United States District Court, M.D. Tennessee, Nashville Division
JOSEPH C. LONGWAY, d/b/a LONGWAY BROADBAND SERVICES, Plaintiff,
THE SANBORN MAP COMPANY and APPLIED GEOGRAPHICS, INC., Defendants.
MEMORANDUM AND ORDER
ALETA A. TRAUGER, District Judge.
On September 29, 2014, the Magistrate Judge issued a Report and Recommendation ("R&R") (Docket No. 121), which recommends that the Motion to Dismiss (Docket No. 103) filed by Defendant Applied Geographics, Inc. ("App Geo") be granted and that this action be dismissed with prejudice. Plaintiff Joseph C. Longway d/b/a Longway Broadband Services ("Longway") has filed an Objection (Docket No. 122), to which App Geo has filed a Response (Docket No. 123). For the following reasons, the court will overrule the Objection, accept and adopt the R&R, and grant the Motion to Dismiss.
When a magistrate judge issues a report and recommendation regarding a dispositive pretrial matter, the district court must review de novo any portion of the report and recommendation to which a specific objection is made. Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1)(C); United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001); Massey v. City of Ferndale, 7 F.3d 506, 510 (6th Cir. 1993). Objections must be specific; an objection to the report in general is not sufficient and will result in waiver of further review. See Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). However, issues are not waived if the magistrate judge fails to warn the party of the potential waiver. See Mattox v. City of Forest Park, 183 F.3d 515, 519-20 (6th Cir. 1999).
A federal court sitting in diversity applies state law. Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 528 (6th Cir. 2006). A federal court should analyze a res judicata claim preclusion defense based on a prior state-court judgment by applying the law of the state that entered the preclusive judgment. Lawlor v. SunTrust Mortg., Inc., No. 3:13-cv-00387, 2013 WL 4431319, at *4 (M.D. Tenn. Aug. 15, 2013) (quotation omitted); Abbott v. State of Michigan, 434 F.3d. 324, 330 (6th Cir. 2007); Ingram v. City of Columbus, 185 F.3d 579, 593 (6th Cir. 1999). In this case, the relevant state law is that of Colorado.
I. Facts and Procedural Background
The thorough R&R sets forth the facts and procedural history of this matter in detail, and the court incorporates those sections of it by reference. The court sets forth herein only the facts and procedural history specifically relevant to the Objection - namely, (1) the underlying facts concerning the relationships between Longway, Sanborn, and App Geo, and (2) the history of parallel litigation between Longway and Sanborn. Both are straightforward.
Sanborn submitted bids to receive government contracts for broadband mapping services in several states. When preparing bids for three specific states, Sanborn entered into negotiations with Longway about a possible collaboration, in the event Sanborn was awarded contracts by those states. As part of those negotiations, Sanborn and Longway entered into a confidentiality agreement. Sanborn was not awarded contracts by those three states, nor did it receive subcontract work from the winning bidders in those states. Sanborn therefore did not enter into any services agreement with Longway.
Sanborn subsequently submitted bids in response to various requests for proposals from approximately seventeen other states. App Geo participated in some of those bids but had no independent dealings or agreements with Longway. In the end, Sanborn received contracts from two states. Sanborn was also hired by other successful bidders to do work in three other states as a subcontractor.
Sanborn thereafter filed a declaratory judgment action in Colorado, seeking adjudication of its rights relative to Longway with respect to bids in various states. Longway brought counterclaims against Sanborn for violation of the Colorado Consumer Protection Act, breach of contract, non-consensual production of proprietary material and trade secret violations, and "Promissory Estoppel agreement and Quasi-contract."
While the Colorado action was pending, Longway filed the instant action in Wilson County, Tennessee against Sanborn, App Geo, and SM Baldwin Consulting ("SMB"). (Docket No. 1-1.) The Complaint contains claims for violation of the Tennessee Consumer Protection Act,  breach of contract, violation of the Tennessee Uniform Trade Secrets Act, and unjust enrichment. The defendants removed the case to this court and filed Motions to Stay, or alternatively, to Dismiss (Docket Nos. 12, 14, 17), based on the prior-filed case pending in state court in Colorado. Longway did not oppose the motions; the court granted them and stayed this action. (Docket No. 41.) Notably, in consenting to the stay, Longway conceded that the claims in this action were "similar" to those in the Colorado case. (Docket No. 38 at 1.) Longway further recognized that the outcome of the Colorado case could render this action "unnecessary." ( Id. )
While this action was stayed, the Colorado lawsuit between Sanborn and Longway proceeded to trial. On April 8, 2011, the Colorado court entered an order and judgment in favor of Sanborn and against Longway as to Sanborn's request for declaratory judgment and each of Longway's counterclaims. Longway appealed parts of that ruling, but the Colorado Court of Appeals affirmed the judgment of the lower court. (Docket No. 57-1.)
Soon thereafter, the court lifted the stay of the instant action. (Docket No. 70.) On May 24, 2013, Sanborn filed a Motion to Dismiss based on the principles of res judicata and collateral estoppel. (Docket No. 80.) The court granted the motion. (Docket No. 100-101.) In doing so, the court found that "there is no question that the claims by Longway in the case at bar either were presented to the Colorado court or could have been presented to the Colorado court in the prior Colorado action." (Docket No. 100 at 6.) The court held that Sanborn had "satisfied the four requirements... for asserting a defense of res judicata under Colorado law." ( Id. ) Accordingly, the court terminated Sanborn as a party to this litigation, and App Geo became the only remaining defendant. (Docket No. 101.)
II. The Pending Motion
App Geo subsequently filed its Motion to Dismiss. (Docket No. 103.) App Geo argued, inter alia, that res judicata bars Longway's claims against App Geo in this action, as it had barred Longway's claims against Sanborn. App Geo contended that the requirements for res judicata claim preclusion had been met: (1) Longway's claims could have been brought in the Colorado action; (2) the Colorado judgment was final; (3) both lawsuits involve the same subject matter; (4) both lawsuits involve the same claims for relief; and (5) the same parties or privies were involved in both actions. (Docket No. 104 at pp. 6-16.) As to the last of these contentions, App Geo maintained that it was in privity with Sanborn because they shared a "partnership" working relationship on various bids and shared an identity of interests vis a vis Longway. ( Id. at pp. 11-13.) App Geo further argued that Sanborn (1) represented the identical legal rights and positions that App Geo would have taken in the Colorado litigation, and (2) made the same legal arguments to defeat Longway's claims in the Colorado action that ...