ALLY FINANCIAL INC. v. MENTE CHEVROLET OLDSMOBILE, INC.
5:11-cv-07709
E.D. Pa.Sep 28, 2012Background
- A prior jury verdict awarded the Mente Defendants $4 million against GMAC for breach of contract related to the Wholesale Security Agreement (WSA).
- The jury found the dealerships were not out of trust and that GMAC breached the WSA by demanding immediate payment; the Third Circuit affirmed.
- GMAC filed a new action seeking $1.1 million allegedly still owed under the same contracts, asserting breach of the WSA's upon-demand clause and related claims.
- Defendants moved to dismiss under Rule 12(b)(6) based on claim preclusion; GMAC argued the claims could not have been presented as counterclaims and that the issues were not previously litigated.
- The court held the prior action addressed the same core issues, and the current claims are precluded by both claim preclusion and issue preclusion; Counts III and IV were tied to the failed contract claims.
- The court granted immediate release of funds deposited in the Registry, and imposed sanctions on GMAC and its counsel under Rule 11, §1927, and Local Civil Rule 83.6.1; the complaint was dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does claim preclusion bar GMAC's Count I? | GMAC argues it could present new grounds not argued before. | Defendants contend prior final judgment on the merits and same underlying facts preclude. | Yes; precluded. |
| Does claim/issue preclusion bar GMAC's Count II (Guaranty)? | GMAC contends new theory not previously litigated. | Defendants argue same core issues were resolved and would be unfair to relitigate. | Yes; precluded. |
| Are Counts III and IV viable after preclusion on Counts I–II? | GMAC seeks declaratory and injunctive relief independent of contract claims. | Relief seeks are remedies tied to contract claims; if those fail, relief fails. | Dismissed. |
| Whether sanctions against GMAC and counsel are warranted. | GMAC contends sanctions unjustified and retaliatory. | GMAC's filings repeated repudiated positions and wasted resources; sanctions appropriate. | Sanctions granted. |
Key Cases Cited
- Lubrizol Corp. v. Exxon Corp., 929 F.2d 960 (3d Cir. 1991) (essential similarity of underlying events governs 'same cause of action')
- Duhaney v. Att’y Gen. of the U.S., 621 F.3d 340 (3d Cir. 2010) (three elements of claim preclusion; final judgment on merits; same parties; same cause of action)
- In re Mullarkey, 536 F.3d 215 (3d Cir. 2008) (restatement-based considerations for preclusion in related actions)
- Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3d Cir. 1988) (judicial notice of prior records and res judicata principles)
- Gregory v. Chehi, 843 F.2d 111 (3d Cir. 1988) (protects against relitigating released claims in later actions)