Was Bugg finally squashed? Did a federal judgment preclude state court litigation?

Bugg doesn’t quit.

Eldon Bugg’s troubles started when the conservator for Laura Downs convinced a court that Bugg had essentially stolen a promissory note from Downs. Bugg appealed. The death of Downs, before the appeal was decided, terminated the conservator’s power to enforce the judgment. The court appointed Rutter as personal respresentative of the Downs estate, and the court entered a judgment against Bugg for $17,573, which was the value of the promissory note that Bugg took from Downs.

Bugg appealed again. Not only did he lose, the appellate court’s judgment against Bugg included the estate’s attorney fees, since Bugg’s appeal was frivolous.

When Bugg didn’t pay the judgment, a frustrated judge, convinced that Bugg has the money to pay, ordered him locked up. Bugg appealed again, this time successfully, arguing that the United States Constitution had abolished imprisonment for failure to pay debts.

With his freedom and a determination that he had been wrongfully deprived of his liberty, Bugg sued Rutter and the estate’s attorney, Goldstein, in federal court. According to Bugg, Rutter and Goldstein, engaged in a conspiracy, using common law abuse of process, breaching fiduciary duties, and interfering with his expectancy of an inheritance, among other things. The federal court tossed out his lawsuit, first dispensing of the federal claims, then addressing the state law claims, finding them without merit.

Undeterred, Bugg filed the same case in state court. Did the federal dismissal of Bugg’s state law claims prevent him from raising the claims in state court? The trial court said that it did, and once again Bugg appealed.

Under the doctrine of “res judicata,” also called claim preclusion, once a court has decided a case on its merits, with there having been a full and fair opportunity to litigate, then the same parties no longer have the right have a court hear the same case. So the party wanting to relitigate the claim will argue that the judgment in the previous case was not on the merits or that the judgment was somehow invalid.

On December 14, 2010, the Missouri Court of Appeals, Bugg v. Rutter, affirmed the decision of the trial court.

The appellate court rejected Bugg’s claim that the federal court, having dismissed Bugg’s federal claims, had no jurisdiction to decide Bugg’s claims that were based on state law. Federal courts, under the United States Constitution, have limited jurisdiction, unlike state courts, which have general jurisdiction. But if the federal and state claims have “a common nucleus of operative fact,” the federal court may (but is not required to) decide the state claims. Thus, the federal court’s judgment on Bugg’s state law claims had a jurisdictional basis.

Even if the federal court’s decision was valid, it would not prohibit Bugg from relitigating the case unless the judgment was “on the merits.” The federal court stated that Bugg’s claims were entirely without merit, dispensing with them at the outset on a motion to dismiss, without a trial. Unlike Missouri state courts, federal courts have a procedural rule (41(b)) that states that a dismissal of a case for having no merit “operates as a judgment on the merits.”