United States District Court, D. Kansas
Cleo Clemens, Administrator for the Estate of Sheila Bowers, deceased, et al., Plaintiffs,
Wells Fargo Bank, N.A., et al., Defendants.
MEMORANDUM AND ORDER
J. THOMAS MARTEN, District Judge.
In 2009, Roy and Sheila Bowers agreed to refinance their home mortgage with Wells Fargo. The closing agent mistakenly notified Wells Fargo that the refinancing closing had occurred, and Wells Fargo released its prior lien. When Wells Fargo discovered the truth, it moved to add a caveat to the Bowers's title to reflect the original debt. The Bowers, who in the interim had been making the scheduled payments under the refinanced mortgage, stopped payments and instituted an action in Shawnee County District Court against Mortgage Electronic Registration Systems (MERS), a servicing entity for the closing agent, seeking millions of dollars in damages. MERS removed the action to this court, Wells Fargo intervened in the action, and on October 4, 2012, the court granted defendants summary judgment on all claims advanced by the Bowers. See Bowers v. MERS, 2012 WL 4747162 (D. Kan. 2012) ( Bowers I ) (Dkt. 301). The court later granted summary judgment to Wells Fargo on its counterclaim, under which it sought an equitable reinstatement of the mortgage. ( Id. Dkt. 352)
The plaintiffs promptly appealed the action ( Bowers I, Dkt. 311). While that appeal was pending, they also filed another action against Wells Fargo in Shawnee County District Court. This action, filed on October 12, 2013, is virtually a carbon copy of their original action. The only major difference is that plaintiffs' counsel added as a defendant Shapiro & Mock, LLC. the law firm which represented Wells Fargo in Bowers I. Wells Fargo removed the action to this court, and both defendants have moved to dismiss the action under principles of res judicata, collateral estoppel, and the statute of limitations. For the reasons provided herein, the court grants the defendants' motions.
Bowers I was litigated fully. The plaintiffs claims included fraud, slander of title, conversion of "chain of title, " breach of contract, anticipatory repudiation, negligence, detrimental reliance, unjust enrichment, violation of the Real Estate Settlement Procedures Act (RESPA) and of the Kansas Consumer Protection Act (KCPA). The docket in that action comprises 393 separate pleadings and other events. In its summary judgment Order, the court explicitly recognized the discovery in that action was "extensive" and the briefing "exhaustive." 2012 WL 4747162, at *18. This is understatement. Wells Fargo grounded its summary judgment motion on 159 paragraphs of factual contentions. The plaintiffs controverted many of these facts, and asserted a further 102 paragraphs. (Bowers I, Dkt. 255). The court resolved all factual and legal issues in the case in a lengthy opinion. The court granted summary judgment on Wells Fargo's counterclaim afer receiving additional factual allegations and legal argument
Bowers II repeats the allegations advanced in Bowers I, again focusing on the inadvertent release of lien and Wells Fargo's attempt to correct the error. (Dkt. 30, Amended Complaint, ¶¶ 11-37, 51, 100-101, 184-188). Accordingly, the court finds that plaintiffs' claims are subject to dismissal under the doctrine of res judicata, which precludes the relitigation of issues which were previously litigated.
In determining whether the doctrine applies in a diversity action, this court looks to Kansas law relating to res judicata. Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001). See Tri-State Truck Ins. v. First Nat'l Bank of Wamego, 931 F.Supp.2d 1120, 1133 (D. Kan. 3013). "As a practical matter, Kansas law regarding claim preclusion does not appear to differ significantly from federal law." Tri-State, 931 F.Supp.2d at 1133 (citing Rhoten v. Dickson, 290 Kan. 92, 106, 223 P.3d 786, 797 (2010); Stanfield v. Osborne Indus., 263 Kan. 388, 396, 949 P.2d 602, 608 (1997). See RESTATEMENT (SECOND) OF JUDGMENTS § 87, Comment a, p. 315 (noting "little difference in the doctrine of res judicata as expounded in state and federal courts").
The doctrine applies "when four conditions concur: (1) identity in the thing sued for, (2) identity of the cause of action, (3) identity of persons and parties to the action, and  identity in the quality of persons for or against whom claim is made." Regency Park v. City of Topeka, 267 Kan. 465, 478, 981 P.2d 256 (1990). See also Stanfield v. Osborne Industries, 263 Kan. 388, 397, 949 P.2d 602 (1997). The doctrine is not limited to claims actually advanced in prior litigation, but to "any matter that might have been asserted in the first lawsuit." Stanfield, 263 Kan. at 397 (citing Prospero Assoc. v. Burroughs Corp., 714 F.2d 1022, 1025 (10th Cir. 1983) (emphasis added).
All of the elements of res judicata are present here. Bowers I presented a huge list of claims, all centering on the attempted 2009 refinancing. Bowers II is the same. Allowing for the substitution of the Estates for Roy and Sheila Bowers, the parties are the same. Although Bowers I is currently on appeal, this court's summary judgment rulings are final judgments for purposes of res judicata. See Bui v. IBP, Inc., 205 F.Supp.2d 1181, 1189 (D. Kan. 2002) ("[t]he pendency of the appeal does not alter the finality of the case for purposes of res judicata or collateral estoppel").
And all of the plaintiffs' claims arise from the same cause of action. For purposes of res judicata, "the Court views the evidence pragmatically, considering whether the facts are related in time, space, origin, or motivation, and whether they form a convenient trial unit." Jackson v. Yellow Tech. Services, 988 F.Supp. 1399, 1402 (D. Kan. 1997). See also Hatch v. Boulder Town Council, 471 F.3d 1142, 1149 (10th Cir. 2006); Yapp v. Excel Corp., 186 F.3d 1222, 1227 (10th Cir.1999). All of the plaintiffs' claims are premised on the events surrounding the 2009 refinancing, the inadvertent release of lien, and the filing of the caveat.
In responding to the defendants' motions, the plaintiffs suggest that Bowers I was somehow narrow in scope, and that the earlier case simply could not include the claims now presented. A review of the extensive record, and multitude of claims, advanced in Bowers I disproves any such suggestion. As defendants note, in separate letters to the Tenth Circuit panel hearing the Bowers I appeal, the plaintiffs have explicitly acknowledged the vast scope of that case. It may be that for tactical reasons, relating to avoiding Wells Fargo's intervention in Bowers I, plaintiffs avoided advancing certain claims in that action. But, as noted above, res judicata applies not simply to claims which were actually advanced, but to claims which might have been.
The plaintiffs also argue that the cases are different because the "[m]otivation to protect an interest or create a cloud by the Caveat is distinctly different from collecting and enforcing" the underlying debt. (Dkt. 56, at 10). This purported distinction is wholly without merit. As the court recognized in Bowers I, the entire point of the Caveat was to preserve the lender's rights, including the right to ultimately collect on the debt. Nothing prevented the plaintiffs from presenting their current claims in Bowers I. 
Res judicata also protects the defendant law firm. The only additional allegation against the law firm is that Shapiro & Mock set a demand letter to the Bowers in October 14, 2010, based on their default on mortgage payments. The October 14 demand letter, and a second, followup letter, preceded the December, 2010 foreclosure action by Wells Fargo which, as noted elsewhere in this opinion, Wells Fargo voluntarily dismissed a few weeks after filing. The Amended Complaint references the foreclosure complaint and other correspondence from Shapiro & Mock, but all of these acts took place in the context of the firm's representation of Wells Fargo, and all took place as a part of that lender's attempt to protect its mortgage interest in the underlying property. Further, for purposes of the "same party" element of res judicata, attorneys subjected to suit for their actions in previous litigation are deemed in privity with their clients. See Plotner v. AT&T Corp., 224 F.3d 1161, 1169 (10th Cir. 2000) ("[t]he law firm defendants appear by virtue of their activities as representatives of [their clients] creating privity") (citing Henry v. Farmer City State Bank, 808 F.2d 1228, 1235 n. 6 (7th Cir.1986)).
Plotner arose in the context of a federal bankruptcy claim, but the court finds no reason to believe that Kansas law would generate any different result. While Kansas has not explicitly deemed lawyers to be in privity with the clients for res judicata purposes, it has recognized that the privity element may be satisfied by " substantial identity between the issues in controversy and showing the parties in the two actions are really and substantially in interest the same. '" Van Deelen v. City of Kansas City, No. 101, 226, 2009 WL 3738833, *4 (Kan.App. Nov 6. 2009) (quoting and adding emphasis to Lowell Staats Min. Co. v. Philadelphia Elec., 878 F.2d 1271, 1279 (10th Cir. 1989)). As further observed in Lowell, consistent with Plotner, "[p]rivity has been held to exist in the following relationships: concurrent relationship to the same property right (i.e. trustee and beneficiary); successive relationship to the same property or right (i.e. seller and buyer); or representation of the interests of the same person." 878 F.2d at 1279. Van Deelen, emphasizing this same passage from Lowell, held that city employees employed to conduct surveillance of the plaintiff were in privity with the city for res judicata purposes.
Other states explicitly hold that the attorney-client relationship establishes privity. See Taylor v. Riley, ___ P.3d ___, 2014 WL 4401418 (Idaho Aug. 27, 2014); Kinsky v. 154 Land Co., 371 S.W.3d 108, 113 (Mo.Ct.App. 2012); Jayel Corp. v. Cochran, 366 Ark. 175, 234 S.W.3d 278 (2006) (attorney-client relationship was sufficient to satisfy the privity requirement); Smith v. Jenkins, 562 A.2d 610, 615-16 (D.C.App.1989). See also RESTATEMENT (SECOND) OF JUDGMENTS § 39 (1982) ("A person who is not a party to an action but who controls or substantially ...