Delaware Business Litigation Report

Superior Court Rejects Affirmative Defense of Res Judicata at Damages Stage

Gibbs v. Fairbanks Capital Corp., C.A. No. 04C-06-258-JRJ (Del. Super. Nov. 20, 2006).

In this opinion denying Defendant’s motion for summary judgment, the Superior Court rejected Defendant’s argument that the affirmative defense of res judicata barred Plaintiffs’ claims for damages. Plaintiffs, residential mortgage customers of Defendant, sued for breach of contract, consumer fraud, defamation, and violation of the Uniform Deceptive Trade Practices Act. After Defendant failed to answer the complaint, the Court entered default judgment against it, and Defendant’s subsequent motion for an order vacating that judgment was denied. Defendant then moved for summary judgment as to Plaintiffs’ damages claims, arguing that res judicata barred the claims because Plaintiffs were class members in a similar suit in Massachusetts, and could not relitigate the same damages claims in the Delaware action. The Superior Court denied Defendant’s motion for summary judgment, concluding that it “[could not] assert res judicata as an affirmative defense under the particular circumstances….” 

In response to Defendant’s motion for summary judgment, Plaintiffs’ argued that the default judgment precluded Defendant from raising any affirmative defenses and that Defendant waived any affirmative defenses by failing to file a timely answer to the complaint. The Court stated that Defendant “[could not] use res judicata to circumvent the default judgment,” and that the affirmative defense of res judicata is only appropriate as a basis for relief under Superior Court Civil Rule 60(b) from an order of default judgment, “not as the basis for a summary judgment motion that, if granted, would vitiate the default judgment order.” The Court noted that although Defendant raised the issue of res judicata in its first motion to vacate default judgment (though not in its second motion or at oral argument), the decision to deny the motion was based on Defendant’s failure to demonstrate excusable neglect or mistake in answering the complaint. However, the Court went on to conclude that the fact that the motion was denied on grounds other than the res judicata argument “does not preserve [Defendant’s] right to revive the affirmative defense of res judicata as the basis for a summary judgment motion during the [damages] phase of the case.” The court therefore denied Defendant’s motion for summary judgment as to Plaintiff’s damages claims. 

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