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Shamley v. ITT Corp.

decided: March 1, 1989.


Appeal from a partial final judgment of the United States District Court for the Southern District of New York, Michael B. Mukasey, Judge, entered to give res judicata effects in another forum on an order of John F. Keenan, Judge, that applied New York law to claims for wrongful discharge, defamation, and emotional distress, and dismissed those claims.

Kaufman, Oakes, and Newman, Circuit Judges.

Author: Oakes

OAKES, Circuit Judge.

This case concerns two issues: whether a partial final judgment under Fed. R. Civ. P. 54(b) may be entered in order to permit a defendant to assert res judicata as a bar to a duplicative state court action; and whether the conflict of laws rules of New Jersey would apply the law of New Jersey or the law of New York when the plaintiff, a New Jersey domiciliary, sues his New York employer for matters related to his employment. The United States District Court for the Southern District of New York, John F. Keenan, Judge, dismissed certain state law claims asserted by Gary Shamley, one of the ITT Corporation's former employees. These state law claims were for wrongful discharge, defamation of character, and intentional infliction of emotional distress. Judge Keenan held that New York law was applicable and that under this law these claims were meritless. When Shamley brought a state court claim in New Jersey reasserting the same claims--though restyling the defamation claim as "malicious interference with advantageous employment relationship and inducement of breach of contract"--ITT sought an order under Fed. R. Civ. P. 54(b) for entry of a partial final judgment on the claims dismissed by Judge Keenan so that it could assert res judicata as a bar in the New Jersey action. The same district court, Michael B. Mukasey, Judge, granted this motion, stating "because I believe potentially vexatious litigation in New Jersey is sufficient reason under Rule 54, Fed. R. Civ. P., for entry of immediate judgment, defendant's motion is granted." Shamley claims that this reasoning was insufficient. He also asserts that the state law claims should not have been dismissed in the first place because New Jersey rather than New York law should have been applied. We affirm.

This case has a somewhat tortuous procedural history. Indeed, the action began in 1984 against ITT and several of its employees in the United States District Court for the District of New Jersey. Shamley, a cost accountant who was employed for fourteen years by ITT, alleged that he was discriminated against on the basis of his age (fifty-eight), his religion (Jewish), and his ethnic origin (Bulgarian-born Hispanic former resident of Israel). He made federal civil rights claims for employment discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the Civil Rights Act of 1866, 42 U.S.C. § 1981, after filing charges with the Equal Employment Opportunity Commission ("EEOC") and obtaining a right-to-sue letter; for conspiracy to deprive him of his civil rights and equal privileges under the Civil Rights Law of 1871, 42 U.S.C. § 1985(3); for conspiracy under 42 U.S.C. § 1985(2) to punish him for previously suing in New York state court for defamation and intentional infliction of emotional distress; for wrongful discharge from employment motivated by bad faith and malice contrary to 42 U.S.C. § 1981 and 42 U.S.C. § 1985(2); and for discriminatory discharge and retaliatory acts under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq., again after charges were filed with the EEOC. He also asserted claims for wrongful discharge and defamation and intentional infliction of emotional distress under the common law of New Jersey.

ITT moved for a change of venue in the New Jersey action. The New Jersey federal court transferred the case to the Southern District of New York (where it was consolidated with an age-discrimination action previously brought by Shamley in the Southern District) because, according to the New Jersey district court, "this suit has a far more substantial connection with the Southern District of New York than with the District of New Jersey." The transfer was appealed, but that appeal has been withdrawn.

In May 1985, ITT moved for summary judgment on all of Shamley's claims in the consolidated actions, and Judge Keenan, by memorandum opinion and order dated April 9, 1987, applied New York law and dismissed the state law claims for wrongful discharge, defamation, and intentional infliction of emotional distress, but entered no final judgment because Shamley's federal claims remained alive.*fn1

After Judge Keenan's order, Shamley began another action in the Superior Court of New Jersey for Bergen County asserting substantially the same claims against the same defendants, though the claim for defamation appeared in a different guise. On or about February 26, 1988, ITT moved to dismiss the New Jersey state court complaint, claiming that it was barred by the doctrine of res judicata in light of Judge Keenan's order. Because no judgment had been entered by the federal district court in New York, ITT sought a partial final judgment from Judge Mukasey, to whose docket the case had been transferred. This request, as we have said, was granted by Judge Mukasey on April 21, 1988. Thereafter the Superior Court of New Jersey granted ITT's motion to dismiss Shamley's complaint in the New Jersey action with prejudice based on New Jersey's "entire controversy doctrine," which mandates that all related claims be heard in the same forum. Since the instant appeal was argued, New Jersey's Appellate Division has affirmed the Superior Court on res judicata grounds. Shamley v. ITT Corp., No. A-4728-87T1, slip op. at 3 (N.J. Super. Ct. App. Div. Dec. 27, 1988).

Shamley's present appeal is from Judge Mukasey's entry of partial final judgment on Judge Keenan's order dismissing the state law claims. He disputes both Judge Mukasey's decision and Judge Keenan's dismissal of those claims. Shamley declined to follow Judge Mukasey's suggestion that with ITT's permission he delay perfection of his appeal until the district court decides all of his federal claims.


A. Partial Final Judgment

The first question is whether Rule 54(b) authorizes entry of partial final judgment in order to create res judicata effects elsewhere.*fn2 The ordinary purpose of Rule 54(b) is to permit the party aggrieved by a partial determination to appeal immediately. See generally Cullen v. Margiotta, 811 F.2d 698, 710-13 (2d Cir.), cert. denied, 483 U.S. 1021, 107 S. Ct. 3266, 97 L. Ed. 2d 764 (1987); Weiss v. York Hosp., 745 F.2d 786, 801-04 (3d Cir. 1984), cert. denied, 470 U.S. 1060, 84 L. Ed. 2d 836, 105 S. Ct. 1777 (1985). Shamley argues that Judge Mukasey granted a partial final judgment not to permit such an appeal but solely to bestow res judicata effect on the dismissal of Shamley's state law claims. The most apposite authority is Continental Airlines v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 1525 (9th Cir. 1987), which held that an otherwise proper 54(b) certification may be awarded "for the purpose of producing res judicata effects elsewhere," following dicta in Bank of Lincolnwood v. Federal Leasing, Inc., 622 F.2d 944, 950 n.7 (7th Cir. 1980), and Republic of China v. American Express Co., 190 F.2d 334, 339 (2d Cir. 1951) (Frank, J.). Continental Airlines held that "an otherwise permissible 54(b) certification designed to produce res judicata effects in another forum was proper." 819 F.2d at 1525. This circuit's Republic of China did not go so far as to approve the entry of a partial final judgment for the purpose of creating res judicata effects. Judge Frank did mention that the trial judge "intended . . . that his [partial] discharge order would be available to the Express Co. by way of res judicata," but only in saying that the lower court probably intended the partial discharge as final, though the court had failed to enter a partial final judgment. 190 F.2d at 339. Nevertheless, we find the Ninth Circuit's reasoning persuasive. There is no justification for limiting the issues that a district court can consider in entering a partial final judgment, nor is it realistic to ask a district court to approach the decision while blinding itself to one of the decision's most important effects. See Continental, 819 F.2d at 1525.

Given that the res judicata purpose did not prevent Judge Mukasey from entering his partial order, the question remains whether the order was properly entered under Rule 54(b). Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 8, 64 L. Ed. 2d 1, 100 S. Ct. 1460 (1980), reminds us that the district court should be mindful of judicial economy and, in general, refuse to grant a partial final judgment when an appellate court would have to decide the same issues on separate appeals. We also note that some circuits use a more rigid test based not just on overlapping issues but on overlapping facts, namely, that "while claims with some factual overlap may still be separate for the purposes of Rule 54(b), 'claims are not separate for Rule 54(b) purposes if the facts they depend on are largely the same.'" ODC Communications Corp. v. Wenruth Invs., 826 F.2d 509, 512 (7th Cir. 1987) (quoting Minority Police Officers Ass'n v. City of South Bend, 721 F.2d 197, 201 (7th Cir. 1983)).

We think that these tests are met here, since this appeal does not require us to decide the same issues or review largely the same facts that will be before us on Shamley's federal claims of religious discrimination, ethnic discrimination, and age discrimination. Those claims span Shamley's entire fourteen-year employment history, which allegedly included being passed over for promotion twelve times in favor of Christian, native-born, younger Americans. By contrast, because Shamley's state law claims were dismissed for purely legal reasons, the only facts relevant to this appeal are the procedural history of the case and Shamley's discovery of some allegedly defamatory material in his personnel file. See infra Section C. Because Shamley's two appeals address different issues and largely different facts, the Rule 54(b) certification in this case does not promote piecemeal appeals. Rather, it has helped prevent duplicative ...

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