Litigants May Not Try Again After Losing
Barry Zalma
Read the full article at https://lnkd.in/gqQEbBWV and see the full video at https://lnkd.in/gFDJaCqm and at https://lnkd.in/ggWHcYY2 and at https://zalma.com/blog plus more than 4500 posts.
The plaintiffs in this action are a group of special-purpose entities that acquired various commercial properties and funded those acquisitions with loans. The loans required the plaintiffs, as borrowers, to obtain residual value insurance policies guaranteeing payment of the outstanding loan to the lenders if the borrowers did not satisfy the loan at maturity. The defendants are the insurers under those policies and related entities. The parties litigated the dispute to final judgment in Michigan and Idaho and filed a new suit in Delaware seeking the remedies they were not allowed to receive in Michigan and Idaho.
In PVP Aston LLC, et al v. Financial Structures Limited, et al., C. A. No. N21C-09-095 AML CCLD, Superior Court of Delaware (March 31, 2023) the court was faced with a claim of collateral estoppel – that is – once you lose in one court you cannot go to another court for a different result on the same issue.
A “Final Judgment” is Final
At the end of the loans’ terms, the plaintiffs did not pay the balloon payment, and the defendants therefore paid the lenders the insured value. In exchange for those payments, the lenders assigned the loans and related documents to the defendants. The insurance policies likewise required the borrowers to transfer all title and ownership interest in the properties to the defendants, but the plaintiffs refused to do so. Instead, they took the position that the insurers and lenders breached the parties’ agreement or the parties’ agreement was otherwise unenforceable.
The question that ultimately is dispositive for purposes of the pending motions is whether the collateral estoppel doctrine bars the plaintiffs from relitigating the issues already decided in Michigan and Idaho.
FACTUAL BACKGROUND
The Parties and the Loan Purchases
Plaintiffs are thirty-four special-purpose entities that obtained commercial loans (each, a “Loan”) from several lenders or agents of lenders (each, a “Lender”) to finance the sale and leaseback of properties formerly owned by Rite-Aid drugstores (each, a “Property”). The Loans were evidenced and secured by a mortgage, note, and related instruments for each Property (the “Loan Documents”). Each Loan required a considerable “balloon” payment when the Loan matured in 2020 or 2021.
Defendants are Financial Structures Limited (“FSL”) and its special-purpose subsidiaries.
Filings in other Courts
This litigation is not the only dispute between various Borrowers and FSL, the Lenders, and their affiliates. In addition to the two actions pending in Delaware, litigation has arisen in several states where the subject properties are located, as FSL, its nominees, or third-party purchasers have asserted ownership and possession rights in the properties. Importantly for the purposes of Defendants’ motion to dismiss, decisions in two of those states address the same claims and legal theories Plaintiffs seek to advance in this case. Specifically, during the period between the filing of Plaintiffs’ initial Complaint and their Amended Complaint, courts in Michigan and Idaho issued decisions that rejected the theories and contractual constructions Plaintiffs advanced in Delaware. Defendants have moved to dismiss the Amended Complaint on the basis of those decisions.
Claims in Amended Complaint
On December 22, 2021, Plaintiffs moved for partial summary judgment. The Court stayed consideration of that motion while it resolved Defendants’ motion to dismiss the Original Complaint. After the Court partially dismissed that complaint and Plaintiffs filed their Amended Complaint, Defendants again moved to dismiss.
ANALYSIS
Plaintiffs’ Amended Complaint Must Be Dismissed In Its Entirety Because All Plaintiffs’ Claims Are Barred Under The Collateral Estoppel Doctrine.
Collateral estoppel, also known as issue preclusion, refers to the preclusive effect of a judgment on the merits of an issue that was previously litigated or that could have been litigated. Under the collateral estoppel doctrine, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation.
The Issues Previously Decided Are Identical To The Issues Presented In This Action.
The first question for collateral estoppel purposes is whether the issues are identical. Identicality depends on whether the contentions raised in the second proceeding are necessarily inconsistent with the previously adjudicated issues.
The Michigan and Idaho courts both disagreed with the Borrowers’ position that the parties intended the Insurer’s right to a Loan assignment to be conditioned on the performance of an appraisal. The Michigan Court also rejected Plaintiff’s effort to recover breach of contract damages because the Policy provides that “the [Insurer] shall have no liability to [the Plaintiff] except to make payment to the Additional Insured in accordance with this Policy.” The Idaho Court similarly found that the breach of contract claim was futile. In addition, having concluded the ICA was enforceable, the Idaho Court rejected the claim that FSL allegedly sold unenforceable agreements.
The Prior Actions Have Been Finally Adjudicated On The Merits.
Under Delaware law, a Delaware court will give the judgments of another state court the same preclusive effect as would a court in that state. Collateral estoppel law in Idaho and Michigan is substantially the same as the law in Delaware. Delaware follows the majority rule that an appeal does not render a judgment non-final for purposes of res judicata or collateral estoppel. Michigan and Idaho law control the question of finality for purposes of this Court’s collateral estoppel analysis, and Michigan and Idaho also follow the majority rule.
The Michigan Plaintiff And Idaho Borrowers Had A Full And Fair Opportunity To Litigate The Issues In Those Actions.
Finally, it is apparent that the parties had a full and fair opportunity to litigate the issues addressed in the Michigan and Idaho actions. The decisions issued by those courts describe the cases’ procedural history and reflect that the parties had the opportunity to fairly present their positions. Those courts fully analyzed and considered the parties’ multifaceted arguments. The Michigan Borrower moved for reconsideration of the April 22, 2022 decision but did not argue that it had lacked an opportunity to fully litigate the issues. Rather, it argued the Court erred in its analysis of the law regarding clogging the equity of redemption.
Defendants’ Motion to Dismiss is Granted. Accordingly, Plaintiffs’ Motion for Partial Summary Judgment is Denied As Moot.
ZALMA OPINION
The old children’s motto that says one must try and try again when they fail does not apply to litigation. The insurers in this case were entitled to their subrogation rights to require payment of the loan and get title to the property. Once the plaintiffs’ lost in Idaho and Michigan they did not have the right to bring the same claims in Delaware and were prevented by the application of the collateral source doctrine.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Barry Zalma, Esq., CFE is available at http://www.zalma.com and [email protected]
Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
See the video at and at and at https://www.zalma.com/blog plus more than 5250 posts.
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
Read the full article at https://lnkd.in/guNhStN2, see the full video at https://lnkd.in/gYqkk-n3 and at https://lnkd.in/g8U3ehuc, and at https://zalma.com/blog plus more than 5250 posts.
Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
See the video at and at
When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
