
USCA1 Opinion

	




                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 95-2197                                    DARYL E. PORN,                                Plaintiff, Appellant,                                          v.                      NATIONAL GRANGE MUTUAL INSURANCE COMPANY,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                              FOR THE DISTRICT OF MAINE                     [Hon. D. Brock Hornby, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                               Selya, Stahl, and Lynch,                                   Circuit Judges.                                   ______________                                 ____________________            Catherine  R.  Connors,  with whom  Scott  T.  Maker  and  Pierce,            ______________________              ________________       _______        Atwood,  Scribner,  Allen,  Smith  &  Lancaster,  were  on  brief  for        _______________________________________________        appellant.            Constance L. Epstein,  with whom  John R.  FitzGerald, Matthew  D.            ____________________              ___________________  ___________        Gilmond,  Howard,  Kohn,  Sprague &  Fitzgerald,  Harold  J. Friedman,        _______   _____________________________________   ___________________        Elizabeth A. Germani, Jonathan M. Dunitz, and Friedman & Babcock, were        ____________________  __________________      __________________        on brief for appellee.                                _____________________                                   August 23, 1996                                _____________________                      STAHL, Circuit Judge.  Having successfully sued his                      STAHL, Circuit Judge.                             _____________            insurer, National Grange Mutual Insurance Company  ("National            Grange"),  six months  earlier  for  breach  of  contract  in            refusing  to pay his claim for underinsured motorist benefits            incurred during a July 1990 car accident, plaintiff-appellant            Daryl  E. Porn  brought  this  diversity  action  in  Maine's            federal  district  court   against  National  Grange  seeking            additional  damages  for  its   alleged  mishandling  of  his            underinsured  motorist  claim.   The  district  court granted            summary judgment  in favor  of National Grange  based on  the            doctrines of  collateral estoppel (issue  preclusion) and res            judicata  (claim  preclusion),   concluding  that  an   issue            underlying  one of  Porn's  claims had  been  decided in  the            earlier  proceeding and that all of  Porn's claims could have            been  raised  therein.   Porn  appeals  the  district court's            summary judgment order.  Finding no error, we affirm.                                          I.                                          I.                                          __                            Background & Prior Proceedings                            Background & Prior Proceedings                            ______________________________                      On July 17, 1990, Porn, a Connecticut resident, was            involved in an  automobile accident in Portland,  Maine, when            motorist  Lori  Willoughby  sped  through  a  stop  sign  and            broadsided  his  vehicle.     Because  his  damages  exceeded            Willoughby's  $20,000  policy  limit, Porn  made  a  claim to            National Grange under his automobile policy  seeking recovery            from  the underinsured  motorist  indorsement to  the policy.                                         -2-                                          2            For  reasons  not  apparent in  the  record,  National Grange            refused to pay the claim.                        Disgruntled by this refusal, Porn wrote to National            Grange accusing  it of  bad faith in  handling his  claim and            threatening legal action.  Porn  sent copies of his letter to            the insurance commissioners of Connecticut and Massachusetts.            National  Grange,  unimpressed,  remained  steadfast  in  its            refusal to pay, and in November 1993, Porn filed suit against            National  Grange in Maine's federal district court for breach            of the insurance contract ("first action").                      Because Porn's policy with National Grange required            a finding of legal liability  on the part of the underinsured            motorist as a condition precedent to the payment of benefits,            the two-day trial before the magistrate judge1 focused on the            question of Willoughby's  negligence and Porn's  contributory            negligence.   Following the  completion of the  evidence, the            magistrate judge entered judgment as a matter of law for Porn            on  the  issue  of  contributory  negligence,  and  the  jury            returned  a  verdict  for  Porn,  finding  that  Willoughby's            negligence had caused  him $400,000 worth of  damages.  After            reducing  the   jury's  award  to  reflect   Porn's  $300,000            underinsured motorist policy  limit and appropriate set-offs,            the magistrate judge entered judgment for Porn in  the amount                                            ____________________            1.  Under Fed.  R. Civ. P.  73, the parties consented  to the            magistrate judge, rather than the district  judge, conducting            the jury trial.                                         -3-                                          3            of  $255,314.40.  The  magistrate judge denied  Porn's motion            for prejudgment interest, finding that while Maine law allows            prejudgment interest in excess of the policy limit where  the            insurer  acted  in  bad faith  and  needlessly  prolonged the            litigation,  Porn  had presented  no  evidence that  National            Grange exhibited such behavior.                      Six  months  later,   Porn  commenced  this  action            against  National Grange  in Maine's  federal district  court            ("second  action").   This time  Porn  alleged that  National            Grange's conduct in handling his underinsured  motorist claim            constituted breach of the covenant of good faith, intentional            infliction  of  emotional distress,  negligent  infliction of            emotional distress,  and violations of the Connecticut Unfair            Insurance  Practices Act  and  the  Connecticut Unfair  Trade            Practices Act.   National Grange moved for  summary judgment,            arguing that the judgment in the first  action precluded Porn            from bringing the second action.  The district court accepted            that  argument and  granted  summary  judgment  in  favor  of            National Grange on the grounds  that (1) one aspect of Porn's            bad-faith claim was barred by issue preclusion and (2) all of            Porn's claims were barred by claim preclusion.                        In reaching  its first holding, the  district court            explained that the  magistrate judge's decision not  to award            Porn prejudgment interest  was based in  part on his  finding            that Porn had presented no evidence to  suggest that National                                         -4-                                          4            Grange  acted in  bad  faith  and  needlessly  prolonged  the            litigation.    Accordingly,  the  court  concluded  that  the            question  of National Grange's  alleged bad-faith  conduct in            litigating the  first action  was raised  and decided  in the            first  action, and, therefore, to the extent Porn's bad-faith            claim  involved National  Grange's conduct  during  the first            action, it was barred by issue preclusion.                      In  reaching its broader  holding that all  five of            Porn's claims were  barred by claim preclusion,  the district            court reasoned that once Porn chose to bring the first action            against  National Grange  for  breach  of  contract,  he  was            required to raise  all his claims arising from  the breach or            else  forfeit the  right to  do so.   Because  it  found that            Porn's  five  tort  and statutory  claims,  like  the earlier            breach  of   contract  claim,   involved  National   Grange's            obligations arising under the insurance  policy, the district            court  concluded that  they should  have been brought  in the            first  action and therefore  were barred by  claim preclusion            from being raised in the second action.                                         II.                                         II.                                         ___                                       Analysis                                       Analysis                                       ________                      Porn appeals the district  court's grant of summary            judgment  in favor  of  National  Grange,  arguing  that  the            judgment in the first action  for breach of contract does not            preclude  his bad-faith,  emotional  distress, and  statutory                                         -5-                                          5            unfair  practices  claims  (collectively  "bad-faith  claim")            against National Grange  in this action.   Specifically, Porn            argues that (1) the facts relevant to his bad-faith claim are            separate from those  relevant to his contract  claim, (2) the            bad-faith facts do not form  a convenient trial unit with the            contract facts, (3) treatment of both sets of facts as a unit            does not conform to the parties' expectations, and (4) it was            inequitable to apply the res judicata bar where, as here, the            insurer's  conduct in the  contract litigation forms  part of            the bad-faith action.2  After reciting the standard of review            and setting forth the governing res judicata law, we consider            each argument in turn.                          We  review a  grant of  summary  judgment de  novo,                                                                __  ____            under  the same standards that govern  the district court, to            determine  whether  "the pleadings,  depositions,  answers to                                            ____________________            2.  All  of these arguments attack the district court's claim            preclusion holding.   Porn  also makes arguments  challenging            the district court's conclusion that  the portion of his bad-            faith  claim relating  to National  Grange's  conduct in  the            first  action was barred by issue  preclusion.  However, when            Porn commenced the first action, he knew that National Grange            had neither settled  his benefits claim  despite overwhelming            evidence  that  Willoughby  alone  caused  the  accident  nor            conducted  an independent investigation into the cause of the            accident  in  an   attempt  to  offset  Porn's   evidence  of            Willoughby's wrongdoing.   Thus, we conclude that  Porn could            have  raised a  bad-faith  claim based  on  this evidence  of            National  Grange's litigation conduct in the first action and            could also  have used  National  Grange's ensuing  litigation            conduct as further evidence of that claim in the same action.            The claim therefore is barred by the doctrine of res judicata            (claim  preclusion), see  infra.    Accordingly,  we  do  not                                 ___  _____            consider Porn's arguments regarding issue preclusion.                                         -6-                                          6            interrogatories, and  admissions on  file, together  with the            affidavits, if any, show that there is no genuine issue as to            any material  fact and that  the moving party is  entitled to            judgment  as a matter  of law."   Fed. R. Civ.  P. 56(c); see                                                                      ___            also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).  The            ____ _____________    _______            applicability  of the doctrine of  res judicata is a question            of law subject to plenary review.  Wolf v. Gruntal &  Co., 45                                               ____    ______________            F.3d 524, 527 (1st Cir. 1995).                        Because  the  judgment  in  the  first  action  was            rendered  by a federal  court, the preclusive  effect of that            judgment  in  the  instant diversity  action  is  governed by            federal res judicata principles.  See Johnson v. SCA Disposal                                              ___ _______    ____________            Servs., Inc.,  931 F.2d 970,  974 (1st Cir. 1991)  (noting in            ____________            addition  that  the  application   of  federal  res  judicata            principles  allows federal  courts to  define  the effect  of            their  own judgments); see  also Apparel  Art Int'l,  Inc. v.                                   ___  ____ _________________________            Amertex Enters. Ltd., 48 F.3d  576, 582-83, 583 n.7 (1st Cir.            ____________________            1995).   Under  the  federal  law of  res  judicata, a  final            judgment on  the merits  of an action  precludes the  parties            from relitigating claims that were  raised or could have been            raised in  that action.   Allen v.  McCurry, 449 U.S.  90, 94                                      _____     _______            (1980).  For a claim  to be precluded, the following elements            must be established:   (1) a final judgment  on the merits in            an earlier action, (2) sufficient identity between the causes            of action  asserted in the  earlier and later suits,  and (3)                                         -7-                                          7            sufficient identity  between the  parties in  the two  suits.            See  Apparel Art,  48 F.3d  at 583;  Gonzalez v.  Banco Cent.            ___  ___________                     ________     ___________            Corp., 27 F.3d 751, 755 (1st Cir. 1994).  Because there is no            _____            dispute that  the first  and third elements  of the  test are            established, we  focus on the  second element:   whether  the            causes of  action  in  the two  lawsuits  are  sufficiently              identical.                        In  defining the cause  of action for  res judicata            purposes,  this  circuit  has   adopted  the  "transactional"            approach of the Restatement (Second) of Judgments.  Manego v.                                                                ______            Orleans Bd. of  Trade, 773 F.2d 1,  5 (1st Cir. 1985),  cert.            _____________________                                   _____            denied, 475 U.S.  1084 (1986).  Under this  approach, a valid            ______            and  final judgment  in  the  first  action  will  extinguish            subsequent claims  "'with respect to  all or any part  of the            transaction,  or series  of  connected  transactions, out  of            which  the action arose.'"  Id. (quoting Restatement (Second)                                        ___            of  Judgments    24  (1982)).    We  determine  what  factual            grouping  constitutes a  "transaction" pragmatically,  giving            weight to such  factors as "whether the facts  are related in            time,  space,  origin,  or motivation,  whether  they  form a            convenient trial unit, and whether their treatment as a  unit            conforms  to the parties'  expectations."  Restatement    24;            see  also Aunyx Corp.  v. Canon U.S.A.,  Inc., 978 F.2d  3, 7            ___  ____ ___________     ___________________            (1st Cir.  1992), cert. denied,  507 U.S. 973 (1993).   These                              _____ ______            factors,  however,  are  merely  suggestive;  they  are   not                                         -8-                                          8            intended   to  be   exhaustive,  nor   is   any  one   factor            determinative.   See Restatement    24  cmt. b;  Gonzalez, 27                             ___                             ________            F.3d at 756.   Finally, in making this  determination, we are            mindful  that  a  single  transaction  may  give  rise  to  a            multiplicity  of  claims,  Gonzalez,  27  F.3d  at  755,  and                                       ________            recognize that "the  mere fact that different  legal theories            are  presented in  each  case  does not  mean  that the  same            transaction is not behind each," Manego, 773 F.2d at 6.                                             ______            A.  Consideration of the Restatement Factors            ____________________________________________                      With that background, we inquire whether the causes            of  action  asserted  in  the  first  and  second  suits  are            sufficiently  identical,  focusing on  the  three Restatement            factors.                       1.  Relation of the Facts in Time, Space, Origin,                      _________________________________________________            or        Motivation            ___       __________                      The first Restatement factor asks whether the facts            underlying  the breach of  contract and bad-faith  claims are            related  in time, space, origin, or motivation, i.e., whether                                                            ____            they  arise out  of  the same  transaction, seek  redress for            essentially the same basic wrong,  and rest on the same or  a            substantially  similar factual basis.   See Kale  v. Combined                                                    ___ ____     ________            Ins.  Co. of  Am.,  924  F.2d 1161,  1166  (1st Cir.),  cert.            _________________                                       _____            denied, 502  U.S. 816 (1991).   In this case,  our answers to            ______            these questions lead us to conclude that the facts underlying            the two claims are closely related.                                         -9-                                          9                      First,  we find that  both the bad-faith  claim and            the contract claim derive from the same occurrence:  National            Grange's refusal to pay Porn the proceeds of his underinsured            motorist policy  for the  July 17,  1990, accident.   Second,            although the two claims present different legal theories, one            sounding in  contract and the  other in tort, they  both seek            redress for essentially the same basic wrong.   For instance,            Porn's contract  action sought redress for  National Grange's            refusal  to  pay  the policy  proceeds,  while  his bad-faith            action sought redress for its unreasonable refusal to pay the            proceeds, see Buckman v. People  Express, Inc., 530 A.2d 596,                      ___ _______    _____________________            599 (Conn. 1987).  Third,  a comparison of the two complaints            illustrates that  the two  claims rest  on a  similar factual            basis.    Both  complaints,  in  their  factual  allegations,            outline the circumstances of the accident, the particulars of            the  insurance  policy,  and  National  Grange's  conduct  in            refusing to pay.  In sum, the facts underlying the two claims            are closely related in time, space, origin, and motivation.3                                            ____________________            3.  A  majority of  the  courts  that  have  considered  this            question,  i.e., whether  the facts  underlying  a breach  of                       ____            insurance   contract   claim  and   a  bad-faith   claim  are            sufficiently  related for purposes of res judicata, also have            concluded that both claims arise out of the insurer's refusal            to pay  the insured the proceeds  of the policy.   See, e.g.,                                                               ___  ____            McCarty v. First  of Ga.  Ins. Co., 713  F.2d 609, 612  (10th            _______    _______________________            Cir. 1983) (applying  Oklahoma res judicata law);  Duhaime v.                                                               _______            American  Reserve Life  Ins.  Co., 511  A.2d 333,  334 (Conn.            _________________________________            1986);  Chandler v. Commercial Union Ins. Co., 467 So.2d 244,                    ________    _________________________            250 (Ala.  1985); Hubbell v.  Trans World Life Ins.  Co., 408                              _______     __________________________            N.E.2d 918,  919 (N.Y.  1980); Stone  v. Beneficial  Standard                                           _____     ____________________            Life Ins.  Co., 542 P.2d 892, 894 (Or.  1975).  Of the courts            ______________                                         -10-                                          10                      Porn expends considerable effort characterizing the            instant action as arising out  of a transaction separate from            that giving  rise to the  first action.  In  particular, Porn            maintains  that  the  bad-faith  action  stems  from National            Grange's conduct in handling his insurance claim, whereas the            contract action  stems from the circumstances surrounding the            car accident.  Porn's definition of the  two transactions out            of which the  claims arise, however, is  artificially narrow.            For instance, the contract claim  arises out of more than the            car  accident  alone.   It  arises  out  of the  accident  in            conjunction with National  Grange's refusal to pay  under the            policy.   Indeed, without  the  refusal to  pay, no  contract            breach could exist.   Similarly, the factual  basis of Porn's            bad-faith  claim  cannot  be  limited  to  National  Grange's            conduct in handling  Porn's insurance claim.   In this  case,            the facts of the car  accident are also probative of National            Grange's reasonableness in refusing to pay Porn's claim.  For            instance, if, as  Porn suggests,  the facts  of the  accident                                            ____________________            holding  otherwise,  i.e.,  that  the  facts  underlying  the                                 ____            contract and  bad-faith claims  are  unrelated, most  applied            state-law theories of res judicata  that differ significantly            from the  federal res  judicata principles  that govern  this            case.   See,  e.g., Schmueser v.  Burkburnett Bank,  937 F.2d                    ___   ____  _________     ________________            1025, 1031 (5th Cir. 1991) (applying Texas res judicata law);            Robinson v. MFA Mut. Ins. Co., 629 F.2d 497, 501-02 (8th Cir.            ________    _________________            1980)  (applying Arkansas's  "primary rights"  theory of  res            judicata); Corral v. State Farm Mut. Auto. Ins. Co., 155 Cal.                       ______    ______________________________            Rptr.  342, 345  (Cal.  Ct.  App.  1979)  (applying  "primary            rights" theory); but see Rios  v. Allstate Ins. Co., 137 Cal.                             ___ ___ ____     _________________            Rptr. 441,  445-46 (Cal.  Ct. App.  1977) (reaching  contrary            conclusion under "primary rights" theory).                                              -11-                                          11            present a clear  picture that Willoughby was the  legal cause            of  the accident and  Porn was not  contributorily negligent,            National  Grange would  have had less  reason to  contest the            claim andtherefore its refusalto pay appearsless reasonable.4                      Admittedly, each  legal theory relies  more heavily            on some  of the underlying  facts than others.   The accident            facts,  for example,  will likely  receive  more emphasis  in            proving  the  contract  claim,   while  the  facts  regarding            National Grange's conduct in handling  Porn's insurance claim            will be more focal in  proving the bad-faith claim.  However,            the  Restatement makes clear  that merely because  two claims            depend  on different  shadings  of  the  facts  or  emphasize            different  elements of  the facts,  we should  not color  our            perception  of  the  transaction  underlying  them,  creating            multiple  transactions  where  only  one transaction  exists.            Restatement    24  cmt. c.   By  focusing exclusively  on the            facts most critical to each claim, Porn has ignored the other                                            ____________________            4.  Porn's argument  that the facts  underlying the bad-faith            and  contract claims  are not  related  in time  is similarly            unpersuasive.  Porn argues that the facts underlying the bad-            faith action  go to National  Grange's handling of  the claim            after  the car  accident,  while  the  facts  underlying  the            _____            contract action  go to the  accident itself.  However,  as we            explained above,  the factual basis of the contract action is            formed  by more  than  just the  accident;  it also  includes            National Grange's refusal  to pay, and that  refusal occurred            after  the accident.   Therefore,  the  facts underlying  the            contract  action cannot be limited to the accident itself but            extend to the time period after the accident as well, thereby            minimizing any time differential between the facts underlying            the two claims.                                          -12-                                          12            facts underlying each  claim.  Accordingly, we  reject Porn's            grouping of the facts underlying the two claims into separate            transactions.                       2.  Trial Convenience                      _____________________                      The  second   Restatement  factor  directs   us  to            determine  whether the facts underlying the contract and bad-            faith claims  form  a convenient  trial unit.   This  factor,            aimed at  conserving judicial resources, provides  that where            the witnesses or  proof needed in  the second action  overlap            substantially with those used in the first action, the second            action should ordinarily be precluded.  Restatement   24 cmt.            b.  We conclude that Porn's bad-faith claim would use much of            the same evidence produced in  the first action for breach of            the  insurance contract,  and therefore  it  would have  been            convenient and efficient for the district court to have heard            the two claims in the same action.                      Testimony and  exhibits about the  circumstances of            the accident are relevant to both  the contract and bad-faith            claims.    To  establish that  National  Grange  breached the            insurance policy in  not paying his claim, Porn  had to prove            that  Willoughby's negligence caused the accident and that he            was  not contributorily negligent.  Accordingly, in the first            action, Porn  presented evidence detailing  the circumstances            of the  accident.    This evidence  would  likely  have  been            repeated in a second action for bad faith, as Porn would have                                         -13-                                          13            sought   to  portray  the   accident  facts  as   so  plainly            establishing Willoughby's negligence that National Grange had            no credible reason for refusing to pay his claim.                          The  evidence in the contract action and the second            action  would  also  overlap  as  to  the  terms   of  Porn's            underinsured motorist policy and National Grange's refusal to            pay his  claim.   To prove  breach of contract,  Porn had  to            establish that National Grange refused to pay his claim where            the  terms  of  the  policy  so   required.    Likewise,  the            reasonableness of  National  Grange's refusal  to pay,  i.e.,                                                                    ____            whether it  acted in  bad faith, depends  on what  the policy            required.                        Rather  than  addressing  the degree  to  which the            evidence supporting each claim  overlaps, Porn challenges the            convenience  of bringing  the claims  together  on two  other            grounds.   First, Porn  argues that evidence  relevant to the            bad-faith  claim,  specifically  evidence  of  the amount  of            insurance available  and the  fact of  settlement offers  and            negotiations,  would prejudice  the insurer's defense  of the            contract claim,  and therefore the  two claims do not  form a            convenient trial  unit.  However, we agree  with the district            court  that  any  potential prejudice  could  be  resolved by            bifurcating the trial.  With bifurcation, the evidence common            to  both  claims,  which was  considerable,  could  have been            presented at once and not "in separate  lawsuits commenced at                                         -14-                                          14            a distance of months or years."  Porn v. National Grange Mut.                                             ____    ____________________            Ins. Co., No. 95-140-P-H, 1995 WL 626374, at *3 (D. Me. Sept.            ________            27, 1995).                      Second,  Porn argues  that  he  had  to  procure  a            judgment that National Grange breached the insurance contract            before the  cause of  action for bad  faith could  accrue and            therefore  the bad-faith  and contract  claims  could not  be            joined in the same action.   Porn bases this contention on an            assumption  that, although  a Connecticut  court  has yet  to            decide this issue, it would follow jurisdictions like Florida            and  require a  judgment of  contract breach  as a  condition            precedent to  the pursuit of  a bad-faith claim.   See, e.g.,                                                               ___  ____            Blanchard v. State Farm Mut.  Auto. Ins. Co., 575 So.2d 1289,            _________    _______________________________            1290 (Fla.  1991)  ("[A]n  insured's  underlying  first-party            action for insurance benefits against the insurer necessarily            must be resolved favorably to the insured before the cause of            action   for  bad  faith   in  settlement   negotiations  can            accrue.").5  The district court correctly observed,  however,            that the Connecticut  Supreme Court rejected  this contention            in Duhaime v.  American Reserve Life Ins. Co.,  511 A.2d 333,               _______     ______________________________                                            ____________________            5.  Porn's reliance  on McAllaster  v. Bruton,  655 F.  Supp.                                    __________     ______            1371,  1374 (D.  Me. 1987),  as additional  support for  this            proposition is  sorely misplaced.   McAllaster  held that  an                                                __________            insurer  could  not  be required  to  pay  uninsured motorist            benefits without a prior judgment that the uninsured motorist            was liable.   Id.  at 1374-75.   McAllaster does  not address                          ___                __________            whether a judgment finding breach  of the insurance policy is            a condition precedent to pursuit of a bad-faith claim.                                              -15-                                          15            334-35  (Conn. 1986).  Invoking the doctrine of res judicata,            the  Connecticut  Supreme Court  held that  Duhaime's earlier            action for breach of the insurance policy barred a subsequent            action  for  bad  faith.   Id.    In  so holding,  the  court                                       ___            implicitly  acknowledged that  a bad-faith action  can accrue            without a  separate judgment  of contract  breach.   Although            Duhaime involved  disability insurance  and the  instant case            _______            involves underinsured  motorist  insurance,  we  see  nothing            unique  about  underinsured  motorist  insurance  that  would            preclude Duhaime's holding from governing here.6                     _______                      3.  Parties' Expectations                      _________________________                      The final  Restatement factor  is whether  treating            the underlying facts as a trial unit conforms to the parties'            expectations.  For the following reasons, we conclude that it            does.                        When he brought his contract suit in November 1993,            Porn knew the facts necessary for bringing a bad-faith claim.            He knew  that National Grange had refused to pay; he knew its            alleged reasons  for so refusing;  and he knew the  extent of            the delay in payment attributable to the refusal.  Therefore,                                            ____________________            6.  In all events, in a bifurcated trial such as the district            court envisioned, see supra, the jury would first be asked to                              ___ _____            determine the breach of contract  claim.  Only if the insured            prevailed on that claim would the second (bad-faith) phase of            the trial transpire.  Thus,  the insured would have to secure            a finding that  the insurer breached  the contract before  he            could recover on his bad-faith claim.   We do not think  that            the Connecticut Supreme Court would require more.                                           -16-                                          16            because the two claims  arose in the  same time frame out  of            similar facts, one would reasonably expect them to be brought            together.   See  18 Charles  A.  Wright &  Arthur R.  Miller,                        ___            Federal  Practice  and   Procedure     4407,  at   56  (1981)            __________________________________            ("Defendants  may reasonably  demand that disposition  of the            first  suit establish repose as  to all matters that ordinary            people  would  intuitively  count  part  of  a  single  basic            dispute.").   Indeed, in  February 1993,  nine months  before            filing  the  first action,  Porn wrote  a letter  to National            Grange in which  he made a demand for his policy proceeds and            concomitantly threatened to  sue for bad faith.   In light of            this letter, it would not have been unreasonable for National            Grange  to expect  that  any  subsequent  lawsuit  that  Porn            initiated  would include claims  for both breach  of contract            and bad faith.   Finally, bringing related claims together is            arguably more conducive to settlement and therefore, at least            in this case, may have had some pragmatic appeal.                               In  sum, applying  the Restatement's  transactional            test to this case, we conclude that the two lawsuits involved            sufficiently identical causes  of action.  Because  the cause            of  action  should not  have  been split  into  two lawsuits,            Porn's bad-faith claim is barred by claim preclusion.              B.  Equitable Exception            _______________________                      As his final  argument, Porn contends that  even if            we  find  that  res  judicata  applies,  equity  demands  its                                         -17-                                          17            suspension  in this  case.   Specifically,  Porn argues  that            because  National Grange's decision to proceed to judgment in            the contract  action with no evidence to  support its defense            ("litigation  conduct") is probative  of bad faith,  the full            nature of National  Grange's bad-faith tort was  not revealed            until   judgment  was   entered  in   the   contract  action.            Therefore, Porn argues, it would  be premature and unfair  to            require him  to bring his  bad-faith claim together  with his            contract claim.                        The  Supreme Court has  counselled us to  adhere to            traditional principles  of res judicata  and not to  make any            "ad hoc determination of the equities in a particular  case."            Federated Dep't  Stores, Inc.  v. Moitie,  452 U.S.  394, 401            _____________________________     ______            (1981) (refusing to condone an exception to an application of            res judicata  that would  bar relitigation  of an  unappealed            adverse judgment where  other plaintiffs  in similar  actions            against common defendants successfully appealed the judgments            against  them).   In a  post-Moitie  decision, however,  this                                         ______            court  has suggested that an "'occasional exception' to claim            preclusion"  may   still  exist  in  instances  of  "'unusual            hardship.'"  Kale,  924 F.2d at 1168 (quoting Rose v. Town of                         ____                             ____    _______            Harwich, 778 F.2d  77, 82 (1st Cir. 1985),  cert. denied, 476            _______                                     _____ ______            U.S. 1159  (1986)); but see  Johnson v. SCA  Disposal Servs.,                                ___ ___  _______    _____________________            Inc., 931  F.2d 970, 977  (1st Cir. 1991) (citing  Moitie for            ____                                               ______            the proposition that "we cannot relax the principles of claim                                         -18-                                          18            preclusion even if  we find that the equities  cry out for us            to do so").  Assuming  arguendo that Moitie did not foreclose                                   ________      ______            the possibility  of an equitable exception, we  find that, in            the context of this case, requiring the bad-faith claim to be            brought  in the first action creates  no unusual hardship for            Porn and therefore the exception does not apply.                        First,   we   challenge  Porn's   assumption   that            requiring  the  two  claims  to  be  brought  together  would            necessarily preclude as  support for the bad-faith  claim any            evidence  about  National  Grange's  decision  to proceed  to            judgment in the  contract action with no  evidence to support            its defense.   Had  the  contract and  bad-faith claims  been            brought  together,  the  district  court  would  likely  have            bifurcated  the trial into  two phases.   By the  time of the            bad-faith  phase of  the  trial,  the  contract  phase  would            already have  been  completed and  Porn would  know both  the            quality of evidence  National Grange presented to  defend the            contract  claim and  that the  magistrate  judge had  granted            judgment  as  a matter  of  law  for  Porn  on the  issue  of            contributory negligence.   Accordingly,  we see nothing  that            would  have prevented Porn  from presenting this  evidence in            the bad-faith phase of the trial and arguing to the jury that            National  Grange's  refusal  to  settle the  contract  action                                         -19-                                          19            despite insufficient  evidence of  a meritorious  defense was            more evidence of its bad faith.7                      Moreover, assuming arguendo  that Porn's assumption                                         ________            was  correct and  that at  the time  he brought  the contract            action he  was unaware of  the litigation conduct  that would            occur therein, we nonetheless conclude that Porn was aware of            other conduct by National Grange sufficient to support a bad-            faith   claim.    Indeed,  of  the  ten  factual  allegations            supporting  Porn's  bad-faith complaint,  nine were  known to            Porn  at  the time  he  instituted  the  first action.    For            instance, the  second complaint alleged  that National Grange            failed to act on the claim for nine months; failed to make an            offer on the  claim for sixteen months; failed  to allow Porn            to  settle  with  Willoughby's   carrier  for  the  available            liability proceeds for  two years; justified delays  with the            possibility of other insurance coverage when it  knew no such            insurance  existed; made Porn  investigate the possibility of            other coverage;  failed to investigate  the claim; repeatedly            lied to  Porn about  the policy's terms;  and instructed  its            claims personnel  to withhold  helpful information about  the                                            ____________________            7.  Even if  the trial had  not been bifurcated and  Porn did            not yet know  that the magistrate judge  would grant judgment            as a matter  of law on the issue  of contributory negligence,            Porn still  could have pointed  to National Grange's  lack of            evidence of contributory negligence and  argued that National            Grange's  refusal to  settle the  contract case  with  such a            meager defense was more evidence of its bad faith.  See supra                                                                ___ _____            note 2.                                          -20-                                          20            policy  from Porn.    Because  the  events  underlying  these            allegations had occurred  by the time Porn  brought his first            action, we  find that Porn had ample  opportunity to litigate            the bad-faith  claim therein,  see Gonzalez,  27 F.3d  at 758                                           ___ ________            (holding that for claim preclusion to apply, a litigant first            must have  had a  full and fair  opportunity to  litigate her            claim), and  his asserted  inability to  present evidence  of            National Grange's  litigation conduct  as additional  support            for his bad-faith claim does not present an            unusual hardship.                                         III.                                         III.                                         ____                                      Conclusion                                      Conclusion                                      __________                      For  the   reasons  stated  above,  we  affirm  the                                                              ______            district  court's grant  of  summary  judgment  in  favor  of            National Grange.                                         -21-                                          21
