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May 24, 1999


The opinion of the court was delivered by: Joyner District Judge.


By way of the motion which is now pending before this Court, Defendants seek to have Plaintiff's complaint dismissed in its entirety and with prejudice as barred by principles of res judicata. For the reasons which follow, Defendants' motion shall be granted.

Factual Background

This action was filed not quite one month after Magistrate Judge Thomas Reuter issued his opinion granting the motion of George and Michelenia O'Neill for judgment as a matter of law and to vacate, alter or amend a civil judgment entered by a jury in a prior civil action between the same parties in this Court at No. 97-3353. That case, like the one now before us, also arose out of the plaintiff's 10% shareholder interest in William M. Hendrickson, Inc. and the individual defendants' alleged taking title to corporate property in their own name, failure to pay plaintiff the dividends to which he was entitled, mishandling of the corporation's financial affairs resulting in decreased shareholders' equity, refusal to produce corporate books and records as required by the Pennsylvania Business Corporations Law and failing to represent plaintiff as a 10% company owner on tax returns, loan applications and bankruptcy court filings. There, as here, Mr. Tyler asserted claims for breach of fiduciary duty and fraud, as well as for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et. seq. and conspiracy to violate RICO.

That action was tried on agreement of the parties before Magistrate Judge Reuter to a jury commencing on May 27, 1998 and resulted in a verdict on June 4, 1998 for plaintiff on his breach of fiduciary duty and fraud claims in the amount of $225,000 against George O'Neill only. On the other claims, the jury found in favor of the defendants. In response to special interrogatories on the issue of when plaintiff should have discovered he was harmed by the defendants, however, the jury found that plaintiff should have learned he was harmed in March, 1991. As this response indicated that the plaintiff's fraud and breach of fiduciary duty claims were barred by the two-year statute of limitations, judgment was entered in favor of defendants and against plaintiff as a matter of law pursuant to Fed.R.Civ.P. 50(b). That decision was appealed to and is now pending before, the U.S. Court of Appeals for the Third Circuit.

Defendants now argue in support of the instant motion to dismiss that since plaintiff could (and should) have challenged the corporation's failure to issue stock, failure to produce tax returns and refusal to file amended tax returns to reflect that the plaintiff did not participate in the 1987 decision to allow Hendrickson, Inc. to change its filing status from that of a regular corporation to that of a Subchapter S corporation, he is barred under the doctrine of res judicata (or claims preclusion) from pursuing these claims now. In response, Plaintiff contends: (1) that since he did not endeavor to compel the issuance of his stock or the amendment of the corporate income tax returns in the first action, he is not precluded from asserting these claims in a subsequent action and, (2) given that the refusal to issue stock and to re-file the returns is continuing, the statute of limitations with respect to the claims raised in this action has essentially been tolled. Alternatively, Mr. Tyler submits that the motion to dismiss should be denied because both res judicata and the statute of limitations are affirmative defenses which are properly pled in an Answer to his Complaint and which cannot be determined at this stage of the proceedings.

Standards Governing Rule 12(b)(6) Motions

Among the vehicles often used to challenge the sufficiency of a pleading is the filing of a motion to dismiss for failure to state a claim upon which relief can be granted under Fed.R.Civ.P. 12(b)(6) and res judicata, although an affirmative defense, may be raised in a Rule 12(b)(6) motion. Rycoline Products, Inc. v. C & W Unlimited, 109 F.3d 883, 886 (3rd Cir. 1997); Mack v. Municipality of Penn Hills, 547 F. Supp. 863, 868, note 9 (W.D.Pa. 1982). Of course, in resolving a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3rd Cir. 1990). In so doing, the court must accept as true the facts alleged in the complaint, together with all reasonable inferences that can be drawn therefrom and construe them in the light most favorable to the plaintiff. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3rd Cir. 1990); Hough/Loew Associates, Inc. v. CLX Realty Co., 760 F. Supp. 1141 (E.D.Pa. 1991). Dismissal under Rule 12(b)(6) for failure to state a claim is therefore limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved. Ransom v. Marrazzo, 848 F.2d 398, 401 (3rd Cir. 1988); Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3rd Cir. 1985), cert. denied, 474 U.S. 935, 106 S.Ct. 267, 88 L.Ed.2d 274 (1985).


The doctrine of res judicata*fn1 is intended to ensure the finality of judgments and prevent repetitive litigation. Sendi v. NCR Comten, Inc., 624 F. Supp. 1205, 1206 (E.D.Pa. 1986) citing Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205, 2209, 60 L.Ed.2d 767 (1979). See Also: Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979). Claim preclusion and issue preclusion are the currently accepted terms for two different applications of the doctrine of res judicata; issue preclusion has also been referred to as collateral estoppel. Venuto v. Witco Corp., 117 F.3d 754, 758 (3rd Cir. 1997); Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 961, n. 1 (3rd Cir. 1991), citing Gregory v. Chehi, 843 F.2d 111, 116 (3rd Cir. 1988) and United States v. Athlone Industries, Inc., 746 F.2d 977, 983 n. 4 (3rd Cir. 1984).

Under collateral estoppel or issue preclusion, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior cause of action. Mars, Inc. v. Nippon Conlux Kabushiki-Kaisha, 855 F. Supp. 673, 677 (D.Del. 1994), aff'd, 58 F.3d 616 (Fed.Cir. 1995), citing Montana v. U.S., 440 U.S. at 153, 99 S.Ct. at 973. Claim preclusion, on the other hand, provides that when a court has entered a final judgment on the merits of a cause of action, the parties to the suit and their privies are thereafter bound "not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose." Donahue v. Gavin, 1999 WL 165700 (E.D.Pa. 1999) quoting, inter alia, Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597, 68 S.Ct. 715, 92 L.Ed. 898 (1948).

Given the difficulty in precisely defining the term "cause of action" for purposes of res judicata, the courts in the Third Circuit have noted that the question of whether two suits are based on the same cause of action turns on the essential similarity of the underlying events rather than on the specific legal theories invoked. Lubrizol, 929 F.2d at 963; Davis v. United States Steel Supply, 688 F.2d 166, 171 (3rd Cir. 1982), cert. denied, 460 U.S. 1014, 103 S.Ct. 1256, 75 L.Ed.2d 484 (1983). Thus, the focal point of the court's analysis should be "whether the acts complained of were the same, whether the material facts alleged in each suit were the same and whether the witnesses and documentation required to prove such allegations were the same." ...

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