AUSABLE RIVER TRADING POST, LLC, Plаintiff-Appellant, v. DOVETAIL SOLUTIONS, INC.; Tawas Area Chamber of Commerce, Defendants-Appellees.
No. 17-1283
United States Court of Appeals, Sixth Circuit.
October 23, 2017
271
BERNICE BOUIE DONALD, Circuit Judge.
Argued: October 5, 2017
Mattox v. City of Forest Park does not change our minds. 183 F.3d 515 (6th Cir. 1999). The district court in that case denied the officer and the city summary judgment in a
The Bays’ claim differs materially. Our review of Sigler‘s qualified-immunity claim does not necessarily decide whether the Bays produced enough evidence to save their claim against the County. It could be that the district court correctly held that the Bays failed to carry their burden. Or it could be that the district court erred and the County is liable. The question remains open for appeal after the district court renders final judgment in the case.
For these reasons, we affirm the district court‘s denial of qualified immunity to Donna Sigler and dismiss the Bays’ appeal for lack of jurisdiction.
ARGUED: Ronald Tyler, TYLER & TYLER, P.C., East Tawas, Michigan, for Appellant. Robert G. Kamenec, PLUNKETT COONEY, Bloomfield Hills, Michigan, for Appellee Tawas Area Chamber of Commerce. ON BRIEF: Ronald Tyler, TYLER & TYLER, P.C., East Tawas, Michigan, for Appellant. Robert G. Kamenec, Michael J. Barton, PLUNKETT COONEY, Bloomfield Hills, Michigan, for Appellee Tawas Area Chamber of Commerce.
OPINION
BERNICE BOUIE DONALD, Circuit Judge.
Plaintiff-Appеllant AuSable River Trading Post, LLC (the “Trading Post“) filed this action against Defendants-Appellees Dovetail Solutions, Inc. (“Dovetail“) and Tawas Area Chamber of Commerce (the “Chamber“) for a declaratory judgment as to whether Defendants hold a valid, enforceable tradеmark for the term “Perchville,” and for damages under Michigan state law claims. The district court granted summary judgment in favor of the Defendants, finding that Plaintiff‘s trademark challenge is barred by the doctrine of res judicata and remanding the state court claims. In reaching its conclusion, thе district court determined that Plaintiff was in privity with an hourly employee who had
I.
Yearly, the сity of Tawas, Michigan hosts a winter festival known as “Perchville.” The Chamber is a non-profit Michigan corporation dedicated to promoting local business, and Dovetail is a for-profit corporation that oversees and manages the Chamber. In March 2002, the Chambеr applied for federal trademark registration for the term “Perchville,” which was then registered in May 2003. The trademark was temporarily cancelled in December 2013 for failure to renew the application, but within three weeks the Chamber reapplied for re-rеgistration, which it received just over one year later. The Trading Post is a wholesale provider of miscellaneous products, including mugs, banners, t-shirts, and sweatshirts. It is alleged that the Trading Post had an order to sell or was actively selling merchandise depicting the term “Perchville.”
On Jаnuary 29, 2016, the Chamber filed suit in Michigan state court against Salvatore Agnello, an employee of the Trading Post, seeking to obtain an injunction against his unauthorized use of the term “Perchville” on t-shirts. The Chamber did not include the Trading Post in their lawsuit, as it was initially unaware that Agnello was selling the shirts on behalf of the Trading Post. The state court granted the Chamber an ex parte injunctive order. The language of the order included, “this order shall be binding upon the parties to this action, their officers, agents, servants, employees, and attorneys and on those pеrsons in active concert or participation with them who receive actual notice of this order by personal service [or] otherwise.”
A hearing was set for February 2, 2016. Agnello appeared without an attorney. He indicated that he had spoken to а partial owner of the Trading Post about the lawsuit, but repeatedly stated that he was unsure why the injunction was issued against him, rather than the Trading Post. He noted that he had only received notice the Sunday before the hearing date. The judge indicated that a hearing was unnecessary and concluded that anyone that had notice and acted in concert would be bound by the injunction. The judge then asked Agnello if he had any objection to the permanent injunction being entered, to which Agnello initially objected, stating that he did not know exactly what it meant. Specifically, Agnello indicated, “[a]gain, I‘m sort of lost at this time. I would ask that the lawsuit itself be thrown out. Again, there was no harm, no foul. And the fact of the matter is, why are you—why are they coming after me? It‘s not my company.” Agnello then consented to the permanent injunction. The judge informed Agnello that the order would be binding on anyone acting in concert with Agnello, stating “just so you understand, you and everybody in your chain is on the hook. So if there‘s—if there is a violation, you know, then we‘re talking about contempt of Court. . . .”
Since the entry of the injunсtion, Agnello and the Trading Post have complied with the injunction. The Trading Post filed this suit on March 4, 2016, challenging the Chamber‘s trademark of “Perchville,” among other claims for damages under Michigan law.1 The parties filed cross-motions for summary judgment. Defendants argued that Plaintiff‘s trademark сhallenge was barred by the doctrine of res judicata
II.
The Court reviews de novo the district court‘s grant of summary judgment. Niemi v. NHK Spring Co., Ltd., 543 F.3d 294, 298 (6th Cir. 2008). We must determine whether Michigan law precludes this appeal because “federal courts are required to give the judgments of state courts the same preclusive effect as they are entitled to under the laws of the state rendering the decision.” Exec. Arts Studio v. City of Grand Rapids, 391 F.3d 783, 795 (6th Cir. 2004). Thus, the Court looks to Michigan law to determine whether Plaintiff‘s claims are barred by res judicata.
Under Michigan law, a “second, subsequent action” is barred by res judicata when “(1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, оr could have been, resolved in the first.” Adair v. State, 470 Mich. 105, 680 N.W.2d 386, 396 (2004) (citing Sewell v. Clean Cut Mgmt., Inc., 463 Mich. 569, 621 N.W.2d 222, 225 (2001)). Res judicata is applied broadly by Michigan courts, barring “not only claims already litigated, but also every claim arising from the same transaction that the parties, exercising reasonable diligence, could have raised but did not.” Id. (citing Dart v. Dart, 460 Mich. 573, 597 N.W.2d 82 (1999)).
The parties appear to concede that the first and third elements of res judicata are fulfilled, and this panel agrees. The Michigan state court‘s permanent injunction constitutes a merits decision, Ludwig v. Twp. of Van Buren, 682 F.3d 457, 460 (6th Cir. 2012), and the challenge to the validity of the “Perchville” trademаrk could have been raised by Agnello as a defense in the original action. Plaintiff challenges whether there is sufficient privity between the Trading Post and Agnello such that Plaintiff‘s claims are barred by res judicata. Privity is defined broadly under Michigan law:
To be in privity is to be so identified in interеst with another party that the first litigant represents the same legal right that the later litigant is trying to assert. The outer limit of the doctrine traditionally requires both [1] a ‘substantial identity of interests’ and [2] a ‘working functional relationship’ in which [3] the interests of the nonparty are presented and protected by the party in the litigation.
Bates v. Twp. of Van Buren, 459 F.3d 731, 734-35 (6th. Cir. 2006) (quoting Adair, 680 N.W.2d at 396) (alteration in original), “[A] perfect identity of the parties is not required, only a ‘substantial identity of interests’ that are adequately presented and protected by the first litigant.” Adair, 680 N.W.2d at 397.
In determining that privity exists, the district court relied in part on a finding that the facts here are parallel to those considered by this Court in Bates, 459 F.3d 731. The Bates Court affirmed a district court‘s determination that an exotic dancer‘s challenge to a municipal ordinance banning nude dancing at liquor establishments was barred by res judicata. The district court conсluded that the dancer‘s interests were protected in a previous litigation by her employer challenging the
This case is distinguishable from Bates and Ludwig, beginning with the obvious factual differences. First, the employer-employee factual scenario is inversed here. This Court dоes not face an employee seeking not to be bound by an injunction against his employer, but rather, an employer seeking to litigate its rights despite an injunction having been entered against an employee. Practically speaking, an injunction against an emрloyer must apply to its employees for it to have any effect. See Ludwig, 682 F.3d at 461. The inverse is not necessarily true.
Further, unlike the employer in Bates and Ludwig, Agnello did not challenge the underlying claim—here, the trademark—that was at issue in the first litigation. The record indicates that Agnello did not have an attorney, did not understand why the injunction was served on him (hе describes himself as a “salesman“), and did not oppose the entry of a permanent injunction. The district court erroneously concluded, without legal support, that the Trading Post‘s notice of the first litigation and continued compliance with the injunction implied that its interеsts were adequately represented by Agnello.
While there may be circumstances when an employee‘s interests are so aligned with his or her employer as to be in privity for the purposes of res judicata, there is no support for that here. For examplе, Plaintiff might be in privity with Agnello had he substantively defended the initial action and represented the Trading Post‘s interests. Cf. ADF Intern., Inc. v. Steelcon, Inc., 409 F.Supp.2d 836, 840 (E.D. Mich. 2005) (finding privity where a plaintiff‘s claims were substantively the same as the defense asserted by its surety in a previous action). Given the posture of the two cases here, the Trading Post‘s claims here would not constitute a “reward [to] litigants who failed, intentionally or not, to include all relevant parties in an action and . . . permit two (or possibly many more) attempts to try the same cause of action.” Fleming v. City of Detroit, No. 04-74081, 2006 WL 2559862, at *6 (E.D. Mich. 2006) (internal citations omitted).
Ultimately, Agnello was an hourly employee given a few days’ notice of an injunction. He was clearly confused in the first action, wherein he repeatedly said he did not understand why the action was brought against him, rather than his employer. While he may have a functional working relationship with the Trading Post, it is clear that he lacks an “identity
While the Trading Post may have had аctual notice of the injunction, it did not appear at the scheduled hearing and the Chamber seems to have made no effort to include it. The facts here are distinguishable from previous questions of privity between employers and employees that this Court has addressed, and Defendants fail to meet their burden of showing that Agnello and the Trading Post are in privity such that the doctrine of res judicata would bar Plaintiff‘s claims as a matter of law. Consequently, summary judgment on the basis of the doctrine of res judicata was inappropriate.
III.
Accordingly, we REVERSE and REMAND for proceedings in accordance with this opinion.