## Facts

- James W. Herendeen worked as a paper salesman for Nationwide Papers Incorporated, a subsidiary of Champion International Corporation.
- In 1969, Herendeen resigned and took a job with a competitor.
- Herendeen alleged his resignation was induced by promises that he would receive a new written employment contract and continue to receive employment benefits, including pension benefits.
- In a first action in New York Supreme Court, he sued corporate defendants and individuals, alleging fraudulent inducement and seeking damages for lost commissions and lost pension benefits.
- The state trial court dismissed the complaint for failure to state a claim, characterizing the alleged promise as an unenforceable oral “agreement to agree”; the Appellate Division affirmed.
- Herendeen then filed a federal action in the Southern District of New York against Champion, Nationwide, and plan fiduciaries, seeking benefits allegedly due under the terms of the employer retirement income plan.
- The federal district court dismissed the federal complaint as barred by res judicata based on the state-court dismissal.

## Issues

1. Whether the prior New York judgment dismissing Herendeen’s fraud/contract action precluded, under New York res judicata law, a later federal action seeking benefits allegedly owed under the written pension plan.

## Decision

- The Second Circuit reversed the district court’s dismissal and remanded.
- The court held the prior state judgment did not bar the federal suit because the federal complaint asserted a different cause of action: enforcement of rights under the pension plan, not liability for an alleged oral promise or fraudulent inducement.
- The state-court dismissal adjudicated only the legal sufficiency of the alleged oral contract/fraud theory; it did not determine Herendeen’s entitlement to plan benefits under the plan’s terms.

## Legal Principles

- Under New York claim preclusion, a prior judgment bars later litigation only as to the same cause of action (including matters that were or could have been litigated within that cause of action).
- A dismissal for failure to state a claim precludes relitigation of the same claim, but it does not bar a later, analytically distinct claim that rests on a different primary right and was not adjudicated.
- Courts must give the same preclusive effect to a state judgment that the rendering state would give, but may not extend preclusion beyond what the earlier judgment actually decided.

## Conclusion

Because the earlier New York action was dismissed on the ground that the alleged oral promise was unenforceable and did not adjudicate any entitlement under the written pension plan, the later federal action to recover plan benefits was not barred by res judicata, requiring reversal and remand for proceedings on the merits.


Herendeen v. Champion Int’l Corp., 525 F.2d 130 (2d Cir. 1975)