Semtek International Inc. v. Lockheed Martin Corp.

736 A.2d 1104

128 Md. App. 39

SEMTEK INTERNATIONAL INCORPORATED v. LOCKHEED MARTIN CORPORATION.

No. 1041, Sept. Term, 1998.

Court of Special Appeals of Maryland.

September 7, 1999.

Andrew W. Zepeda (Lurie & Zepeda, Beverly Hills, Marvin Ellin, Ellin & Baker, Baltimore, Walter J. Lack, Steven C. Shuman, Engstrom, Lipscomb & Lack, Thomas V. Girardi, James Kropff and Girardi & Keese, Los Angeles, on the brief), for appellant.

Francis B. Burch, Jr. (Anthony L. Meagher, Piper & Marbury, LLP, Baltimore, Robert E. Willett, Richard W. Buckner, Jess B. Frost and O'Melveny & Meyers, LLP, Los Angeles, on the brief), for appellee.

Argued before MOYLAN, ADKINS and THEODORE R. BLOOM (Ret., Specially Assigned), JJ.

MOYLAN, Judge.

Semtek International Corp. ("Semtek"), the appellant, challenges an Order issued by Judge Joseph H.H. Kaplan in the Circuit Court for Baltimore City, whereby Semtek's Complaint against Lockheed Martin Corporation ("Lockheed"), the appellee, was dismissed on grounds of res judicata. On appeal, Semtek raises the sole issue of whether the trial court erred in dismissing the Complaint. Although Semtek has strained, at least before us if not necessarily before Judge Kaplan, to inject all sorts of peripheral doctrines and issues into the case, the question before us, in essence, is the single issue of

whether Judge Kaplan was entitled to give preclusive effect to the judgment of a federal district court dismissing Semtek's suit against Lockheed, stating as it did so that the suit was being "dismissed in its entirety on the merits."

Procedural Background

A. California State Suit Removed to Federal District Court on Ground of Diversity:

On February 26, 1997, Semtek filed a Complaint against Lockheed in the Superior Court for Los Angeles (hereinafter "the California action"), alleging (1) breach of contract, (2) intentional interference with prospective economic advantage, (3) negligent interference with prospective economic advantage, and (4) civil conspiracy, in relation to Semtek's joint venture with a Russian company for the use of former military satellites for commercial purposes. Lockheed immediately removed the action to the United States District Court for the Central District of California (hereinafter "California District Court") based on diversity of citizenship.

B. District Court Dismissed Suit and Dismissal Affirmed by Ninth Circuit:

In the California District Court, Lockheed moved to dismiss Semtek's Complaint based on the expiration of California's two-year Statute of Limitations. On May 8, 1997, the California District Court granted Lockheed's motion and dismissed the action with prejudice, holding that the causes of action had accrued in August of 1994, thus making the February 26, 1997 Complaint untimely. Three days later, the following Order was issued:

IT IS ORDERED, ADJUDGED AND DECREED that plaintiff Semtek International Incorporated take nothing on its complaint in this action, that the action be dismissed in its entirety on the merits and with prejudice, and that this Judgment be entered forthwith in favor of defendants Lockheed Martin....

(Emphasis supplied).

Semtek appealed that judgment to the United States Court of Appeals for the Ninth Circuit. On February 25, 1999, the Ninth Circuit affirmed the California District Court's dismissal of Semtek's Complaint on Statute of Limitations grounds. Semtek Internat'l Inc. v. Lockheed Martin Corp., No. 97-55840, 1999 WL 97355 (9th Cir. Feb. 25, 1999).

C. Refiling of Suit in Maryland State Court:

On July 2, 1997, Semtek filed in Maryland another Complaint against Lockheed (hereinafter "the Maryland action"), alleging (1) breach of contract, (2) intentional interference with prospective economic advantage, (3) negligent interference with prospective economic advantage, and (4) civil conspiracy, based on the same purported joint venture between Semtek and a Russian company regarding the use of military satellites. That suit was filed in the Circuit Court for Baltimore City, making the underlying claim subject to Maryland's three-year Statute of Limitations rather than California's two-year Statute of Limitations.

D. Failed Injunction Attempt in Original Federal District Court:

In response, Lockheed filed an All Writs Act injunction in the California District Court on July 23, 1997. Lockheed asserted that Semtek was barred from bringing suit in Maryland on the grounds of res judicata. Two days later, Lockheed removed the Maryland action to the United States District Court for the District of Maryland (hereinafter "Maryland District Court"), citing the involvement of a federal question as grounds for removal.¹ Specifically, Lockheed maintained that, even though none of Semtek's claims presented a federal question, Lockheed planned to assert the defense of res judicata based on the California Federal Court's ruling, thus presenting a federal question for resolution.

Ultimately, the California District Court denied Lockheed's injunctive efforts, holding as follows:

[T]his Court is not convinced that the single action filed by [Semtek] in Maryland rises to the level of vexatious relitigation which would warrant the use of the rather extreme remedy that Lockheed requests. [Semtek] has not filed subsequent actions that are either "numerous" or "patently without merit." The Court does not view this chronology as one in which the Court is justified in summarily precluding [Semtek's] access to the courts. This Court's prior order did not reach the substantive merits of [Semtek's] tort claims. If another proper forum will afford [Semtek] the opportunity to fully litigate the merits of its causes of action, without applying a statutory or res judicata bar, the Court does not find it appropriate to bar [Semtek] from proceeding in that forum.

(Citation omitted).

E. Removal From Local Federal District Court to Maryland State Court:

After the California District Court's ruling, Lockheed filed a Motion to Dismiss the Maryland action in the Maryland District Court on grounds of res judicata. Semtek, on the other hand, sought to have the Maryland District Court remand the action to the Circuit Court for Baltimore City, alleging lack of subject matter jurisdiction in the Maryland District Court. On December 31, 1997, the Maryland District Court granted Semtek's motion to remand the case to the circuit court on the ground that federal removal could not be predicated on an alleged federal affirmative defense. Semtek Internat'l, Inc. v. Lockheed Martin Corp., 988 F.Supp. 913 (D.Md.1997). The Maryland District Court did not rule on Lockheed's Motion to Dismiss.

The Res Judicata Ruling

Thereafter, Lockheed filed another Motion to Dismiss in the Circuit Court for Baltimore City, again asserting that the suit was barred by res judicata. A hearing was held on April 23, and on April 30, 1998, the trial court granted Lockheed's Motion to Dismiss. The thorough and well-researched opinion of Judge Kaplan explained:

The central issue that this court has been asked to consider is the preclusive effect of a federal dismissal on a subsequent identical state court action.... Pursuant to the clear language of the Federal Rules of Civil Procedure and federal preclusion law, federal law determines the preclusive effect of a prior federal judgment.

* * *

The Court is convinced that Federal Rule of Civil Procedure 41(b), Fourth, Fifth, Ninth Circuit case law and the Andes [v. Paden, Welch, Martin & Albano, 897 S.W.2d 19 (Mo.App.1995) ] holdings mandate this Court to find the judgment of the District Court for the Central District of California, dismissing Semtek's claims on statute of limitations grounds, a final judgment on the merits, and therefore prohibits Semtek from relitigating these claims in Maryland due to res judicata. Federal law does not permit [Semtek] to shop indefinitely for a forum that will give credence to their arguments. [Semtek] had its day in Court for this action and apparently was not satisfied with [the California District Court's] decision. Semtek could have originally filed this suit in Maryland state court, but instead filed this action in California. Thus, Semtek should be bound by California's two year statute of limitations and [the California District Court's] decision dismissing the action. Lockheed should not be forced to follow [Semtek] from state to state to defend an action previously decided in another jurisdiction. Accordingly, the Court agrees with Lockheed in that the fairest and most efficient use of federal and state judicial resources mandates that this Court grant Lockheed's Motion to Dismiss Semtek's Maryland Complaint with prejudice.

(Emphasis supplied). This timely appeal followed.

The propriety of Judge Kaplan's dismissal of Semtek's suit on the ground on res judicata is the sole issue before us on this appeal.

Preclusive Effect of Federal Judgment Determined by Federal Law

Semtek argues that our analysis of whether the Maryland action is barred on res judicata grounds should be dictated by California state law and that Judge Kaplan erroneously applied federal law when making his determination. We disagree.

In Kent County Bd. of Ed. v. Bilbrough, 309 Md. 487, 494, 525 A.2d 232 (1987), the Court of Appeals unambiguously stated that "[f]ederal law determines the effects under the rules of res judicata of a judgment of a federal court," quoting with approval Restatement(Second) of Judgments, § 87 (1982). See also Douglas v. First Security Federal Savings Bank, Inc., 101 Md.App. 170, 179, 643 A.2d 920 (1994). The case law is well settled that it is federal law that determines the preclusive effect of a federal judgment. Brooks v. Arlington Hosp. Ass'n, 850 F.2d 191, 195 (4th Cir.1988); Agrilectric Power Partners, Ltd. v. General Electric Co., 20 F.3d 663, 664-65 (5th Cir.1994); Luxford v. Dalkon Shield Claimants Trust, 978 F.Supp. 221, 223 n. 6 (D.Md.1997); Green v. Kadilac Mort. Bankers, Ltd., 936...