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The Eighth Circuit Court of Appeals offered two important lessons for contract disputes this week.
First, choice of venue clauses are sometimes mere suggestions.
Second, res judicata can be raised in a motion to dismiss.
George Lobrano signed a noncompete agreement with his employer, C.H. Robinson Worldwide, Inc., as part of Lobrano's promotion to a management position in the company's Shreveport, La. office. Minnesota law governed the Employee Agreement, and the choice of venue clause required litigation to be initiated in Hennepin County, or the United States District Court for the District of Minnesota.
When his employment conditions changed in 2010, Lobrano left C.H. Robinson, and asked the company to modify the geographic scope of the noncompete clause to allow him to work for a competitor. C.H. Robinson declined Lobrano's request and litigation ensued.
In November 2010, Lobrano commenced action in Louisiana state court seeking a judicial declaration that Louisiana law rendered the noncompete void and unenforceable. C.H. Robinson removed the case to a federal court in Louisiana. On December 10, 2010, Lobrano moved for summary judgment.
On December 21, 2010, C.H. Robinson commenced action in Minnesota state court and filed a motion for anti-suit injunction. Lobrano removed the case to a federal court in Minnesota, and moved to dismiss, stay, or transfer the suit. In response, C.H. Robinson sought a preliminary injunction to enjoin Lobrano from proceeding in the Louisiana action.
On January 7, 2011, before the scheduled summary judgment hearing in Minnesota, the district court in the Louisiana action rendered judgment on the merits, granting Lobrano's motion for summary judgment. The district court determined that it had to apply Louisiana law in deciding the validity of the noncompete provisions. Pursuant to Louisiana law, the district court concluded that the noncompete provisions contained an overly broad geographic scope and voided the agreement.
Lobrano moved to dismiss the Minnesota action on the grounds of the Full Faith and Credit Clause and Louisiana's res judicata principles. When C.H. Robinson proceeded to amend its complaint in the Minnesota action, Lobrano moved for sanctions and attorney's fees, arguing that C.H. Robinson ignored well-settled res judicata principles in pursuing the Minnesota action.
The district court sided with Lobrano, concluding that the Louisiana judgment precluded the Minnesota action on the basis of res judicata, and that the Minnesota action should have been brought as a compulsory counterclaim in the Louisiana action, and the Eighth Circuit Court of Appeals affirmed.
On appeal, C.H. Robinson argued that res judicata is not an appropriate defense to raise in a motion to dismiss. Eighth Circuit precedent, however, suggests otherwise.
The court noted that res judicata is an affirmative defense that can be raised when the identity of the two actions can be determined from the face of the petition itself, and the court has implicitly endorsed the use of a motion to dismiss to raise res judicata.