Zafer v. Hermann

1
NOT DESIGNATED FOR PUBLICATION

No. 118,550

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

WASSE ZAFER and ZAFER CHIROPRACTIC & SPORTS INJURIES, INC.,
Appellants,

v.

ANDY HERMANN; FARMERS INSURANCE COMPANY, INC.; FARMERS GROUP, INC.; and
FARMERS INSURANCE EXCHANGE,
Appellees.


MEMORANDUM OPINION

Appeal from Johnson District Court; KEVIN P. MORIARTY, judge. Opinion filed May 25, 2018.
Affirmed.

P. Dan Calderon, of Calderon Law LLC, of Prairie Village, for appellants.

Melody L. Rayl, of Fisher & Phillips LLP, of Kansas City, Missouri, for appellees.

Before ATCHESON, P.J., PIERRON and STANDRIDGE, JJ.

PER CURIAM: Wasse Zafer and Zafer Chiropractic & Sports Injuries, Inc.
(collectively Zafer) appeal the district court's decision barring Zafer's claims against
Andy Hermann; Farmers Insurance Company, Inc.; Farmers Group, Inc.; and Farmers
Insurance Exchange (collectively Farmers) under the doctrine of res judicata. Zafer
previously filed the same claims against the same parties in Missouri. The Lincoln
County, Missouri trial court entered judgment on the pleadings against Zafer. The
Missouri Court of Appeals for the Eastern District upheld the decision on appeal. Zafer
Chiropractic & Sports Injuries, P.A. v. Hermann, 501 S.W.3d 545 (Mo. App. 2016).
2
Because the Missouri judgment was a final decision on the merits, we affirm the district
court's decision finding the claims in this action are precluded by res judicata.

FACTS

Wasse Zafer was the sole owner and operator of Zafer Chiropractic & Sports
Injuries, Inc. Zafer originally filed suit against Farmers in February 2012 in Cole County,
Missouri. Some of Zafer's patients were insured by Farmers' automobile insurance
policies, which provided personal injury protection coverage and/or medical payments
coverage. Zafer alleged that some of those insured patients executed an assignment of
benefits agreement, which assigned their right to insurance payments from Farmers to
Zafer in exchange for treatment. Zafer's petition sought payments under the benefits
agreements. It also alleged several tortious acts against Farmers, including that Farmers:
attempted to undervalue and deny insurance claims, contacted Zafer's "Hispanic and/or
Spanish-speaking patients" and threatened to contact "immigration" if they did not assist
in filing complaints against Zafer, and filed false complaints about Zafer to Kansas
criminal and administrative entities. The petition claimed that these actions caused
Zafer's business to become financially insolvent.

In December 2012, the Cole County trial court dismissed Zafer's action without
prejudice based on the doctrine of forum non conveniens. The court held that Missouri
was an inconvenient forum because "[t]he nexus between Kansas and the claims is far
more significant than with Missouri" and because the claims would be governed by
Kansas substantive law.

In May 2013, Zafer filed an almost identical petition in Jackson County, Missouri,
based on the same allegations against Farmers. Farmers filed a motion for judgment on
the pleadings. Zafer then amended his petition, which asserted five counts against
3
Farmers: breach of contract, tortious interference with business expectancy and business
disparagement, abuse of process, negligence, and breach of fiduciary duties.

In July 2015, the case was transferred to the trial court in Lincoln County,
Missouri. On December 16, 2015, the Lincoln County court granted Farmers' motion for
judgment on the pleadings. Applying a conflict of laws analysis, the court used Kansas
substantive law (since the claims had the most significant relationship with Kansas) and
used Missouri's procedural rules. In Missouri, a "fact pleading" state, a plaintiff must
state sufficient facts demonstrating he or she is entitled to the relief sought in the petition.
The court held that Zafer's breach of contract and tortious interference with a business
expectancy claims failed to plead sufficient facts to state a claim under the Missouri
pleading rule. The court also dismissed Zafer's negligence and breach of fiduciary duty
claims, which were both based on the assignment of benefits agreement. The court
explained that those claims were either contract based and, therefore, insufficiently pled
for the same reason as the breach of contract claim, or tort based and, therefore, improper
as a matter of law because tort claims are not assignable under Kansas law. Finally, the
court rejected Zafer's abuse of process claim, which was based on allegations that
Farmers initiated investigations and administrative hearings with Kansas state agencies
because abuse of process pertains only to judicial, not administrative, proceedings in
Kansas.

Zafer appealed to the Missouri Court of Appeals for the Eastern District. The
appellate court affirmed the Lincoln County trial court, holding that even if "all pled facts
are true, after disregarding all conclusions pled without factual support, [Zafer] failed to
establish they would be entitled to relief for any claim alleged." Zafer Chiropractic &
Sports Injuries, P.A., 501 S.W.3d at 556. The appellate court agreed with the trial court
that Zafer failed to allege specific facts sufficient to state a breach of contract cause of
action under Kansas substantive law. The court additionally held that Zafer's breach of
contract claim failed because the assignment of benefits agreement assigned only to the
4
right to payment, not the right to bring a breach of contract claim on behalf of the
insureds. 501 S.W.3d at 552-53. The appellate court upheld the trial court's reasoning on
Zafer's other claims: Zafer did not plead sufficient facts to demonstrate tortious
interference with a business expectancy; Zafer's abuse of process claim was based on
investigations and administrative hearings, but Kansas law provides remedy only for
abuse of judicial proceedings; and Zafer's allegations of negligence and breach of
fiduciary duty were tort claims, which are not assignable under Kansas substantive law.
501 S.W.3d at 552-56.

In February 2017, Zafer filed a petition in Johnson County, Kansas, based on the
same factual allegations and making the same claims against Farmers. Farmers filed a
motion to dismiss based on res judicata, a doctrine that precludes a party from filing the
same claims that were previously determined on the merits in earlier litigation against the
same parties. The Johnson County District Court granted Farmers' motion, holding that
Zafer could not bring the same cause of action in Kansas. The Johnson County District
Court stated:

"There is no existing authority in Kansas on the issue of whether a dismissal
based on Missouri's fact pleading standard constitutes a final judgment on the merits for
purposes of res judicata in Kansas. Under the Full Faith and Credit Clause of the United
States Constitution, a judgment in Missouri 'cannot be impeached for irregularities in the
proceedings or erroneous rulings, but must be regarded as binding, until set aside by the
court rendering it, or by a reviewing court on appeal.' Padron v. Lopez, 289 Kan. 1089,
1098, 220 P.3d 345 (2009) (quoting Littlefield v. Paynter, 111 Kan. 201, 205, 206 [P.]
1114 [1922]). Indeed, Kansas law is clear that even state law claims dismissed without
prejudice by the prior court determination are nonetheless precluded under the claim
preclusion doctrine, harsh though that result might be. Stanfield[ v. Osborne Industries,
Inc.,] 263 Kan. [388,] 404, 949 P.2d 602 [1997] (expressly affirmed by Rhoten[ v.
Dickson], 290 Kan. [92,] 112[, 223 P.3d 786 (2010)]). While this Court may wish to
allow Plaintiffs the opportunity to replead their claims under the more liberal Kansas
notice pleading standard, there is no existing authority for this Court to find that a
5
dismissal of claims under Missouri's fact pleading standard does not constitute a
determination on the merits as to those same claims if refiled under Kansas' notice
pleading standard. Thus, in the absence of any such authority, this Court must give full
faith and credit to the Missouri judgment, which has a preclusive effect and bars
Plaintiffs' claims in the present case by res judicata."

Zafer timely appealed.

ANALYSIS

The doctrine of res judicata—also called "claim preclusion"—bars a party from
relitigating claims that already have been decided on the merits. Stanfield v. Osborne
Industries, Inc., 263 Kan. 388, 396, 949 P.2d 602 (1997). It is a judicially created
doctrine founded on considerations of judicial economy and public policy favoring
certainty and finality in the law. Res judicata protects litigants from the cost and
aggravation of multiple lawsuits on the same claims or claims that could have been
brought in a prior suit. 263 Kan. at 397.

In his sole issue on appeal, Zafer argues that the district court erroneously barred
the claims in his Kansas petition under the doctrine of res judicata. Whether res judicata
applies to a case is a question of law over which this court exercises unlimited review. In
re Tax Appeal of Fleet, 293 Kan. 768, 777, 272 P.3d 583 (2012); Stanfield, 263 Kan. at
396.

To establish res judicata, four elements must be present: (1) the same claim, (2)
the same parties, (3) the claim was or could have been raised, and (4) a final judgment on
the merits. In re Tax Appeal of Fleet, 293 Kan. at 777-78. Here, there is no dispute that
Zafer previously filed suit against the same parties for the same claims and the Missouri
trial court entered a final judgment that was affirmed by the Missouri Court of Appeals.
6
The only disputed issue is whether the Missouri judgment on the pleadings was "on the
merits."

Zafer argues that the Missouri judgment was not on the merits because it was
based on the sufficiency of the pleadings under Missouri's heightened pleading standard,
which would not apply in Kansas. Missouri's fact-pleading statute requires that a petition
contain a "short and plain statement of the facts showing that the pleader is entitled to
relief." Mo. Rev. Stat. § 55.05 (2016); see also Ford Motor Credit Co. v. Updegraff, 218
S.W.3d 617, 621 (Mo. App. 2007) (petition must plead "ultimate facts" showing
entitlement to relief sought and may not rely on mere conclusions). In contrast, Kansas'
notice-pleading standard requires only "a short and plain statement of a claim that will
give the defendant fair notice of what the plaintiff's claim is and the ground upon which it
rests." Rinsley v. Frydman, 221 Kan. 297, 302, 559 P.2d 334 (1977); see K.S.A. 2017
Supp. 60-208(a)(1); see also Oller v. Kincheloe's, Inc., 235 Kan. 440, 447, 681 P.2d 630
(1984) ("It is not necessary to spell out a legal theory of relief so long as an opponent is
apprised of the facts that entitle plaintiff to relief."). Zafer's position is that this court
should not consider the Missouri judgment a final judgment on the merits under Kansas
law because Zafer's petition would have survived Kansas' more liberal pleading
standards.

But we do not determine the legal effect of a judgment by asking what would have
happened had the suit been filed in our own courts; we look to the law of the state that
rendered the judgment. Under the Full Faith and Credit Clause of the United States
Constitution, Article 4, Section 1, a judgment rendered by the courts of one state is
entitled in the courts of another state to the same force and effect the judgment has
according to the law of the state where the judgment was rendered. Fisher v. Kipp, 177
Kan. 196, 197-98, 277 P.2d 598 (1954); see also Padron v. Lopez, 289 Kan. 1089, 1096,
220 P.3d 345 (2009) ("As a general rule, when a properly authenticated judgment of a
state other than Kansas is offered as evidence in a Kansas court, the Full Faith and Credit
7
Clause . . . gives the foreign judgment the same force and effect in Kansas as it has in the
state where the judgment was rendered."). "In an action on a foreign judgment, its nature,
validity, and finality are to be tested by the law of the jurisdiction where the judgment
was rendered." Johnson Brothers Wholesale Liquor Co. v. Clemmons, 233 Kan. 405, Syl.
¶ 3, 661 P.2d 1242 (1983) (looking to Minnesota law to determine whether second
Minnesota judgment was new judgment or extension of statutory period in which to
impose original Minnesota judgment); see also Baker v. Erbert, 199 Kan. 59, 62, 427
P.2d 461 (1967) (looking to Colorado law to determine whether fraud induced defendant
to forego his defense as basis for challenging the original Colorado judgment); Hankin v.
Graphic Technology, Inc., 43 Kan. App. 2d 92, 99, 222 P.3d 523 (2010) (looking to
Pennsylvania law to determine whether judgment by confession should continue to be
recognized after defendant moved to "open" judgment in Pennsylvania).

So we must look to the law of Missouri, the state in which the judgment was
rendered, to determine the nature of the judgment in this case. In Missouri, when a party
files a motion for judgment on the pleadings, the court considers all facts pled, and
reasonable inferences that can be drawn from the facts, in the plaintiff's favor. If the
plaintiff cannot prevail under any legal theory after the pleadings are closed, judgment is
entered as a matter of law on the pleadings. In re Marriage of Busch, 310 S.W.3d 253,
260 (Mo. App. 2010). "[A] motion for judgment on the pleadings contemplates a final
judgment on the merits." 310 S.W.3d at 260; see also Essen v. Adams, 342 Mo. 1196,
1204, 119 S.W.2d 773 (1938) ("Ordinarily a motion for a judgment on the pleadings
contemplates a judgment on the merits."); Bank of New York v. Yonts, 388 S.W.3d 560,
561 (Mo. App. 2012) (same).

The Missouri judgment is entitled to full faith and credit in Kansas. Missouri
courts would not allow Zafer to bring the same claims against Farmers in its courts; thus,
Kansas courts must give it the same force and effect. The Johnson County District Court
8
did not err in giving the Missouri judgment preclusive effect under the Full Faith and
Credit Clause.

Zafer seeks an exception to the regular application of res judicata, contending that
the Missouri fact-pleading rule prevented him from receiving a full and fair opportunity
to litigate his claims because his petition would have been sufficient under Kansas'
notice-pleading rules. While Kansas' law of res judicata does not specifically require a
court to examine whether the plaintiff had a full and fair opportunity to litigate, federal
courts have considered that factor in exceptional cases. Zafer urges this court to find that
this is such an exceptional case and adopt the federal analysis. We decline to do so.

Federal courts preclude claims under res judicata if the following three elements
are met: (1) There is a final judgment on the merits in an earlier action; (2) the same
parties are involved in the two suits; and (3) there is the same cause of action in both
suits. Rhoten v. Dickson, 290 Kan. 92, 106, 223 P.3d 786 (2010).

"The majority of federal courts, including the United States Supreme Court and the Tenth
Circuit, recognize an exception if the party seeking to avoid preclusion did not have a full
and fair opportunity to litigate the claim in the prior suit. Although some courts treat this
exception as a fourth element, the Tenth Circuit agrees it is an exception that only needs
to be addressed in limited circumstances. Yapp v. Excel Corp., 186 F.3d 1222, 1226 n.4
(10th Cir. 1999)." Rhoten, 290 Kan. at 106.

To determine whether a claim was fully and fairly litigated under the exception,
federal courts consider the following factors: (1) whether there were significant
procedural limitations in the prior proceeding; (2) whether the party had the incentive to
fully litigate the issue; and (3) whether effective litigation was limited by the parties'
nature or relationship. Rhoten, 290 Kan. at 110-11 (citing Burrell v. Armijo, 456 F.3d
1159, 1172 [10th Cir. 2006]). The exception is exceedingly narrow and inapplicable here.

9
Zafer cites three cases in which federal courts analyzed the exception he seeks.
Those cases—which examined prior judgments issued by foreign or tribal courts—used
an analysis entirely different from cases in which one state's courts must give full faith
and credit to another state court's judgment. Moreover, the cases Zafer cites actually
demonstrate how significant the procedural differences must be from the practices of
domestic courts for a party to lack a full and fair opportunity to litigate. Those cases do
not control here.

In Gordon and Breach Science Publishers S.A. v. American Institute of Physics,
905 F. Supp. 169 (S.D.N.Y. 1995), one of the plaintiffs unsuccessfully sued the
defendants in Switzerland and Germany prior to bringing suit in New York federal court.
The New York federal district court noted the "well-established" rule that "United States
courts are not obliged to recognize judgments rendered by a foreign state, but may choose
to give res judicata effect to foreign judgments on the basis of comity." 905 F. Supp. at
178-79. The court refused to bar issues in the foreign judgments, citing "civil law
procedural differences" (without discussion of what the procedural differences were) as
one out of six "principles of fairness and reasonableness" it considered in its comity
analysis. 905 F. Supp. at 179.

Similarly, in Haung Tang v. Aetna Life Ins. Co., 523 F.2d 811, 812 (9th Cir.
1975), the Ninth Circuit Court of Appeals refused to give preclusive effect to a
Taiwanese criminal judgment. Seeking proceeds from his wife's life insurance policy,
Jaw-Mann Jong argued in California federal court that he was temporarily insane at the
time he killed his wife. The alternate beneficiary sought to preclude Jong from
relitigating the issue of his sanity because a Taiwanese criminal court had previously
determined that he was not insane at the time of the murder. The Ninth Circuit refused to
apply issue preclusion because the Taiwanese substantive criminal and procedural law
differed significantly from California law: It was unclear from the record whether the
defense of legal insanity was the same in Taiwanese criminal law as in California law,
10
and the Taiwanese high court refused Jong's request to be examined by a psychiatrist,
which would have been granted in California. 523 F.2d at 813-14.

Third, in Burrell, 456 F.3d 1159, the plaintiffs sued the Pueblo Indian tribe and
some of the tribe's leaders in Santa Ana Tribal Court. After a period of four years, during
which the tribal court took no action, it dismissed the plaintiffs' claims as barred by
sovereign immunity. The plaintiffs refiled their claims in federal court. The Tenth Circuit
Court of Appeals refused to preclude the plaintiffs' claims, citing the close relationship
between the tribal court and the tribal leader defendants, the fact that the tribal court
judgment did not cite any evidence or testimony, and the lack of appellate review
available to the plaintiffs in the tribal court system. 456 F.3d at 1173.

None of these cases guide this court's analysis here, where the Full Faith and
Credit Clause requires recognition of judgments rendered by the courts of other states.
Zafer contends that the "the difference between the pleading standards in Kansas and
Missouri is the very type of procedural limitation contemplated by the federal court
analysis." But the difference in pleading standards is not analogous to the significant
procedural differences discussed in Huang Tang, where the defendant was not entitled to
present the same evidence and where the issue may not have been governed by a similar
substantive law, or in Burrell, where there was no authority or legal explanation for the
court's ultimate decision and no right to appeal. And unlike in Burrell, Zafer does not
claim that the litigation was limited by the parties' relationship. Although Missouri has a
more stringent pleading standard than Kansas, it did not deprive Zafer the opportunity to
fully and fairly litigate his claims against Farmers. Zafer has not provided a convincing
case to adopt the federal exception here.

Finally, Zafer cites Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S. Ct. 645, 58
L. Ed. 2d 552 (1979), a case in which the plaintiff sought to preclude the defendant from
litigating an issue on which the defendant had lost in prior litigation brought by another
11
party. The United States Supreme Court noted that such "offensive use of issue
preclusion" may be unfair to a defendant for several reasons: The defendant may have
little incentive to defend the prior litigation vigorously if only nominal damages are at
stake or if future suits are not foreseeable; the prior judgment may be inconsistent with
another judgment in favor of the defendant; and the second action might afford
procedural opportunities unavailable to the defendant in the first action—such as an
inconvenient forum that made it difficult for the defendant to engage in full-scale
discovery or call witnesses. 439 U.S. at 329-31 & n.15.

Parklane Hosiery Co. does not control here. The procedural posture of this case is
very different from offensive issue preclusion and does not raise the same concerns. Here
the question is whether the district court properly applied defensive claim preclusion:
Farmers, the defendant, sought to avoid litigating the same claims brought by the same
parties that were previously determined by the Missouri courts. Zafer, the plaintiff in this
action, chose to bring suit in Missouri (twice), even after the action was dismissed for
forum non conveniens by the Cole County court because of the suit's relationship to
Kansas. There is no reason to believe that Zafer had less of an incentive to fully liltigate
the suit it brought in Missouri as it did in this suit. Thus, this case does not present the
same concerns that Zafer was forced to litigate in an unfair forum as were discussed in
Parklane Hosiery Co.

Affirmed.