Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.


United States District Court, Northern District of Illinois, E.D

March 9, 1984


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

                             MEMORANDUM OPINION
                                 AND ORDER

In this action (the "1983 Action") Car Carriers, Inc. and eight related entities (for convenience collectively "Car Carriers," treated as a singular noun), including controlling shareholder James P. Byrne, have filed a 24-count, 107-page Amended Complaint (the "Complaint" or "1983 Complaint") accusing Ford Motor Company ("Ford"), Nu-Car Carriers, Inc. ("Nu-Car") and the Norfolk & Western Railway Company ("N & W") of racketeering and various unlawful business practices in contravention of federal and state law. Ford and Nu-Car now move for dismissal under Fed. R.Civ.P. ("Rule") 12(b)(6), claiming Car Carriers is barred from bringing this suit by the res judicata effect of a dismissal with prejudice of its earlier action against them, Car Carriers, Inc. v. Ford Motor Co., No. 82 C 7009 (the "1982 Action").*fn1 N & W also moves to dismiss under Rule 12(b)(6), asserting the Complaint discloses no basis on which it could be held liable for the alleged practices of Ford and Nu-Car. For the reasons stated in this memorandum opinion and order, all defendants' motions are granted and this action is dismissed in its entirety on the terms hereafter specified.

Procedural Profile

Car Carriers' 1982 Action alleged Ford and Nu-Car ran Car Carriers out of the business of shipping Ford automobiles from Chicago. Many of the relevant facts alleged in that suit are set forth in the Opinion, 561 F. Supp. at 886-87. Six claims were advanced by the Complaint in the 1982 Action (the "1982 Complaint"): one federal law count under Sherman Act § 1, 15 U.S.C. § 1, and five pendent state law counts. This Court's Opinion dismissed the Sherman Act claim with prejudice because Car Carriers lacked "antitrust standing" to assert its claim—that is, the 1982 Complaint affirmatively showed no competitive harm to Car Carriers because actions attributed to the defendants (561 F. Supp. at 888) constituted "procompetitive rather than anticompetitive activity." With the Sherman Act claim gone, the state law claims were dismissed without prejudice as not pendent to any valid federal claim (id. at 889).

Car Carriers' 1983 Complaint also alleges facts surrounding Car Carriers' termination as a shipper of Ford automobiles. Except for three conspicuous differences, it is substantially similar to the 1982 Complaint:

    1. It goes into greater detail: 24 counts and 529
  paragraphs, as against the 1982 Complaint's six counts
  and 151 paragraphs.*fn2 Car Carriers' contention
  (discussed below) is the 1983 Complaint invokes facts
  not within the basic fact situation underlying the
  1982 Action.

    2. It invokes different legal theories. Unlike the
  1982 Complaint, which contained only a single federal
  law count based on the Sherman Act and five Illinois
  law counts, the 1983 Complaint brings six counts under
  the Racketeer Influenced and Corrupt Organizations Act
  ("RICO"), 18 U.S.C. § 1961-1968, one count under
  the Elkins Act, codified at 49 U.S.C. § 11902-11904,
  and 17 counts under Illinois law.

    3. It joins somewhat different parties. N & W was
  not a defendant in the 1982 Action and therefore
  cannot join with Ford and Nu-Car in invoking res
  judicata. In addition the 1983 Complaint adds two
  related entities as plaintiffs—Transport
  Terminals, Inc. ("Transport") and Selby Transport
  Co.—but that addition is irrelevant to res
  judicata because the new plaintiffs are in privity
  with the plaintiffs in the 1982 Action. Contrast Beard
  v. O'Neal, 728 F.2d 894, 896-97 (7th Cir. 1984).

Ford and Nu-Car Res Judicata Motions

Res judicata bars a lawsuit if three essential elements are present, Lee v. City of Peoria, 685 F.2d 196, 199 (7th Cir. 1982):

  (1) a final judgment on the merits in an earlier
  action; (2) an identity of the cause of action in both
  the earlier and the later suit; and (3) an identity of
  parties or their privies in the two suits.

N & W does not join in the res judicata motion, and the additional plaintiffs in this action do not deny their obvious privity with the plaintiffs in the 1982 Action. Accordingly only the first two elements of res judicata are at issue.

1. Final Judgment on the Merits

Because the opinion dismissed the 1982 Action for failure to state a claim upon which relief can be granted, it was a disposition of the case on the merits. As our Court of Appeals stated in Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272, 1277 (7th Cir. 1983) (citations omitted, emphasis in original):

  A dismissal for lack of subject matter jurisdiction is
  not on the merits and consequently will not bar a
  later suit. . . . A dismissal for failure to state a
  claim upon which relief can be granted, however, is a
  dismissal on the merits and is res judicata. Federated
  Department Stores, Inc. [v. Moitie], 452 U.S. [394,]
  at 398, 101 S.Ct. [2424,] at 2427 [69 L.Ed.2d 103]
  [(1981)]; Harper Plastics, Inc. [v. Amoco Chemicals
  Corp.], 657 F.2d [939,] at 945 [(7th Cir. 1981)]. lB
  Moore's Federal Practice 110.405[1] (2d ed. 1982).

Moreover the Opinion's language makes clear this Court intended to dispose of the 1982 Action on the merits. In its statement of facts the Opinion assumed as true not only allegations of the 1982 Complaint but also factual assertions in Car Carriers' memorandum not contained in that Complaint. This Court said it did so (561 F. Supp. at 886 n. 2) to show plaintiffs "confront more than mere pleading deficiencies." A the Opinion's "Conclusion" section stated (id. at 889, footnote omitted):

    Ford's and Nu-Car's motions to dismiss are granted.
  Because Count I could not possibly be repleaded to
  withstand Rule 12(b)(6) onslaught, this entire action
  is dismissed—Count I with prejudice and the
  other counts without prejudice.

Car Carriers interprets Bunker Ramo as holding any dismissal of a claim for lack of antitrust standing is not on the merits and thus is not res judicata. True enough, Bunker Ramo held Judge Aspen's dismissal of an earlier complaint in Bunker Ramo Corp. v. Cywan, 511 F. Supp. 531 (N.D.Ill. 1981)—a dismissal for failure to allege competitive injury—was not on the merits and had no res judicata effect. But in that case Judge Aspen had expressly stated (id. at 534) the dismissal was "for lack of subject matter jurisdiction." By contrast, the language quoted earlier from both the Court of Appeals' Bunker Ramo decision and the Opinion demonstrates this Court's disposition of the 1982 Action, unlike dismissal of the prior suit in Bunker Ramo, was a dismissal on the merits.

Car Carriers' parting shot on this issue is an argument this Court intended to bar only the filing of future antitrust claims, not the filing of claims under different theories as far Carriers has done in its 1983 Complaint. Car Carriers cites an April 29, 1983 colloquy in open court at a hearing in which Car Carriers sought leave to file an Amended Complaint in the 1982 Action four weeks after the Opinion had dismissed the suit with prejudice. This Court viewed Car Carriers' motion for leave to amend its then-dismissed Complaint as a belated Rule 59(e) motion to alter or amend the judgment, and it thus denied that motion. When Car Carriers' counsel pointed out the proposed Amended Complaint contained RICO counts not lodged in the 1982 Complaint, this Court responded:

  You have only asked leave to file an amended
  complaint. I am denying leave to file the amended
  complaint. That obviously is not a substantive ruling
  with respect to counts not previously asserted. Your
  RICO count, for better or worse, you can take that
  business to Walgreen's or if it is delivered back into
  this Court I will deal with it. . . . I am not making
  a substantive ruling on your RICO claim. Car Carriers
  contends that statement indicates this Court's
  willingness to consider the merits of the 1983
  Complaint's RICO claims.

That argument is deficient for a number of reasons:

    1. As an attempt to delve into this Court's state of
  mind, Car Carriers' argument fails. This Court neither
  had nor expressed any intention on April 29 to
  foreclose a later consideration of relevant issues
  that could bear on Car Carriers' future ability to
  reassert its claim.

    2. Indeed the record in the 1982 Action definitively
  shows this Court harbored no such intent. In a portion
  of the April 29 transcript Car Carriers omitted to
  cite, this Court admonished Car Carriers' counsel:

    Then you can file a new lawsuit. . . . And you may
    be met with res judicata questions on that score,
    but that is another lawsuit.

    3. Even had this Court intended (as it did not) to
  permit future consideration of the merits of Car
  Carriers' RICO claims, under res judicata principles
  it would not be at liberty to do so. It dismissed the
  1982 Action on the merits, and it is bound to abide by
  the legal consequences of that dismissal.

Thus the 1982 Action was clearly dismissed on the merits. That leaves open only the question whether the 1982 Action's cause of action is the same as that of the 1983 Complaint.

2. Identity of Causes of Action

Under the doctrine of res judicata, a cause of action encompasses all theories that were or could have been used in support of recovery on a single basic fact situation. See Nevada v. United States, ___ U.S. ___, 103 S.Ct. 2906, 2918-19 n. 12, 77 L.Ed.2d 509 (1983); Harper Plastics, Inc. v. Amoco Chemicals Corp., 657 F.2d 939, 944-45 (7th Cir. 1981). Accordingly the relevant inquiry is into the facts Car Carriers alleged in its 1982 Complaint, not the legal theories on which it relied.

Ford and Nu-Car have conducted the requisite factual analysis, while Car Carriers has not. Both Ford Mem. 8-9 and Nu-Car Mem. 13-15 list in detail the unlawful conduct of which they have been accused in both the 1982 and 1983 Complaints. Notably, that conduct includes a plan by Ford to run Car Carriers out of business and to divert its business to Nu-Car. Ford also presents a neat syllogistic proof the two lawsuits arise out of the same fact situation. It is based on the requirement of United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966) that for a federal court to exercise pendent jurisdiction over a state law claim, "state and federal claims must derive from a common nucleus of operative fact." Both complaints allege the propriety of pendent jurisdiction. Those allegations subsume the necessary premise (which Ford does not now dispute) the state law counts arise from the same "nucleus of operative fact" as the federal count or counts. Thus Ford argues:

    1. Car Carriers' five state law counts in the 1982
  Complaint necessarily arise from the same nucleus of
  operative fact as the federal count.

    2. Those five state counts were practically and
  legally equivalent to five of the state law counts in
  the 1983 Complaint.*fn3

    3. Under the Gibbs requirement, the five equivalent
  state law counts in the 1983 Complaint, as well as the
  12 new state law counts, all necessarily arise from
  the same nucleus of operative fact as the six federal
  counts in the 1983 Complaint.

    4. Ergo the 1983 Complaint counts— both
  federal and state—arise from the same nucleus of
  operative fact as the 1982 Complaint counts. Q.E.D.

Car Carriers has provided no response.

Car Carriers purports to make seven arguments the 1982 Action is not res judicata. Four of those arguments however (numbers 1, 2, 5 and 6) rely on differences between the Sherman Act and RICO to contend the two complaints represent separate causes of action. But the application of res judicata principles depends on differences in the underlying facts, not differences in the legal theories relied on. It is therefore simply irrelevant that in enacting RICO Congress created a new "cause of action" (argument 1), that the essential elements of the Sherman Act and RICO causes of action differ (argument 2), or that RICO does not require proof of a conspiracy while Sherman Act § 1 does (argument 5).

As its only factual argument (argument 6), Car Carriers says (Mem. 13):

  The essence of the antitrust claims was (i) the
  alleged conspiratorial termination of plaintiff Car
  Carriers pursuant to NuCar's sham and predatory bid
  and (ii) the boycott of plaintiffs' attempted sale of
  its assets following termination. The RICO claims, on
  the other hand, allege, inter alia, that Ford, through
  a pattern of racketeering activity, gained dominance
  and control over the Car Carriers' enterprise with the
  result that they were able to force Car Carriers to
  invest heavily in new equipment and terminal
  improvements without an opportunity to recoup or
  amortize these expenditures by receipt of compensatory
  tariffs and other allowances (RICO Counts I and II).

That glib separation of the facts underlying the RICO and Sherman Act counts does not withstand scrutiny. Like the present RICO claims, the earlier antitrust claims alleged Ford induced Car Carriers to make investments it could not recoup. Like the earlier antitrust claims, the current RICO claims allege Car Carriers was terminated due to a sham and predatory bid, and Ford and Nu-Car refused to buy Car Carriers' assets upon' its termination.*fn4

Nor do Car Carriers' remaining three arguments compel the retention of the 1983 lawsuit. Those arguments are (retaining Car Carriers' numbering):

    3. Because the Sherman Act has a four-year statute
  of limitations, dismissal of the 1982 Action is res
  judicata only as to events occurring after November
  16, 1978; the date four years before filing of the
  1982 Complaint.

    4. Dismissal of the 1982 Action occurred April 1,
  1983 and thus is not res judicata as to events
  occurring or discovered after that date.

    7. Marrese v. American Academy of Orthopaedic
  Surgeons, 726 F.2d 1150 at 1153 (7th Cir. 1984) (en
  banc) held res judicata applies only if the cause of
  action in the prior suit was "materially identical" to
  the cause of action in the subsequent suit.*fn5 RICO
  is not identical to the Sherman Act, so that res
  judicata does not apply.

All three of those arguments, especially the last, deserve short shrift:

    3. If Car Carriers' current theory encompasses
  pre-1978 facts while its 1982 theory did not, the 1982
  Action is still res judicata because Car Carriers
  could have argued its current theory in 1982. Moreover
  the 1982 Complaint did allege pre-1978 facts, and such
  allegations were not unreasonable in light of judicial
  interpretation of the federal antitrust limitations
  provision. See Zenith Radio Corp. v. Hazeltime
  Research, Inc., 401 U.S. 321, 339, 91 S.Ct. 795, 806,
  28 L.Ed.2d 77 (1971).

    4. of course no lawsuit bars actions arising out of
  events occurring after its dismissal. Lawlor v.
  National Screen Service Corp., 349 U.S. 322, 327-28,
  75 S.Ct. 865, 868, 99 L.Ed. 1122 (1955). Car
  Carriers, however, presents no authority for the
  starting proposition that "discovery" of a cause of
  action after disposition of a previous lawsuit
  prevents the operation of res judicata. If Car
  Carriers can base the cause of action entirely on
  events occurring after April 1, 1983, it is free to do
  so—but this Court will not comb the 107-page
  Complaint to search for such allegations. Instead it
  will dismiss the 1983 Complaint without prejudice
  (leaving the res judicata effect of the with-prejudice
  dismissal of the 1982 Action intact). Car Carriers may
  then if it wishes—and if it can—bring a
  suit alleging actions occurring entirely after April

    7. Car Carriers betrays a total misunderstanding of
  the basic proposition that the operation of res
  judicata depends on the facts alleged and all theories
  that were or could have been advanced to support
  recovery on those facts. Because Car Carriers could
  have advanced a RICO theory in 1982, and that theory
  is materially identical to the RICO theory it did
  advance in 1983, res judicata applies.

All of Car Carriers' contentions have thus evaporated. In the language of our Court of Appeals in Harper Plastics, 657 F.2d at 945:

  An unsuccessful party may not, therefore, frustrate
  the doctrine of res judicata by cloaking the same
  cause of action in the language of a theory of
  recovery untried in the previous litigation.

Because none of Car Carriers' assertions justifies survival of its 1983 Complaint the motions by Ford and Nu-Car must be granted. Inasmuch as Car Carriers asserts its Complaint contains allegations of events occurring after April 1, 1983 that should not be barred by its earlier lawsuit, the current federal claims are dismissed without prejudice. Under Gibbs the state law claims must once again be dismissed without prejudice as not pendent to any valid federal claim.

N & W Motion To Dismiss

Car Carriers joined N & W in the 1983 Complaint because it seeks equitable rescission of the lease between N & W and Car Carriers' related entity Transport, also a plaintiff. N & W seeks dismissal for two reasons:

    1. Even though Car Carriers joins N & W in two of
  its RICO claims, the Complaint nowhere alleges N & W
  acted contrary to federal law. If Ford and Nu-Car are
  dismissed out, the charges against N & W should be
  dismissed as not pendent to any valid federal law

    2. While not alleging N & W violated RICO, Car
  Carriers does seek equitable rescission of N & W's
  lease with Transport as a RICO remedy (in fact
  rescission is the only remedy sought against N & W
  under any claim). But RICO does not provide equitable
  remedies, according to N & W, so the Complaint should
  be dismissed as to N & W.

This Court has previously had occasion to deal with the second question: whether RICO provides equitable remedies to civil plaintiffs. It answered that interesting question in the negative in Kaushal v. State Bank of India, 556 F. Supp. 576, 581-84 (N.D.Ill. 1983). Were it called on to do so, this Court would adhere to that decision.

But the first ground for N & W's dismissal—a far more fundamental one— prescinds any need to consider the equitable relief issue. Both Counts I and II (the only federal counts in which N & W is joined) name Ford and Ford alone as the villain, the "person" that controls the "enterprise" in RICO terms. N & W is alleged to have ended up with a lease with Transport "[a]s a result of the Ford control over the enterprise" (Complaint ¶ 33(k)). It is not alleged to have been a conspirator or in any way implicated as a wrongdoer, but rather at worst the innocent beneficiary of Ford's machinations. Indeed Complaint ¶ 33(1) alleges N & W was itself the target of Ford pressure to provide Ford an alternate railroad site.

Of course that is not the stuff of which a RICO claim is forged. RICO's sections creating private remedies, 18 U.S.C. § 1964 and 1962, permit suit only against the culpable "person." Parnes v. Heinold Commodities, Inc., 548 F. Supp. 20, 23-24 (N.D.Ill. 1982). N & W does not fit that description, and it simply cannot be haled into federal court via RICO.

At most then N & W can be drawn into this action under some notions of pendent party jurisdiction. Our Court of Appeals has strongly indicated little, if anything, of that doctrine survives in any event. Graf v. Elgin, Joliet & Eastern Railway Co., 697 F.2d 771, 775 (7th Cir. 1983); Hixon v. Sherwin-Williams Co., 671 F.2d 1005, 1008-09 (7th Cir. 1982). But "where as here the underlying federal claim has vanished through dismissal of Ford and Nu-Car, it would require some mystical kind of levitation to keep N & W in the case. After all, "pendent jurisdiction" must be pendent to something.


All defendants' Rule 12(b)(6) motions are granted, and this action is dismissed. For the reasons already stated the entire dismissal is without prejudice, but the res judicata effect of Opinion's with-prejudice dismissal of the 1982 Action remains in full force.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.