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
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
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
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).
Thus, under the federal law of claim preclusion, a claim may
not be asserted if a defendant can demonstrate that there has
been (1) a final judgment on the merits in a prior suit involving
(2) the same parties or their privies and (3) a subsequent suit
based on the same cause of action. Arab African International
Bank v. Epstein, 10 F.3d 168, 171 (3rd Cir. 1993); Lubrizol v.
Exxon, 929 F.2d at 963; Lentz v. Mason, 32 F. Supp.2d 733, 746
(D.N.J. 1999). In this manner, the doctrine of claim preclusion
prevents a party from prevailing not only on issues that were
actually litigated in a prior suit, but also on issues it might
have but did not assert in the first action. Mars v. Nippon,
855 F. Supp. at 677 citing Gregory v. Chehi, 843 F.2d 111, 116
(3rd Cir. 1988). This is because a party may not split a cause of
action into separate grounds of recovery and raise the separate
grounds in successive lawsuits; a party must raise in a single
lawsuit all the grounds of recovery arising from a single
transaction or series of transactions that can be brought
together. Mars, Inc. v. Nippon Conlux Kabushiki-Kaisha,
58 F.3d 616, 619-620 (Fed.Cir. 1995), citing Restatement (Second) of
Judgments § 24(2) (1984) and Gregory v. Chehi, 843 F.2d at 117.
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." ...