Sanctions – Res Judicata

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7^th Circuit Court of Appeals

Case Name: H.A.L. NY Holdings, LLC, v. Joseph Michael Guinan, Jr.,

Case No.: 19-1942

Officials: ROVNER, HAMILTON, and SCUDDER, Circuit Judges.

Focus: Sanctions – Res Judicata

Plaintiff H.A.L. NY Holdings, LLC is in the business of trading securities. It set up a brokerage account with Advantage Futures, LLC in Chicago. H.A.L.’s trading losses led Advantage to issue margin calls, which H.A.L. failed to meet. Advantage then liquidated H.A.L.’s account, leaving a negative balance of more than $75,000. When H.A.L. failed to pay, Advantage sued in federal court in Chicago. H.A.L. responded with an offer of judgment under Federal Rule of Civil Procedure 68 for the entire amount in dispute, plus attorney fees and costs. Advantage accepted and judgment was entered.

One might expect that to have been the end of the story. But H.A.L. did not actually pay the judgment it had offered. Instead, H.A.L. filed this new lawsuit against the CEO of Advantage claiming damages of more than $25 million arising from the same transactions. The Advantage CEO invoked the defense of res judicata based on the prior judgment. The district court agreed and dismissed this case. H.A.L. has appealed.

We affirm. Several features of this appeal also convince us that this is one of those unusual cases where we should impose sanctions under Federal Rule of Appellate Procedure 38. H.A.L. admits that its solitary argument to the district court was wrong and offers in its place an entirely new argument on appeal. Both are meritless. And after telling the district court that state law is irrelevant, H.A.L. now insists that if we do not reverse, only certification to the state supreme court can resolve this case. This appeal is an exercise in unacceptable gamesmanship, without a reasonable and good-faith basis. Hence the Rule 38 sanctions.

Affirmed

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.