953 F.3d 998
7th Cir.2020Background
- Rexing (Indiana) contracted with Rembrandt (Iowa) for weekly supply of cage-free eggs; Rexing repudiated the contract alleging quality breaches.
- In Rexing I (S.D. Ind.), Rexing sought declaratory relief and damages; district court found Rexing unjustifiably terminated the contract and a jury later awarded Rembrandt over $1.5 million; Rexing voluntarily dismissed an appeal.
- Before trial in Rexing I completed, Rexing filed Rexing II (state court, later removed) for torts (conversion and deception) claiming Rembrandt retained reusable shipping materials (“EggsCargoSystem”).
- Rexing had demanded return of the EggsCargoSystem before and after filing Rexing I, and sought its value as start-up costs in Rexing I.
- Rembrandt moved to dismiss Rexing II as barred by claim-splitting/res judicata; the federal district court dismissed on Indiana claim-splitting grounds and Rexing appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claim-splitting bars Rexing II | Different tort elements require different evidence; not a split claim | Same transaction/occurrence and same parties; claims could have been raised earlier | Claim-splitting applies; Rexing II barred |
| Applicable law for claim-splitting | District misapplied Indiana test; federal court should follow state rule differently | Semtek: federal common law governs effect of federal dismissal but uses state law content | Semtek approach applies; Indiana law supplies the content of the doctrine |
| Whether later-discovered facts excuse splitting | Rembrandt’s continued refusal to return materials revealed new facts after Rexing I | Rexing knew custody/possession dispute before/when filing Rexing I and sought relief then | No new material facts; claim could and should have been raised in Rexing I |
| Whether conversion is a continuing tort exception | Conversion is continuing; Restatement §26 and Van Bibber allow successive suits | This appropriation was a single act; refusal to return does not create a continuing tort here | Conversion not treated as a continuing-tort exception to claim-splitting in these circumstances |
Key Cases Cited
- Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001) (federal common law governs the effect of a federal diversity dismissal, using the state law that would be applied by state courts)
- Telamon Corp. v. Charter Oak First Ins. Co., 850 F.3d 866 (7th Cir. 2017) (applied two-part test for claim-splitting: same transaction/occurrence and identity of parties)
- MicroVote Gen. Corp. v. Indiana Election Comm’n, 924 N.E.2d 184 (Ind. Ct. App. 2010) (Indiana recognizes prohibition on splitting causes of action)
- Wabash Valley Power Ass’n v. Rural Electrification Admin., 903 F.2d 445 (7th Cir. 1990) (identical-evidence/common-occurrence framing of claim-splitting)
- Hilliard v. Jacobs, 957 N.E.2d 1043 (Ind. Ct. App. 2011) (explains identical-evidence test as use of same general evidence for multiple claims)