Cochran v. Griffith Energy Services, Inc.

ADKINS, J. In this case, we apply the principles of res judicata in deciding whether a pair of adult children (“Petitioners”) may proceed with a lawsuit against an energy company that spilled heating oil in their parents’ home. Their parents (“Cochran Parents” or “Parents”) had previously sued Griffith Energy Services (“Griffith”), the same company, and won a judgment after a jury trial. The Circuit Court for Washington County dismissed the Petitioners’ lawsuit, holding, inter alia, that Petitioners’ claims were barred by res judicata. The Court of Special Appeals (“CSA”) affirmed in an unreported opinion, reaching only the ¹³⁷ res judicata issue.

Petitioners appealed, and we granted certiorari on the following question presented: Will Maryland allow a defendant who commits fraud during litigation to continue to escape liability, even when that fraud inflicted actual harm on the victims independent of the litigation, victims who are not owners and do not have the power to test the property? 1 We will affirm and hold that the Petitioners’ claims are barred by res judicata. Facts and Legal Proceedings This case is the second iteration of a lawsuit against Griffith Energy Services, arising out of a 2002 fuel oil spill in the basement of the Cochran household. The first lawsuit was filed by the Cochran Parents against Griffith, including claims for negligence and breach of contract. Although Petitioners here were not parties to that suit, Petitioner Elizabeth Ingoe testified at the trial, and Griffith took the deposition of Petitioner Robert Cochran, Jr. In the course of the first litigation, Griffith had the home tested, in May 2006, and the results showed more than a 300 percent increase in benzene levels.

Griffith and its attorneys failed to disclose this information to the Cochran Parents until late 2006. When Griffith made the disclosure, the Cochran Parents amended their lawsuit to include a claim that Griffith fraudulently concealed the contamination levels in the home. The Cochran Parents further alleged that Griffith and its ¹³⁸ lawyers had affirmatively misrepresented that the test results showed improvement in the benzene levels. The Circuit Court granted summary judgment on the fraud claim, opining: “To say the [Cochran Parents] had a right to rely on any representation in such a highly contested and contentious case ... stretches credulity to the point that it no longer exists.” The Circuit Court also said the fraud allegations were inadequately pled.

The case went to trial on the negligence and breach of contract claims, and the Cochran Parents prevailed. Their jury award, in the low six figures, was affirmed by the CSA in an unreported opinion, filed July 2, 2008. Although the Cochran Parents appealed the summary judgment on the fraud claim, the intermediate appellate court affirmed the judgment of the Circuit Court. Apparently not satisfied with the verdict obtained by their parents, in May 2009, Petitioners filed suit against Griffith and its attorneys (“Respondents”) for fraud and negligent supervision. 2 In their complaint, as facts common to all counts alleged, Petitioners claimed to have suffered “loss of use of the lower portion of the home ... emotional distress, concern, anxiety, and loss of enjoyment of the use of the home, and past, present, and future concern, anguish and anxiety regarding the health effects which may have been inflicted upon them.” Respondents moved to dismiss the lawsuit, and the Circuit Court for Washington County granted that motion in an order filed March 2, 2010.

The Circuit Court ruled that Petitioners’ claims were barred by res judicata; that Respondents owed Petitioners no duty to disclose the results of the air quality test; and that the Petitioners did not allege any legally cognizable damages. Petitioners timely appealed to the CSA, raising four issues: 1. Did the circuit court err by treating the appellees’ dispositive motion as a motion to dismiss, when matters ¹³⁹ outside the complaint were presented to and relied upon by the court in granting that motion? 2. Did the circuit court err by holding that the appellants were barred from instituting suit under the doctrine of res judicata? 3.

Did the circuit court err by holding that the fraud counts were barred because the defendants owed no duty to the appellants? 4. Did the circuit court err by holding that the claim for damages is barred? In an unreported opinion, the intermediate appellate court affirmed, reaching only the first two issues. First, the court held that the Circuit Court properly treated Respondents’ motion as a motion to dismiss, even though it relied on matters outside the pleadings.

Second, the court held that Petitioners’ claims were barred under res judicata, as the three elements of that doctrine were present: Petitioners’ claims raised the same issues as the Cochran Parents’ lawsuit; Petitioners were in privity with the Cochran Parents; and the first lawsuit was finally adjudicated on the merits. Petitioners filed a petition for certiorari, which we granted on November 18, 2011. See Cochran v. Griffith Energy Servs., 423 Md. 450 , 31 A.3d 919 (2011). Discussion In reviewing a lower court’s ruling on a motion to dismiss, we must determine whether the court was “legally correct.” See, e.g., Napata v. Univ. of Md. Med.

Sys. Corp., 417 Md. 724, 732 , 12 A.3d 144, 148 (2011). We accept all wellpled facts in the complaint, and reasonable inferences drawn from them, in a light most favorable to the nonmoving party. See id.

We also interpret Maryland case law to review whether the lower courts’ conclusions were correct as a matter of law. See, e.g., Montgomery Pres., Inc. v. Montgomery County Planning Bd., 424 Md. 367, 372 , 36 A.3d 419, 422 (2012). ¹⁴⁰ The doctrine of res judicata “bars the relitigation of a claim if there is a final judgment in a previous litigation where the parties, the subject matter and causes of action are identical or substantially identical as to issues actually litigated and as to those which could have or should have been raised in the previous litigation.” R & D 2001, LLC v. Rice, 402 Md. 648, 663 , 938 A.2d 839, 848 (2008) (citations and quotation marks omitted); see also Anne Arundel County Bd. of Ed. v. Norville, 390 Md. 93, 106-07 , 887 A.2d 1029, 1037 (2005) (same). As we have previously described, the res judicata doctrine “embodies three elements: (1) the parties in the present litigation are the same or in privity with the parties to the earlier litigation; (2) the claim presented in the current action is identical to that determined or that which could have been raised and determined in the prior litigation; and (3) there was a final judgment on the merits in the prior litigation.” Rice, 402 Md. at 663 , 938 A.2d at 848 . As we explained in Norville : Res judicata protects the courts, as well as the parties, from the attendant burdens of relitigation.

This doctrine avoids the expense and vexation attending multiple lawsuits, conserves the judicial resources, and fosters reliance on judicial action by minimizing the possibilities of inconsistent decisions. Norville, 390 Md. at 106-07 , 887 A.2d at 1037 . Petitioners argue that res judicata should not apply because they were not parties to the first suit and not in privity with their Parents, the plaintiffs in that suit. 3 The CSA rejected this theory, holding that Petitioners were in privity with their Parents. The court relied on Ugast v. LaFontaine, 189 Md. 227, 232-33 , 55 A.2d 705, 708 (1947), to help define when nonparties in a prior lawsuit are in privity with a party in that lawsuit for purposes of res judicata: ¹⁴¹ [T]he term “parties” includes all persons who have a direct interest in the subject matter of the suit, and have a right to control the proceedings, make defense, examine the witnesses, and appeal if an appeal lies.

So, where persons, although not formal parties of record, have a direct interest in the suit, and in the advancement of their interest take open and substantial control of its prosecution, or they are so far represented by another that their interests receive actual and efficient protection, any judgment recovered therein is conclusive upon them to the same extent as if they had been formal parties. (Citations omitted; emphasis added.) Applying Ugast , the CSA held that Petitioners, based on their pre-existing interest in redressing their exposure to the benzene in the family home, were indeed “so far represented by [their parents] that their interests received actual and efficient protection” in the prior lawsuit. As the court explained: According to the complaint, [Petitioners] were living in the Cochran home “for substantial periods of time” during the discovery stage of the Cochran Parents’ litigation, when the test results were allegedly concealed. They also allege that [Griffith’s] remediation efforts deprived them of the ... use and enjoyment of a portion of the home and caused emotional distress and anxiety regarding the home and future health effects.

Even when drawing all inferences in the appellants’ favor, we must conclude that they were aware of the Cochran Parents’ litigation and chose not to intervene. Indeed, the fraudulent conduct alleged by [Petitioners] was [Griffith’s] failure to disclose and misrepresentations regarding the test results to the Cochran Parents. Therefore, assuming the truth of the facts in the complaint, appellants were in privity with their parents for purposes of res judicata. (Citation omitted and emphasis added.) The CSA also relied on its decision in Douglas v. First Sec. Fed. Sav.

Bank, Inc., 101 Md.App. 170, 186-87 , 643 A.2d 920, 928-29 (1994), which considered a party’s “intimat[e] familiarity]” with the earlier litigation relevant to the question of ¹⁴² privity. Relying on that precedent, the intermediate appellate court concluded that Petitioners’ interests were adequately represented by the Cochran Parents in the first lawsuit. See also Small v. Ciao Stables, Inc., 289 Md. 554, 570 , 425 A.2d 1030, 1038 (1981) (binding a nonparty to a judgment because the record demonstrated that he had actual notice of the prior action and that his interests were adequately represented in it). Before us, Griffith cites Ugast and Douglas for these same propositions.

Our research also reveals other eases that support binding a nonparty to a lawsuit in similar circumstances. See, e.g., Greenwell v. Am. Guar. Corp., 262 Md. 102, 114 , 277 A.2d 70, 76 (1971) (“They could have intervened, had they chosen to do so.

Having decided not to do so, they cannot now relitigate the same question[.]”); Reddick v. State, 213 Md. 18, 30 , 130 A.2d 762, 768 (1957) (“There is a well established principle of law that a person who has full knowledge of pending litigation and that it affects, and will determine, his rights, and, who is entitled to appear, but who makes no effort to intervene as a party, and permits a conclusion thereof without objection, such person is concluded by the proceedings as effectually as if he were named on the record.”); see also John A. Lynch, Jr. & Richard W. Bourne, Modern Maryland Civil Procedure § 12.2(c) (2d ed. 2004) (“The notion that a nonparty may be bound by a judgment in a suit he or she knew about and in which he or she might have intervened, but did not do so has been reaffirmed on several occasions. The rule has much to commend it in the sense that it tends to reduce duplicative litigation.” (citations omitted)). The family relationship itself, of course, is a major factor. See, e.g., Jaffree v. Wallace, 837 F.2d 1461, 1467 (11th Cir. 1988) (“Although a familial relationship need not, in