United States District Court, D. Maryland, Southern Division
MEMORANDUM OPINION AND ORDER
W. Grimm, United States District Judge.
Humane Society v. National Union Fire Insurance Co.,
No. DKC-13-1822 (D. Md.) (“Humane Society
I”), the Humane Society of the United States
(“Humane Society” or “HSUS”) and two
of its attorneys sued their insurer, National Union Fire
Insurance Company of Pittsburgh, P.A. (“National
Union”), for coverage under a claims-made insurance
policy. They sought to recover defense costs relating to a
lawsuit filed against them in the United States District
Court for the District of Columbia. Although the lawsuit was
filed during 2007, the policy under which they sought
coverage required that claims first be made against them
during 2009-2010 (“2009-2010 Policy”). Judge
Chasanow granted partial summary judgment to National Union
with respect to Humane Society's 2009-2010 Policy
coverage claims, but denied National Union's other
requests for summary judgment as to the individual
plaintiffs. Before Humane Society I concluded,
Humane Society filed this suit, seeking to recover the same
damages it sought in Humane Society I, pursuant to
two different insurance policies. Compl., ECF No.
National Union moved to dismiss or to stay pending resolution
of Humane Society I, ECF No. 9, and then the parties
jointly moved to stay this litigation on the same basis, ECF
No. 15. I granted the joint motion, staying this case while
Humane Society I concluded, and reopened this case
upon entry of final judgment in Humane Society I.
ECF No. 16. Now, because res judicata bars this
action, I will grant National Union's motion and dismiss
AND PROCEDURAL BACKGROUND
2007, Feld Entertainment, Inc. (“Feld”) filed
suit in the United States District Court for the District of
Columbia against the Fund for Animals, an affiliate of Humane
Society. Feld amended its complaint in 2010 to name Humane
Society and two of its in-house counsel as additional
defendants. July 30, 2015 Mem. Op. 1-3, ECF No. 84 in
Humane Society I. Humane Society sought to recover
its litigation costs by providing notice on March 1, 2010
under insurance policies (the 2009-2010 Policy and the
“Employed Lawyer Policy”) that it held through
National Union. See Id. at 3-4; Compl. ¶ 24.
The 2009-2010 Policy provided coverage for “claim[s]
first made against the Organization [which was defined to
include Humane Society as the policy holder, as well as its
affiliates] during the Policy Period, ” that is, from
June 1, 2009 to June 1, 2010. July 30, 2015 Mem. Op. 17, 21
in Humane Society I.
National Union refused to pay under the 2009-2010 Policy
(having not yet determined whether it would provide coverage
on the other claim), Humane Society (as well as two
individual plaintiffs, Humane Society's in-house counsel)
filed suit based on that denial. Compl., ECF No. 2 in
Humane Society I. Litigation began in the Circuit
Court for Montgomery County on June 21, 2013, where Humane
Society alleged breach of contract and sought a declaratory
judgment. Id. National Union removed the case to
this Court, where it was assigned to Judge Chasanow. ECF No.
1 in Humane Society I. Judge Chasanow issued a
scheduling order that set the deadline for seeking leave to
amend the pleadings as August 15, 2013, ECF No. 11 in
Humane Society I; Humane Society never requested an
extension of that deadline.
Union denied coverage under the Employed Lawyers Policy on
April 13, 2015, Compl. ¶ 26, but Humane Society did not
seek leave at that time to amend its complaint in Humane
Society I to add a claim under that policy. On summary
judgment after the close of discovery in Humane Society
I, Judge Chasanow concluded that “no coverage is
available for HSUS under the 2009-2010 Policy” because
Feld filed suit against Humane Society's affiliate
“in 2007, outside the 2009-2010 coverage period.”
July 30, 2015 Mem. Op. 22, 25 in Humane Society I.
The Court entered judgment in National Union's favor on
Humane Society's claims on July 30, 2015; the individual
plaintiffs' claims remained pending. July 30, 2015 Order,
ECF No. 85 in Humane Society I; see also
July 11, 2016 Mem. Op., ECF No. 98 in Humane Society
I (summarizing procedural history); Jt. Ex. 4, ECF No.
on August 24, 2015, Humane Society “made a claim . . .
for National Union to provide coverage under the 2007-2008
D&O Policy” (“2007-2008
Policy”) and on September 8, 2015, it sought leave
to amend its complaint in Humane Society I,
inter alia, to add breach of contract and
declaratory judgment claims under that policy and the
Employed Lawyers Policy, alleging that National Union had
rejected its claim under the Employed Lawyers Policy on April
13, 2015 and was “anticipated to breach its coverage
under the 2007-2008 . . . Policy.” ECF Nos. 87, 90,
90-2 in Humane Society I. National Union did indeed
deny the claim on October 28, 2015. The Court denied the
motion to amend on July 11, 2016, because Humane Society
failed to establish good cause for the untimely amendment or
show due diligence in pursuing these claims, and the proposed
amendment, almost a year after discovery closed and about two
months after the summary judgment ruling, would prejudice
National Union. ECF Nos. 98, 99 in Humane Society
month before Judge Chasanow denied leave to amend and while
the individual plaintiffs' claims (which they assigned to
Humane Society) remained pending, Humane Society filed this
suit on June 10, 2016,  bringing claims under the 2007-2008
Policy and the Employed Lawyers Policy that are identical to
the claims they sought to bring in Humane Society I.
National Union moved to dismiss or stay the claims in this
case based on res judicata and principles of comity.
ECF No. 9. The parties fully briefed the motion, ECF Nos.
9-1, 10, 11, and then filed a consent motion to stay the case
pending resolution of Humane Society I, ECF No. 15.
I granted the consent motion, administratively closed the
case, and struck the motion, without prejudice to
reinstatement when the case reopened. ECF No. 16.
Humane Society I, the parties stipulated to the
dismissal of the individual plaintiffs with prejudice, which
the Court approved. ECF No. 110, 111. On August 2, 2017, the
parties stipulated to the dismissal of the remaining claim
and entry of judgment in National Union's favor. ECF No.
156. The Court approved the stipulation, ECF No. 157, and
entered an order dismissing any remaining claims and closing
the case, ECF No. 158.
parties filed a status report, informing me of the dismissal
and agreeing that it resolved Humane Society's claims in
this case under the Employed Lawyers Policy, such that only
the claims under the 2007-2008 Policy remain. Jt. Status Rep.
1-2, ECF No. 18. I reopened this case and reinstated National
Union's motion to dismiss or stay. In light of the
resolution of Humane Society I, insofar as National
Union sought to stay the case or to dismiss the claims under
the Employed Lawyers Policy, the motion is moot. With regard
to dismissal of the claims under the 2007-2008 Policy, the
motion is ripe for resolution, and a hearing is not
necessary. See Loc. R. 105.6. Because res
judicata bars the remaining claims, I will grant the
motion and dismiss the claims.
Union moves to dismiss pursuant to Rule 12(b)(6), under which
Humane Society's pleadings are subject to dismissal if
they “fail[ ] to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). A pleading must
contain “a short and plain statement of the claim
showing that the pleader is entitled to relief, ”
Fed.R.Civ.P. 8(a)(2), and must state “a plausible claim
for relief, ” Ashcroft v. Iqbal, 556 U.S. 662,
678-79 (2009). “A claim has facial plausibility when
the [claimant] pleads factual content that allows the court
to draw the reasonable inference that the [opposing party] is
liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. Rule 12(b)(6)'s purpose “is to test
the sufficiency of a [claim] and not to resolve contests
surrounding the facts, the merits of a claim, or the
applicability of defenses.” Velencia v.
Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md.
Dec. 13, 2012) (quoting Presley v. City of
Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006)). If
an affirmative defense “clearly appears on the face of
the [pleading], ” however, the Court may rule on that
defense when considering a motion to dismiss. Kalos v.
Centennial Sur. Assocs., No. CCB-12-1532, 2012 WL
6210117, at *2 (D. Md. Dec. 12, 2012) (quoting Andrews v.
Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000) (citation and
quotation marks omitted)). One such affirmative defense is
res judicata, or claim preclusion.
I must determine whether to apply state or federal law to
decide what preclusive effects the rulings in Humane
Society I have. Humane Society insists that
“federal res judicata law . . . applies here,
” Pl.'s Opp'n 14, whereas National Union argues
that “substantive Maryland law [is] controlling here,
” Def.'s Reply 1; see also Id. at 2-3. It
is true that when a party raises the defense of res
judicata in federal court with regard to a prior
judgment issued by a federal court, federal common law
governs the preclusive effect of the prior federal court
judgment. Taylor v. Sturgell, 553 U.S. 880, 891
(2008). But, when the federal court that issued the prior
judgment did so while exercising diversity jurisdiction,
federal common law adopts the preclusion rule of the state in
which that court was located. Semtek Int'l Inc. v.
Lockheed Martin Corp., 531 U.S. 497, 508 (2001); see
also Taylor, 553 U.S. at 891 n.4 (“For judgments
in diversity cases, federal law incorporates the rules of
preclusion applied by the State in which the rendering court
sits.” (citing Semtek). Thus, where, as here,
a federal court in Maryland exercises diversity jurisdiction
to hear a case and issue a judgment, Maryland claim
preclusion law applies. See Taylor, 553 U.S. at 891
n.4; Semtek, 531 U.S. at 508.
Maryland law, res judicata provides grounds for
dismissal if a defendant establishes that “(1) the
present parties are the same or in privity with the parties
to the earlier dispute, (2) the claim presented is identical
to the one determined in the prior adjudication, and (3)
there has been a final judgment on the merits.”
Capel v. Countrywide Home Loans, Inc., No.
WDQ-09-2374, 2010 WL 457534, at *3 (D. Md. Feb. 3, 2010)
(citing Anne Arundel County Bd. of Educ. v.
Norville, 887 A.2d 1029, 1037 (Md. 2005)). Maryland law
employs the “transaction test” to determine
whether the claims are identical. See Kent Cty. Bd. of
Educ. v. Bilbrough, 525 A.2d 232, 238 (Md. 1987).
“Under the transaction test, a ‘claim'
includes all rights of the plaintiff to remedies against the
defendant with respect to all or any part of the transaction,
or series of connected transactions, out of which the claim
arose.” Boyd v. Bowen, 806 A.2d 314, 325 (Md.
Ct. Spec. App. 2002) (citing FWB Bank v. Rickman,
731 A.2d 916, 928 (Md. 1999)). Res judicata bars not
only claims from the original litigation, but also other
claims that could have been brought in the original
litigation. Id. (citing Gertz v. Anne Arundel
Cty., 661 A.2d 1157, 1161 (Md. 1995)).
Union contends that the parties are the same as in Humane
Society I and that Humane Society “advance[s] the
exact same claims” that it sought to bring in its
motion for leave to amend its complaint in Humane Society
I, which “Judge Chasanow has already rejected,
” and “an order denying leave to amend has
res judicata effect on the rejected claims.”
Def.'s Mem. 1-2, 3. Additionally, it insists that the
denial of leave to amend did not have to be on the merits
under these circumstances because “res
judicata applies to denials based on mere
timeliness.” Id. at 4. In support of its
position, National Union cites a single Maryland case,
Gonsalves v. Bingle, 5 A.3d 768 (Md. Ct. Spec.
App.), cert. denied, 10 A.3d 1181 (Md. 2010)
(Table); federal case law; and treatises.
Society concedes that the parties are the same, but counters
that its claims are not “de facto identical to
the claims in Humane Society I simply because HSUS
unsuccessfully sought to add the same claims by way of
amendment in Humane Society I.” Pl.'s
Opp'n 11, 13. Humane Society also argues that
“National Union's insurance coverage obligations to
HSUS under each policy are independent of its obligations
under each other policy, ” such that the policies are
not all part of the same transaction. Id. at 11-12.
And, in Humane Society's view, there was no judgment on
the merits of these claims. Id. at 2. Plaintiff
cites federal case law and differentiates Gonsalves
on the basis that the claims at issue in that case were
“virtually identical to prior claims, so that the final
resolution of the prior claim necessarily resolved the merits
of the subsequent claims as well.” Id. at 11.
first time in its Reply, National Union argues that the
claims under the 2007-2008 Policy and the Employed Lawyers
Policy are the same as the claim under the 2009-2010 Policy
for res judicata purposes because, as Judge Chasanow
found, Humane Society “could have filed suit under the
two policies [at issue in this case] ¶ 2012 because
their causes of action had already arisen by 2012.”
Def.'s Reply 11. Although typically “courts should
not consider new arguments or new evidence raised for the
first time in reply briefs, ” courts may consider new
arguments when, as here, they are “offered to rebut
arguments specifically raised in an opposition.”
Sprint Nextel Corp. v. Simple Cell Inc., 248
F.Supp.3d 663 (D. Md. 2017) (citing Clawson v. FedEx
Ground Package Sys., Inc., 451 F.Supp.2d 731, 734 (D.
Md. 2006); Allen v.
Techs. Corp., 2016 WL 4240074, at *4, 11-13 (D. Md. Aug.
11, 2016). Moreover, given that this Court may dismiss an
action sua sponte under the doctrine of res
judicata if it “is on notice that the issues
presented in a suit have been previously decided, ”
Roberts v. Thrasher, No. ELH-15-1906, 2015 WL
4485477, at *2 (D. Md. July 20, 2015) (quoting Arizona v.
California,530 U.S. 392, 413 (2000) (citation and
citation marks omitted)), and I am aware of Judge
Chasanow's decision, it is appropriate to consider this
argument. See Innocent v. Bank of New York Mellon,