Cycles, Ltd. v. Navistar Financial Corp.

Cycles, Ltd. (plaintiff) leased tractor trailers to W. J. Digby until their deal fell apart. Cycles had financed the purchase of the trailers it leased to Digby with Navistar Financial Corp. (defendant), which eventually transferred the trailers’ certificates of title to Digby in exchange for full payment on the note. Digby refused to return the trailers to Cycles. Cycles originally sued Digby in the United States District Court for the Southern District of Mississippi for conversion, but that case was later vacated for want of personal jurisdiction over Digby. Cycles next sued Navistar in the United States District Court for the Southern District of Mississippi for conversion. The district court first ruled for Cycles, finding that because Digby’s possession of the trailers was tortious, so too was Navistar’s delivery of the trailers’ certificates to Digby. But after Navistar’s post-judgment motions, the Mississippi district court refrained from entering final judgment while it awaited the outcome of Cycles’s subsequent conversion suit against Digby in the United States District Court for the Eastern District of Arkansas. The Arkansas district court did not agree with the Mississippi district court and found no conversion and instead ruled for Digby. Thereafter, believing it was compelled to do so given the Arkansas district court’s decision, the Mississippi district court revised its original decision for Cycles and entered judgment for Navistar. The Mississippi district court ruled that principles of res judicata (claim preclusion) and collateral estoppel (issue preclusion), via the Arkansas district court decision finding no conversion of the trailers by Digby, required it to reverse its original and now inconsistent judgment and enter judgment for Navistar. Cycles appealed and argued that, notwithstanding the nonappealability of the Mississippi district court’s original judgment in Cycles’s favor, the judgment was nevertheless final for preclusion purposes and the Arkansas district court’s later inconsistent judgment did not require the Mississippi district court to revise its previous judgment.