Civil Practice – Res Judicata – Intervention Motion – Prior Lawsuit – Timeline & Relevant Matters

Edwards v. Richardson (Lawyers Weekly No. 012-144-17, 17 pp.) (Robert Hunter Jr., J.) Appealed from Union County Superior Court (Theodore Royster, J.) N.C. App. Unpub.

Holding: Given the short time between the intervenor-plaintiff’s prior action against defendant, as well as the similarity of subject matters, the intervenor’s current individual claims should have been brought in his prior action; accordingly, his current individual claims are barred by the doctrine of res judicata.

We affirm the trial court’s order allowing intervention only as to the derivative actions in this lawsuit.

The original plaintiff in this action asserts, in both individual and derivative claims, that defendant breached his fiduciary duties as a director of the nominal corporate defendant. The intervenor-plaintiff sought to intervene with similar claims, also both individual and derivative.

The trial court found that res judicata barred the intervenor’s individual claims.

We have jurisdiction over the intervenor’s interlocutory appeal because limiting his involvement to only a derivative suit affords only the original plaintiff the ability to recover fully.

The doctrine of res judicata extends not only to matters actually determined but also to other matters which in the exercise of due diligence could have been presented for determination in a prior action.

Here, the intervenor first litigated issues revolving around the business decisions and practices of defendant and the corporation. The intervenor alleged he made three loans to the corporation and that defendant personally guaranteed those loans. The purpose of those loans was to “pay for expenses including . . . attorney fees, continuing with the development of the medical devices and obtaining required government approvals.” At the heart of this lawsuit lies a dispute regarding the business decisions and practices of the corporation and defendant, its primary shareholder.

Now, in the present lawsuit, the intervenor alleges defendant used corporate assets, including the intervenor’s personal investment, for defendant’s own personal gain. The intervenor contends defendant breached his fiduciary duties by misappropriating the assets of the corporation for his own benefit. These are claims the intervenor, in exercising reasonable diligence, could have brought forward in his initial lawsuit along with his direct claims against defendant.

Additionally, the intervenor filed his first lawsuit on Aug. 9, 2013. On Oct. 21, 2015, the original plaintiff filed the current action. On Dec. 28, 2015, the trial court dismissed the intervenor’s original lawsuit with prejudice. Due to the short timeline overlap between these two lawsuits, the intervenor, in exercising reasonable diligence, could have added his additional claims before his original lawsuit was adjudicated.

Therefore, res judicata bars the intervenor’s motion to intervene in an individual capacity.

Affirmed.