Laches Is a Judgment on the Merits for Res Judicata - Injury & Tort Law - U.S. Tenth Circuit
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Laches Is a Judgment on the Merits for Res Judicata

The Tenth Circuit Court of Appeals clarified this week that a state Supreme Court's finding of laches is binding on a federal district court in parallel litigation.

In 1942, the Fundamentalist Latter Day Saints Church (FLDS) established United Effort Plan (UEP), a community trust. FLDS followers shared in the assets. In 2005, Utah seized control of UEP, amid allegations of mismanagement by church leaders, including Warren Jeffs, Deseret News reports.

FLDS has been battling the seizure in federal and state courts for years. The group lost its state appeal in 2010. This week, FLDS lost its appeal before the Tenth Circuit.

In October 2008, the FLDS Association filed a complaint in federal district court seeking declaratory and injunctive relief regarding the Utah probate court's reformation and administration of the UEP Trust. The FLDS Association also moved for a temporary restraining order and preliminary injunction against the probate court's ongoing administration of the UEP Trust. The federal suit was then stayed pending the parties' settlement negotiations.

While the federal case was pending, the FLDS Association filed a petition for extraordinary writ in the Utah Supreme Court. The petition raised substantially similar claims as the federal complaint.

The Utah Supreme Court dismissed the FLDS Association's petition and held that "the FLDS Association's claims regarding the ... modification of the Trust are barred by the equitable doctrine of laches" because the FLDS Association had waited nearly three years from the date the [state] district court modified the UEP Trust to challenge its modification; in the interim, transactions had occurred and other parties had acted in reliance on the Trust's modification.

After the Utah Supreme Court issued its decision, the FLDS Association renewed its motion for temporary restraining order and preliminary injunction with the federal district court. The district court, in a memorandum opinion and order issued 2011, granted the FLDS Association's motion for a preliminary injunction.

The district court independently found that there was "no basis for a finding of laches, especially with respect to the state's continuing administration of the Trust" and that the Utah Supreme Court's finding of laches was not a judgment on the merits for res judicata purposes.

The Tenth Circuit reversed that decision on Monday, agreeing with the Utah Supreme Court that FLDS had waited too long to file its claim in federal court.

Noting that the Supreme Court has interpreted 28 U.S.C. §1738 to mean that "federal courts are required to give preclusive effect to state-court judgments whenever the courts of the state from which the judgments emerged would do so," the appellate court concluded that the district court had erred in holding that the Utah Supreme Court's finding of laches was not a judgment on the merits for res judicata purposes.

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