N.D.Ill. Examines Res Judicata and Claim-Splitting Doctrines

In Tank v. T-Mobile USA, Inc., 2013 WL 4401375, the Northern District of Illinois examined the reach of the res judicata and claim-splitting doctrines in an employment discrimination suit. 

In 2012, the plaintiff sued T-Mobile, his former employer, for employment discrimination and for violating the Telecommunications Act of 1996, 47 U.S.C. § 201 et seq. (the “TCA”), which outlaws employers accessing “customers’ proprietary network information” (basically, “cell phone records”) without the customer’s consent.  Plaintiff’s TCA count claimed the defendant accessed plaintiff’s cell phone records without his permission while looking into plaintiff’s EEOC claim against the telecom giant. 

This was plaintiff’s second discrimination suit against T-Mobile. In 2011, he filed similar Federal employment discrimination claims (but not a TCA claim) which were defeated on T-Mobile’s summary judgment motion.  After plaintiff filed his second action in 2012, T-Mobile moved to dismiss on the basis of res judicata and improper claim-splitting.  T-Mobile argued that plaintiff’s 2012 case was based on the same operative facts as his 2011 suit (which T-Mobile won on summary judgment) and so the 2012 case was defeated by res judicata’s and claim-splitting.

Held: The Court denied defendant’s motion to dismiss plaintiff’s TCA claim and granted the motion to dismiss plaintiff’s employment discrimination claims.

Reasoning/Rules

Res judicata and claim-splitting both aim to prevent repetitive and duplicative litigation; ensuring that all factually-related claims are brought in a single case. 

Res judicata’s elements:

(1) an identity of causes of actions (that is, the second claim is based on the same core of operative facts as the previously litigated “first” claim);

(2) identity of parties or their privies (a fact-specific inquiry decided on case-by-case basis); and

(3) a final judgment on the merits (final judgment = judgment based on the parties’ legal rights as opposed to matters of practice, procedure, jurisdiction or form)  

Claim-Splitting Doctrine

Related to res judicata, claim-splitting differs in only a single sense: while res judicata contemplates a final judgment and separate, sequential lawsuits, claim-splitting applies to two currently pending lawsuits that have not yet reached the final judgment stage.  The claim-splitting doctrine provides the basis for dismissal where two pending lawsuits are duplicative of  one another.    

The ‘Single Core of Operative Facts’ Element 

The Court held that plaintiff’s TCA claims (based on T-Mobile’s (alleged) cell phone snooping) were not barred by res judicata or claim-splitting.  While both the 2011 and 2012 suits pled T-Mobile’s discriminatory conduct, only the 2012 suit alleged T-Mobile violated the TCA’s privacy provisions by scouring plaintiff’s cell phone.  As a result, the Court found that the core of underlying facts giving rise to the 2011 suit (which exclusively involved employment discrimination claims) differed from the 2012 suit (which additionally involved T-Mobile’s violation of the TCA).  *5-6. 

Take-aways: Res judicata and claim-splitting are properly brought as part of a Rule 12(b)(6) motion.  The Tank Court gives content to the same claim/same core of operative facts element of res judicata/claim-splitting and shows a willingness to look into factual differences between two separate lawsuits which look on the same on the surface.

Tank provides ammunition to litigants opposing res judicata or claim-splitting pleadings motions by highlighting what a court should focus on when analyzing the same cause/identity of cause action element of the defenses.

Commercial Lease Acceleration: Termination of Possession vs. Termination of Lease

accelerator Form commercial lease language usually gives the landlord the option of terminating the lease OR terminating the tenant’s right to possession after a tenant default. Generally, if a landlord terminates the lease, this cuts off his damages at the date of termination. So, if landlord terminates the lease on January 1, 2013 and the lease expires on January 1, 2015 – the landlord cannot recover damages beyond January 1, 2013.

By contrast, if a landlord terminates only the tenant’s right to possession, the landlord can still periodically sue for rents as they come due or, using the above example, wait until January 1, 2015 (the expiration date) and sue for all accrued damages on that date.

Stillwell Real Estate Limited Partnership v. Deluxe Auto, Inc., 2011 IL App (2d) 100966-U examines the lease termination-vs.-lease possession  distinction. 

The landlord filed two separate actions: (1) an eviction (forcible) case; followed by (2) a breach of contract case for money damages.  The parties’ lease was three years (2007-2010) for the operation of a car dealership.  The tenant defaulted about two years into the term and the landlord sued to evict about a year before the lease ended.  The tenant moved out a month later and the court awarded the landlord damages owed through the trial date. (¶ 5). 

Six months later, when there was still some time left on the lease, landlord filed a separate breach of contract action against the lease guarantors to recover rental damages that accrued after the eviction trial date. 

One of the guarantors moved to dismiss on the basis of res judicata – that the landlord’s breach of contract claim was barred by failing to seek accelerated damages in the prior eviction suit.  The guarantor based this argument on lease language that said if the landlord terminated the lease, it could recover all rental damages through the 2010 lease end date.   But since the  landlord chose not to sue for all rents in the prior eviction suit, it was now too late.  The trial court agreed and dismissed the landlord’s suit.  Landlord appealed.

Disposition: Reversed.  

Reasoning: The lease required the landlord to provide written notice of its intent to terminate the lease.  Upon termination, the lease allowed the landlord to recover “all damages incurred by reason of the breach.” 

The lease also had an “excess rent” clause (landlord can recover excess rental stream for remainder of lease minus fair market value through the lease term). 

The Court found that the landlord’s statutory five-day notice didn’t equal a lease termination.  It merely signaled the landlord’s intent to terminate possession only.  Also, the landlord’s eviction suit didn’t terminate the lease since the purpose of a forcible/eviction suit is limited to the right  to possession. (¶¶ 18-19).   

Shifting to res judicata, the Court cited the doctrine’s three elements: (1) final judgment on the merits; (2) identity of parties; and (3) identity of cause of action.  (¶ 11).  Applying these rules, the Court found element (3) missing: there was no identity of cause of action between the earlier eviction suit and the later damages action. (¶ 12). 

The  the first eviction/forcible suit – was limited to the issue of possession and rents that were owed on the date of that trial.  The later filed breach of contract suit sought money damages accruing after the eviction trial date. 

Since the landlord never terminated the lease (it only terminated possession) it could sue separately to recover damages as they became due. (¶¶ 12-16).

Take-aways: Service of a 5-day notice and the filing of a forcible suit doesn’t equal a lease termination.  

This case vividly captures the importance of lease drafting precision and that leases contain clear acceleration language.  The case also describes what constitutes a lease termination (as opposed to possession termination only).