United States v. Bryan Boneshirt

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 10-3354, 10-3355, 10-3356
Nos. 10-3357, 10-3358, 10-3359
Nos. 10-3360, 10-3362, 10-3363
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Jeanette Rick, et al., *
*
Plaintiffs - Appellants, *
* Appeals from the United States
v. * District Court for the
* District of Minnesota.
Wyeth, Inc., et al., *
*
Defendants - Appellees. *
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Submitted: June 15, 2011
Filed: October 25, 2011
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Before LOKEN, BEAM, and GRUENDER, Circuit Judges.
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LOKEN, Circuit Judge.
In 2004 and 2005, appellants, citizens of New York, sued the appellee
pharmaceutical companies in New York state court claiming that appellees’ hormone
replacement therapy drugs caused appellants to develop breast cancer. After
substantial discovery, appellees moved for summary judgment on the ground that the
claims were time-barred under the three-year New York statute of limitations.
Appellants argued the claims were not time-barred for many reasons. They also filed
these diversity actions asserting the same claims in the District of Minnesota, a State

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with a six-year statute of limitations, and moved the New York court to dismiss their
New York claims without prejudice.
In a lengthy opinion, the New York court denied dismissal without prejudice
and dismissed the claims as time-barred. Applying New York law, the court granted
appellees summary judgment after discussing and rejecting appellants’ contrary
assertions, namely, that an extended accrual statute applied, that appellees’ fraud and
deception warranted equitable estoppel, that the limitations period was extended by
class action tolling, and that appellants’ fraud claims were not time-barred under New
York law. Addressing the motions to dismiss without prejudice, the court noted that
appellants had filed actions in Minnesota and that grant of the motions would “allow
them to avail themselves of Minnesota’s six year statute of limitations and get around
New York’s obviously shorter three year statute.” It denied the motions because,
“under the circumstances presented it is truly difficult for this court to fathom
anything more prejudicial to defendants than being deprived of their right to judgment
on the merits dismissing these clearly time-barred actions.”
The district court then granted appellees summary judgment dismissing the1
Minnesota actions. Recognizing that the issue is whether the New York judgment
would be given preclusive effect under New York law, and that prior state and federal
decisions applying New York law may not conclusively answer that question, the
court concluded that, given the extent to which appellants had litigated their claims
to the New York court, that court’s grant of summary judgment based on timeliness
“is sufficiently close to the merits to have preclusive effects in other jurisdictions.”
(Quotation omitted.) On appeal, appellants argue, as they did to the district court, that
we should give the New York state court’s statute-of-limitations-based dismissal no
The Honorable Ann D. Montgomery, United States District Judge for the1
District of Minnesota, overruling objections to the Report and Recommendation of
the Honorable Jeanne J. Graham, United States Magistrate Judge for the District of
Minnesota.
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preclusive effect in this diversity action in a Minnesota federal court. Reviewing the
district court’s grant of summary judgment de novo, we affirm.
I.
This appeal raises a single issue -- whether dismissal of appellants’ actions as
time-barred under New York law precludes assertion of the same claims in a federal
court diversity action in a State where the claims would not be time-barred. The issue
lies at the intersection of three complex areas of the law, full faith and credit,
diversity jurisdiction, and claim preclusion (res judicata). So we begin by reviewing
relevant basic principles.
In Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001),
the Supreme Court rejected contrary theories and held that the preclusive effect of a
federal court judgment dismissing a diversity action as time-barred was a matter of
federal common law. The Court then adopted, “as the federally prescribed rule of
decision, the law that would be applied by state courts in the State in which the
federal diversity court sits.” Id. at 508. The Supreme Court noted that -
the traditional rule is that expiration of the applicable statute of
limitations merely bars the remedy and does not extinguish the
substantive right, so that dismissal on that ground does not have claim-
preclusive effect in other jurisdictions with longer, unexpired limitations
periods. See Restatement (Second) of Conflict of Laws §§ 142(2), 143
(1969); Restatement of Judgments § 49, Comment a (1942).
531 U.S. at 504. It would “violate the federalism principle” of Erie R. Co. v.
Tompkins, 304 U.S. 64. 78-80 (1938), if federal courts sitting in States adhering to
this “traditional rule” nonetheless gave claim-preclusive effect to time-bar dismissals
in diversity cases. Id. The Court remanded the case to a Maryland state court to
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determine the preclusive effect that the prior dismissal by a federal court in California
would be given under California law.
By contrast, the preclusive effect of a prior state court judgment is determined
by the Constitution’s Full Faith and Credit Clause, Article IV, § 1, as implemented
by the federal Full Faith and Credit Statute, 28 U.S.C. § 1738. “It is now settled,” the
Supreme Court has explained, “that a federal court must give to a state-court
judgment the same preclusive effect as would be given that judgment under the law
of the State in which the judgment was rendered.” Migra v. Warren City Sch. Dist.
Bd. of Educ., 465 U.S. 75, 81 (1984). Thus, under the Full Faith and Credit Statute,
the rule of decision is the same as the rule adopted in Semtek: the issue of preclusive
effect turns on the law of the State where the prior judgment issued -- here, New York
-- as the New York courts would apply it. See Marrese v. Am. Acad. of Orth.
Surgeons, 470 U.S. 373, 385 (1985) (“the concerns of comity reflected in § 1738
generally allow States to determine the preclusive scope of their own courts’
judgments”); Hanig v. City of Winner, S.D., 527 F.3d 674, 676 (8th Cir. 2008). It is
a rule of federal law but not, as in Semtek, a rule of federal common law. “By the
Constitutional provision for full faith and credit, the local doctrines of res judicata,
speaking generally, become a part of national jurisprudence, and therefore federal
questions cognizable here.” Riley v. New York Trust Co., 315 U.S. 343, 349 (1942).
II.
In New York, as in most States, the doctrine of claim preclusion bars
successive litigation of claims arising out of the same transaction or series of
transactions if “(i) there is a judgment on the merits rendered by a court of competent
jurisdiction, and (ii) the party against whom the doctrine is invoked was a party to the
previous action, or in privity with a party who was.” People ex rel. Spitzer v. Applied
Card Sys., Inc., 894 N.E.2d 1, 12 (N.Y. 2008); O’Brien v. City of Syracuse, 429
N.E.2d 1158, 1159 (N.Y. 1981); Reilly v. Reid, 379 N.E.2d 172, 176 (N.Y. 1978).
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Every aspect of this general principle has spawned extensive litigation and
commentary. At issue in this case is whether the New York judgment dismissing
claims as time-barred was a determination “on the merits.”
New York law is far from silent on this issue. The leading modern case is
Smith v. Russell Sage College, 429 N.E.2d 746 (N.Y. 1981). In the first suit, plaintiff
sued his former employer for breach of an oral contract and tortious
misrepresentation. The trial court dismissed the contract claims as barred by the
Statute of Frauds and the tort claims as time-barred. Rather than appeal, plaintiff
filed a new action alleging additional fraud that “first came to light while the earlier
action was pending.” Id. at 748. The New York Court of Appeals held that the new
fraud claim was part of the same transaction and therefore precluded. In rejecting the
contention that claim preclusion did not apply because the prior judgment was not “on
the merits,” the Court explained, in language anticipating the later discussion in
Semtek:
[T]he impact of the Statute of Limitations, though often denominated as
procedural, in a practical sense may also be said to be substantive; as we
have had occasion to observe, while a time bar is usually said to affect
the remedy its interposition is at least as often the difference between
life or death for the right as well as the remedy. Suffice it to say that a
dismissal on these grounds is at least sufficiently close to the merits for
claim preclusion purposes to bar a second action, especially where the
motion to dismiss the first action was treated as one for summary
judgment on which the court considered submissions of the parties
dehors the pleadings.
Id. at 750 (citations and quotations omitted). “It is pertinent,” the Court added, “that
the Restatement, 2d, [of Judgments] has completely abandoned the term ‘on the
merits.’” Id. at n.3.
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Russell Sage has been cited in at least a dozen published decisions of the New
York intermediate appellate courts for the proposition that a “dismissal on statute of
limitations grounds is considered a dismissal on the merits for claim preclusion
purposes and bars a second action.” Karmel v. Delfino, 740 N.Y.S.2d 373, 374 (N.Y.
App. Div. 2002); see, e.g., Simmons v. N.Y.C. Health & Hosp. Corp., 894 N.Y.S.2d
750 (N.Y. App. Div. 2010); Komlosi v. City of N.Y., 769 N.Y.S.2d 890 (N.Y. App.
Div. 2004); Cold Spring Harbor Area Civic Ass’n v. Bd. of Zoning Appeals, 762
N.Y.S.2d 392 (N.Y. App. Div. 2003); Marinelli Assocs. v. Helmsley-Noyes Co., Inc.,
705 N.Y.S.2d 571 (N.Y. App. Div. 2000). These decisions include dismissals of
subsequent claims brought in a different jurisdiction, as appellants seek to do here.
Mchawi v. State Univ. of N.Y., Empire State Coll., 669 N.Y.S.2d 545, 545-46 (N.Y.
App. Div. 1998) (federal court’s statute-of-limitations dismissal precludes similar,
non-time-barred claims in state court).
To overcome this potent evidence that New York does not follow the
“traditional rule” cited in Semtek, appellants argue that Russell Sage was effectively
overruled by Tanges v. Heidelberg North America, Inc., 710 N.E.2d 250 (N.Y. 1999).
Tanges answered a question certified by the Second Circuit: whether a Connecticut
statute of limitations barred the plaintiff’s products liability action under New York
choice-of-law principles. Id. at 251. Although holding that the statute applied to bar
plaintiff’s claim because it was part of Connecticut’s substantive law, the court
commented, in language again anticipating the discussion in Semtek:
In New York, Statutes of Limitation are generally considered procedural
because they are viewed as pertaining to the remedy rather than the
right. The expiration of the time period prescribed in a Statute of
Limitations does not extinguish the underlying right, but merely bars the
remedy. Nicely summarized elsewhere, “[t]he theory of the statute of
limitations generally followed in New York is that the passing of the
applicable period does not wipe out the substantive right; it merely
suspends the remedy.”
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Id. at 253 (citations and quotations omitted). Appellants argue that Semtek and
Tanges, read together, demonstrate that New York law does not preclude these claims
in Minnesota federal court.
We see nothing in the Tanges opinion suggesting that the Court of Appeals was
overruling Russell Sage. Tanges did not cite Russell Sage or refer to claim preclusion
because no prior judgment was at issue. Tanges raised only a choice-of-law question,
and the Court applied New York’s basic choice-of-law principle: statutes of limitation
are “generally considered procedural.” 710 N.E.2d at 253. Russell Sage had
recognized that principle, but with the caveat that, for claim-preclusion purposes, a
limitations period “may also be said to be substantive.” 429 N.E.2d at 750. This
context-based differentiation is not surprising. Different policies underlie claim2
preclusion and choice-of-law principles. See Seavey v. Chrysler Corp., 930 F. Supp.
103, 108-09 (S.D.N.Y. 1996); 18A Charles Alan Wright, Arthur R. Miller & Edward
H. Cooper, Federal Practice and Procedure § 4441 at 224 (2d ed. 2002). The Full
Faith and Credit Statute commands us to apply New York’s claim-preclusion law.
It is instructive that, since the Tanges decision, numerous New York intermediate
appellate court decisions have continued to cite Russell Sage for the proposition that
a statute-of-limitations-based judgment is claim-preclusive. See, e.g., Karmel, 740
N.Y.S.2d at 374. Not one has even cited Tanges. In this context, Russell Sage is the
far more relevant New York authority.
Indeed, the same dichotomy is present in Minnesota law. “In Minnesota, a2
dismissal based on statute of limitations grounds is a decision on the merits and is a
bar to a second action brought under a different limitations period where the claims
are substantially the same.” Sautter v. Interstate Power Co., 567 N.W.2d 755, 759
(Minn. App. 1997); accord Austin v. Super Valu Stores, Inc., 31 F.3d 615, 618 (8th
Cir. 1994). By contrast, for choice-of-law purposes, the common law of Minnesota
“consider[s] statutes of limitations to be procedural without exception.” Fleeger v.
Wyeth, 771 N.W.2d 524, 528 (Minn. 2009).
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We are more than a little troubled that a panel of the Second Circuit relied on
Tanges in concluding that “New York law does not depart from the traditional rule”
recognized in Semtek. Cloverleaf Realty of N.Y., Inc. v. Town of Wawayanda, 572
F.3d 93, 95 (2d Cir. 2009). Without citing the Full Faith and Credit Statute,
Cloverleaf held that a prior state court judgment did not preclude a federal court
action asserting the same claim under 42 U.S.C. § 1983. It declined to follow earlier
Second Circuit decisions applying Russell Sage as “no longer appropriate” after
Tanges given Russell Sage’s “ambiguity.” Id. at 96. A subsequent Second Circuit
decision referred favorably to the decision in Russell Sage, but was not called upon
to apply it. Hanrahan v. Riverhead Nursing Home, 592 F.3d 367, 369 (2d Cir. 2010).
Most recently, the Second Circuit certified a controlling claim preclusion question in
a federal employment discrimination case. Joseph v. Athanasopoulos, 648 F.3d 58
(2d Cir. 2011). The New York Court of Appeals has accepted the certified question.
Having carefully reviewed this complex landscape, we return to the holding in
Russell Sage -- because the first case was fully litigated all the way to summary
judgment, the prior dismissal on statute of limitations grounds was “at least
sufficiently close to the merits for claim preclusion purposes to bar a second action.”
That is what the New York court concluded in denying appellants’ motions to dismiss
without prejudice -- appellees had a “right to judgment on the merits.” The district
court found this procedural history “decisive.” Plaintiffs logically chose to bring their
claims in New York where they reside and the claims arose. As in Russell Sage, they
fully litigated those claims up to summary judgment, “and New York law does not
provide them with the proverbial second bite at the apple merely by switching
jurisdictions.” This narrow, case-specific approach is consistent with Russell Sage
and with other critics of the categorical traditional rule:
The view that the forum would entertain a claim that was not barred by
its own statute of limitations, even though the forum had no other
contact with the case, could lead on occasion to egregious examples of
forum shopping.
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Restatement (Second) of Conflict of Laws § 142 cmt. g (1988 Revision). These cases
are a paradigmatic example of egregious forum shopping.
On this record, we have no difficulty concluding that, under New York claim
preclusion law as articulated in Russell Sage and the many New York appellate
decisions applying Russell Sage, the prior grant of summary judgment dismissing
appellants’ New York claims as time-barred precluded the assertion of the same
claims in these federal diversity actions in Minnesota. Therefore, the district court
properly applied the Full Faith and Credit Statute in these cases, even if the New
York Court of Appeals declines in the future to apply statute-of-limitations claim
preclusion to more sympathetic plaintiffs, such as the plaintiff in Joseph.
The judgments of the district court are affirmed.
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