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There is an identity of the causes of action when the cases are based on the same nucleus of facts because it is the facts surrounding the transaction or occurrence which operate to constitute the cause of action, not the legal theory on which a litigant relies. Put a little more pithily, claim preclusion precludes the litigation of claims, not just arguments. Claim preclusion is also intended to prevent litigation of matters that should have been raised in an earlier suit.
Appellant Capitol Hill Group filed suit in the Superior Court of the District of Columbia against its former counsel, Shaw Pittman, and various associated attorneys, for claims stemming from alleged legal malpractice. Appellees removed the case to federal court, asserting federal jurisdiction under 28 U.S.C. § 1334(b); so-called "arising in" bankruptcy jurisdiction. The district court denied appellant's motion to remand for lack of jurisdiction, and later granted summary judgment for appellees because appellant’s claims were barred by res judicata. Appellant challenged the decision, arguing that the district court erred in exercising jurisdiction over the case under 28 U.S.C. § 1334(b). Appellant also argued that res judicata should not bar it from pressing its malpractice claims against appellees despite the fee litigation during the bankruptcy proceedings.
The court held that malpractice claims against court-appointed professionals stemming from services provided in the bankruptcy proceeding were inseparable from the bankruptcy context, and therefore, it constituted a proceeding “arising in” the bankruptcy. Such claims fell within the bankruptcy jurisdiction of the federal courts. Anent the issue on res judicata, the court noted that the appellant’s argument went to the involving-the-same-claims or cause of action element of res judicata, the so-called identity element. There was an adversarial process before the bankruptcy court and the bankruptcy court was in a position to judge the quality of appellees' services. When the client decided to litigate appellees' fees, raising broad professional responsibility arguments questioning the representation, the client's duty to discover the legal errors, if any, committed by appellees was triggered. In conclusion, the court held that the fee applications and the malpractice claim arose out of the same nucleus of facts and the identity element of res judicata is satisfied.