Res judicata; vague use of disjunctive in stipulated administrative order means plaintiff can relitigate in defamation suit the truth of accusation that plaintiff diverted a regulated drug.

Shaddy v. Brattleboro Retreat, 2012 VT 67 (Burgess, J.)  

There were three prior proceedings: in the Windham Criminal Division, the Department of Labor and the Board of Nursing. The criminal charge was resovlved by a plea of nolo contendere, which “is not, in any civil or criminal proceeding, admissible against the defendant.”  V.R.E. 410(2).  Similarly, 21 V.S.A. § 1353, addressing the collateral import of unemployment compensation claims proceedings, provides that a determination of the employment security board "is not binding, conclusive or admissible in any separate or subsequent action between an individual and his or her present or former employer brought before [a] . . . court or judge of this state . . ."   We hold that under Rule 410(2) and § 1353, respectively, neither plaintiff’s criminal plea, nor the result of his unemployment compensation proceeding, can bar his defamation claim. 

Plaintiff  appeals the  dismissal of his complaint against the Brattleboro Retreat and certain employees of the Retreat.  Plaintiff, a former Retreat employee, brought claims of defamation, obstruction of justice, intentional infliction of emotional distress (IIED), and intentional interference with a contract, arising from the Retreat’s allegation that he unlawfully diverted regulated drugs from the medication room at its facility.  The only issue raised on appeal is  whether the court properly dismissed the defamation claim against the Retreat as res judicata, a question of law we consider de novo.    We reverse.  

We further hold that, under our decision in Trepanier v. Getting Organized, Inc., 155 Vt. 259, 583 A.2d 583 (1990), the order settling plaintiff’s Board of Nursing proceeding is too vague to constitute a final judgment on the merits and therefore  does not preclude plaintiff’s claim.  The crux of the issue is whether the truth of the Retreat’s accusation against plaintif was “fully litigated and resolved in favor of the Retreat." Assuming, without deciding, that a stipulated administrative judgment could have preclusive effect as argued by the Retreat, it must at least describe the factual and legal issues being resolved with enough specificity so as to precisely identify what those issues are.   

In this case, the stipulated order was too vague to resolve the issue of whether the Retreat’s allegedly defamatory statements are true.  Pursuant to the order, plaintiff agreed that the State could prove by a preponderance of the evidence that he “engage[d] in conduct of a character likely to deceive, defraud or harm the public which include[d], but [was] not limited to, diverting supplies, equipment, or drugs for personal or other unauthorized use” in violation of 26 V.S.A. § 1582(7).  (Emphasis added.)  This charge reads in the disjunctive and fails to specify plaintiff’s misconduct, so that plaintiff can be understood to admit to preponderant proof of diversion of “supplies” or “equipment” to the public detriment, but not necessarily to diversion of drugs.  Plaintiff's admission that the State could prove misconduct which just possibly included drug diversion does not establish the truth of the Retreat’s specific defamatory allegation that plaintiff thrice diverted a regulated drug.  In short, for want of specificity the order does not establish the truth of the Retreat’s allegations and thus does not preclude plaintiff’s defamation suit.  Accordingly, we reverse the trial court’s dismissal of plaintiff’s defamation suit against the Retreat and remand this matter for proceedings consistent with this opinion.

Res judicata. Ordinarily, the court issuing a judgment should not address its preclusive effect on future litigation.

Alden and Alden v. Alden, Alden, Dee and Alden (2009-017) (22-Jan-2010) 2010 VT 3 (mem.)
Julia Dee and Todd Alden appeal the Superior Court’s denial of a Rule 59(e) motion to amend the court’s order terminating the 1973 William C. Alden Trust. Appellants contend that the court’s refusal to expressly limit the preclusive effect of the order was an abuse of discretion. We affirm.

With respect to the Termination Action, each of the beneficiaries consented to termination of the Trust. However, they disagreed over how to distribute the Trust assets. The court issued its final order distributing the Trust. Meanwhile, appellants filed a series of motions all requesting that the court clarify that they would not be precluded from litigating their fiduciary breach claims in the Fiduciary Breach Action and that they would not be precluded from each seeking one-fifth of the amount, if any, that decedent’s second wife is found to have misappropriated, as damages in the Fiduciary Breach Action. The superior court denied the various motions and objections and declined to address the preclusive effect of its orders on the Fiduciary Breach Action.

The general rule is that a court should not dictate preclusion consequences at the time of deciding a first action. Rather, the court in the subsequent action is entitled to make its own determination as to the preclusive effect of the earlier judgment. “It is the duty of the second trial court—which knows both what the earlier finding was and how it relates to a later case—to independently determine what preclusive effect a prior judgment may be given.” Any exception to this rule is entirely prudential and not compelled by law. In the instant case, the superior court had no obligation to address the res judicata effect of its judgment. Therefore, we conclude that the superior court did not abuse its discretion in refusing to amend its order.


However we are compelled to address the preclusive effect of the judgment here. Because appellants sought, but were not permitted, to raise their fiduciary breach claims in the Termination Action, res judicata principles would not preclude them from pursuing the fiduciary breach claims in the Fiduciary Breach Action. Further, should decedent’s second wife be found liable in the Fiduciary Breach Action, appellants remain free to argue that they should each receive one-fifth of the value of the Trust assets that decedent’s second wife is proven to have misappropriated.

Arbitration proceeding not res judicata to later claim outside the scope of reference.

In re Shelburne Supermarket, Inc. (2009-181) (09-Apr-2010) 2010 VT 30 (Reiber, C.J. )
Parents Harry Clayton and Lucille Clayton appeal from the trial court’s order in this long-running family dispute over stock shares. An arbitrator concluded in 2002 that son Steven Clayton, rather than parents, owned certain disputed shares. The trial court confirmed this decision on appeal. Following additional proceedings, the trial court also concluded that son was entitled to $514,964.26 in past dividends paid on these shares. Parents argue that the court erred in awarding son this sum.

We affirm. As the trial court found, son was not “splitting his claim” because the issue of dividend payments was not within the scope of the agreed-upon arbitration. The requirements of res judicata are plainly not satisfied here.

It is true that “an arbitration is in the nature of a judicial inquiry, and thus has the same force and effect of an adjudication in terms of precluding the same parties from relitigating the same subject.” Unlike a judicial proceeding, however, the scope of an arbitration is a creature of contract.

Thus, as the trial court stated, the parties are free to arbitrate some parts of their dispute while setting other matters aside, regardless of the legal implications that would attach if the issue had been litigated rather than arbitrated. See also Restatement (Second) of Judgments, § 84, cmt. d. (1982) (“A preliminary question in giving res judicata effect to an arbitration award is whether the claim or issue was within the scope of the reference to arbitration.”). In this case, the parties did not agree to arbitrate the issue of payment for the shares and recovery of dividends.