250 So. 3d 310
La. Ct. App.2018Background
- In 2006 R & C (owned ultimately by the Armbrusters) bought and rehabbed 621 Celeste St.; FINS (Armbruster’s company) did the construction and R & C sought historic tax credits.
- R & C borrowed from Omni Bank, defaulted, and to avoid foreclosure R & C sold the Property to Celeste (Anderson-controlled) in Dec 2009; Celeste assumed the Omni debt in Mar 2010 as part of a two-step “Transaction.”
- Multiple documents (the "Anderson Documents") and a Lease were executed in Dec 2009–Mar 2010; the Armbrusters and their companies guaranteed obligations related to occupancy and financing.
- R & C filed a bankruptcy adversary proceeding (seeking to void the Transaction) and litigated to judgment; the Bankruptcy Court dismissed R & C’s claims and the federal district court affirmed in 2014.
- Subsequent state litigation (eviction/breach) produced a state-court judgment in 2016 that was later reversed in part on appeal; plaintiffs then filed this separate declaratory-judgment action (2016) seeking rescission/damages based on the same Transaction.
- Trial court granted defendants’ peremptory exception of res judicata and dismissed the suit; plaintiffs appealed and the appellate court affirmed, holding the federal bankruptcy judgment precluded the claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether res judicata bars the plaintiffs’ declaratory-judgment suit | Armbrusters/companies are not R & C (non-debtors) so the bankruptcy judgment cannot preclude their independent claims | Plaintiffs are in privity with R & C (Armbrusters controlled R & C and prior litigation); the bankruptcy judgment covered the same Transaction and claims | Res judicata applies — federal bankruptcy judgment bars the suit |
| Whether the parties are identical or in privity for res judicata | The adjudicated party was R & C only; other plaintiffs weren’t parties to the adversary proceeding | Non-party plaintiffs are in privity: they succeeded to interests, controlled prior litigation, and were adequately represented | Identity/privity satisfied; plaintiffs were the real parties in interest in prior case |
| Whether the prior federal judgment was final and by a court of competent jurisdiction | Plaintiffs challenge the bankruptcy court’s authority to bind non-debtors | Bankruptcy judgment was affirmed by the district court; it was final and by a competent federal tribunal | Finality and jurisdiction satisfied; district court affirmed bankruptcy court’s rulings |
| Whether the claims involve the same cause of action (same nucleus of facts) | Plaintiffs try to separate the Anderson Documents from the Transaction and assert distinct claims | The bankruptcy adversary expressly encompassed all December 2009 and March 2010 documents; claims arise from the same Transaction and seek to void it | Cause-of-action identity satisfied; both actions share the same nucleus of facts |
Key Cases Cited
- Stern v. Marshall, 564 U.S. 462 (Sup. Ct.) (distinguishes bankruptcy subject-matter jurisdiction from statutory authority to enter final judgment in core vs non-core proceedings)
- Terrebonne Fuel & Lube, Inc. v. Placid Ref. Co., 666 So.2d 624 (La. 1996) (sets out federal/state res judicata principles and rare exceptions)
- Reeder v. Succession of Palmer, 623 So.2d 1268 (La. 1993) (discusses claim preclusion / true res judicata)
- Apotex, Inc. v. Food & Drug Admin., 393 F.3d 210 (D.C. Cir.) (test for same cause of action: "nucleus of facts")
- Latham v. Wells Fargo Bank, N.A., 896 F.2d 979 (5th Cir.) (defines privity/non-party boundness for res judicata)
- CoreStates Bank, N.A. v. Huls Am., Inc., 176 F.3d 187 (3d Cir.) (bankruptcy-related claims and inapplicability of certain res judicata exceptions)