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Professional Management Associates, Inc. Employee's Profit Sharing Plan, on Behalf of Itself and All Others Similarly Situated v. Kpmg Llp, Professional Management Associates, Inc. Employee's Profit Sharing Plan, on Behalf of Itself and All Others Similarly Situated v. Kpmg LLP

Citations: 345 F.3d 1030; 56 Fed. R. Serv. 3d 902; 2003 U.S. App. LEXIS 20212Docket: 03-1935_1

Court: Court of Appeals for the Eighth Circuit; October 3, 2003; Federal Appellate Court

Narrative Opinion Summary

In this case, an employee profit-sharing plan (PMA) holding stock in a financial corporation filed a lawsuit against an auditing firm (KPMG) alleging improprieties related to the corporation's financial statements. The district court dismissed the claims under the Securities Litigation Uniform Standards Act of 1998 (SLUSA) and denied the motion to amend the complaint. PMA subsequently filed a new lawsuit using the denied amendment, which was also dismissed, with the court affirming that both actions were barred by res judicata. The Eighth Circuit Court of Appeals upheld the dismissal of the initial case, PMA I, confirming the appropriate application of SLUSA and the futility of the amendment. In the appeal of the second case, PMA II, the appellate court found that sanctions under Rule 11 were justified against PMA for pursuing a barred and frivolous lawsuit. The denial of the motion to amend was considered a final judgment on the merits, precluding the same claims in a subsequent action. The court also affirmed the denial of PMA's Rule 59(e) motion as it involved repetitive arguments. As a result, the appellate court reversed and remanded for sanctions while affirming the dismissal based on res judicata.

Legal Issues Addressed

Denial of Motion to Amend as Judgment on the Merits

Application: Denial of PMA's motion to amend in PMA I was treated as a final judgment on the merits, thereby barring similar claims in PMA II.

Reasoning: Denial of a motion to amend a complaint is considered a final judgment on the merits, preventing the same complaint from being filed in a subsequent action.

Res Judicata

Application: The court determined that PMA II was barred by res judicata because it involved the same claims and parties as PMA I, which had already been judged on the merits.

Reasoning: The court noted that under res judicata, a judgment on the merits in a prior case prevents a second lawsuit involving the same parties and claims.

Rule 11 Sanctions

Application: The court found that sanctions were warranted against PMA for filing a frivolous lawsuit barred by res judicata.

Reasoning: Regarding Rule 11, a district court abuses its discretion by not sanctioning a plaintiff and their counsel for pursuing a frivolous lawsuit that relitigates previously denied claims against the same defendant.

Rule 59(e) Motion Denial

Application: The court affirmed the district court's discretion in denying PMA's Rule 59(e) motion, as it merely reiterated previously rejected arguments.

Reasoning: Additionally, the district court acted within its discretion by denying PMA's Rule 59(e) motion, as the arguments presented were merely reiterations of previously rejected positions.

Securities Litigation Uniform Standards Act of 1998 (SLUSA)

Application: The court applied SLUSA to dismiss claims related to financial statements issues, as they involved securities fraud.

Reasoning: The district court dismissed PMA's claims under the Securities Litigation Uniform Standards Act of 1998 (SLUSA) and denied PMA's request to file a second amended complaint.