LEVY MACHINING, LLC; ROBERT LEVY; SHERILENE LEVY; RYAN LEVY v. HANOVER TOWNSHIP, MICHIGAN; JEFF HEATH
No. 23-1125
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Oct 20, 2023
NOT RECOMMENDED FOR PUBLICATION
File Name: 23a0452n.06
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN
OPINION
Before: MOORE, READLER, and MURPHY, Circuit Judges.
KAREN NELSON MOORE, Circuit Judge. Hanover Township sued Sherilene Levy, Mike Levy, and Levy Machining, LLC in state court to enforce Hanover Township‘s zoning ordinances. The state court granted Hanover Township the relief it requested and ordered Levy Machining to relocate so that it complied with the zoning regulations. Sherilene Levy, Robert Levy, Ryan Levy, and Levy Machining now sue Hanover Township and Jeff Heath in federal court based on alleged conflicts of interest and selective enforcement of the zoning ordinances. The district court granted Hanover Township and Heath judgment on the pleadings based on claim preclusion. We AFFIRM the district court.
I. BACKGROUND
For sixteen years, Mike Levy1 operated Levy Machining without any issue on a property in Hanover Township, Michigan, that was zoned Agriculture-1 (“AG-1“). R. 1 (Compl. ¶¶ 13-14) (Page ID #3). In April 2019, Jeff Heath was elected as the Hanover Township Supervisor. Id. ¶ 18 (Page ID #4). Heath owned the property adjacent to Levy Machining and had a tense interpersonal relationship with Mike Levy that had at times “devolved into face-to-face shouting matches” about “driveway use” and “illegal dumping.” Id. ¶¶ 17, 25 (Page ID #4-5). Heath and his family also had connections to Lomar, a direct competitor of Levy Machining, and Lematic, a Levy Machining customer. Id. ¶¶ 26-30 (Page ID #5-6).
After Heath was elected Hanover Township Supervisor, he initiated zoning enforcement proceedings against Mike Levy, Sherilene Levy, and Levy Machining in Michigan state court (the “State-Court Action“). Id. ¶ 19 (Page ID #4). In the State-Court Action, Hanover Township alleged that Mike Levy, Sherilene Levy, and Levy Machining violated several ordinances because they operated a business in an AG-1 zone without permission from Hanover Township. Id. ¶ 24 (Page ID #5). Hanover Township moved for summary disposition of the State-Court Action. R. 19-5 (State Court Mot. Hr‘g Tr. at 3:13-16) (Page ID #226). In response, Mike Levy, Sherilene Levy, and Levy Machining impliedly conceded that they had violated the ordinances, and instead argued several defenses. R. 19-3 (State Defs.’ Opp‘n at 5-7) (Page ID #141-43). First, they argued that Hanover Township‘s motion for summary disposition should be denied because
On June 4, 2020, after hearing arguments on the motion for summary disposition, the state court concluded that Mike Levy, Sherilene Levy, and Levy Machining violated each of the ordinances and that they “fail[ed] to state a valid defense that tests the legal sufficiency of” the claims. R. 19-5 (State Court Mot. Hr‘g Tr. at 40-41) (Page ID #263-64). By granting Hanover Township‘s motion, the state court determined that “the defenses [were] so clearly untenable as a matter of law that no factual development could possibly deny [Hanover Township‘s] right to recover” relief. Id. Levy Machining was ordered to move and, as a result, incurred significant costs, such as moving costs, “sizeable rental obligation[s],” and several lost business contracts. R. 1 (Compl. ¶¶ 20-22) (Page ID #4).
On November 1, 2021, Sherilene Levy, Ryan Levy, Robert Levy, and Levy Machining filed suit against Hanover Township and Heath in federal court. Id. ¶¶ 1-8 (Page ID #2). The plaintiffs alleged eight counts: violation of their equal protection rights (“Count One“); violation of their substantive due process rights (“Count Two“); violation of their procedural due process rights (“Count Three“); conspiracy to interfere with civil rights in violation of
Hanover Township and Heath moved for judgment on the pleadings under
II. ANALYSIS
A. Standard of Review
“We review de novo a grant of judgment on the pleadings” brought under
B. Claim Preclusion
“Res judicata ‘preclude[s] parties from contesting matters that they have had a full and fair opportunity to litigate.‘” Arangure v. Whitaker, 911 F.3d 333, 337 (6th Cir. 2018) (quoting Montana v. United States, 440 U.S. 147, 153 (1979)). “In deciding whether res judicata . . . lend[s] preclusive effect to a particular state court decision, federal courts look to the state‘s law to ‘assess the preclusive effect it would attach’ to [a] decision.” Gutierrez v. Lynch, 826 F.2d 1534, 1537 (6th Cir. 1987) (quoting Loudermill v. Cleveland Bd. of Educ., 721 F.2d 550, 557 (6th Cir. 1983)). Accordingly, in this case we will apply Michigan res judicata law.
Michigan courts have adopted a “broad view of res judicata,” In re MCI Telecomms. Compl., 596 N.W.2d 164, 183 (Mich. 1999), of which there are two types: issue preclusion and claim preclusion, Taylor v. Sturgell, 553 U.S. 880, 892 (2008). Claim preclusion “forecloses ‘successive litigation of the very same claim,‘” while issue preclusion “bars ‘successive litigation of an issue of fact or law.‘” Taylor, 553 U.S. at 892 (quoting New Hampshire v. Maine, 532 U.S. 742, 748 (2001)). “[T]he burden of proving the applicability of the doctrine of res judicata is on the party asserting it.” Baraga County v. State Tax Comm‘n, 645 N.W.2d 13, 16 (Mich. 2002). At issue here is claim preclusion, which “bars not only claims already litigated, but also every claim arising from the same transaction that the parties, exercising reasonable diligence, could
1. Decision on the Merits
First, the district court properly found that the State-Court Action resulted in a decision on the merits. Typically, a state court‘s final judgment and permanent injunction constitute a merits decision for the purpose of claim preclusion. AuSable River Trading Post, LLC v. Dovetail Sols., Inc., 874 F.3d 271, 274 (6th Cir. 2017); Ludwig v. Township of Van Buren, 682 F.3d 457, 459-60 (6th Cir. 2012). Despite this well-established law, the plaintiffs argue that the state-court judgment is not a final decision on the merits because the state court did not explicitly discuss the merits of their defenses. Appellant Br. at 14-15. The state court, however, was not required to do so under the first element of the claim-preclusion inquiry. See AuSable River Trading Post, 874 F.3d at 274 (finding that the Michigan state-court permanent injunction was a final merits decision, even though the claims “could have been raised . . . as a defense in the original action” but were not and the Michigan state court thus did not analyze the defense on its merits). Michigan‘s claim-preclusion test plainly contemplates situations in which the first court does not have the opportunity explicitly to analyze a particular claim on its merits. See Adair, 680 N.W.2d at 396 (stating that res judicata bars “every claim arising from the same transaction that the parties, exercising reasonable diligence, could have raised but did not“). Under the first element of the
Even if the plaintiffs were correct that the state court was required to assess their defenses on the merits to satisfy this element of claim preclusion, the state court‘s oral decision and judgment make clear that it rejected their defenses on their merits. See R. 19-5 (State Court Mot. Hr‘g Tr. at 40-41, 45) (Page ID #263-64, 268) (stating that the court must find that “the defenses are so clearly untenable as a matter of law” to grant judgment in favor of Hanover Township and then concluding that “the defendants have really not presented any tenable defense“); R. 19-2 (State Court J. at 2) (Page ID #134) (granting Hanover Township‘s motion for summary disposition because there was “no valid defense” and “no issue of material fact“). Therefore, there was a determination on the merits in the State-Court Action.
2. Privity
Next, the district court correctly found that both actions involved the same parties or their privies. Levy Machining, Hanover Township, and Sherilene Levy were parties to both cases. Therefore, the parties dispute only whether Heath is in privity with Hanover Township and whether Robert Levy and Ryan Levy are in privity with Levy Machining. “To be in privity is to be so identified in interest with another party that the first litigant represents the same legal right that the later litigant is trying to assert.” Adair, 680 N.W.2d at 396. “[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.” Id. at 397.
Here, Heath is in privity with Hanover Township because he was in an employer-employee relationship with Hanover Township, the claims and defenses arose out of his actions as an
Likewise, Robert Levy and Ryan Levy are in privity with Levy Machining because they were co-owners of Levy Machining at the time of the State-Court Action and they now seek to assert the same legal rights that Levy Machining asserted as defenses in the State-Court Action. See Peterson Novelties, Inc. v. City of Berkley, 672 N.W.2d 351, 358-59 (Mich. Ct. App. 2003) (finding privity because the plaintiff in the second case was the owner of the company that was a plaintiff in the first case and both suits related to the company‘s rights and liabilities); see also Washington v. Sinai Hosp. of Greater Detroit, 733 N.W.2d 755, 757-58, 760-61 (Mich. 2007) (finding that the first personal representative of an estate was in privity with the second representative of an estate because both were asserting the estate‘s rights). Therefore, both actions involve the same parties or their privies.
3. Resolution of the Second Matter during the First Matter
Finally, the district court was correct in determining that the current claims were or could have been resolved in the State-Court Action. Claim preclusion “bars 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.” Adair, 680 N.W.2d at 396. “Whether a factual grouping constitutes a transaction for purposes of res judicata is to be determined
A second action is not precluded by the first if there are new or continuing wrongs that occur after judgment was entered in the first action. See Jones v. Westminster, LLC, No. 334447, 2018 WL 2370634, at *5-6 (Mich. Ct. App. May 24, 2018) (per curiam) (citing Restatement (Second) Judgments §§ 24, 26(1)(e) (1982)). “[A] plaintiff may only bring a second suit when the defendant continues in his or her tortious act, but not where the plaintiff experiences ‘continual harmful effects from an original, completed act.‘” Id. at *6 (quoting Terlecki v. Stewart, 754 N.W.2d 899, 908 (Mich. Ct. App. 2008)); see also Frank v. Linkner, 894 N.W.2d 574, 586 (Mich. 2017) (stating that a “claim accrues at the time the wrong upon which the claim is based was done” (quoting
Moreover, applying res judicata in this case does not, as the plaintiffs suggest, lead to the perverse outcome evident in Sherrell v. Bugaski, 425 N.W.2d 707 (Mich. Ct. App. 1988). In Sherrell, the plaintiff was denied damages in her first action and then prevented by res judicata from bringing a second action based on an injury that did not manifest until after the first action was complete. Id. at 709.3 Here, even if the plaintiffs are correct and their damages were not sufficiently ascertainable during the State-Court Action, they could have requested equitable injunctive relief, as they did in the federal complaint, see R. 1 (Compl. at 16 ¶ B) (Page ID #16) (requesting equitable relief in the form of “[a]n injunction prohibiting any further acts of wrongdoing, discrimination, or retaliation“), or the plaintiffs could have more fully developed the evidentiary record in support of their defense before the state court. Had the plaintiffs done so and had the state court agreed with them on the merits, there would be no state-court order forcing the plaintiffs to move Levy Machining. In other words, there would be no additional damages that became ascertainable only after the state-court proceedings because any additional harm would have been prevented. Indeed, this is the precise efficiency that claim preclusion—and res judicata more broadly—is meant to encourage. See Taylor, 553 U.S. at 892 (“By ‘preclud[ing] parties from contesting matters that they have had a full and fair opportunity to litigate,‘” res judicata “protect[s] against ‘the expense and vexation attending multiple lawsuits, conserv[es] judicial resources, and foste[rs] reliance on judicial action by minimizing the possibility of inconsistent decisions.‘“)
C. Supplemental Jurisdiction
Finally, the plaintiffs argue that the district court abused its discretion by declining supplemental jurisdiction over the state-law claims because the district court improperly found that claim preclusion applied to the other claims. Appellant Br. at 19-20. Because we affirm the district court‘s application of claim preclusion and the plaintiffs do not argue that the district court erred in declining to exercise supplemental jurisdiction under these circumstances, there is no occasion to address the plaintiffs’ argument on this point.
III. CONCLUSION
The district court properly found that Counts One, Two, Three, Four, Five, and Eight were barred by res judicata and properly declined supplemental jurisdiction over the remaining state-law claims. We therefore AFFIRM the judgment of the district court.