Clark v. Phelps

48                   November 6, 2024             No. 798

          IN THE COURT OF APPEALS OF THE
                  STATE OF OREGON

                    Merri Sue CLARK
                 and Richard W. CLARK,
                   Plaintiffs-Appellants,
                              v.
                    Annette PHELPS,
           April Curtis and Christopher Burke,
                 Defendants-Respondents,
                            and
           MEDIATION CASE MANAGER et al.,
                       Defendants.
               Lane County Circuit Court
                  22CV21864; A181977

     Kamala H. Shugar, Judge.
     Argued and submitted September 24, 2024.
   Richard W. Clark argued the cause pro se. Also on the
briefs was Merri Sue Clark pro se.
   Katie Jo Johnson argued the cause for respondents. Also
on the brief were McEwen Gisvold LLP and Julie M. Engbloom
and Tagjedin Thomas & Engbloom Law Group LLP.
  Before Aoyagi, Presiding Judge, Egan, Judge, and Joyce,
Judge.
     AOYAGI, P. J.
     Affirmed.
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          AOYAGI, P. J.
        Plaintiffs, appearing pro se, appeal a judgment dismissing their civil claims filed in state court against defendants Phelps, Curtis, and Burke.1 The trial court granted
defendants’ motion to dismiss on two independent grounds:
claim preclusion, and failure to state a claim under ORCP
21 A(1)(h). On appeal, plaintiffs challenge the dismissal on
both grounds. We conclude that claim preclusion applies
and, given that conclusion, do not reach the other basis for
dismissal. Accordingly, we affirm.
                                  FACTS
         The parties’ dispute stems from a mortgage loan
that plaintiffs obtained in 1993, which was the subject
of a foreclosure action initiated in Lane County in 2014.
Plaintiffs maintain that the foreclosing party did not comply
with state law, including unlawfully obtaining the required
certificate of compliance.
         In 2021, plaintiffs filed a complaint in the circuit
court for Lane County seeking, among other things, dismissal
of the foreclosure proceedings. That action was removed to
federal court. Plaintiffs amended their federal complaint
several times, until the operative pleading was the fourth
amended complaint. Defendants moved to dismiss the fourth
amended complaint on various grounds. In response, plaintiffs moved to remand the case back to state court; they also
filed, without leave, a fifth amended complaint. The federal
court denied the motion to remand to state court. It then
struck the fifth amended complaint that was improperly filed
without leave of court; dismissed the claims in the operative
fourth amended complaint based on issue preclusion, failure
to state a claim, and the statutes of limitations; and denied
plaintiffs leave to amend because the fifth amended complaint “relies on the same mistaken assumptions underlying the earlier complaints.” The federal court further stated
that, in its view, “[p]laintiffs’ goal in numerous litigations is
not to determine who they owe, but rather to prolong, for as
long as possible, any attempted foreclosure proceedings.”

    1
      Although other defendants were named in the complaint, plaintiffs appeal
the dismissal ruling only as to these three defendants.
50                                                          Clark v. Phelps

         Plaintiffs then initiated this action in circuit court
by filing a complaint nearly identical to their fifth amended
federal complaint. Defendants moved to dismiss based on
claim preclusion and failure to state a claim. The trial court
granted the motion on both grounds, and plaintiffs appeal.
As to claim preclusion, plaintiffs argue that it does not apply
to their claims for civil conspiracy, violations of Oregon’s
Racketeering Influenced and Corrupt Organizations Act
(ORICO), and declaratory relief, because those claims
were not in the fourth amended complaint and the federal
court denied leave to file the fifth amended complaint that
included them.2
                         CLAIM PRECLUSION
       We review the claim-preclusion ruling for errors of
law. OEA v. Oregon Taxpayers United, 

,

 (2012).
         The doctrine of claim preclusion applies when (1)
the prior litigation involved the same parties, (2) the claim
arises out of the same factual transaction as the prior claims,
(3) the prior litigation proceeded to a final judgment, and (4)
the claims in the second action could have been joined in the
first action. Rennie v. Freeway Transport, 

,

 (1982). The purposes of claim preclusion include
“preventing harassment by successive proceedings, preventing inconsistent adjudications, and promoting economy of
resources in the adjudicative process.” OEA, 

. In line with those purposes, in deciding whether an
earlier action precludes a current claim, “our focus is on
the transaction at issue in the plaintiff’s claim, with claim
preclusion applying to all claims against the defendant
that were available to the plaintiff arising from that transaction, whether or not the plaintiff actually asserted them.”
Eli v. Lampert (A116201), 

, 

(2004), rev den, 

 (2005) (internal quotation marks
omitted; emphases added); see also Wallace v. Holden, 

, 

, rev den, 

 (2019)
(“In Oregon, a dismissal ‘with prejudice’ creates a claimpreclusive bar, even if the dismissal was due to a procedural
    2
       We note that the civil conspiracy and declaratory relief claims included in
the fifth amended complaint had been included in the first amended complaint.
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fault and not a decision on the substantive validity of the
action.” (Internal quotation marks omitted.)).
         As a general rule, “claim preclusion will bar a plaintiff who litigates a federal claim in federal court from relitigating state claims that the plaintiff could have but did not
litigate in the federal action.” Ram Technical Services, Inc.
v. Koresko, 

, 

 (2009). There is an
exception though. “If the federal court either clearly lacked
jurisdiction over any pendent state law claims or, having
jurisdiction, clearly would have declined to exercise its discretion to hear those state law claims, claim preclusion
does not bar litigating those claims.” 

 (emphases added).
Importantly, it must be “clear” that the federal court either
lacked jurisdiction over the state-law claims or would have
declined to exercise its jurisdiction. 

 “If it is not clear that
the federal court, having jurisdiction, would have declined
to exercise it, then claim preclusion will bar any state law
claim that a plaintiff could have but did not raise initially in
federal court.” 

.
         In Ram, the plaintiffs filed an action in federal court,
alleging federal claims for violations of the Employment
Retirement Income Security Act of 1974 (ERISA). 

.
The federal court concluded that the plaintiffs’ claims were
not really ERISA claims and arose, “if at all, under state
law.” 

. The court dismissed the ERISA claims
for failure to state a claim under federal law. 

. The
plaintiffs then filed state-law fraud claims in state court,
which the state court dismissed on claim-preclusion and
other grounds. 

. On appeal, the Supreme Court
adopted the above-referenced exception from the Restatement
(Second) of Judgments, stating that it could “see no reason
why claim preclusion should apply when it is clear that the
district court would have declined to exercise supplemental
jurisdiction over any state-law claims that plaintiffs could
have asserted.” 

 (discussing Restatement (Second)
of Judgments § 25 comment e). It also concluded that the
exception applied, because “the record le[ft] no doubt that
the district court would have declined to exercise supplemental jurisdiction over any state law claims that plaintiffs
might have asserted.” Id. at 229.
52                                             Clark v. Phelps

        Thus, Ram involved a situation where the federal
court dismissed a case involving only federal claims, and it
was clear from the record that the federal court would not
have been willing to exercise supplemental jurisdiction to
hear the state-law claims on their own.
         We applied the Ram exception in a different scenario a few years later in Lucas v. Lake County, 

, 

 (2012). There, the plaintiff filed an action in
federal court alleging one federal claim and two state-law
claims. 

. As trial approached, the plaintiff moved to
extend discovery to investigate potential additional state-law claims, including a wrongful discharge claim arising
from the same transaction. 

. The federal court
denied the motion, including preemptively denying leave to
file an amended complaint. 

. The court explained
that it wanted to keep the existing trial schedule and that
the plaintiff could “file another lawsuit if [he] want[ed].” 

         The plaintiff subsequently filed the wrongful discharge claim in state court. 

 The state trial court concluded that claim preclusion did not apply but dismissed
the claim on another ground. 

. On appeal, the
defendant challenged the claim-preclusion ruling in a crossassignment of error. 

. We held that the Ram exception applied, because the federal court had “ ‘clearly’ declined
to exercise supplemental jurisdiction over plaintiff’s wrongful discharge claim.” 

. The federal court’s intent not
to exercise jurisdiction over that claim was “patent” under
the circumstances. 

         Thus, Lucas involved a situation where the plaintiff
notified the federal court that it was considering amending
its complaint to add a new state-law claim, and, in response,
the federal court made clear that it would not allow the
amendment—not based on the merits (which the court did
not consider) or because it viewed the claims as untimely
(the court appears to have assumed that the plaintiffs had
only recently learned of the possible claim), but because it
was disinclined to exercise its supplemental jurisdiction in
a manner that would result in a change to the trial schedule
and preferred that any new state-law claims be brought in
state court.
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         Relying on Ram and Lucas, plaintiffs argue that,
when the federal court denied leave to file the fifth amended
complaint, it necessarily declined to exercise its supplemental jurisdiction over plaintiffs’ civil conspiracy, state ORICO,
and declaratory relief claims, triggering the Ram exception.
Defendants disagree. They argue that the Ram exception
does not apply, because the federal court clearly evinced
its intentions regarding jurisdiction by denying remand to
state court, and because the federal court denied leave to
amend for nonjurisdictional reasons.
         We agree with defendants that the Ram exception
does not apply here. In Ram, the record left “no doubt” that
the federal court would have been unwilling to hear the
state-law claims in the absence of a federal issue, preferring that those claims be heard in state court. 

. Similarly, in Lucas, it was clear from the record that
the federal court was unwilling to exercise supplemental
jurisdiction over any new state-law claims that would affect
the trial schedule, preferring that such claims be filed in
state court; indeed, the federal court told the plaintiff to
“file another lawsuit if [he] want[ed]” to pursue a wrongful discharge claim. 253 Or App at 44. Here, by contrast,
the federal court denied leave to file the fifth amended complaint because that complaint “relie[d] on the same mistaken assumptions underlying the earlier complaints.” In
other words, the court viewed amendment as futile, which
is fundamentally different from declining to exercise supplemental jurisdiction as a matter of docket management
or the like. Cf. Van De Hey v. U.S. National Bank, 

, 

 (1992) (where the trial court in the first
action granted summary judgment on two claims, dismissed
the third claim, and denied leave to add five more claims,
that judgment was preclusive as to all claims arising from
the transaction, including the five claims for which leave to
file an amended complaint was denied). It also bears noting
that, unlike in Lucas, the federal court here said nothing
to suggest that plaintiffs should pursue additional claims
in state court. To the contrary, the federal court spoke disapprovingly of the “numerous litigations” and, if anything,
suggested that plaintiffs should stop filing claims related to
these events.
54                                                           Clark v. Phelps

         Having concluded that the Ram exception does not
apply in these circumstances, and there being no other properly raised challenge to the trial court’s ruling,3 we affirm
the judgment.
           Affirmed.




    3
      Plaintiffs tried to raise two new issues at oral argument—one relating to
the declaratory judgment claim and one relating to the finality of the federal
judgment—but neither issue is properly before us. “We do not consider appellate
arguments—even if properly preserved—that are made on appeal for the first
time during oral argument.” Colton and Colton, 

, 

 (2019). Here, not only were the issues raised for the first time at oral argument, but they also are unpreserved, as they were not raised in the trial court.
See State v. Wyatt, 

, 

 (2000) (“Generally, an issue not
preserved in the trial court will not be considered on appeal.”).