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plaintiffdefendantjurisdictionstatuteappealtrialsummary judgmenttrust

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First Interstate Bank of Denver, N.A. v. Central Bank & Trust Co. of Denver, 937 P.2d 855

Facts

In 1989, First Interstate Bank of Denver, N.A. sued The Central Bank & Trust Co. in federal court for aiding and abetting violations of the Securities Exchange Act. The federal court dismissed the federal claims, and the Supreme Court upheld this dismissal. After the Supreme Court's decision, the plaintiff filed a new action in state court, including state law claims that had not been previously raised. The trial court dismissed these claims, citing res judicata and the statute of repose.

In 1989, plaintiff sued defendant in federal court based on an implied private cause of action for aiding and abetting violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1988 & Supp. III 1991). See First Interstate Bank, N.A. v. Pring, 969 F.2d 891 (10th Cir.1992). Plaintiff did not join any state law claims in that complaint.

Issue

Whether the state law claims were barred by res judicata and whether the statute of repose could be waived.

Plaintiff first contends that the trial court erred in dismissing its claims on the basis of res judicata. We agree.

Rule

State law claims that could have been raised in a prior federal suit are not barred by res judicata if the federal court dismissed the federal claims without trial. Additionally, parties can waive the statute of repose limiting the time to bring suit.

1 Two inquiries are applicable to determine whether res judicata bars a state action after a federal action involving the same transaction: whether the federal court had jurisdiction over the state claims and, if so, whether it would nevertheless have exercised its discretion to dismiss the claims.

Analysis

The court found that the federal court's dismissal of the federal claims meant that the state claims were not truly available to the parties in the federal action, thus res judicata did not apply. Furthermore, the court determined that the parties' tolling agreement indicated an intention to waive the statute of repose, allowing the state claims to proceed.

Thus, here, when plaintiff's state claims were not 'truly available' in the federal action, see City & County of Denver v. Block 173 Associates, supra, the trial court erred in requiring plaintiff to show more than that the federal case was dismissed on summary judgment in advance of trial and, consequently erred in dismissing plaintiff's claims on the basis of res judicata.

Conclusion

The Court of Appeals reversed the trial court's dismissal of the plaintiff's claims and remanded the case for further proceedings.

Because we hold that plaintiff's claims are neither barred by res judicata nor the Securities Act statute of repose, we need not address the parties' other contentions.

Who won?

First Interstate Bank of Denver, N.A. prevailed because the court found that the claims were not barred by res judicata and that the statute of repose could be waived.

In this securities action, plaintiff, First Interstate Bank of Denver, N.A., appeals from a judgment of the trial court dismissing its complaint against defendant, The Central Bank & Trust Co., on the grounds that plaintiff's claims were barred by res judicata and the statute of repose. We reverse.

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