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Pavone v. Kirke , John Pavone v. Gerald Kirke (2011) - 807 N.W.2d 828 (Iowa 2011)

Rule:

To determine whether the claim in the second suit could have been fully and fairly adjudicated in the prior case, that is, whether both suits involve the same cause of action, an appellate court must examine: (1) the protected right; (2) the alleged wrong; and (3) the relevant evidence. However, courts carefully distinguish between two cases involving the same cause of action—where claim preclusion bars initiation of the second suit—and two cases involving related causes of action—where claim preclusion does not bar initiation of the second suit. A single cause of action connotes a natural grouping or common nucleus of operative facts. Among the factors relevant to a determination whether the facts are so woven together as to constitute a single claim are their relatedness in time, space, origin, or motivation, and whether, taken together, they form a convenient unit for trial purposes. Though no single factor is determinative, the relevance of trial convenience makes it appropriate to ask how far the witnesses or proofs in the second action would tend to overlap the witnesses or proofs relevant to the first. If there is a substantial overlap, the second action should ordinarily be held precluded. But the opposite does not hold true; even when there is not a substantial overlap, the second action may be precluded if it stems from the same transaction or series.

Facts:

On October 22, 2004, John Pavone and Signature Management Group, L.L.C. (hereinafter collectively referred to as SMG) and Gerald M. Kirke and Wild Rose Entertainment, L.L.C. (hereinafter collectively referred to as Wild Rose) executed a document entitled "Agreement," which, in part, attempted to delineate the parties' relationship with regard to future casino projects in Iowa. On May 11, 2005, the Iowa Racing and Gaming Commission (IRGC) awarded Wild Rose a gaming license to develop a casino in Emmetsburg. On May 24 Wild Rose sent a letter to SMG (hereinafter referred to as the “termination letter”) allegedly terminating the October agreement and any future relationship between the parties. The attorney for Wild Rose, Jim Krambeck, also e-mailed a copy of the termination letter to SMG’s attorney, Ryan Ross, that same day. SMG then sent a proposed management agreement for the Emmetsburg casino to Wild Rose, requesting that Wild Rose execute the agreement and return it to SMG. There was no evidence Wild Rose responded, and the parties never executed a management agreement for the Emmetsburg casino. Subsequently, SMG filed a civil action against Wild Rose (hereinafter referred to as the "Emmetsburg action") alleging, in part that Wild Rose breached the management agreement. The jury awarded SMG $10 million in damages. During the course of the Emmetsburg action, on June 8, 2006, the IRGC awarded Wild Rose a gaming license to develop a casino in Clinton. Wild Rose did not contact or negotiate a management agreement with SMG regarding management of the Clinton casino. On August 15, 2008, SMG filed a separate action against Wild Rose Clinton, L.L.C., a wholly owned subsidiary of Wild Rose Entertainment, L.L.C. (hereinafter referred to as the "Clinton action"). SMG alleged Wild Rose breached paragraph 5A of the October agreement by failing to negotiate in good faith with SMG for the management of the Clinton casino. The district court adjudged that the Clinton action was barred by the doctrine of claim preclusion. On appeal, the Court of Appeals held that because SMG had already brought the Emmetsburg action, it was precluded from seeking damages for any remaining rights of performance under the October agreement. Subsequently, SMG filed an application for further review.

Issue:

Was SMG precluded from seeking damages for any remaining rights of performance under the October agreement because it had already brought the Emmetsburg action?

Answer:

Yes.

Conclusion:

The Court affirmed the judgment of the appellate  court, holding that SMG, in  single cause of action and within the statute of limitations, was required to bring all claims for damages based on its remaining rights to performance under the October agreement. According to the Court, Wild Rose breached the October agreement when it first failed to perform under paragraphs of the October agreement and thereafter repudiated the agreement. SMG became aware of the underlying facts supporting its action when a casino license was awarded and Wild Rose did not name SMG as manager. SMG learned of those facts shortly after it filed another action, but well before the court entered the judgment in that action. The Court averred that SMG had sufficient time and opportunity to amend its action to seek additional damages due to the breach of paragraph 5A of the October agreement in regards to the casino.

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