Precluding the Same Claim: Consistency

Case: Martino v. McDonald's System, Inc. (7th, 1979) [CB 667-672]

598 F.2d 1079, 444 U.S. 966

Facts:
○ Action #1: Martino had a McDonald’s franchise. He signed the contract
with McDonald's that provided that neither Martino nor anyone in his immediate
family would acquire any financial interest in a competing self-service food
business. Then Martino financed a Burger Chef for his son in Iowa. McDonald’s
sued him for breach of contract, and there was a consent judgment (an agreement or
contract of the parties, acknowledged in court). They settled - sell back
franchise to McDonalds at a far lower price.
○ Action #2: Then Martino sued McDonald’s, claiming that enforcement of the
franchise agreement violated the Sherman Antitrust Act. They want damages for
forcing to sell back franchise so cheaply, b/c they were forced to do so because
of prior suit. The district court held that both res judicata (claim preclusion)
and the compulsory counterclaim rule barred the Pls from suing. They entered
summary judgment for McDonald's and Martino appealed.

Issue: Whether the resolution of the breach of contract suit precludes this
cause of action, the antitrust violation claim.

Holding: The trial court’s judgment is affirmed, partially.

Reasoning:
○ Pl's claim not barred as a compulsory counterclaim
§ Rule 13(a) has no effect b/c Martino never filed a pleading.
§ Rule 13a would have required the compulsory counterclaim when Martino
filed his pleading, but Martino never filed the pleading so no effect.
○ Pl's claim is barred because of claim preclusion
§ If Pl wanted to bring up antitrust as a defense in the first suit, he
had to “use it or lose it” at that point and he can’t bring it up now.
§ it would be inconsistent with previous settlement which court views
as judgment on the merits.
§ If in fact this cause was illegal under the antitrust act, then
that’s more than a counterclaim, that’s an affirmative defense (complete bar to
the action), and no judgment should have been entered.
□ If asserted, This would have prevented that first judgment from
ever being entered. Contrasting a counterclaim to a defense. This then undermines
the validity of the judgment, so it has to have been raised then. We cant now
allow you to proceed on a theory that rests on the invalidity of that prior
judgment.
§ What's the problem? Why cant this be allowed?
□ McDonalds relied on the first judgment (maybe re-sold to
someone else)
§ How would this usually be dealt with? If settle, then we agree not to
bring any further actions (release), or reserve rights (release certain claim, but
reserve right to sue on other thing).

RULE: Once a judgment has been rendered on a claim, all possible issues related
to that claim are considered settled even if they weren’t brought up in the first
suit.

According to the principles of res judicata, a judgment on the merits acts as an

absolute bar to relitigation between the parties and those in privity with them of
every matter which was or might have been offered and received to sustain or
defeat the claim or demand.