Bass, Berry & Sims attorney Chris Lazarini outlined a case in which the court applied res judicata and barred a party from maintaining a later action due to the following criteria:

1. The prior action was decided on the merits by a court of competent jurisdiction.
2. The second action involved the same parties as the prior action.
3. The second action involved claims that were or could have been litigated in the prior action.
4. The second action arose out of the same transaction or occurrence that was the subject of the prior action.

Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication. 

Delp vs. Delp, No. L-18-1181 (Ohio App., 6Dist., 11/27/19)

Res judicata bars a party from maintaining a later action when (a) the prior action was decided on the merits by a court of competent jurisdiction, (b) the second action involves the same parties as the prior action, (c) the second action involves claims that were or could have been litigated in the prior action, and (d) the second action arises out of the same transaction or occurrence that is the subject of the prior action.

In this consolidated appeal, the Court examines a feud between brothers who were former partners in brokerage, advisory, and other businesses. Background:  In 2008, FINRA investigated certain of the Delps’ securities activities. Bradley Delp (“BD”) alleged the brothers orally agreed to put the focus of the investigation on him. The alleged plan included BD separating himself from the brothers’ businesses while Cleves Delp (“CD”) formed a new RIA firm. BD would transfer his clients to the new RIA and accept sole responsibility for the FINRA issues. BD alleged he followed through on the plan, but CD, who allegedly agreed to segregate revenue generated by BD’s clients for future payment to BD, did not. BD also alleged the existence of an oral agreement with CD over distributing $4 million in life insurance one of the Delps’ businesses owned on a third party. BD alleged CD retained all $4 million after the third party’s death in violation of the Delps’ alleged oral agreements that BD was entitled to more than half the proceeds and the brothers would settle up after the FINRA investigation concluded. In 2010, the Delps signed “accommodation documents” through which CD claimed to have received BD’s interest in their jointly held businesses, the validity of which BD challenged.

The federal court case:  In 2011, BD sued CD in federal court seeking declaratory relief that the “accommodation documents” had not effected a transfer of his interest in the Delps’ businesses. BD also alleged CD had been unjustly enriched by CD’s improper withholding of income generated by those businesses, including those generated by the new RIA. The alleged oral agreements were not mentioned in the federal court complaint. During discovery, BD produced emails between CD and his lawyer. When asked how he obtained them, BD “took the 5th” but later testified he found them in the Delps’ shared offices or accessed CD’s computer that he claimed was not password-protected. Finding BD’s testimony not credible, the federal court dismissed the complaint with prejudice as a sanction for discovery abuse. The Sixth Circuit affirmed.

BD’s effort to take another bite of the apple:  When the federal court case concluded, BD filed the two underlying state court actions. The first alleged breach of the oral agreement covering segregation and distribution of the new RIA’s revenue. The second alleged breach of the oral agreement covering the insurance proceeds. The trial court dismissed both cases under the doctrine of res judicata and this consolidated appeal followed. The Court affirms. First, the Court finds the federal court dismissal with prejudice was an adjudication on the merits. Second, the Court finds the state court cases involved the same parties as the federal court case. Third, applying Ohio’s expansive view of res judicata, the Court finds BD could have and should have brought the current contractual claims as alternative claims in the federal court case, because they were overlapping in time and involved the same parties and many of the same facts. Finally, the Court finds the state and federal court claims arise from the same “common nucleus of operative facts.” The Court highlights that BD would have offered the same witnesses and evidence to support his federal and state court claims and that BD sought the same damages in all cases.