United States District Court, Northern District of Illinois
June 7, 1973
JOSEPHSON'S NATIONAL BAR REVIEW CENTERS, INC., ET AL., PLAINTIFFS,
NEXUS CORPORATION, AN ILLINOIS CORPORATION, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Bauer, District Judge.
MEMORANDUM OPINION AND ORDER
This cause comes on the defendants' motion for summary
judgment in their favor.
The plaintiff, Josephson's National Bar Review Centers, Inc.
("Josephson's"), is a Michigan corporation engaged in the
business of preparing, distributing, leasing and selling
written materials and lectures to persons preparing to take
various state bar examinations. Such written materials and
lectures are commonly referred to as "Bar Review Courses." The
plaintiff Josephson's conducted Bar Review Courses in the
State of Michigan and the State of Florida and was planning
and attempting to organize a Bar Review Course to compete with
the defendants in the State of Illinois and other states.
The defendants Nexus Corporation ("Nexus") and Bar Review,
Inc. ("BRI") are Illinois corporations engaged in the business
of conducting Bar Review Courses in the States of Arizona,
Colorado, Connecticut, Illinois, Maryland, Missouri,
Pennsylvania, Texas, Virginia and Wisconsin, and the District
of Columbia, and are attempting to establish Bar Review
Courses in many other states.
The defendants Richard J. Conviser, Lewis Collens and
Beardsley Ruml are officers and directors of Nexus and BRI,
and each is a stockholder of Nexus. Defendant Richard Groll is
a resident of Illinois, an employee of defendants Nexus and
BRI, an equitable shareholder of Nexus, and active in the
management of both corporations.
The instant first amended complaint contains ten counts.
Counts I through V claim a violation of the federal antitrust
law in that the defendants allegedly attempted and actually
monopolized the National Bar Review Course market and a number
of state submarkets for Bar Review Courses in violation of
Section 2 of the Sherman Act (15 U.S.C. § 2); allegedly
substantially restrained interstate commerce in violation of
Section 1 of the Sherman Act (15 U.S.C. § 1); and allegedly
entered into contractual arrangements constituting violations
of Section 3 of the Clayton Act (15 U.S.C. § 14) and Section 1
of the Sherman Act (15 U.S.C. § 1). Counts VI, VIII and IX
claim a violation of the Illinois antitrust act, Chapter 38,
Section 60-1 et seq. of the Illinois Revised Statutes. Count
VII claims a violation of the Michigan anti-trust laws,
Michigan Compiled Laws, Section 445.701 et seq. and Section
445.761 et seq., while Count X is an action for malicious
prosecution of a civil action.
The defendants, in support of their motion for summary
judgment on Counts I through IX of the plaintiff's amended
complaint, contend that those counts are barred by this
Court's prior ruling of February 7, 1972 in the case of
Michigan Bar Review Centers, Inc. v. Nexus Corporation, No. 71
C 2474 (hereinafter "Michigan Bar").
The plaintiff, in opposition to the instant motion, contends
that this Court's prior ruling does not have a res judicata
effect on the instant action.
After the Michigan Bar case was dismissed by this Court, the
plaintiff redrafted the complaint allegedly in light of this
Court's ruling and filed it in the Eastern District of
Michigan. Pursuant to defendants' motion the suit was
transferred to the Northern District of Illinois and presently
is the instant action
before this Court. The sole question raised by this motion is
whether this Court's ruling in the Michigan Bar case was on
the merits and thus a bar to the instant action.
The thrust of the defendants' theory of res judicata is that
the prior ruling of this Court was on the merits. The basis for
this contention is that the defendants' motion to dismiss,
which was granted, was brought pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure for failure to state a claim
upon which relief can be granted. However, it is clear from the
plain language of this Court's Memorandum Opinion and Order of
February 7, 1972 in the Michigan Bar case that the case was
dismissed because of the lack of subject matter jurisdiction.
More specifically this Court dismissed the Michigan Bar case
pursuant to Rule 12(b)(1) of the Federal Rules of Civil
Procedure because the plaintiff failed to sufficiently allege
facts upon which federal jurisdiction could be based.
Before this Court's previous dismissal can have any res
judicata effect in the present action, it must be shown that
the previous decision was made on the "merits". The term
"merits" is defined as the real or substantial grounds of
action or defense as distinguished from matters of practice,
procedure, jurisdiction, or form. Clegg v. United States,
112 F.2d 886 (10th Cir. 1940); Fairmont Alum. Co. v. Commissioner,
222 F.2d 622 (4th Cir. 1955), cert. denied, 350 U.S. 838, 76
S.Ct. 76, 100 L.Ed. 748 (1955).
This Court's previous decision in the Michigan Bar case was
based on insufficient allegations in the complaint to invoke
jurisdiction under the federal anti-trust laws. It was not a
decision which went to the substantive provisions of the
federal anti-trust laws. In short, the prior ruling was not a
decision on the merits. Thus, there could be no res judicata
effect on the instant action.
This ruling is not novel. As early as 1866 the United States
Supreme Court stated:
"In order that a judgment may constitute a bar
to another suit, it must be rendered in a
proceeding between the same parties or their
privies, and the point of controversy must be the
same in both cases, and must be determined on its
merits. If the first suit was dismissed for
defect of pleadings, or parties, or a
misconception of the form or proceeding or the
want of jurisdiction, or was disposed of on any
ground which did not go to the merits of the
action, the judgment rendered will prove no bar
to another suit."
Hughes v. United States, 71 U.S. 232 (4 Wall.
232) 18 L.Ed. 303 (1866). See also Smith v.
McNeal, 109 U.S. 426, 3 S.Ct. 319, 27 L.Ed. 986
(1866); Ripperger v. A. C. Allyn & Co., Inc.,
37 F. Supp. 373, 374 (S.D.N.Y. 1940), aff'd,
113 F.2d 332 (2nd Cir. 1940), cert. denied 311 U.S. 695,
61 S.Ct. 136, 85 L.Ed. 423 (1940).
It is clear to this Court that the instant motion claiming
that this Court's prior ruling should be res judicata is not
sufficient in and of itself to cause the instant amended
complaint to be dismissed.*fn*
Accordingly, it is hereby ordered that the defendants'
motion for summary judgment is denied.