                    United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 02-2047
                                  No. 02-2202
                                  ___________

Oscar Stilley,                     *
                                   *
                  Appellant,       * Appeals from the United States
                                   * District Court for the Western
      v.                           * District of Arkansas
                                   *
Margaret James; Rick Grinnan;      * [UNPUBLISHED]
Linda Varnado; Alban Varnado,      *
                                   *
                  Appellees.       *
                              ___________

                            Submitted: September 16, 2002

                                 Filed: September 30, 2002
                                  ___________

Before McMILLIAN, FAGG, and BOWMAN, Circuit Judges.
                            ___________

PER CURIAM.

      Attorney Oscar Stilley represented John Speed in a suit against Red Cross
employees Margaret James, Rick Grinnan, Linda Varnado, and Alban Varnado. The
Red Cross fired Speed based on an audit report that found Speed used Red Cross
funds to purchase a plane ticket for personal use. Speed sued, contending the audit
report contained false information. The Red Cross counterclaimed for personal
expenses Speed charged to a Red Cross credit card. The trial judge dismissed all
claims against the Red Cross defendants personally, and issues concerning the
preparation and accuracy of the audit report were tried to a jury. The jury returned
a verdict in favor of the defendants on the claim and counterclaim, awarding the Red
Cross $4000.

       The Red Cross employees then sued Speed and Stilley for malicious
prosecution. Stilley filed a counterclaim on behalf of Speed for damages flowing
from the allegedly fraudulent audit report. The court dismissed the counterclaim,
finding the claim was virtually the same as the claim litigated in the first lawsuit. The
malicious prosecution claim proceeded to trial. Speed became uncomfortable with
Stilley’s representation and was concerned that Stilley had a conflict of interest.
Stilley did not want Speed to change attorneys, so agreed to indemnify Speed if Speed
were found liable. After trial, the court directed a verdict in favor of Stilley. The jury
found in favor of the Red Cross employees, and awarded a $200,000 judgment
against Speed. Stilley appealed the judgment on Speed’s behalf, but later Speed
moved to dismiss the appeal.

       The Red Cross employees then learned of the indemnification agreement and
sued Stilley for a declaratory judgment on the $200,000 judgment against Speed.
Stilley filed a counterclaim alleging malicious prosecution and abuse of process. The
court dismissed the counterclaim, finding identical facts were pled in earlier litigation
and were dismissed. The court granted summary judgment in favor of the Red Cross
employees, and ordered Stilley to pay the $200,000 plus interest. Stilley
unsuccessfully appealed. See Stilley v. James, 48 S.W.3d 521, 529 (Ark. 2001). The
Arkansas Supreme Court then suspended Stilley from the practice of law for thirty
days for violating the Arkansas Rules of Professional Conduct while litigating these
lawsuits.

      In the present suit, Stilley is suing the Red Cross employees for malicious
prosecution and abuse of process, claims which are virtually identical to
counterclaims dismissed in earlier lawsuits. The heart of Stilley’s suit is that the audit

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report was fraudulent, so the related judgments against Stilley are impermissibly
based on fraud. The Red Cross employees filed a motion for summary judgment and
sanctions. The district court* granted the motion for summary judgment, finding
Stilley is precluded from relitigating issues decided in earlier lawsuits and failed to
state a claim for abuse of process. Stilley moved to alter the judgment under Federal
Rule of Civil Procedure 59, but his motion was denied. The district court also
enjoined Stilley under Federal Rule of Civil Procedure 11 from further litigation
against the Red Cross based on the allegedly fraudulent audit report. Stilley appeals
both the adverse grant of summary judgment and the imposition of sanctions.

       Having reviewed the record de novo and considered the facts and all reasonable
inferences that can be drawn from them in the light most favorable to Stilley, we
conclude the district court correctly granted summary judgment to the Red Cross
employees. Forrest v. Kraft Foods, Inc., 285 F.3d 688, 691 (8th Cir. 2002). First,
Stilley contends issue preclusion should not apply because the underlying judgment
was based on a fraudulent audit report. Issue preclusion requires four elements to be
proven before barring further litigation on an issue: (1) the issue sought to be
precluded is the same as that involved in earlier litigation; (2) the issue must have
been actually litigated; (3) the issue must have been determined by a valid and final
judgment; and (4) the determination must have been essential to the judgment.
Arkansas Office of Child Support Enforcement v. Willis, 59 S.W.3d 438, 444 (Ark.
2001). Here, Stilley’s claims of malicious prosecution and abuse of process presume
the audit report used to fire Speed was fraudulent, thus pursuing payment of the
judgment based on the audit report is improper. Stilley’s contention is precluded
because the underlying issue, that the audit report was fraudulent, was actually
litigated in the first lawsuit between Speed and the Red Cross employees. The issue
was submitted to the jury. The jury returned a verdict in favor of the defendants.


      *
      The Honorable Robert T. Dawson, United States District Judge for the
Western District of Arkansas.

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Rejection of the contention that the audit report was false or fraudulent was essential
to the jury’s verdict. Each of the criteria necessary to apply issue preclusion is
satisfied. We thus reject Stilley’s contention.

      We next reject Stilley’s second contention, that dismissal of his first
counterclaim was without prejudice so his contentions are not precluded, because it
confuses which of several final judgments satisfies the issue preclusion bar. Here, the
relevant final judgment is the jury verdict. Thus, it does not matter whether the
Arkansas trial court dismissal of Stilley’s counterclaim was with or without prejudice.

       Likewise, we reject Stilley’s third contention, that the district court was
mistaken to dismiss the abuse of process claim. We agree with the district court that
Stilley has not shown the Red Cross employees brought the malicious prosecution
suit to induce Stilley to sign a settlement that included agreeing to an improper
restraint on Stilley’s ability to sue the Red Cross. The Red Cross employees later
withdrew the covenant not to sue. Without proof the malicious prosecution suit was
perverted to accomplish the goal an impermissible restraint on Stilley’s ability to sue
the Red Cross, Stilley fails to meet the elements necessary to show abuse of process.
South Ark. Petroleum Co. v. Schiesser, 36 S.W.3d 317, 323 (Ark. 2001) (elements
of abuse of process tort).

       Finally, we reject Stilley’s contention that the district court abused its
discretion in applying Rule 11 sanctions. Chandler v. Norwest Bank Minn., Nat’l
Ass’n, 137 F.3d 1053, 1057 (8th Cir. 1998) (standard of review). The district court
fashioned an appropriate sanction, enjoining Stilley from filing future cases related
to the allegedly fraudulent audit report, the Speed lawsuit, either of the malicious
prosecution lawsuits, or the judgment pending against Stilley. Id. The underlying
issue has been litigated or raised for litigation in three lawsuits and two appeals. The
district court acted appropriately by helping Stilley stop pursuing fruitless litigation.



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We affirm the judgments of the district court. See 8th Cir. R. 47B.

A true copy.

      Attest:

               CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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