Opinion
2022 CA 0423.
11-04-2022
JEFF MERCER, L.L.C. v. AUSTIN BRIDGE AND ROAD, LP, Federal Insurance Company, Fidelity and Deposit Company of Maryland, Travelers Casualty and Surety Company of America, Zurich American Insurance Company and State of Louisiana Department of Transportation and Development.
WELCH, J.
The plaintiff, Jeff Mercer, L.L.C. ("Mercer"), a subcontractor, appeals a judgment in favor of the defendants, Austin Bridge and Road, L.P. ("Austin Bridge"), a contractor, and its sureties and insurers, Federal Insurance Company, Fidelity and Deposit Company of Maryland, Travelers Casualty and Surety Company of America, and Zurich American Insurance Company (collectively "sureties and insurers"), sustaining their peremptory exception raising the objection of res judicata and dismissing Mercer's claims against them. Pursuant to the recent holding by the Louisiana Supreme Court in Carollo v. Department of Transportation and Development, 2021-01670 (La. 9/1/22), 346 So.3d 751, we reverse the judgment of the trial court and issue this memorandum opinion in compliance with Uniform Rules—Courts of Appeal, Rule 2-16.1(B).
On September 28, 2012, Mercer commenced these proceedings for damages against Austin Bridge and its sureties and insurers. According to the petition, Austin Bridge was awarded two public works construction projects commonly referred to as the 1-49 project and the Bastrop project. Mercer and Austin Bridge entered into subcontracts for work on these two projects. The sureties and insurers furnished payment and performance bonds on the two projects, wherein they guaranteed payment on behalf of Austin Bridge to the subcontractors, including Mercer. Mercer claimed that Austin Bridge failed to properly compensate it for work performed and completed on the two projects. Therefore, Mercer sought contractual damages owed to Mercer on the two projects from Austin Bridge and its sureties and insurers.
The State of Louisiana, Department of Transportation and Development ("DOTD") was also named as a defendant in these proceedings. Pursuant to a judgment signed by the trial court on September 23, 2021, Mercer's claims against DOTD were dismissed based on a peremptory exception raising the objection of res judicata. The September 23, 2021 judgment was affirmed by this Court in Jeff Mercer, L.L.C. v. Austin Bridge and Road, L.P. 2021-1458 (La. App. 1st Cir. 6/3/22), 343 So.3d 218, 226. There are no issues in this appeal relative to Mercer's claims against DOTD.
Subsequently, on September 30, 2021, Austin Bridge and its sureties and insurers filed a peremptory exception raising the objection of res judicata. Res judicata bars re-litigation of a subject matter arising from the same transaction or occurrence as a previous suit between the same parties. See Avenue Plaza, L.L.C. v. Falgoust, 96-0173 (La. 7/2/96), 676 So.2d 1077, 1079; see also La. R.S. 13:4231. Louisiana Revised Statutes 13:4231 sets forth the general principles regarding res judicata and it provides as follows:
Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment
(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action.
(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.
The Louisiana Supreme Court has also emphasized that all of the following elements must be satisfied in order for res judicata to preclude a second action: (1) the judgment is valid; (2) the judgment is final; (3) the parties are the same; (4) the cause or causes of action asserted in the second suit existed at the time of final judgment in the first litigation; and (5) the cause or causes of action asserted in the second suit arose out of the transaction or occurrence that was the subject matter of the first litigation. Burguieres v. Pollingue, 2002-1385 (La. 2/25/03), 843 So.2d 1049, 1053.
Austin Bridge and its sureties and insurers, in support of the objection of res judicata, pointed to a previous suit that Mercer had filed against the State of Louisiana, Department of Transportation and Development ("DOTD"), and particular employees of DOTD, bearing docket number 07-3151 in the Fourth Judicial District Court for the Parish of Ouachita ("the Ouachita suit"). The Ouachita suit originated from events that occurred on a previous public works project, commonly referred to as the Louisville Street project, in which Mercer was involved, wherein a DOTD inspector allegedly sought bribes from Mercer. Mercer claimed that after the bribery attempt was reported to DOTD, DOTD and several of its employees retaliated against Mercer by, among other things, withholding payments to Mercer on various projects, including the subsequent 1-49 and Bastrop projects. Essentially, the Ouachita suit sought tort damages from DOTD and the specifically named employees of DOTD based on their alleged a conspiracy to destroy Mercer's business and its business relationships with contractors.
The Ouachita suit proceeded to a jury trial, and a significant jury verdict and judgment was rendered in favor of Mercer. However, that judgment was reversed by the Second Circuit Court of Appeal. See Jeff Mercer, LLC v. State through Department of Transportation and Development, 51,371 (La. App. 2nd Cir. 6/7/17), 222 So.3d 1017, writ denied, 2017-1442 (La. 12/5/17), 231 So.3d 625, cert. denied, ___ U.S. ___, 138 S.Ct. 1566, 200 L.Ed.2d 746 (2018). A petition seeking to nullify the decision of the Second Circuit Court of Appeal on the basis of "ill practices" is currently pending in the Ouachita suit.
It is undisputed that Austin Bridge and its sureties and insurers were not parties in the Ouachita suit and that Mercer did not assert a contractual claim for payment or damages against Austin Bridge and its sureties and insurers in the Ouachita suit. Rather, Mercer claimed that DOTD had refused to pay it on several projects, including the 1-49 project and the Bastrop project, as part of the conspiracy to ruin Mercer's business. However, Austin Bridge and its sureties and insurers argued that the objection of res judicata was appropriate pursuant to La. C.C.P. art. 425.
Louisiana Code of Civil Procedure article 425, entitled "Preclusion by judgment," provides, in pertinent part, that "[a] party shall assert all causes of action arising out of the transaction or occurrence that is the subject matter of the litigation." At the time the objection of res judicata was urged herein by Austin Bridge and its sureties and insurers, September 30, 2021, the jurisprudence of this Court (and of the Louisiana Fifth Circuit Court of Appeal) provided that the identity of parties requirement of res judicata was not applicable to preclusion by judgment under La. C.C.P. art. 425. See Westerman v. State Farm Mut. Auto. Ins. Co., 2001-2159 (La. App. 1st Cir. 9/27/02), 834 So.2d 445; Butler v. United States Auto. Ass'n Ins. Co., 2004-2562 (La. App. 1st Cir. 12/22/05), 928 So.2d 53, writ denied, 2006-0182 (La. 4/24/06), 926 So.2d 546; and Handy v. Parish of Jefferson, 2020-122 (La. App. 5th Cir. 6/1/20), 298 So.3d 380. Rather, all that was required under La. C.C.P. art. 425 was that a plaintiff's cause of action in the first-filed suit and in the subsequent suit arise from the same transaction or occurrence —regardless of whether the parties were identical or different in each suit. On the other hand, the jurisprudence of the Second, Third, and Fourth Circuit Courts of Appeal had a different interpretation of La. C.C.P. art. 425. Those appellate courts had held that La. C.C.P. art. 425 was not an independent claim preclusion provision, but rather, referenced the requirements of res judicata, such that all elements of res judicata must be satisfied for preclusion by judgment under La. C.C.P. art. 425 to operate. See Spires v. State Farm Mut. Auto. Ins. Co., 2008-573 (La. App. 3rd Cir. 11/5/08), 996 So.2d 697, writ denied, 2008-2871 (La. 2/6/09), 999 So.2d 783; Ward v. State, Dept. of Transp. & Dev. (Office of Highways), 43,948 (La. App. 2nd Cir. 1/28/09), 2 So.3d 1231, writ denied, 2009-0431 (La. 4/17/09), 6 So.3d 791; and Carollo v. Department of Transportation and Development, 2021-0114 (La. App. 4th Cir. 10/14/21) ___ So.3d ___, 2021 WL 4785542, writ granted, 2021-01670 (La. 2/8/22), 332 So.3d 630, aff'd by Carollo v. Department of Transportation and Development, 2021-01670 (La. 9/1/22), 346 So.3d 751.
Based on this Court's jurisprudence, Austin Bridge and its sureties and insurers claimed that since Mercer's cause of action herein arose from the same transaction or occurrence as Mercer's cause of action in the Ouachita suit, the judgment in the Ouachita suit was now final, and Mercer's claims herein existed at the time that judgment was rendered, Mercer's claims in this action were barred by La. C.C.P. art. 425. The trial court agreed, and by judgment signed on November 30, 2021, the trial court sustained the peremptory exception raising the objection of res judicata filed by Austin Bridge and its sureties and insurers and dismissed Mercer's claims against those defendants.
See Butler, 928 So.2d at 55 (providing that a peremptory exception raising the objection of res judicata is a proper procedural means to raise the issue of whether an action is precluded by La. C.C.P. art. 425).
From the November 30, 2021 judgment, Mercer appealed. While Mercer's appeal was pending in this Court, the Louisiana Supreme Court granted certiorari to review the Fourth Circuit Court of Appeal's decision in Carollo, ___ So.3d ___, 2021 WL 4785542. See Carollo, 332 So.3d 630. Certiorari was specifically granted to resolve the split in the decisions of the courts of appeal regarding the relationship between La. C.C.P. art. 425 and the res judicata statutes, La. R.S. 13:4231 and 13:4232. See Carollo, 346 So.3d at 753. More specifically, the Court wanted to resolve the issue of whether La. C.C.P. art. 425 was an independent claim preclusion provision apart from res judicata such that identity of parties was not required to preclude a subsequent suit or whether La. C.C.P. art. 425 merely referenced the requirements of res judicata, and thus, a claim could not be precluded unless it was between the same parties as a prior suit. Id. The Court found that La. C.C.P. art. 425 functioned simply as a measure to put litigants on notice—at the outset and during the course of litigation—that all causes of action arising out of the transaction or occurrence that was the subject matter of the litigation had to be asserted. Carollo, 346 So.3d at 753 and 757-58. Further, the Court found that rather than having an independent effect, La. C.C.P. art. 425 operated in tandem with and was enforced through the objection of res judicata. Carollo, 346 So.3d at 753-55 and 757-58. Thus, the Court held that because La. C.C.P. art. 425 is enforced through res judicata, all elements of res judicata— including identity of parties—must be satisfied for a second suit to be precluded. Carollo, 346 So.3d at 753 and 757-58.
Applying the requirements of res judicata, which are set forth above, to this case, we find that the requirement of identity of parties is undisputedly lacking— Austin Bridge and its sureties and insurers were not parties to the Ouachita suit. Thus, the Ouachita suit cannot serve as the basis for the objection of res judicata raised herein. Accordingly, the November 30, 2021 judgment of the trial court, sustaining the peremptory exception raising the objection of res judicata and dismissing Jeff Mercer, L.L.C.'s claims against Austin Bridge and Road, L.P., Federal Insurance Company, Fidelity and Deposit Company of Maryland, Travelers Casualty and Surety Company of America, and Zurich American Insurance Company is reversed.
We recognize that Austin Bridge and its sureties and insurers argue—for the first time in their supplemental brief to this Court— that, although they were not parties to the Ouachita suit, there is an identity of parties in this suit and in the Ouachita suit for purposes of res judicata. In doing so, they rely on jurisprudence from this Court providing that, for purposes of res judicata, an identity of parties exists whenever the same parties, their successors, or others appear, so long as they share the same qualities as parties. Mandalay Oil & Gas, L.L.C. v. Energy Development Corporation, 2001-0993 (La. App. 1st Cir. 8/4/04), 880 So.2d 129, 140, writ denied , 2004-2426 (La. 1/28/05), 893 So.2d 72 and Capital One, N.A. v. Service Door & Millwork, LLC, 2011-0691 (La. App. 1st Cir. 11/9/11), 2011 WL 5420374 *4. Stated differently, the identity of parties element of res judicata does not require that the parties in the two suits be physically identical as long as they share the same quality as parties. Capital One, N.A., 2011 WL 5420374 at *4. Further, the preclusive effect of a judgment binds the parties to the action and nonparties who are deemed the "privies" of the parties in certain limited circumstances, including where the nonparty's interests were adequately represented by a party to the action, who may be considered the "virtual representative" of the nonparty, because the interests of the party and the nonparty are so closely aligned. Id. at *3, citing Mandalay Oil & Gas, L.L.C., 880 So.2d at 142.
Based on these precepts, Austin Bridge and its sureties and insurers maintain that there is an identity of parties between them in this case and DOTD in the Ouachita suit because the two suits raise identical issues. However, our review of the record reveals no evidence upon which one could reasonably conclude that Austin Bridge and its sureties and insurers shared an identity of interest with DOTD in the Ouachita suit. The basis of the Ouachita suit was Mercer's claim against DOTD and the named employees for their alleged conspiracy to destroy Mercer's business and its business relationships with contractors by, among other things, withholding payments to Mercer on various projects, whereas this suit is an action for breach of contract by a subcontractor (Mercer) against a general contractor (Austin Bridge) and its sureties and insurers for a DOTD construction project. DOTD's interests in defending itself and its named employees in the Ouachita suit are not identical to that of Austin Bridge and its sureties and insurers in defending this suit for breach of contract. Thus, we cannot say that the interests of DOTD in the Ouachita suit and Austin Bridge and its sureties and insurers in this case were so closely aligned that an identity of parties existed between them in the Ouachita suit for purposes of res judicata. Therefore, we find no merit to the arguments of Austin Bridge and its sureties and insurers in this regard.
All costs of this appeal are assessed to the defendants, Austin Bridge and Road, L.P., Federal Insurance Company, Fidelity and Deposit Company of Maryland, Travelers Casualty and Surety Company of America, and Zurich American Insurance Company.