Carter, 903 F.3d 779, 782 (8th Cir. 2018). Furthermore, the party against whom res judicata is asserted must have had a full and fair opportunity to litigate the matter in the proceeding that is to be given preclusive effect. In re Anderberg-Lund Printing Co., 109 F.3d 1343, 1346 (8th Cir. 1997).

         Defendants assert that claim preclusion applies to bar plaintiff's claims in this case. The Court addresses each of the elements in turn. First, a final judgment has been reached in the federal district court in Iowa. The Eighth Circuit has held that “the pendency of an appeal does not diminish the res judicata effect of a judgment rendered by a federal court.” In re Ewing, 852 F.2d 1057, 1060 (8th Cir. 1988). While the Eighth Circuit has not addressed the res judicata impact of post-trial proceedings in a district court on a judgment, such proceedings do not lessen the finality of a judgment for res judicata purposes. A district court judgment is “final” for purposes of res judicata even if a Rule 59(e) motion or an appeal from that judgment is pending. Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 1988), cert. denied, 488 U.S. 982 (1988); cf., Hubbell v. United States, 171 U.S. 203, 209-10 (1898) ("Indeed, it may well be doubted whether the pendency of a motion for a new trial would ...

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