National Diversified Business Services, Inc. v. Corporate Financial Opportunities, Inc.

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National Diversified Business Services, Inc. v. Corporate Financial Opportunities, Inc.
1997 OK 36
946 P.2d 662
68 OBJ 1167
Case Number: 84331
Decided: 04/01/1997
Supreme Court of Oklahoma

 
NATIONAL DIVERSIFIED BUSINESS SERVICES, INC., Plaintiff-Appellant,
v.
CORPORATE FINANCIAL OPPORTUNITIES, INC., BILL D. BURNETT, and BOB BELL, Defendants-Appellees.

ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIV. I

¶0 In an action by an Oklahoma company against a Texas company to recover for violations of the Oklahoma Business Opportunity Sales Act, the District Court, Oklahoma County, Niles Jackson, Judge, dismissed the claim as barred by an earlier dismissal rested on a forum-selection clause in the parties' contract. The Court of Civil Appeals reversed. On certiorari granted upon the Texas company's petition,

THE COURT OF CIVIL APPEALS' OPINION IS VACATED
AND THE TRIAL COURT'S DISMISSAL ORDER

John B. Davis John B. Davis, P.C. Metheny, Mitchell, Davis & Klein Oklahoma City, Oklahoma For Appellant

Herman D. Brandon Oklahoma City, Oklahoma For Appellees

OPALA, J.

[946 P.2d 663]

¶1 The dispositive issue on certiorari is whether the earlier dismissal without prejudice (National I)1 operates as a bar against relitigation of the forum-selection issue that is pressed in the present case (National II)? We answer in the affirmative.

I

THE ANATOMY OF LITIGATION

¶2 Corporate Financial Opportunities, Inc. [CFO or Texas company] is a business incorporated under the laws of the State of Texas. In January 1991 CFO published an advertisement in an Oklahoma newspaper, which contained a solicitation for inquiries regarding financial brokerage opportunities. When National Diversified Business Services, Inc. [National or Oklahoma company], an entity incorporated under the laws of Oklahoma, responded to the ad, CFO's agents made representations of CFO's ability to provide access to numerous lenders and informational databases.

¶3 CFO and National entered into a written contract (entitled broker agreement), dated February 22, 1991, by which CFO agreed to furnish National with services, information, and materials for the establishment of a brokerage business. The contract includes a forum-selection clause2 that requires the [946 P.2d 664] parties to litigate in a Texas forum any dispute arising from their agreement.

National I Litigation

¶4 National brought suit in Oklahoma against CFO in 1991, alleging (a) breach of contract, (b) fraud in the inducement, and (c) fraud.3 CFO moved to dismiss for (a) lack of in personam jurisdiction, (b) mislaid venue, and (c) failure to state a claim upon which relief can be granted. On September 11, 1991 the trial court dismissed the claim without prejudice to its refiling in a Texas forum.4 The dismissal was explicitly grounded on the contract's forum-selection clause. No appeal was taken from that decision.

National II Litigation

¶5 On September 8, 1993 National brought the present suit against CFO and two of its agents. By changing its theory of recovery from a contractual to a noncontractual basis (violations of the Oklahoma Business Opportunity Sales Act [OBOSA or Act]),5 National now seeks to escape the prior decision's preclusive effect. The earlier suit was rested on the contractual character of the claim. The present petition, although abandoning the theories urged in National I (i.e., fraud, fraud in the inducement, and breach of contract), alleges many of the same facts and seeks the same relief as that pressed in the first suit.6

¶6 CFO moved to dismiss on the ground that the petition fails to state a claim upon which relief may be granted. According to CFO, the first (September 11) dismissal order bars the second suit by interposition of res judicata (claim preclusion). The earlier dismissal order is binding on the parties, CFO urged, because (a) National did not appeal from that ruling and (b) the present (National II) litigation is based on the same facts and transactions as those in the first suit.7

¶7 National's response urged that (a) CFO's motion to dismiss is but a quest for summary relief because CFO was relying on facts not found in the petition,

¶7 National's response urged that (a) CFO's motion to dismiss is but a quest for summary relief because CFO was relying on facts not found in the petition,

¶8 The trial court dismissed the second suit, resting its decision on the earlier (September 11) adverse (to National) adjudication of the forum-selection clause.10 The Court of Civil Appeals reversed, holding that the prior dismissal order does not bar National's later OBOSA-based action in Oklahoma. The appellate court reasoned that (a) because the dismissal of an action for mislaid venue is not a decision on the merits, the first dismissal did not have preclusive effect under the doctrine of "res judicata or [of] collateral estoppel," (b) National could not relitigate any fact or law issue settled by the first dismissal,11 (c) a forum-selection clause in a contract does not prevent a court from exercising its jurisdiction,12 (d) the dismissal of the first suit did not become the "law of the case" since there was no appellate pronouncement upon the correctness of the trial court's ruling, and (e) a forum-selection clause, which would require that suit to enforce a statutory civil remedy must be brought in another state, is unenforceable on public policy grounds.

II

THE STANDARD OF REVIEW

¶9 A motion to dismiss for failure to state a claim upon which relief can be granted may not be sustained unless it should appear without doubt that the plaintiff can prove no set of facts in support of the stated claim for relief.13 Under this State's pleading [946 P.2d 666] regime,14 if the dismissal motion also tenders for consideration materials dehors the pleadings, summary process must be utilized.15 Since evidentiary materials were indeed presented for nisi prius consideration,16 CFO's quest for dismissal must be treated as though it were one for summary adjudication. A motion for summary disposition submits the controversy to the court for application of the pertinent law to uncontroverted facts. The tendered evidentiary materials will warrant summary relief if all material facts are undisputed and supportive of but a single inference that favors the movant.17 For the reasons to be stated, we hold, on de novo review of the record, that the trial court's summary ruling for CFO is free from error.18

III

SINCE NATIONAL II IS PREDICATED ON A
RELATIONSHIP CREATED BY AND THEREFORE
ARISING OUT OF THE UNDERLYING CONTRACT,
IT FALLS WITHIN THE OUTER RANGE
OF ISSUE PRECLUSION

A.

The Relitigation Bar

¶10 CFO's quest for dismissal at nisi prius was rested on a claim-preclusion bar, but we conclude that issue preclusion is the correct concept that governs here.

¶11 Under the doctrine of issue preclusion (formerly known as collateral estoppel),

¶12 The issue-preclusion bar is distinct from that of claim preclusion (formerly known as res judicata). Under the latter principle, a final judgment on the merits of an action precludes the parties from relitigating not only the adjudicated claim but also any theories or issues that were actually decided, or could have been decided, in that action.

¶13 The first lawsuit came in the framework of a cause of action different from the statutory claim that is now asserted in this case. For invocation of issue preclusion, there need not be a judgment on the merits (as it is often the case with res judicata), but only a final determination of a material issue (common to both cases).

¶14 The first (September 11, 1991) dismissal, based on an adjudication upon the tendered forum-selection clause, determined a single issue dehors the merits. It decided no issues upon the claim or defenses pressed in National I.

III

SINCE NATIONAL II IS PREDICATED ON A
RELATIONSHIP CREATED BY AND THEREFORE
ARISING OUT OF THE UNDERLYING CONTRACT,
IT FALLS WITHIN THE OUTER RANGE
OF ISSUE PRECLUSION

A.

The Relitigation Bar

¶10 CFO's quest for dismissal at nisi prius was rested on a claim-preclusion bar, but we conclude that issue preclusion is the correct concept that governs here.

¶11 Under the doctrine of issue preclusion (formerly known as collateral estoppel),

¶12 The issue-preclusion bar is distinct from that of claim preclusion (formerly known as res judicata). Under the latter principle, a final judgment on the merits of an action precludes the parties from relitigating not only the adjudicated claim but also any theories or issues that were actually decided, or could have been decided, in that action.

¶13 The first lawsuit came in the framework of a cause of action different from the statutory claim that is now asserted in this case. For invocation of issue preclusion, there need not be a judgment on the merits (as it is often the case with res judicata), but only a final determination of a material issue (common to both cases).

¶14 The first (September 11, 1991) dismissal, based on an adjudication upon the tendered forum-selection clause, determined a single issue dehors the merits. It decided no issues upon the claim or defenses pressed in National I.

B.

¶15 National rests its second lawsuit on violations of the statutory (OBOSA) requirements [946 P.2d 668] for the offer and sale of a business opportunity in Oklahoma. It seeks recovery for lost profits caused by CFO's failure to furnish reliable lender data under the agreement's terms.

¶16 Although this theory of liability is different from that pressed in National I, the underlying foundation of the tendered controversy remains the same. Both lawsuits are predicated on a relationship that was created by - and therefore arises out of - the very same contract of which the forum-selection clause is a part.

¶17 The precluded issue in National I clearly targets the contract-based relationship that limited litigation to the situs prescribed in that document. Even though issue preclusion may be viewed as more narrow in scope than claim preclusion, the outer boundaries of a precluded issue must be firmly charted along the character of the litigation.29 Tendered in National I was a controversy arising out of a contractual relationship. That did not change in National II. Albeit on different theories, in both lawsuits contract-generated rights were sought to be redressed. The issue that stands barred by National I's preclusion is co-extensive with any controversy that owes its origin or existence to the contract-derived relationship between the parties. In short, because National II, much like National I, seeks to redress rights arising from the same contract, the forum-selection clause in that document governs, regardless of the theory selected by the pleader for the agreement's vindication.

¶18 Because all issues in this controversy arise out of the February 22, 1991 contract, National cannot escape the issue-preclusion bar by now changing its theory of recovery. Inasmuch as the September 11 order fully and fairly settles the binding effect of the forum-selection clause for all of the parties' disputes that are derived from their single contract, and the present action re-presents the same facts under the garb of a different basis for liability, issue preclusion operates in National II to bar from relitigation the previously adjudicated effect of the contested forum-selection clause.

SUMMARY

¶19 Once an issue has been reached and decided, the doctrine of issue preclusion operates to bar its relitigation in a later action that is once again rested on rights derived from the same contract, though they are pressed on a different theory of recovery. The trial court's decision in National I "fully and fairly" settled the forum-selection dispute by ruling that only Texas affords the correct forum for adjudication of rights derived from the parties' conduct under their contract. Because National II, much like National I, seeks to redress interests acquired from the very same contract whose critical clause's effect now stands settled by the precluded issue, National may not again interpose that clause for another judicial inquiry into its breadth.

¶20 On certiorari granted upon the Texas company's petition, the Court of Civil Appeals' opinion is vacated and the trial court's dismissal order is affirmed.

¶21 KAUGER

¶22 HODGES

FOOTNOTES

1 National Diversified Business Services, Inc. v. Corporate Financial Opportunities, Inc., No. CJ 91-5031, District Court, Oklahoma County [National I].

2 The pertinent terms of the forum-selection clause are:

 

"I understand and agree that this Agreement is not valid or binding unless signed by an authorized representative of CFO at its headquarters in Irving, Texas; and this Agreement is a Texas contract governed by the laws of Texas; and any dispute arising from this agreement shall be brought only in the courts of the State of Texas." (Emphasis added.)

3 National alleges that CFO (a) breached its contract when it failed to provide reliable lender data in conformity with the written agreement, (b) made material misrepresentations for the purpose of inducing National to enter into the written brokerage agreement and (c) perpetrated fraud against National. National I, supra note 1.

4 The trial court's earlier dismissal (filed September 11, 1991 in National I) states in pertinent part:

 

"Upon consideration of the briefs, arguments of counsel and the relevant law, the Court finds that defendant's Motion to Dismiss should be sustained. The choice of forum clause contained in the agreement is controlling; therefore, the proper venue would lie in the Texas Courts.

IT IS THEREFORE ORDERED that defendant's Motion to Dismiss is sustained.

IT IS FURTHER ORDERED that plaintiff's petition is hereby dismissed but without prejudice to be refiled in a proper tribunal. * * *" (Emphasis added.)

5 71 O.S.1991 §§ 801 et seq. National alleges that (a) CFO's actions constituted an offer or sale of a business opportunity under the terms of the OBOSA; (b) the business opportunity sold (or offered) by CFO was not registered nor did it qualify for an exemption under the Act's provisions; (c) CFO did not file a written disclosure statement pertaining to the offer or sale of the business opportunity; (d) the parties' contract failed to include provisions required by the Act; (e) contrary to the Act, CFO did not have a minimum net worth of $50,000 at the time of its offer or sale of the business opportunity; and (f) CFO's actions and those of its agents constitute fraud or deceit in connection with the offer or sale of the business opportunity in violation of the Act.

6 The petitions in National I and II allege, inter alia, that (a) CFO made false representations about its access to 2,000 suitable lenders, (b) in reliance on these representations, National entered into a written contract with CFO, (c) National paid CFO the contract price of $8,981, and (d) CFO failed to furnish reliable lender data under the agreement's terms, which resulted in lost profits to National, exceeding $10,000. Both petitions seek (a) damages in the amount of $8,981, (b) damages for lost profits in excess of $10,000, (c) punitive damages in excess of $10,000 for the defendants' fraudulent and malicious conduct, and (d) the costs of the action.

7 For the National I and II allegations, see supra note 6.

8 CFO attached to its motion copies of the following papers: (a) the petition in the 1991 action (National I); (b) the parties' contract (broker agreement) and (c) CFO'S motion to dismiss (and brief) in the first action together with the attached exhibits (affidavit of CFO's president and the September 11, 1991 dismissal order).

9 The Oklahoma Securities Commission's order - whose terms found that the transaction here in contest is within that agency's jurisdiction under OBOSA and that the parties' contract is governed by that Act (OBOSA) - was later affirmed on appeal. In the Matter of Corporate Financial Opportunities, Inc. v. Oklahoma Department of Securities (Sup.Ct.No. 80,115, July 27, 1993, unpublished opinion by the Court of Civil Appeals).

10 The second dismissal order (filed July 14, 1994 in National II) states in pertinent part:

"* * * This cause comes before the court upon defendants' motion to dismiss for failure to state a claim, filed April 13, 1994. The Court finds that Defendants' Motion to Dismiss should be sustained upon the grounds that Plaintiff's claim is barred by prior adjudication. * * *"

11 The appellate court cites Swan v. Sargent Industries, Okl.App., 620 P.2d 473 (1980)(approved for publication by the Supreme Court), which holds that an earlier dismissal for want of personal jurisdiction over the defendant does not preclude a later litigation over the merits before a court of competent jurisdiction, although it does bar a retender upon the same issue of in personam jurisdiction.

12 In support of this principle, the appellate court cites Eads v. Woodmen of the World Life Insurance Society, Okl.App., 785 P.2d 328 (1990), which holds that forum-selection clauses, while not per se invalid, may be unenforceable if found unfair or unreasonable.

13 The terms of 12 O.S.1991 § 2012(B) provide in pertinent part:

"Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion:

* * *

6. Failure to state a claim upon which relief can be granted;

* * *

If, on a motion asserting the defense numbered 6 of this subsection to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by the rules for summary judgment. * * *" (Emphasis added).

"[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957); Atchison, Topeka and Santa Fe Ry. Co. v. Buell, 480 U.S. 557, 568 n.15, 107 S. Ct. 1410, 1417 n.15, 94 L. Ed. 2d 563 (1987); Groce v. Foster, Okl., 880 P.2d 902, 906 (1994); Dyke v. Saint Francis Hospital, Inc., Okl., 861 P.2d 295, 298-299 (1993); Frazier v. Bryan Memorial Hosp. Authority, Okl., 775 P.2d 281, 289 (1989). See also Committee Comment to 12 O.S.1991 § 2012(B), which observes that § 2012(B) is virtually the same as Federal Rule of Civil Procedure 12(b).

14 The Oklahoma Pleading Code, 12 O.S.1991 §§ 2001 et seq.

15 12 O.S.1991 § 2012(B), supra note 13. See Dyke, supra note 13 at 299 n.8; Norman v. Trison, Okl., 832 P.2d 6, 8 (1992); Hulsey v. Mid-America Preferred Ins. Co., Okl., 777 P.2d 932, 932 n.14. (1989); Silver v. Slusher, Okl., 770 P.2d 878, 881 n.8 (1988).

16 For the evidentiary materials attached to CFO's motion to dismiss, see supra note 8.

17 Hulsey, supra note 15 at 936 n.15.

18 An order that grants summary relief disposes only of questions of law. It is reviewable de novo. An appellate court claims for itself plenary, independent and nondeferential authority to re-examine a trial court's legal rulings. Kluver v. Weatherford Hospital Authority, Okl., 859 P.2d 1081, 1083 (1993). Oklahoma's summary judgment process is similar to that followed by the federal judicial system. See Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S. Ct. 1217, 1221, 113 L. Ed. 2d 190 (1991).

19 Fent v. ONG, Okl., 898 P.2d 126, 133 (1995). Issue preclusion and collateral estoppel are two different names for the same legal doctrine. The former term was introduced through the Restatement and the seminal writings by Prof. Allen Vestal, Res Judicata/Preclusion, Personal Injury Annual (1969); Res Judicata/Preclusion: Expansion, 47 S.Cal.L.Rev. 357 (1974); State Court Judgment as Preclusive in Section 1983 Litigation In A Federal Court, 27 Okla.L.Rev. 185, 202 (1974). The latter is a common-law term of long usage. Restatement of Judgments (Second) § 27, Comment b; Underside v. Lathrop, Okl., 645 P.2d 514, 517 n. 8 (1982); Veiser v. Armstrong, Okl., 688 P.2d 796, 799 n.7 (1984).

20 Allen v. McCurry, 449 U.S. 90, 94-95, 101 S. Ct. 411, 414-415, 66 L. Ed. 2d 308 (1980); Underside, supra note 19 at 516-517; Chambers v. City of Ada, Okl., 894 P.2d 1068, 1072 n. 5 (1995); Wilson v. Kane, Okl., 852 P.2d 717, 722 n. 23 (1993); Veiser, supra note 19 at 800. See also Robinson v. Volkswagenwerk AG, 56 F.3d 1268, 1272 (10th Cir. 1995).

21 Swan, supra note 11 at 477; White v. White, Okl., 607 P.2d 700, 702 (1980) (Opala, J., concurring in result); Duncan v. Seay, Okl., 553 P.2d 492, 494 (1976); Bruce v. Miller, Okl., 360 P.2d 508, 511 (1961).

22 Fent, supra note 19 at 133; Underside, supra note 19 at 516; Veiser, supra note 19 at 800.

23 A litigant who is deemed aggrieved by a jurisdictionally defective decision is allowed but a single "whack" (attack) at any facially void target. Stites v. DUIT Constr. Co., Okl., 903 P.2d 293, 298 n.13 (1995); Salyer v. National Trailer Convoy, Inc., Okl., 727 P.2d 1361, 1363 (1986); Depuy v. Hoeme, Okl., 775 P.2d 1339, 1345 (1989); White, supra note 21 at 703 (Opala, J., concurring in result); Bruce, supra note 21 at 511-512; Tippins v. Turben, 162 Okl. 136, 19 P.2d 605, 608 (syl.4)(1933); Brett v. Fielder, 136 Okl. 222, 277 P. 216, 217 (1928).

24 Wilson, supra note 20 at 722; McCurry, supra note 20 at 94, 101 S. Ct. at 414; Restatement of Judgments, supra note 19 at 852.

25 Carris v. John R. Thomas and Associates, Okl., 896 P.2d 522, 527 (1995); Chambers, supra note 20 at 1072; Wilson, supra note 20 at 722 n.23. See also A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 626 N.E.2d 280, 289-290 (1994); Cirro Wrecking Company v. Roppolo, 153 Ill. 2d 6, 605 N.E.2d 544, 552 (1992).

26 The terms of 12 O.S.1991 § 953 are:

"An order affecting a substantial right in an action, when such order, in effect, determines the action and prevents a judgment, and an order affecting a substantial right, made in a special proceeding or upon a summary application in an action after judgment, is a final order, which may be vacated, modified or reversed, as provided in this article." (Emphasis added.)

Gilliland v. Chronic Pain Associates, Okl., 904 P.2d 73, 76 (1995); Mayhue v. Mayhue, Okl., 706 P.2d 890, 893 (1985); Moses v. Hoebel, Okl., 646 P.2d 601, 603 (1982); Stubblefield v. GMAC, Okl., 619 P.2d 620, 624 (1980); Centorp Corporation v. Gulf Production Corp., 183 Okl. 436, 83 P.2d 181 (syl. 1) (1938). Ordinarily, an order's finality is measured by the effect it has on the termination of the proceedings. In re Estate of Caldwell, Okl., 692 P.2d 1380, 1381 n.5 (1984).

27 Gilliland, supra note 26 at 76; Patmon v. Block, Okl., 851 P.2d 539, 543 (1993); Southwestern Natural Gas Co. v. Vernor, 178 Okl. 344, 62 P.2d 1262, 1265 (1936); Sanford v. Street, 178 Okl. 172, 62 P.2d 479, 480 (syl. 3) (1936).

28 For the pertinent terms of the September 11, 1991 dismissal, see supra note 4.

29 The Restatement (Second) of Judgments' test for determining the scope of issue preclusion is akin to the law's method for defining the outer reach of claim preclusion. Both doctrines have a similar purpose - "'to prevent repetitious litigation of what is essentially the same dispute.'" 18 Wright & Miller, Federal Practice and Procedure § 4417 at 149 (quoting Restatement (Second) of Judgments, 1981, § 27, Comment c).