Tong v. Dunn,
2012 NCBC 29.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF ORANGE 11 CVS 1522
SIU S. TONG, et al., )
)
Plaintiffs, )
)
v. )
) ORDER ON
DAVID DUNN, TIMOTHY ) INDIVIDUAL DEFENDANTS’
KRONGARD, ED MASI, SOPHIA ) MOTION FOR JUDGMENT ON THE
WONG and JANET WYLIE, ) PLEADINGS
)
Defendants. )
)
)
{1} THIS MATTER is before the court on the motion by Defendants David
Dunn, Timothy Krongard, Ed Masi, Sophia Wong, and Janet Wylie (collectively,
“Individual Defendants”), styled Motion for Judgment on the Pleadings (“Motion”),
brought pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure
(“Rule” or “Rules”), by which they seek to dismiss the individual claims of Plaintiff
Siu S. Tong (“Tong”) by application of res judicata. For the reasons stated below,
the Motion is GRANTED.
Robinson & Lawing, LLP by Michael L. Robinson, H. Stephen Robinson, and
Kurt A. Seeber; Arrowood Peters, LLP by Raymond P. Ausrotas, pro hac
vice; Todd & Weld LLP by David Rich, pro hac vice, for Plaintiffs.
Kilpatrick Townsend & Stockton LLP by Gregg E. McDougal, John M. Moye,
and Michael A. Kaeding, pro hac vice, for Individual Defendants.
Gale, Judge.
I. SUMMARY OF DECISION
{2} Plaintiffs are each former holders of Engineous Software, Inc.
(“Engineous”) common stock. Tong is also a founder and former Engineous director.
Plaintiffs collectively filed this Action (“Present Action”) in Orange County Superior
Court nine days after Tong had separately filed an Action (“Initial Action”) in Wake
County in which he was the sole Plaintiff. Both Actions relate to a merger
transaction (the “Merger”) through which Engineous was acquired by Dassault
Systemes Simulia Corp. (“Dassault”). In this action, Plaintiffs contend they
suffered monetary damages because the Merger unfairly enriched Individual
Defendants and preferred shareholders. Plaintiffs complain of alleged breaches of
fiduciary duty by Individual Defendants, liability for which they contend was
imputed to Defendants ENG Acquisition, Inc. and Engineous Software, Inc.
(“Corporate Defendants”) either by agency or because they aided and abetted
breaches of fiduciary duty by Individual Defendants. The court, by its March 19,
2010 Order, dismissed all claims against Corporate Defendants. Additional facts
are stated in that Order.
{3} The Initial Action was removed from Wake County Superior Court to the
United States District Court for the Eastern District of North Carolina. Claims
against Individual Defendants stated in the Amended Complaint in the Initial
Action were voluntarily dismissed with prejudice. The Initial Action focuses on
Tong’s allegations that he was fraudulently induced to enter agreements that were
necessary to allow the Merger to close.
{4} In the Initial Action, Tong did not expressly state the same causes of
action for breach of fiduciary duty which Plaintiffs state in the Present Action.
However, Tong alleged many common facts in both Actions and in the Initial Action
he clearly characterized actions by Individual Defendants as breaches of duty
causing injury to common shareholders.
{5} The voluntary dismissal with prejudice unquestionably resolved with
finality those causes of action that were dismissed.1 The Motion raises the issue of
whether the dismissal further precludes subsequent litigation of causes of action
not expressly stated in the Initial Action but which could have been stated and
would have been supported by the factual allegations stated. In certain instances,
the doctrine of res judicata promotes judicial economy by precluding a litigant’s
right to split claims. The questions here are whether this case presents such
circumstances, and if so, whether Individual Defendants acquiesced in the claim
splitting so as to be barred from use of the doctrine of res judicata.
{6} Tong has offered no reason that he could not have joined all claims in
one action. There is no basis to conclude that he was not aware of all facts pled in
the Present Action when he filed the Initial Action nine days earlier. Rather, Tong
opposes the Motion by asserting that the two suits represent actions to recover for
different injuries so that he has not impermissibly split claims and the adjudication
of the first suit does not preclude litigation of the second. In summary, he asserts
that the Initial Action was to collect damages for wrongs suffered only by him
individually, including breaches of an employment agreement and promises to pay
“carve-out” compensation; and the Present Action is to collect losses of value in his
common stock along with his fellow common shareholders.
{7} While these injuries can be conceptually distinguished, both flow from a
single course of conduct by which Tong alleges Individual Defendants misused their
fiduciary positions and manipulated facts to complete the Merger for their own
interests. Essential facts adequate to plead an actionable claim of breach of
fiduciary duty were stated in the Initial Action. Issues related to those claims were
then raised by the pleadings even though causes of actions for such breaches were
not explicitly stated. The essence of Tong’s two Actions is that Individual
Defendants set out on a concerted course of action designed to complete the Merger,
and that Individual Defendants simultaneously intended to buy Tong’s consent
1 Other claims against other Defendants were not dismissed when all claims against the Individual
Defendants were dismissed with prejudice.
through false pretenses in order for the Merger to proceed and to extinguish rights
of the common shareholders.
{8} Appellate decisions have addressed res judicata in a variety of fact
specific scenarios, allowing for cogent arguments on both sides of the issue of
whether claim preclusion should be applied to the facts of this case. Having
carefully considered these precedents, as well as the thorough briefs and argument
of counsel, the court concludes that res judicata applies on the particular facts of
this case, and that the adjudication of the Initial Action by the voluntary dismissal
with prejudice precludes Tong’s litigation of the Present Action.
II. PROCEDURAL HISTORY
{9} Tong filed the Initial Action in Wake County Superior Court on July 11,
2011, styled Tong v. Dassault Systemes Simulia Corp., Engineous Software, Inc,
Janet Wylie, Edward Masi, Tim Krongard, David Dunn, Sophia Wong, and Charles
Johnson. The Initial Action was removed to the United States District Court for the
Eastern District of North Carolina (Civ. Action No. 5:11-cv-429). Tong then filed an
Amended Complaint. The causes of action naming Individual Defendants were
voluntarily dismissed with prejudice on October 7, 2011.
{10} The Complaint in the Present Action was filed in Orange County
Superior Court on July 20, 2011. The matter was designated as a Complex
Business Case by Chief Justice Sarah Parker on August 29, 2011 and assigned to
the undersigned on September 2, 2011. Individual Defendants filed their Answer
on September 19, 2011 and their Amended Answer on October 24, 2011. Individual
Defendants filed their Motion on November 30, 2011. Corporate Defendants were
dismissed by the court’s March 19, 2012 Order.
{11} The Motion has been fully briefed and the court heard oral argument.
The Motion is therefore ripe for disposition.
III. FACTUAL BACKGROUND
{12} The court does not make findings of fact on a 12(c) motion. Erickson v.
Starling, 235 N.C. 643, 657,
71 S.E.2d 384, 394 (1952). The court summarizes those
facts established by the pleadings when construed favorably to Tong with
reasonable inferences in his favor in order to provide context for the Motion and the
court’s ruling. See Vereen v. Holden,
121 N.C. App. 779,
468 S.E.2d 471 (1996).
{13} The Complaints in both the Initial Action and the Present Action
expressly recite that their claims arise from the Merger. The Initial Action
concentrates on Tong’s claim that he was fraudulently induced to enter into an
employment agreement necessary to allow the Merger to proceed, including a
promise that he would receive monies from a “carve-out” fund.2
{14} The Present Action concentrates on the Merger’s wash-out of common
shareholders. Plaintiffs complain that Individual Defendants who were preferred
shareholder directors or officers breached their fiduciary duties when protecting
their own interests. Plaintiffs complain that Individual Defendants failed to: (1)
sufficiently consider common shareholder interests in negotiating and
consummating the Merger; (2) delay the sale until after the roll-out of Engineous’
new product, FIPER; (3) adequately consider Tong’s warnings; and (4) adequately
value the company before agreeing to the Merger.3
{15} Clearly, there are differences in the two Complaints. But there is also
substantial overlap in the factual allegations in the two Actions. The allegations of
the Initial Complaint clearly complain of preferences to preferred shareholders at
the expense of common shareholders. With the Complaints having been filed nine
days apart with such common allegations, Tong obviously intentionally chose to
split his individual contract claims and his claims as a common shareholder into
two separate actions. Tong asserts that his allegations in the Initial Action
regarding harm to common shareholders were not essential but were only
background. Individual Defendants contend instead that the factual allegations
2 See Exh. A to Amended Answer, Amended Complaint ¶¶ 1, 256-352.
3 Compl. ¶¶ 65, 66, 67, 70, 71, 74, 76.
clearly raised issues materially related to the claims in the Present Action and are
support res judicata.
{16} In support of their position, Individual Defendants provided a side-byside comparison of factual allegations in the two Actions. The court has separately
conducted its own careful comparison, but recites the chart Individual Defendants
submitted for a convenient summary. The chart is set out below.
The Initial Action The Present Action
63. Plaintiff Tong was elected by the common 2. [Tong] served on Engineous’s board as a
stockholders to represent their interests on the director nominated to represent the interests of
Board of Directors. its common shareholders.
99. In early spring 2006, the Engineous Board of 57. In the early spring of 2006, the Engineous
Directors voted to hire an investment banking Board of Directors. . . voted to hire an
firm to explore opportunities to sell the company. investment banking firm to explore opportunities
to sell the company.
101. Defendant Krongard stated that he would 58. Defendant Krongard viewed a sale price
not support the sale of Engineous if the price for below $60 million as not being in the best
the sale of the company fell below $60 million. interests of Engineous or its shareholders.
102. Defendant Krongard told Plaintiff that he 60. Defendant Krongard stated that he would
would work to block the sale of Engineous if the work with Mr. Tong, the director elected by the
valuation was too low. common shareholder and founder of Engineous,
to block any sale of the valuation was too low.
103. Wachovia Bank, whose representatives 59. Wachovia Bank was selected as the
valued Engineous as having a sale price between investment banking firm, in part based upon its
$100 and $120 million dollars, was selected as claim that it would bring non-traditional buyers
the investment banking firm to find a buyer for to compete for Engineous’s assets and its oral
Engineous. projection of a sale price between $100 million -
$120 million.
104. After several months of work, Wachovia 62. Wachovia Bank was not able to generate the
was unable to generate proper sales offers and competition as promised and turned to Mr. Tong
turned to Plaintiff Tong for help. for help.
105. Through Plaintiff Tong’s efforts, five 63. Through Mr. Tong’s efforts, four well known
potential buyers expressed interest in the sale, potential buyers eventually expressed interest in
including two large companies, Siemens and a potential purchase of Engineous, and two large
Defendant DSS. acquirers entered the bidding process, one of
which was Dassault.
106. The Investor Defendants had decided to 70. [The] preferred stock owning directors,
effect a quick sale of Engineous. including Individual Defendants, had expressed
a self-serving need to exit quickly, despite their
recognition that the company was not in a strong
or its best position to sell.
108. Despite Plaintiff’s assistance in finding 64. Despite his assistance in moving the process
potential buyers, the Board of Directors forward through that date, a special meeting of
(including the Investor Defendants) voted to the Board of Directors was held in the fall of
effectively remove Plaintiff Tong from interaction 2007 to effectively cut off Mr. Tong’s interaction
with potential buyers. with potential buyers.
110. At this September 2007 meeting, a heated 65. At one meeting of the full board in the fall of
debate took place regarding the rights of the 2007, a heated debate took place over the rights
preferred versus the common shareholders. of preferred versus common shareholders. . .
111. Plaintiff Tong. . . insisted that common 68. [Defendants’] individual interests . . . would
stock stockholders should be properly drive the decision making process going forward
compensated if the company were sold. (casting aside the common shareholders’
interests). . .
70. . . . Mr. Tong had specifically requested that
the Board consider the fair treatment of all
stockholders. . .
112. Defendant Dunn explicitly stated at this 65. . . . Defendant Dunn stated that since the
meeting that the preferred shareholders were preferred shareholders “are ahead” of the
ahead of the common shareholders. common shareholders.
113. The minutes of this Board meeting were 66. The minutes of these board meetings were
intentionally drafted to the benefit of the drafted in such a manner as to hide the issue
Investor Defendants to delete references to the that certain board members were placing their
debate over the rights of common shareholders. own interests ahead of common shareholders. . .
114. Plaintiff Tong refused to sign off on the 68. Mr. Tong refused to sign off on the board
minutes of the Board meeting because of this minutes for one of the key board meetings from
omission. this time, citing the omission of many statements
...
116. Plaintiff Tong warned the Board (including 70. Mr. Tong had specifically requested that the
the Investor Defendants) that, at the price being Board consider the fair treatment of all
discussed, the preferred stock shareholders stockholders . . .
would receive substantial compensation and the
common stock shareholders would receive very 76. . . . the Board should be looking into how to
little. improve exit value for all shareholders, including
the Common Shareholders.
117. Plaintiff Tong explained they should wait 71. Mr. Tong explained that by waiting a bit
longer to sell the company because Engineous longer, Engineous’ new enterprise product,
had a new software product known as “FIPER” FIPER, would be tested by approximately a
which would soon be sold to pilot customers, dozen pilot customers and the resulting “rollwould generate revenues, and would maximize out” could increase and maximize the company’s
the company’s potential sale price. potential sale price.
118. Plaintiff Tong repeatedly warned the 78. Mr. Tong, considering the interest of
Investor Defendants that their failure to improve shareholders including the Common
the value of the company could damage the Shareholders, suggested that the Board wait for
common shareholders. a competitive purchase offer from another buyer.
129-130. In early 2008, the Engineous Board of 76. Mr. Tong did not vote in favor of either the
Directors voted to sign a letter of intent to sell Dassault or Siemens letter of intent . . .
Engineous to DSS for approximately $40 million
dollars. Plaintiff Tong voted against signing the
letter of intent.
143-44. Defendant Krongard was now willing to 78-80. After receiving the $40 million offer from
sell Engineous for approximately $40 million Dassault, “the Board showed little interest in
dollars. . . Despite his earlier commitment to undertaking any actions to negotiate a higher
protect the common stockholders, Defendant sale price which might improve upon the
Krongard had been persuaded by other Investor Common Shareholders’ rights and interests. . . .
Defendants about the need to sell Engineous. [they] were more interested in proceeding to a
closing that would benefit only themselves.”
Thus, the Defendants “proposed that the Board
accept the sale price.”
148. “Plaintiff Tong was reluctant to sell 78. “Mr. Tong, considering the interests of all
Engineous” and “felt the sale was not timed shareholders including the Common
properly to obtain maximum value for the Shareholders, suggested that the Board wait for
company. . . . Plaintiff wanted to protect the a competitive purchase offer from another
common shareholders in any transaction that potential buyer.”
occurred.”
161. On June 10, 2008, because of his concerns
regarding the manner in which the proposed sale
was going to affect the common shareholders,
Plaintiff Tong resigned from the Engineous
Board of Directors.
205. On July 21, 2008, the transaction merging 83. . . . A merger deal closed on or about July 21,
Engineous and DSS was closed. 2008.
IV. STANDARD OF REVIEW
{17} The function of Rule 12(c) is to “dispose of baseless claims or defenses
when the formal pleadings reveal their lack of merit” as a matter of law. Ragsdale
v. Kennedy, 286 N.C. 130, 137,
209 S.E.2d 494, 499 (1974). In considering a motion
for judgment on the pleadings under Rule 12(c), the court will grant the motion if
“no issue of material fact remains to be resolved” and “the movant is entitled to
judgment as a matter of law.” Groves v. Cmty. Hous. Corp. of Haywood Cnty.,
144
N.C. App. 79, 86−87,
548 S.E.2d 535, 541 (N.C. App. 2001) (citations omitted). “In
deciding such a motion, the trial court looks solely to the pleadings. The trial court
can only consider facts properly pleaded and documents referred to or attached to
the pleadings.” Reese v. Mecklenburg County,
200 N.C. App. 491, 497,
685 S.E.2d
34, 37-38 (2009) (citing Wilson v. Development Co.,
276 N.C. 198, 206,
171 S.E.2d
873, 878 (1970)). The court must “view the facts and permissible inferences in the
light most favorable to the non-moving party, taking all well-pleaded factual
allegations in the non-moving party’s pleadings as true.”
Id.
V. ANALYSIS
{18} Various doctrines regulate when “claims” are or are not proper. There
is, however, no precise and common definition of the term “claim” as employed by
these doctrines. The term is used in rules and in case law in various contexts. For
example, the legal doctrines of res judicata or collateral estoppel are referred to as
“claim preclusion.” Civil Procedure Rule 13 refers to compulsory and permissive
“claims.” Civil Procedure Rule 18 refers to “claims and remedies.” Cases define a
prohibition on “claim splitting.” The Motion requires the court to determine
whether Tong’s “claims” in the Present Action are barred by the dismissal of
“claims” in the Initial Action. The exercise is not simply a matter of determining
whether Tong specifically stated the same causes of action stated as “claims for
relief” in the two Actions. The doctrine of res judicata reaches issues raised by the
pleadings that reasonably could and should have been brought based on stated
factual allegations.
{19} Although the federal courts and the various states have somewhat
different approaches to the doctrine, the principle of res judicata is a firmly
entrenched judicial doctrine. It “is a judicially made doctrine with the purpose of
both giving finality to parties who have already litigated a claim and promoting
judicial economy . . . .” Eastman Kodak Co. v. Atlanta Retail, Inc., 456 F.3d 1277,
1284 (11th Cir. 2006) (citing Parklane Hosiery Co. v. Shore,
439 U.S. 322, 326,
99 S.
Ct. 645, 649,
58 L. Ed. 2d 552, 559 (1979)). Application of the doctrine relieves
litigants of the cost and confusion of multiple lawsuits, conserves judicial resources,
and encourages reliance on adjudication. Allen v. McCurry,
449 U.S. 90, 94,
101 S.
Ct. 411, 515,
66 L. Ed. 2d 308, 311 (U.S. 1980); see, e.g., Taylor v. Sturgell,
553 U.S.
880, 892,
128 S. Ct. 2161, 2171,
171 L. Ed. 2d 155, 168 (2008), 18-131 James Wm.
Moore et al., Moore’s Federal Practice § 131.21 (2012).
{20} Like the United States Supreme Court, the North Carolina Supreme
Court has noted that res judicata “serves the dual purposes of protecting litigants
from having to relitigate previously decided matters and promoting judicial
economy[.]” Bockweg v. Anderson, 333 N.C. 486, 491,
428 S.E.2d 157, 161 (1993).
Therefore, a final judgment on the merits in a prior action in a court of competent
jurisdiction precludes a second suit involving the same claim between the same
parties.
Id. at 491,
428 S.E.2d at 161.
{21} As a general proposition, the elements of res judicata are that it bars a
subsequent action when: (1) there is a final judgment on the merits; (2) between the
same parties; and (3) involving the same claim. In this case, the Parties concede
that the October 7, 2011 voluntary dismissal constitutes a final judgment on the
merits of the Initial Action. They agree that Tong and Individual Defendants were
Parties to both Actions. The Motion then turns on resolving their disagreement with
respect to whether the two Actions present the same “claims” for res judicata
purposes.
{22} The test for determining “same claims” for purposes of res judicata has
not been definitively stated by our appellate courts. Northwestern Financial Group,
Inc. v. County of Gaston, 110 N.C. App. 531, 537,
430 S.E.2d 689, 693 (1993). The
federal courts and several state courts adopt what is referred to as the
“transactional approach”4 defined by Restatement of Judgments Second § 24
(“Section 24”) which provides that a plaintiff must assert in a single action all rights
arising out of a single transaction or series of transactions, determined by a
pragmatic test. See Bockweg, 333 N.C. at 493−94, 428 S.E.2d at 162−63; see also
Northwestern, 110 N.C. App. at 537−38, 430 S.E.2d at 693−94. The North Carolina
Supreme Court was invited to adopt and apply Section 24 to the particular facts
before it, but the court did not because it found that those facts fell outside the
ambits of Section 24. Bockweg, 333 N.C. at 493−94, 428 S.E.2d at 162−63. The
court did not necessarily reject applying the Section 24 approach to different facts.
The North Carolina Court of Appeals later followed Bockweg but also found that the
reasoning expressed by Section 24 was instructive even though it had not been
expressly adopted by the North Carolina Supreme Court. Northwestern, 110 N.C.
App. at 537−38, 430 S.E.2d at 693−94.
{23} Bockweg involved claims of medical negligence arising from a course of
medical treatment. The court concluded that res judicata did not apply. In part,
4 See Pueschel v. United States, 369 F.3d 345, 355 (4th Cir. Va. 2004), Restatement of Judgments
Second § 24 (1982): “[A] valid and final judgment rendered in an action extinguishes the plaintiff's
claim . . . includ[ing] all rights of the plaintiff to remedies against the defendant with respect to all or
any part of the transaction, or series of connected transactions, out of which the action arose.”
the court reasoned that the conduct of which plaintiff complained represented
separate injuries and separate acts of negligence. The court further discussed that
issues brought forward in the second action could not be said to have been raised by
the pleadings in the first action when the relevant factual allegations had been
expressly dismissed and severed from the first action. The court also was clearly
influenced by the fact that the defendants acquiesced in the removal of those claims
from the first action. Bockweg,
333 N.C. at 493,
430 S.E.2d at 162. 5
{24} Nevertheless, Bockweg also confirms that a judgment precludes
relitigation of issues when they are raised by the pleadings of the prior action. “A
judgment is decisive of the points raised by the pleadings, or which might be
properly predicated upon them.” Bockweg, 333 N.C. at 492-93;
430 S.E.2d at 162.
{25} The courts have leaned toward a standard based on materiality and
relevance, and focus as well on whether facts necessary to the claims in the second
action were known to the plaintiff at the time of the first action. “A judgment
operates as an estoppel not only as to all matters actually determined or litigated in
the proceeding, ‘but also as to all relevant and material matters within the scope of
the proceeding which the parties, in the exercise of reasonable diligence, could and
should have brought forward for determination.’” Rodgers Builders, Inc. v.
McQueen, 76 N.C. App. 16, 22,
331 S.E.2d 726, 730; see Moody v. Able Outdoor,
Inc.,
169 N.C. App. 80, 87,
609 S.E.2d 259, 263 (2005) (indicating “[i]t is well settled
that under principles of res judicata a final judgment is conclusive ‘not only as to all
matters actually litigated and determined, but also as to matters which could
properly have been litigated and determined in the former action’”); see also Gaither
Corp. v. Skinner,
241 N.C. 532, 535,
85 S.E.2d 909, 911 (1955) (stating that res
judicata “is broader in its application than a mere determination of the questions
involved in the prior action, such that the judgment bar extends not only to matters
5 See also Restatement of Judgments Second § 26 (1982), which states:
“When any of the following circumstances exists, the general rule of § 24 does not
apply to extinguish the claim, and part or all of the claim subsists as a possible basis
for a second action by the plaintiff against the defendant: . . . [t]he parties have
agreed in terms or in effect that the plaintiff may split his claim, or the defendant
has acquiesced therein . . .”
actually determined, but also as to other matters which . . . could have been
presented for determination in the prior action”).
{26} Courts then scrutinize the pleadings from each case with a particular
focus on whether the actions “stem from the same relevant conduct.” Skinner v.
Quintiles Transnational Corp., 167 N.C. App. 478, 483,
606 S.E.2d 191, 194 (2004).
A final judgment bars not only all matters actually determined or litigated in the
prior proceeding, but also all relevant and material matters within the scope of the
proceeding which the parties, in the exercise of reasonable diligence, could and
should have brought forward for determination.
Id. at 482,
606 S.E.2d at 193-94.
{27} The principle underlying res judicata is sometimes expressed as a
prohibition against claim splitting. “The common law rule against claim-splitting is
based on the principle that all damages incurred as a result of a single wrong must
be recovered in one lawsuit.” Bockweg, 333 N.C. at 492,
428 S.E.2d at 161. In
Gaither, the North Carolina Supreme Court described the rule as follows:
[T]he rules which preclude splitting of a cause of action or the
relitigation of the same cause of action between the same parties are
applicable where a cause of action is adjudicated upon, even though all
the relief to which the party asserting the cause of action is entitled is
not requested or granted in such action. The general rule is that the
whole cause of action must be determined in one action, and where an
action is brought for a part of a claim, a judgment obtained in the
action ordinarily precludes the owner thereof from bringing a second
action for the residue of the claim.
Gaither, 241 N.C. at 535,
85 S.E.2d at 911.
{28} A plaintiff may not avoid application of res judicata by simply shifting
legal theories or asserting a new or different ground for relief on a common set of
facts. Rodgers, 76 N.C. App at 30, 331 S.E.2d at 735. Neither can a party recover
for the same injury based on two different statutory or common law schemes of
recovery, arising from the same conduct. See generally Skinner,
167 N.C. App. 478,
606 S.E.2d 191.
{29} However, the mere instance that there are two successive suits sharing
common facts does not alone mandate applying res judicata. Separate or successive
lawsuits are appropriate in certain situations. A second action involving an
altogether different claim arising from the common facts will not be barred if the
facts underlying the claim were not actually litigated and determined in the original
action. Country Club of Johnston County, Inc. v. United States Fid. & Guar. Co.,
150 N.C. App. 231, 239,
563 S.E.2d 269, 275 (2002) (internal citations and
quotations omitted). And, as noted, the North Carolina Supreme Court approved
successive actions by a plaintiff who suffered multiple wrongs arising from
successive acts of negligence. Bockweg,
333 N.C. at 492,
428 S.E.2d at 161.
Further, a second action will not be barred when it could not have with reasonable
diligence been brought at the time the first action was filed, such as when a
predicate “right to sue” letter had not been issued. Skinner,
167 N.C. App. 478,
606
S.E.2d 191. Likewise, res judicata will not bar claims that rest on facts which were
not with reasonable diligence known at the time of the earlier adjudication.
Northwestern Fin. Group v. County of Gaston,
110 N.C. App. 531, 538-539,
430
S.E.2d 689, 694 (1993).
{30} Here, it is apparent that: 1) all of the facts relevant to Tong’s claims
stated in the Present Action were known to him when the Initial Action was filed
only nine days earlier; (2) the Initial Action asserts at least twenty-one common
factual allegations material and relevant to the fiduciary duty claims; and (3) Tong
has identified no compelling reason why he could not have asserted all his claims in
the Initial Action.
{31} The court concludes that issues Tong now seeks to litigate in the Present
Action were raised by the pleadings in the Initial Action and res judicata applies.
Rather than asserting different injuries arising from independent successive acts,
Tong complains that Individual Defendants set out on a concerted course of action
designed to complete the Merger, including buying Tong’s consent through false
pretenses and at the same time extinguishing the rights of common shareholders,
including Tong’s. While other shareholders that were not party to the Initial Action
and are not then subject to res judicata, Tong’s claims are barred by his dismissal of
the Initial Action with prejudice.
{32} The court has considered whether Individual Defendants may have
acquiesced in Tong’s claim splitting when they did not initially challenge one action
based on the pendency of the other. See Bockweg, 333 N.C. at 496, S.E.2d at 164.
The court concludes that they did not.
VI. CONCLUSION
{33} For the reasons stated, Tong’s claims in this Action are barred by
application of res judicata. Accordingly, Individual Defendants’ Motion is
GRANTED. The Present Action shall proceed on the claims of the remaining
Plaintiffs.
IT IS SO ORDERED, this 18th day of May, 2012.
