United States District Court, Northern District of Illinois, E.D
March 9, 1984
CAR CARRIERS, INC., ET AL., PLAINTIFFS,
FORD MOTOR COMPANY, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
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.
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
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
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
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 (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
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.
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'
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
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
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
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.