CHRISTOPHER SMITH v. PREIS PLC (2026)

The Plaintiff, Christopher W. Smith (hereinafter “Mr. Smith”) seeks review of the trial court's October 27, 2025 judgment granting the exception of res judicata filed by Defendants, Preis, PLC (hereinafter “the Firm”) and Edwin G. Preis, Jr. (hereinafter “Mr. Preis”). After consideration of the record before this Court and the applicable law, we affirm the trial court's October 27, 2025 judgment granting the exception of res judicata.

FACTS AND PROCEDURAL HISTORY

This case arises from a breach of contract dispute involving an employment contract between Mr. Smith and the Firm. In June 2015, the Firm hired Mr. Smith as an associate attorney.¹ The contract provided for an annual salary of $80,000.00, with possible fringe benefits and salary increases based on performance. It also included a “Firm's Commitment” clause under which the Firm agreed, “assuming satisfactory performance,” to employ Mr. Smith for a three-year term, while reserving the right to terminate his employment for “unsatisfactory” performance after thirty days written notice. On November 16, 2016, the Firm terminated Mr. Smith, asserting that his immediate termination was based on “unsatisfactory” performance.²

On November 16, 2020, Mr. Smith filed a petition for damages against the Firm in Civil District Court for the Parish of Orleans (hereinafter “State Court Case”), alleging breach of the express terms of the employment contract and other allegations of bad faith. He sought to recover: (1) compensation for the unexpired term of the contract, approximately $124,000.00; (2) reasonable attorney's fees and penalty wages; (3) moving expenses and rent incurred to relocate to New Orleans to satisfy the Firm's residency requirement; (4) loss of fringe benefits; and (5) emotional distress and mental anguish damages allegedly resulting from his inability to resign or secure other legal employment.³

The parties conducted pre-trial discovery in the State Court Case; however, on October 13, 2023, the Firm filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Western District of Louisiana (hereinafter “the Bankruptcy Court”). On October 24, 2023, the Firm filed a Notice of Pendency of Bankruptcy and Automatic Stay of the Proceedings.⁴

On May 8, 2024, Mr. Smith filed a proof of claim in the Bankruptcy Court as a creditor of the Firm.⁵ During the pendency of the bankruptcy proceeding, Mr. Smith filed a supplemental petition for damages in the State Court Case naming Mr. Preis as an additional defendant, referring to him as “the president of [the Firm].”⁶ In the supplemental petition, Mr. Smith alleged that: (1) Mr. Preis intentionally undercapitalized the Firm, causing its insolvency to the detriment of creditors; (2) the Firm committed accounting violations by failing to balance its books; (3) Mr. Preis “improperly used [the Firm] as his personal bank account” and mismanaged company funds by taking out loans for himself and friends that were never repaid; and (4) Mr. Preis committed numerous acts of malpractice, neglect, mismanagement and other civil wrongs.

The Bankruptcy Court's Trustee issued a final report on the bankruptcy proceeding on February 21, 2025, listing Mr. Smith as an “unsecured claimant” with a $5,890,247.00 claim and a proposed payment of $121,236.82. Mr. Preis, as a creditor of the Firm, objected to Mr. Smith's claims in the Bankruptcy Court.⁷ On April 21, 2025, after Mr. Smith failed to respond or prosecute his claims, the Bankruptcy Court dismissed his claims (hereinafter “Judgment of Dismissal”).⁸ In response, the Firm and Mr. Preis filed an exception of res judicata in the State Court Case, arguing that the Judgment of Dismissal precluded re-litigation of Mr. Smith's claims.

After a hearing, the trial court granted the Firm and Mr. Preis’ exception of res judicata and dismissed Mr. Smith's claims against both parties, with prejudice. This appeal followed.

DISCUSSION

Mr. Smith raises two assignments of error. However, we frame the dispositive issue as whether the trial court erred in granting the Firm and Mr. Preis’ exception of res judicata. A trial court's ruling on an exception of res judicata presents both factual and legal questions; factual findings are reviewed for manifest error, while legal questions are reviewed de novo. Jones v. Daimler Trucks N. Am., Inc., 2021-0504, p. 4 (La.App. 4 Cir. 2/23/22), 336 So.3d 622, 626 (citing Armbruster v. Anderson, 2018-0055, p.7 (La.App. 4 Cir. 6/27/18), 250 So.3d 310, 315).

Res judicata operates as a claim and issue preclusion doctrine under both federal and state law. See St. Charles Surgical Hosp., LLC v. Louisiana Health Serv. & Indem. Co., 2018-0052, pp. 3-4 (La.App. 4 Cir. 3/21/18), 317 So.3d 854, 857. Its purpose is to promote judicial efficiency and finality by preventing needless re-litigation. See Terrebonne Fuel & Lube, Inc. v. Placid Refin. Co., 1995-0654, 1995-0671, pp. 11-12 (La. 1/16/96), 666 So.2d 624, 631. Under federal law, claim preclusion, or “true res judicata,” treats a final judgment as the full measure of relief between the same parties on the same claim or cause of action. Reeder v. Succession of Palmer, 623 So.2d 1268, 1271 (La. 1993). This Court has likewise recognized that La. R.S. 13:4231 encompasses both claim preclusion and issue preclusion.⁹ Maschek v. Cartemps USA, 2004-1031, p. 5 (La.App. 4 Cir. 2/16/05), 896 So.2d 1189, 1193 (citing Stroscher v. Stroscher, 2001-2769, pp. 6-7 (La.App. 1 Cir. 2/14/03), 845 So.2d 518, 525). Claim preclusion extinguishes all causes of action existing at the time of final judgment that arise out of the transaction or occurrence at issue and bars a later action on those causes of action. See La. R.S. 13:4231. Because res judicata is stricti juris in Louisiana, any doubt must be resolved against its application. Bd. of Supervisors of Louisiana State Univ. v. Dixie Brewing Co., Inc., 2014-0641, p. 6 (La.App. 4 Cir. 11/19/14), 154 So.3d 683, 688 (citation omitted).

The Firm and Mr. Preis rely on the Judgment of Dismissal to support their exception of res judicata. Although the Bankruptcy Court had not entered its final Chapter 7 discharge when the exception was filed, the judgment was final by the time the trial court heard the exception. We therefore consider whether the Judgment of Dismissal precludes Mr. Smith from proceeding with the State Court Case.¹⁰

Application of Res Judicata Principles

A prior federal judgment based on the same facts may support a plea of res judicata in a Louisiana court. Armbruster, 2018-0055, p. 9, 250 So.3d at 317 (citation omitted). In fact, Louisiana courts apply federal law when determining the preclusive effect of a federal judgment. Id. (citations omitted). In Terrebonne Fuel, the Court held that a bankruptcy judgment has the preclusive effect of barring litigation of the same issues when: “(1) both cases involve the same parties; (2) the prior judgment was rendered by a court of competent jurisdiction; (3) the prior decision was a final judgment on the merits; and (4) the same cause of action is at issue in both cases.” Terrebonne Fuel & Lube, Inc., 1995-0654, 1995-0671, p. 15, 666 So.2d at 633 (citing Matter of Baudoin, 981 F.2d 736, 740 (5th Cir. 1993)).

The first requirement of res judicata requires a determination of whether the parties or their privies have previously litigated the same claim to a valid final judgment. Reeder, 623 So.2d at 1271. When determining if the parties of two claims are the same, inquiry is made as to whether “a person has the same ‘quality’ when [they] appear[ ] in the same capacity in both suits or when [they] [are] privy to a party in the prior suit.” TMF Hotel Props. L.L.C. v. Crescent City Connections 501(C) 7 Gris-Gris Pleasure Aide & Soc. Club, 2018-0079, p. 11 (La.App. 4 Cir. 11/28/18) 318 So.3d 756, 764 (citations omitted). This Court has previously defined privy as “encompassing ‘representatives and successors, including any person having a legal right or interest in the subject matter of the prior suit derived through succession or assignment from the litigant who asserted the right; or any person whose legal right or interest in the subject matter of the prior suit was asserted by his legal representative.’ ” Nieto v. Dodd, 2024-0293, p. 5 (La.App. 4 Cir. 5/20/24) 390 So.3d 432, 436 (quoting TMF Hotel Properties, L.L.C., p. 5, 318 So.3d at 764). Courts have further explained that:

“[P]arties” for purposes of res judicata does not mean formal, paper parties only, but also includes “ ‘parties in interest, that is, that persons whose interests are properly placed before the court by someone with standing to represent them are bound by the matters determined in the proceeding.’ ” (quoting 1B J. Moore, Moore's Federal Practice, P.O. 411[1] at 390–391 (2d ed. 1983)) (emphasis supplied). A non-party is in privity with a party for res judicata purposes in three instances. First, if he has succeeded to the party's interest in property, he is bound by prior judgments against the party. Second, if he controlled the prior litigation, he is bound by its result. Third, he is bound if the party adequately represented his interests in the prior proceeding.

Armbruster, 2018-0055, p. 11, 250 So.3d at 318 (quoting Latham v. Wells Fargo Bank, N.A., 896 F.2d 979, 983 (5th Cir. 1990)).

Mr. Smith maintains that unlike the State Court Case, which names both the Firm and Mr. Preis as defendants, the Firm was the sole named party in the Bankruptcy Court case. Thus, he argues that the Judgment of Dismissal only precludes his breach of contract claim against the Firm, not against Mr. Preis individually. Conversely, Mr. Preis asserts that he was privy to the Firm in the bankruptcy proceeding, based on his capacity as President, and as the sole principal and authorized representative of the Firm. Mr. Preis supports his argument by citing to Mr. Smith's supplemental petition which states, in pertinent part: “On information and belief, [Mr. Preis], was also the controlling owner, in fact and in law, of [the Firm], a law firm bearing only his name, and the firm was his alter ego.” According to Mr. Preis, these allegations establish his close relationship and aligned interest with the Firm. He contends that, by virtue of Mr. Preis’ privy to the Firm, Mr. Smith's interest in recovering damages from both were adequately represented in the bankruptcy claim. We agree.

The record reflects that only the Firm was named in the bankruptcy proceeding, and Mr. Preis was not individually named in Mr. Smith's proof of claim. This, however, does not resolve the inquiry, and we must consider the totality of the claims. Specifically, the issue of whether Mr. Preis is privy to the Firm by virtue of his role as President of the corporation. For purposes of res judicata, the law does not require that a party be formally named as a “paper” party in the prior proceeding to be bound. This conclusion is further supported by the allegations in the supplemental petition that Mr. Preis mishandled the Firm in his capacity as President. Under these circumstances, Mr. Preis’ privity with the Firm placed these issues before the Bankruptcy Court, and Mr. Smith's decision to abandon his claims does not negate the Judgment of Dismissal. Accordingly, we find that the res judicata requirement that the parties be the same is satisfied.

Next, we consider the second and third elements of res judicata which require that the prior judgment be rendered by a court of competent jurisdiction and that the decision be a final judgment on the merits. As discussed above, the Bankruptcy Court had jurisdiction to decide Mr. Smith's state law issues brought before the court in his proof of claim. Mr. Smith argues that the Bankruptcy Court lacked authority to consider the claims of the State Court Case because its jurisdiction is limited to “core” bankruptcy matters. The State Court Case is related to the bankruptcy proceeding because both matters arise from the same alleged breach of the employment contract and alleged acts of bad faith, which formed the basis for Mr. Smith's claims against the Firm. In its bankruptcy filing, the Firm, through Mr. Preis as its sole representative, was required to disclose all related legal actions involving the Firm, including Mr. Smith's pending State Court Case. The overlap between the State Court Case and Mr. Smith's proof of claim further confirms that both proceedings concern the same alleged breach of contract. Mr. Smith's claims for breach of contract and alleged acts of bad faith could and should have been pursued in the Bankruptcy Court. Thus, the second element is satisfied.

The third element of res judicata requires a final judgment on the merits. Mr. Smith argues that the Judgment of Dismissal did not address the merits of the State Court Case. Our review of the bankruptcy pleadings indicate that Mr. Smith addressed the merits of his case in his bankruptcy proof of claim. He stated that the basis for the claims involves breach of contract and bad faith by the Firm. In response to Mr. Smith's claims, Mr. Preis filed an objection arguing that the merits of the claim relate to an employment dispute. Additionally, Mr. Smith's amended petitions against Mr. Preis in the State Court Case included allegations that he intentionally undercapitalized the Firm, mishandled funds and improperly used personal funds of the Firm–all claims related to the bankruptcy proceeding. These claims could have been–and had to have had been–asserted in the bankruptcy proceedings. Mr. Smith had the opportunity to further prosecute the merits of his claims against the Firm and Mr. Preis by responding to the objection to the proof of claim. However, Mr. Smith chose not to respond and therefore, abandoned his claims in the Bankruptcy Court. With no response from Mr. Smith, the Bankruptcy Court rendered a final judgment dismissing his proof of claim. Therefore, the third element of res judicata has been satisfied.

The fourth element of res judicata requires that both actions involve the same cause of action. In considering this element, this Court uses a transactional test to determine whether “a prior judgment's preclusive effect extends to all rights of the plaintiff with respect to all or any part of the transaction․ .” St. Charles Surgical Hosp., 2018-0052, p. 4, 317 So.3d at 857 (quoting Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005)). Louisiana courts apply a pragmatic, not a rigid, approach to determine if this element is met. See id. Here, Mr. Smith's bankruptcy proof of claim and the State Court Case both arise from the breach of his employment contract and allegations of bad faith with the Firm and Mr. Preis. In both proceedings, Mr. Smith's claims arose from the same set of facts and circumstances as the claims litigated and disposed of in the bankruptcy proceedings; which include his claims for unpaid salary for the remainder of the contract term, reimbursement of expenses, attorney's fees, lost benefits, loss of earning capacity, alleged acts of bad faith and general damages. The similarities between the two cases support a finding that they arise from the same facts or occurrence. When a party seeks the same categories of damages in both proceedings, it indicates that the claims are based on the same alleged wrongdoing and the party is pursuing the same substantive recovery. Thus, the overlap in requested relief reinforces that the facts are identical for purposes of res judicata, even if styled differently in each court. Accordingly, we find that both cases arise from the same nucleus of operative facts and seek recovery for the same alleged breach. As such, the fourth element of res judicata has been satisfied.

CONCLUSION

Based on the foregoing, we find that all the elements of res judicata are satisfied. The Bankruptcy Court's Judgment of Dismissal precludes Mr. Smith from re-litigating his breach of contract claims against the Firm and Mr. Preis in state court.

DECREE

The trial court's October 27, 2025 judgment granting the Firm and Mr. Preis’ exception of res judicata is affirmed.

AFFIRMED

FOOTNOTES

1.   The signatories to the June 8, 2015 employment contract include Mr. Smith and David M. Flotte on behalf of the Firm. At the time the contract was signed, David Flotte was a partner at the Firm.

2.   The Firm maintains that Mr. Smith's unsatisfactory performance was based on concerns regarding the quality of his work. It contends that Mr. Smith was counseled “several times by his supervisors.” An internal committee of attorneys, organized to review Mr. Smith's performance, determined that his work was “substandard and deficient.” On the contrary, Mr. Smith states that his termination was not reflective of his performance as he received positive performance reviews, including one on September 30, 2015, and a bonus for compliance with his contractual requirements. Upon his termination, the Firm paid Mr. Smith thirty days wages.

3.   Mr. Smith asserted a wage claim pursuant to La. R.S. 23:631, et seq.

4.   In the Bankruptcy Court petition, the Firm included the State Court Case with Mr. Smith under the “Legal Actions or Assignments” section.

5.   Mr. Smith sought $5,890,247.00, which he asserted included the unpaid balance of his three-year contract, $4,500.00 in rent, lost earnings, general damages, loss of earning capacity, attorney's fees and expenses and damages for bad faith.

6.   On June 13, 2025, Mr. Smith filed a second “Supplemental Petition for Damages” seeking to amend the State Court Case. This second “Supplemental Petition for Damages” contained identical arguments.

7.   The trustee for the Firm also joined in the objection to Mr. Smith's claims.

8.   The Bankruptcy Court issued a final judgment on September 22, 2025, discharging the Firm's debts under Chapter 7.

9.   La. R.S. 13:4231 provides:Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment.(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action.(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.

10.   Mr. Smith contends that the federal Bankruptcy Court did not have jurisdiction to adjudicate his state law issues. While Bankruptcy Court has limited jurisdiction, it maintains jurisdiction over four types of matters, including: “(1) cases ‘under Title 11;’ (2) proceedings ‘arising under’ Title 11; (3) proceedings ‘arising in’ a case under Title 11; and (4) proceedings ‘related to’ a case under Title 11.” S. Par. Oil Co., Inc. v. Slater Law Firm, 2002-1717, pp. 2-3 (La.App. 4 Cir. 4/9/03) 844 So.2d 1056, 1058 (quoting 28 U.S.C. § 1334(a)). Bankruptcy courts have maintained authority over state law issues as required to adjudicate bankruptcy proceedings in depth, with case law confirming that, “[a] bankruptcy court can, and regularly does, decide state law questions ․ .” In re SCS Logistics, Inc., 671 B.R. 224, 245 (Bankr. S.D. Ohio 2025) (quoting In re Noll, 2022 WL 1274909, *5, 2022 Bankr. LEXIS 1165, *13 (Bankr. W.D. Tex. April 28, 2022)). Moreover, “[t]he mere presence of state law issues does not alone mandate bankruptcy court abstention.” Id. We find that Mr. Smith's State Court Case claims are issues subsumed in the Bankruptcy Court's jurisdiction.

Judge Tiffany Gautier Chase