The legal doctrine of res judicata bars a litigant from challenging a final judgment in a prior lawsuit between the same parties (or their privies). Here, in a foreclosure matter, the plaintiff filed the same or similar lawsuit against Wells Fargo four separate times. The problem, of course, is that two of the prior cases were dismissed with prejudice. The court’s reasoning is set forth below:
After providing Nguyen the Rule 11 “safe harbor” period, Wells Fargo filed the Sanctions Motion [Doc. # 9]. Wells Fargo argues that Nguyen violated Rule 11 by filing the Fourth Lawsuit, in which she assisted Khan to assert claims Nguyen knew previously had been dismissed with prejudice in the First and Third Lawsuits. Nguyen responds that she did not violate “the Federal Rules of Civil Procedure” because: Khan’s complaint filed in the First Lawsuit was not groundless; Khan’s attorney in the First Lawsuit did not explain the significance of a non-suit with prejudice to Khan; Khan was unaware that her attorney had filed a non-suit with prejudice; and counsel for Wells Fargo bullied Khan’s attorneys, including Nguyen.
Nguyen’s arguments are meritless. In filing the Fourth Lawsuit, Nguyen ignored two prior dismissals with prejudice of the very claims asserted in this case. The doctrine of res judicata precludes multiple lawsuits on the same causes of action. See United States v. Davenport, 484 F.3d 321, 325-26 (5th Cir. 2007). Under the doctrine, “a final judgment on the merits bars further claims by parties or their privies based on the same cause of action.” Id. at 326 (quoting Montana v. United States, 440 U.S. 147, 153 (1979)). The Fifth Circuit determines whether two suits involve the same claim or cause of action by applying the transactional test of the Restatement (Second) of Judgments, § 24, which turns on “whether the two cases under consideration are based on `the same nucleus of operative facts.” Id. at 326 (quoting In re Southmark Corp., 163 F.3d 925, 934 (5th Cir. 1999)). Independent of any argument Nguyen may assert regarding the effect of the non-suit with prejudice of the First Lawsuit, it is undisputed that Nguyen was counsel in the Third Lawsuit, which was dismissed with prejudice on April 2, 2015, just months before Nguyen filed the Fourth Lawsuit, and which created a final judgment with respect to the claims presented in the Fourth Lawsuit. Moreover, the Petition in the Third Lawsuit alleged that the First Lawsuit had also been dismissed with prejudice. Nguyen, who filed both the Third and Fourth Lawsuits, knew or should have known the basic legal tenets of res judicata. Nevertheless, she ignored the dismissal of the Third Lawsuit.
Nguyen also has delayed resolution of the issues regarding foreclosure on the deed of trust on the Property by repeatedly filing bankruptcies on behalf of Khan without completing the reorganization or discharge process. Together with her disregard of res judicata, this course of conduct suggests an egregious pattern of harassment and purposeful unwarranted delay. See Hall v. Chase Home Fin., LLC, No. A-10-CA-206-SS, 2010 WL 2732404, at *1 (W.D. Tex. July 8, 2010) (imposing sanctions on plaintiff under Federal Rule of Civil Procedure 11 because filing of the case, which was barred by res judicata, “is clearly intended to harass the opposing parties and delay the inevitable foreclosure of property in question.”) There simply was no excuse for Nguyen’s pursuit of Khan’s duplicative and barred causes of action. Nguyen’s conduct violated Federal Rule of Civil Procedure 11 and merits the sanctions sought by Wells Fargo.
Much of the recent sanctions jurisprudence comes from the foreclosure area, an area where the litigants are often desperate and often hire non-mainstream lawyers to defend cases for which there is no defense. The result is often Rule 11 sanctions for asserting frivolous legal positions.
Edward X. Clinton, Jr.
Source: Khan v. WELLS FARGO BANK, NA, Dist. Court, SD Texas 2017 – Google Scholar