Date: 06-07-2018

Case Style:

Case Number: 17-2498

Judge: Bauer

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Southern District of Indiana (Marion County)

Plaintiff's Attorney: Leslie B. Pollie and Steven C. Shane

Defendant's Attorney: Stephen R. Felson and Leslie B. Pollie

Description: Bobbi Kilburn‐Winnie and Michelle
Allen‐Gregory (collectively, “Appellants”) filed suit against the
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Town of Fortville, Indiana, Fortville Waterworks, and Fortville
Utilities (collectively, “Fortville”), alleging that their Fourteenth
Amendment procedural due process rights were
violated when Fortville disconnected their water service. The
district court granted summary judgment in favor of Fortville,
holding that res judicata barred Appellants’ claim because the
parties had settled a prior class action that involved the same
claim. We affirm.
I. BACKGROUND
In July 2014, Allen‐Gregory filed a putative class action
alleging that Fortville violated the class members’ Fourteenth
Amendment right to procedural due process when it terminated
their water service without affording them a hearing.
See Allen‐Gregory v. Town of Fortville, No. 1:14‐cv‐01148‐RLYDML
(S.D. Ind.) (“Fortville I”). Two months later, the class
filed a motion for preliminary injunction to prevent Fortville
from disconnecting any customer’s water without a hearing.
In response, Fortville revised its notice and disconnection
procedures, instituting a hearing process effective November
2014. In December 2014, however, the class plaintiffs filed
another motion for preliminary injunction, alleging that the
new procedures still did not comport with due process.
On January 23, 2015, while that motion was pending, the
parties agreed to the terms of settlement at a settlement
conference, which was later reduced to a formal written
agreement. On September 10, 2015, the district court entered an
order granting final approval of the settlement agreement and
dismissing the case with prejudice. Though the case was fully
resolved at that point, the district court entered another order
No. 17‐2498 3
twelve days later dismissing as moot both motions for preliminary
injunction.
The settlement agreement stated that its purpose was to
“fully, finally, and forever resolve, discharge and settle all
claims released herein on behalf of the named plaintiffs and
the entire class.” It defined the class and class members as
“[a]ll customers of the Town of Fortville, Fortville Utilities
and/or Fortville Water Department from July 9, 2012 through
October 31, 2014 who had their water service terminated and
who paid a reconnection fee to reestablish their water service.”
The agreement included an expansive and global release of all
claims, stating, as relevant to this case:
Named Plaintiffs and the Class will release any
and all claims against [Fortville] and any related
entities which claims relate to the actions alleged
to have violated the due process provision of the
14th Amendment to the Constitution of the
United States, including pre‐litigation, litigation,
and post‐litigation activities. The claims released
by Named Plaintiffs and the Class will include
all claims that were or could have been raised in
[Fortville I].
Allen‐Gregory received settlement proceeds as a member
of the class, as well as an additional award for acting as the
named plaintiff and class representative. Kilburn‐Winnie was
a member of the class based upon water disconnections that
occurred in February and June of 2014, and she received
settlement proceeds pursuant to the agreement.
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In November 2015, Kilburn‐Winnie filed the instant case
alleging that Fortville disconnected her water service again as
a result of her failure to pay her water bill on time in March
and April of 2015. The complaint was later amended to add
Allen‐Gregory as a named plaintiff and include allegations that
she had her service disconnected in December 2015 because
she failed to pay her bill on time. The amended complaint
claimed that the hearing procedures Fortville implemented in
November 2014 were so complicated and burdensome that
they violated Appellants’ Fourteenth Amendment procedural
due process rights.
Fortville moved to dismiss the complaint, citing the release
of claims in the settlement agreement in Fortville I. The district
court converted the motion into one for summary judgment
and proceeded to analyze whether the terms of the release
acted as a waiver of Appellants’ due process rights. It held that
Allen‐Gregory had waived her rights, but Kilburn‐Winnie had
not because waiver of a constitutional right requires a knowing
and voluntary relinquishment, and she did not personally sign
the agreement.
Ten months later, however, the court revisited that ruling
sua sponte and granted summary judgment to Fortville as to
both Appellants, but on different grounds. It found that the
claim in the present complaint was identical to the claim raised
by the second motion for preliminary injunction in Fortville I.
Therefore, because the claim was completely resolved by way
of the settlement agreement, the doctrine of res judicata barred
the present suit. Appellants timely appealed.
No. 17‐2498 5
II. DISCUSSION
We review a grant of summary judgment on res judicata
grounds de novo. Hicks v. Midwest Transit, Inc., 479 F.3d 468, 470
(7th Cir. 2007). Res judicata bars a claim that was “litigated or
could have been litigated in a previous action when three
requirements are met: (1) an identity of the causes of action;
(2) an identity of the parties or their privies; and (3) a final
judgment on the merits.” Bell v. Taylor, 827 F.3d 699, 706 (7th
Cir. 2016) (internal quotation marks and citation omitted).
In their brief before this Court, Appellants concede that
there is an identity of the causes of action for purposes of this
analysis. At oral argument, however, Appellants’ counsel
seemed to equivocate on that point, so we will briefly address
it. “[T]he test for an identity of the causes of action is whether
the claims arise out of the same set of operative facts or the
same transaction.” Bernstein v. Bankert, 733 F.3d 190, 226 (7th
Cir. 2013) (internal quotation marks and citation omitted). The
operative complaints in the two cases raise technically different
claims. However, there can be no dispute that the claim
Appellants raised in their second motion for preliminary
injunction in Fortville I is identical to the only claim they raise
in the complaint in this case. In both instances, Appellants
alleged that the new hearing process, implemented in November
2014, violates their Fourteenth Amendment procedural due
process rights. It is irrelevant that the claim in Fortville I was
raised in a motion that was not specifically adjudicated. See
Bell, 827 F.3d at 706 (Res judicata “bars any claims that were
litigated or could have been litigated in a previous action.”)
(emphasis added). “[T]he nature of the claims, the legal basis
for recovery, the law involved, and the respective factual
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backgrounds” are the same, and therefore, there is identity for
purposes of res judicata. Bernstein, 733 F.3d at 227.
The second element, an identity of the parties, is also
satisfied, as Appellants again concede. Allen‐Gregory was the
named plaintiff in Fortville I, and Kilburn‐Willie was a member
of the class who received monies pursuant to the terms of the
settlement agreement in that case. Both are named plaintiffs in
the instant suit, which names as defendants the same parties as
those named in Fortville I.
The main issue in this appeal, then, is whether the third
res judicata element is present. Appellants contend that because
the motion for preliminary injunction was dismissed as moot,
there was no final judgment on the merits of that claim for
purposes of res judicata. As support, they cite DiGore v. Ryan,
where we explained that there is “no reason to conclude that
a decision based upon the conclusion that a claim is moot
creates a barrier for future litigation.” 172 F.3d 454, 466 (7th
Cir. 1999), overruled on other grounds by Whetsel v. Network Prop.
Servs., LLC, 246 F.3d 897 (7th Cir. 2001). However, that argument
misapprehends the meaning of the order denying the
motion as moot, as well as the effect of the settlement agreement
and the ensuing dismissal with prejudice.
When the district court entered an order approving the
settlement and dismissing the case with prejudice, the case was
completely resolved. The settlement agreement plainly stated
that it was intended to “fully, finally, and forever resolve” any
and all Fourteenth Amendment due process claims based on
any “pre‐litigation, litigation, and post‐litigation activities” that
“were or could have been raised” in Fortville I. Although the
No. 17‐2498 7
court entered a separate order dismissing the preliminary
injunction motion as moot, the language of the agreement
makes it clear that the motion was only “moot” in the sense
that it had already been resolved, along with the entire case.
As explained above (and as Appellants conceded in their
brief), the claim raised in this case is materially identical to the
claim that provided the basis for their second motion for
preliminary injunction. By its explicit terms, the settlement
agreement fully resolved that claim. Therefore, the district
court’s order dismissing the case with prejudice, which
specifically incorporated the release language of the settlement
agreement, represented a final judgment on the merits of that
claim. See Brooks‐Ngwenya v. Indianapolis Public Sch., 564 F.3d
804, 809 (7th Cir. 2009) (holding that dismissal with prejudice
based on a settlement agreement is a final judgment for
purposes of res judicata). Accordingly, the requirements of
res judicata are satisfied, and the present claim is barred.
We must briefly address one final point. Likely because of
the district court’s initial ruling relying on a waiver analysis,
Appellants dedicated a significant portion of their brief before
this Court to a discussion of whether the Fortville I settlement
agreement effectively waived their constitutional rights. That
discussion, however, is not relevant to the outcome of this case.
Regardless of whether Appellants waived their claim that the
new procedures violated their Fourteenth Amendment rights,
that specific claim, as it relates to both of them individually,
was fully resolved by the terms of the Fortville I settlement
agreement. Therefore, as we have explained, and as the district
court ultimately held, Appellants are not barred from bringing
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that claim here because they waived it; they are barred by
operation of the distinct doctrine of res judicata.

Outcome: For the foregoing reasons, the judgment of the district court
is AFFIRMED.

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