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Davenport v. Djourabchi

United States District Court, District of Columbia

June 11, 2018

STUART MILLS DAVENPORT, et al., Plaintiffs,
v.
BABAK DJOURABCHI, et al. Defendants.

          MEMORANDUM OPINION AND ORDER

          AMY BERMAN JACKSON UNITED STATES DISTRICT JUDGE.

         Pending before the Court is a motion filed by plaintiffs Stuart Mills Davenport and Big Bear Cafe, LLC seeking reconsideration of the Court's November 1, 2017 order granting defendants' motion to dismiss. Pis.' Mot. for Recons. Pursuant to Fed. Rule of Civ. P. 59(e) & 60(b) [Dkt. # 16] ("Pis.' Mot.").[1] The Court previously ruled that plaintiffs' claims against defendants Babak Djourabchi and Monica Welt were precluded under the doctrine of res judicata, Davenport v. Djourabchi, 296 F.Supp.3d 245, 248 (D.D.C. 2017), but it concludes here that reconsideration is warranted.

         The doctrine of res judicata bars parties "from relitigating issues that were or could have been raised" in a previous action. Allen v. McCurry, 449 U.S. 90, 94 (1980), citing Cromwell v. Cty. of Sacramento, 94 U.S. 351, 352 (1876). Under this principle, "a subsequent lawsuit will be barred if there has been prior litigation (1) involving the same claims or cause of action, (2) between the same parties or their privies, and (3) there has been a final, valid judgment on the merits, (4) by a court of competent jurisdiction." Smalls v. United States, 471 F.3d 186, 192 (D.C. Cir. 2006) (citations omitted). The Court found that all four elements of res judicata had been met in connection with prior bankruptcy proceedings, and that plaintiffs were therefore barred from bringing their civil suit. See Davenport, 296 F.Supp.3d at 251-54.

         Plaintiffs ask the Court to "reconsider whether the 'same claim' element of res judicata is met in this action." Pis.' Mot. at 4 & n.3. Pointing to authority they did not raise in connection with the motion to dismiss, plaintiffs contend that the Court "did not consider an intervening ruling of the United States Court of Appeals for the District of Columbia Circuit. . . demonstrating that Davenport's bankruptcy action was not the same claim as those brought by [p]laintiffs in this action." Id. at 3 (emphasis omitted). Further, they argue that the Court's decision "reflects clear error in concluding that [p]laintiffs 'could have brought their . . . claims in the prior bankruptcy proceeding, ' when Bankr. Rules 3007(b) and 7001(1) specifically prohibited [p]laintiffs from bringing those state law claims." Id. at 5 (internal citation omitted) (emphasis in original).

         Because plaintiffs were prohibited from bringing their state and common law claims for damages in the prior bankruptcy proceeding, their current claims do not constitute the same cause of action for res judicata purposes. Therefore, the Court will grant plaintiffs' motion.

         BACKGROUND

         The factual and procedural background of this case, the nature of plaintiffs' claims against defendants, and the basis for the Court's previous ruling are laid out in detail in the Court's decision, see Davenport, 296 F.Supp.3d 245, so the Court will address the facts only briefly here.

         Plaintiff Davenport is the operator and sole owner of Big Bear Cafe, LLC, a restaurant on the lower level of the multistory row-house where he and his family live. Am. Compl. [Dkt.#9]¶¶7-10. Defendants were Davenport's neighbors, id. ¶ 13, and they loaned him $80, 000 in exchange for an executed Promissory Note for Business and Commercial Purposes. Id. ¶ 14; Ex. 1 to Am. Compl. [Dkt. # 9-1] ("Note"). The loan was secured by Big Bear Cafe. Id. ¶¶ 16, 21; see Note; Ex. 2 to Am. Compl. [Dkt. # 9-2] ("Deed of Trust"). This case arises out of defendants' efforts to collect on the debt and the bankruptcy proceedings that followed.

         On October 14, 2015, Davenport filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court for the District of Columbia to prevent a threatened foreclosure on his property by defendants. Am. Compl. ¶¶ 105-06. Defendants filed a proof of claim with the bankruptcy court, alleging that Davenport was in default on the Note and that he owed them $121, 813.88. Id. ¶ 120. Davenport contested this allegation by filing an objection to the proof of claim. Id. ¶¶ 120-21. The bankruptcy court then held a trial to determine the amount due under the Note, and on July 21, 2016, it ruled that Davenport was not in default, but that he owed $53, 557.10. Id. ¶¶ 122-23; Ex. 9 to Am. Compl. [Dkt. # 9-9] ("Bankr. Mem."); Ex. 10 to Am. Compl. [Dkt. # 9-10] ("Bankr. Order").

         After the bankruptcy court established that Davenport was not in default on the Note, Davenport and the cafe filed this civil lawsuit against defendants. See Am. Compl.[2] They brought seven claims alleging that throughout the parties' interactions, defendants have harassed Davenport, and that plaintiffs have suffered as a result of defendants' misrepresentations regarding the Note. See Id. ¶¶ 143-47, 156-57, 162, 176-77, 187-88, 193. Plaintiffs sought at least $150, 000.00 in damages, in addition to punitive damages, and attorneys' fees. Id. at 30.

         STANDARD OF REVIEW

         "Motions under Fed.R.Civ.P. 59(e) are disfavored and relief from judgment is granted only when the moving party establishes extraordinary circumstances." Niedermeier v. Office of Max S. Baucus, 153 F.Supp.2d 23, 28 (D.D.C. 2001), citing Anyanwutaku v. Moore, 151 F.3d 1053, lO57(D.C.Cir. 1998). "A Rule 59(e) motion is discretionary and need not be granted unless the district court finds that there is an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Ciralsky v. CIA, 355 F.3d 661, 671 (D.C. Cir. 2004), quoting Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996).

         A motion to alter or amend the judgment under Rule 59(e) "may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment." Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5 (2008), quoting 11 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 2810.1 (2d ed. 1995). Rather, motions to alter or amend a judgment "are intended to permit the court to correct errors of fact appearing on the face of the record, or errors of law." Hammond v. Kempthorne, 448 F.Supp.2d 114, 118 (D.D.C. 2006), quoting Indep. Petroleum Ass'n of Am. v. Babbit, 178 F.R.D. 323, 324 (D.D.C. 1998).[3]

         ANALYSIS

         Plaintiffs are only challenging the Court's previous conclusion that their current claims constitute the same cause of action as those brought in Davenport's bankruptcy case. "Whether two cases implicate the same cause of action turns on whether they share the same 'nucleus of facts.'" Drake v. FAA, 291 F.3d 59, 66 (D.C. Cir. 2002), quoting Page v. United States, 729 F.2d 818, 820 (D.C. Cir. 1984). "[I]t is the facts surrounding the transaction or occurrence which operate to constitute the cause of action, not the legal theory upon which a litigant relies." Page, 729 F.2d at 820, quoting Expert Elec, Inc. v. Levine, 554 F.2d 1227, 1234 (2d Cir. 1977). The D.C. Circuit has "embraced the Restatement (Second) of Judgments' pragmatic, transactional approach to determining what constitutes a cause of action, " and has explained that the Restatement gives "weight to such considerations as whether the facts are related in time, space, origin, or motivation." U.S. Indus., Inc. v. Blake Constr. Co., 765 F.2d 195, 205, (D.C. Cir. 1985), quoting Restatement (Second) of Judgments § 23(2) (1982). The determination of whether two cases involve the same cause of action requires consideration of not only claims that were actually raised in prior litigation, but also matters that "could have been raised in that action." Allen, 449 U.S. at 94, citing Cromwell, 94 U.S. at 352.

         Plaintiffs argue that their two cases do not constitute the same claim or cause of action because the relief they seek now was not available in the bankruptcy action. Pis.' Mot. at 5. To support their position, they insist that an intervening D.C. Circuit opinion held that "the transactional 'same nucleus' of facts test the Court applied here is not applicable where the second action seeks a remedy unavailable in the first action - money damages." Id. (emphasis in original), citing Hurd v. District of Columbia Gov't, 864 F.3d 671, 679-80 (D.C. Cir. 2017). They maintain that a monetary remedy was unavailable in the first proceeding because the bankruptcy rules prohibited Davenport from bringing state or common law damages claims in his contested matter. Id.

         I. The Court of Appeals' Decision in Hurd

         While it is unclear if the Court of Appeals' decision in Hurd is an "intervening change to controlling law" since the opinion predates this Court's opinion, [4] and it applied already-existing legal principles espoused by the Supreme Court, see Walsh v. Hagee, 316 F.R.D. 1, 2 (D.D.C. 2014) (holding that an intervening case decided on "well-established principles" did not constitute an "intervening change of controlling law"); see Hurd, 864 F.3d at 679-80 (citing mostly Supreme Court cases for its interpretation of the preclusive effect of the plaintiffs state court habeas proceeding on his federal section 1983 claim), the Court finds the case to be a useful clarification on when two cases constitute the same cause of action for purposes of res judicata.[5]

         In Hurd, the Court of Appeals held that an inmate's section 1983 civil lawsuit was not barred by the doctrine of res judicata despite the fact that the inmate had previously brought a habeas proceeding in D.C. Superior Court challenging his confinement as a violation of procedural and substantive due process. 864 F.3d at 674-75, 679-80. In 2007, the Federal Bureau of Prisons released Michael Hurd from prison after he had served approximately thirteen months of a forty-two month sentence. Id. at 674. He believed that his motion for a sentence reduction had been granted, and he proceeded to participate in three-years of supervised release. Id. In 2011, Hurd pleaded guilty to possession of marijuana in D.C. Superior Court, and he was sentenced to serve three consecutive weekends in D.C. jail. Id. at 674-75. After the second weekend, the D.C. Department of Corrections disregarded the Superior Court order specifying Hurd's release, and instead kept him imprisoned for an additional twenty-seven months - apparently the remainder of his original sentence. Id. at 675. On November 16, 2011, he filed a habeas petition against the United States in D.C. Superior Court challenging his confinement as a violation of procedural and substantive due process. Id. The court denied his petition from the bench in July 2012, and even though Hurd appealed the decision, the appeal was dismissed as moot because it was not considered until after he had been released. Id.

         Hurd then filed a damages action against the District of Columbia under 42 U.S.C. § 1983, again pursuing both procedural and substantive due process claims. Hurd, 864 F.3d at 675. The district court dismissed his substantive due process claim as precluded by the D.C. Superior Court's 2012 decision, but the D.C. Circuit reversed this decision. Id. The Court concluded that "the Superior Court's 2012 decision lacks the preclusive effect the district court perceived . . . because section 1983 claims cannot be joined in a habeas proceeding." Id.

         The Court observed that the inquiry for assessing whether a claim is precluded by a prior judgment is based on the following questions: "(1) whether the claim was adjudicated finally in the first action; (2) whether the present claim is the same as the claim which was raised or which might have been raised in the prior proceeding; and (3) whether the party against whom the plea of preclusion is asserted was a party or in privity with a party in the prior case." Hurd, 864 F.3d at 679, quoting Patton v. Klein,746 A.2d 866, 870 (D.C. 1999). Thus, plaintiffs' suggestion that the Hurd Court created an exception to the transactional "same nucleus of facts" test, see Pis.' Mot. ...


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