Procter & Gamble Co, et al v. Amway Corp

United States Court of Appeals
Fifth Circuit
F I L E D
July 19, 2004
Charles R. Fulbruge III
Clerk
Revised July 21, 2004
In the
United States Court of Appeals
for the Fifth Circuit
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m 03-20202
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THE PROCTER & GAMBLE COMPANY;
THE PROCTER & GAMBLE DISTRIBUTING COMPANY,
Plaintiffs-Appellants,
VERSUS
AMWAY CORPORATION, ET AL.,
Defendants,
AMWAY CORPORATION,
Defendant-Appellee.
_________________________
Appeals from the United States District Court
for the Southern District of Texas
_________________________

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Before GARWOOD, HIGGINBOTHAM, and
SMITH, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
The Procter & Gamble Company and the
Procter & Gamble Distributing Company
(jointly referred to in the singular as “P&G”)
appeal a summary judgment in favor of
defendant Amway Corporation, alleging that
the district court gave improper res judicata
effect to a judgment of the United States
District Court for the District of Utah.
Concluding that the Utah court’s judgment is
entitled to res judicata effect, we affirm.
I.
The dispute between Procter & Gamble and
Amway has been before this court on two
prior occasions. See Procter & Gamble Co. v.
Amway Corp., 242 F.3d 539 (5th Cir. 2001)
(“P&G I”); Procter & Gamble Co. v. Amway
Corp., 280 F.3d 519 (5th Cir. 2002)
(“P&G II”). Because the complete factual
history is set out in those opinions, we only
summarize the relevant procedural history.
P&G has long been the subject of rumors
linking it to Satanism and has attempted to
identify Amway and its distributors as the
source of those rumors. In 1995, P&G sued
Amway and other defendants in federal district
court in Utah. P&G then filed a second
amended complaint alleging defamation, com-
mon law unfair competition, violations of the
Utah Truth in Advertising Act, tortious
interference, negligent supervi sion and
violations of the Lanham Act, and vicarious
liability arising out of the Satanism rumor.
P&G later filed a third amended complaint
alleging that Amway’s distribution method was
an illegal pyramid scheme, and claiming fraud
and product disparagement.
The Utah court granted Amway’s motion
to dismiss the Third Amended Complaint.
P&G later filed a Fourth Amended Complaint
asserting claims for product disparagement,
based on allegations that Amway had told con-
sumers that P&G’s Crest toothpaste scratches
teeth, and asserting fraud, but the Utah court
dismissed that complaint as untimely filed.
Meanwhile, P&G sued in the United States
District Court for the Southern District of
Texas, alleging causes of action for unfair
competition, negligent supervision, negligence,
business disparagement, defamation, tortious
interference with prospective business
relations, vicarious liability, fraud, violations of
RICO, violations of the Lanham Act, and
violations of the Texas Business and
Commerce Code. These causes of action were
based on the Satanism rumor, the Crest rumor,
and Amway’s alleged pyramid scheme. In
April 1999, the Utah court entered a final
judgment dismissing all of P&G’s claims.
The instant case went to trial in May 1999.
At the close of P&G’s case, Amway moved
for judgment as a matter of law. The district
court granted the motion and dismissed P&G’s
Lanham Act claim on the basis of the res
judicata effect of the Utah court’s judgment.
It also dismissed P&G’s remaining claims on
the merits. After the Texas court had entered
judgment, but before we heard the appeal, the
Tenth Circuit affirmed in part, reversed in part,
and remanded the Utah district court’s
judgment. See Procter & Gamble Co. v.
Haugen, 222 F.3d 1262 (10th Cir. 2000)
(“Haugen I”).
In P&G I, we affirmed in part and reversed
in part the district court’s rulings on the
merits. Most importantly, we found that at the
time P&G I was decided, there was no res

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judicata effect from the Utah case. We held
that the district court had correctly accorded
the Utah court’s judgment res judicata effect
and that dismissal had been proper when
granted. The Tenth Circuit’s subsequent re-
versal and remand eliminated, however, any
res judicata bar occasioned by the reversed
and remanded judgment. P&G I, 242 F.3d at
546. Accordingly, we vacated on the ground
of res judicata.
The issues we considered in P&G II did
not concern Amway or the appeal before us
today. We did, however, note that after
P&G I and P&G II, “the only claims
current ly before the district court relate to
spreading the Satanism and Crest toothpaste
rumors.” P&G II, 280 F.3d at 524.
On remand from the Tenth Circuit, the
Utah court dismissed all of P&G’s claims.
Procter & Gamble Co. v. Haugen, 158 F.
Supp. 2d 1286 (N.D.Utah 2001), aff’d, 317
F.3d 1121 (10th Cir. 2003). Shortly after the
Tenth Circuit’s affirmance, the Texas district
court granted Amway’s motion for summary
judgment, dismissing P&G’s remaining claims.
P&G filed a timely notice of appeal, and the
district court subsequently entered judgment
pursuant to FED. R. CIV. P. 54(b), thus
assuring our jurisdiction over this appeal.
II.
We review a summary judgment de novo,
using the same standards as did the district
court. BP Oil Int’l, Ltd. v. Empresa Estatal
Petoleos de Ecuador, 332 F.3d 333 (5th Cir.
2003). The res judicata effect of the Utah
judgment is a question of law that we also re-
view de novo. P&G I, 242 F.3d at 546.
A.
Under the law of this circuit, “[c]laim pre-
clusion, or ‘pure’ res judicata, is the
‘venerable legal canon’ that insures the finality
of judgments and thereby conserves judicial re-
sources and protects litigants from multiple
lawsuits.” United States v. Shanbaum, 10
F.3d 305 (5th Cir. 1994). Res judicata applies
where “(1) the parties to both actions are iden-
tical (or at least in privity); (2) the judgment in
the first action is rendered by a court of
competent jurisdiction; (3) the first action
concluded with a final judgment on the merits;
and (4) the same claim or cause of action is
involved in both suits.” Ellis v. Amex Life Ins.
Co., 211 F.3d 935, 937 (5th Cir. 2000). If
these conditions are satisfied, all claims or de-
fenses arising from a “common nucleus of op-
erative facts” are merged or extinguished. Ag-
rilectric Power Partners, Ltd. v. Gen. Elec.
Co., 20 F.3d 663 (5th Cir. 1994).
In P&G I, 242 F.3d at 544, we noted that
“[t]his suit is based on the same transactions,
and involves substantially the same parties, as
does the Utah suit.” Having already decided
that res judicata based on the Utah court’s
judgment in Haugen I would have been
appropriate but for the fact that the judgment
had been reversed and remanded, we now
conclude that res judicata was appropriate
based on the Utah court’s affirmed judgment
on the merits in Haugen II.1
1 P&G was not permitted to amend its Utah
complaint to include claims for disparagement of
Crest toothpaste. This leaves open the possibility
that the events giving rise to the Crest disparage-
ment claim were not a part of the common nucleus
of operative facts giving rise to the Satanism
claims, which would make res judicata inapplic-
able to the Crest claims.
P&G, however, has waived this argument by
failing to raise it in its opening brief, which men-
(continued...)

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P&G contends that the district court erred
in according the Utah court’s judgment res
judicata effect, alleging (1) that it was
improperly based on the res judicata effect of
the later-reversed opinion of the Texas court in
P&G I, (2) that it was based on incorrect legal
conclusions, contrary to those established in
P&G I, and (3) that it was entered without
giving P&G fair opportunity to be heard.
P&G’s arguments amount to the contention
that the Utah court decided the case wrongly,
or at least differently from how the Texas
court would have done so under this circuit’s
law.
P&G’s first allegation is faulty, inasmuch as
the Tenth Circuit recognized the potential
difficulty of the Utah court’s basing its
decision on res judicata and proceeded to
consider and affirm the Utah court’s decision
on the merits. This, highlights a flaw in P&G’s
argument: The proper remedy for an allegedly
erroneous judgment is direct appeal to the
proper court, not an attempt to avoid the res
judicata effect of that judgment in another suit
against the same party for the same cause of
action.
All the issues P&G raises assert errors of
law that would undermine the correctness of
the Utah court’s judgment. The question
whether that judgment on the merits was cor-
rect, however, does not enter into our inquiry
on the subject of res judicata, for even an in-
correct judgment is entitled to res judicata ef-
fect. See Parsons Steel, Inc. v. First Ala.
Bank, 474 U.S. 518, 525 (1986).
“The general rule [of res judicata] stated in
this Section requires that errors underlying a
judgment be corrected on appeal or other
available proceedings to modify the judgment
or to set it aside, and not made the basis for a
second action on the same claim.
RESTATEMENT (SECOND) OF JUDGMENTS §19
cmt. a (1982). As a learned treatise puts it,
“[r]es judicata applies even if the next court
to visit the dispute believes that the second
court’s res judicata ruling was wrong.” 18
WRIGHT, MILLER & COOPER, FEDERAL
PRACTICE AND PROCEDURE: JURISDICTION 2D
§ 4404 (2d ed. 2002). Even where the second
court incorrectly gives preclusive effect to the
first court’s judgment, the first court is bound
by the res judicata effect of the second court’s
judgment. In re Brady, Tex., Mun. Gas Corp.,
936 F.2d 212 (5th Cir. 1991).
When two suits proceed simultaneously, as
in this case, res judicata effect is given to the
first judgment rendered. Chicago, Rock Island
& Pac. R.R. v. Schendel, 270 U.S. 611 (1926);
1(...continued)
tions only that Amway should be estopped from
asserting that the Crest claim does arise from the
common nucleus of operative facts, but does not
provide contentions, facts, legal citations, argu-
ments, or analysis to allow us to conclude that it
the Crest disparagement claim survives the res jud-
icata effect of the Utah judgment. Failure ade-
quately to brief an issue on appeal constitutes
waiver of that argument. See FED R. APP. P.
28(a)(9)(A); United States v. Martinez, 263 F.3d
436 (5th Cir. 2001) (noting the rule); State v.
Thames, 214 F.3d 608, 611 n.3 (5th Cir. 2000)
(waiver for failure to include argument in statement
of issue or body of brief); L&A Contracting Co. v.
S. Concrete Servs., 17 F.3d 106 (5th Cir. 1994)
(waiver for failure to cite authority); United States
v. Beaumont, 972 F.2d 553, 563 (5th Cir. 1992)
(failure to argue issue adequately); United States v.
Torres-Aguilar, 352 F.3d 934, 936 n.2 (5th Cir.
2003) (argument deemed abandoned by appellant
“only briefly mentioning it in a footnote of his
opening brief without providing any legal citation
or analysis”).

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see also 18 WRIGHT, MILLER & COOPER,
supra, JURISDICTION 2D § 4404 (citing Jones
v. Sheehan, Young & Culp, 82 F.3d 1334,
1338-39 n.3. (5th Cir. 1996); In re Hansler,
988 F.2d 35, 38-39 (5th Cir. 1993)).
Maintaining such a litigation strategy almost
assures that at some point one of the cases will
become barred by a judgment in the other; the
successful party will find that all its claims and
defenses have merged into the judgment, while
the unsuccessful party will find that its have
been extinguished. “There is no reason why
defendants should be required to defend, or
courts to hear, additional or multiple cases,
free from the protections of res judicata, simp-
ly because the plaintiff chose to file them
piecemeal at the same time rather than in suc-
cession.” Sidag Aktiengesellschaft v. Smoked
Foods Prods. Co., 776 F.2d 1270 (5th Cir.
1985). A party gets only “one bite at the
apple” and is not allowed to take two bites
simply because it attempts to take both at
once rather than seriatim.
B.
P&G contends that, in according the Utah
judgment res judicata effect, the district court
improperly disregarded the law of the case as
established by this court and slighted the man-
date in P&G I. This objection is misguided.
Nothing in our prior rulings has established
that a valid judgment from the Utah court
should not be given res judicata effect by the
Texas court; quite to the contrary, we stated
that the Texas court’s invocation of res
judicata in P&G I was proper but for the fact
that the Utah court’s decision was later
reversed and remanded. It did not, therefore,
run afoul of our mandate for the district court
to accord the Utah judgment res judicata
effect.
To the degree that the decisions of the Utah
court and Tenth Circuit on particular issues
may conflict with our holdings on those issues,
P&G has identified a potential source of
conflict between the application of collateral
estoppel based on the Utah judgments and the
law of the case or mandate of the Texas case.
This difficulty does not arise, however, where
res judicata operates not to determine issues
within a case but to extinguish the case as a
whole.
Although law of the case and res judicata
are somewhat related preclusive doctrines,
“the law of the case doctrine is merely a rule of
practice, based upon sound policy,” while
“[r]es judicata . . . is categoric and requires
that respect be accorded the prior judgment.”
Loumar, Inc. v. Smith, 698 F.2d 759, 762 (5th
Cir. 1983). In discussing the relationship be-
tween the doctrines of law of the case and res
judicata, the Supreme Court noted that “there
is a difference between such adherence [to law
of the case] and res judicata; one directs
discretion, the other supersedes it and compels
judgment. In other words, in one it is a
question of power, in the other of submission.”
S. R.R. v. Clift, 260 U.S. 316, 319 (1922).
The application of res judicata in this case
does not conflict with this court’s rulings or
mandates on the merits of P&G’s claims.
Rather, it bars them a priori.
The district court properly dismissed
P&G’s claims. The judgment, accordingly, is
AFFIRMED.

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