Success Motivation Institute of Japan Ltd. v. Success Motivation Institute Inc.

The late husband of Iris Lombardi (plaintiff) purchased an exclusive franchise from Success Motivation International, Inc. (SMI) (defendant) to sell and distribute SMI’s motivational records and literature in Japan. Lombardi’s late husband formed Success Motivation Institute of Japan (SMIJ) and served as SMI’s franchisee in Japan until he died in 1983. At that point, Lombardi took over SMIJ’s operations. Lombardi alleged that soon thereafter, SMI’s owner, Paul J. Meyer (defendant), demanded that the royalties payable to his company be doubled and threatened to run Lombardi out of business by canceling the SMIJ franchise agreement and setting up a competing business. Feeling she had no choice, Lombardi agreed to sell SMIJ to Meyer. Even though the agreement was executed by Meyer, several details were never finalized, and he did not make any payments to Lombardi under the agreement. Lombardi attempted to take the company back, and Meyer obtained an injunction from a Japanese court directing Lombardi to cease interfering in SMIJ’s business. Lombardi filed suit in United States federal district court, asserting various claims against SMI and Meyer. SMI and Meyer moved for summary judgment. The district court granted summary judgment in favor of SMI and Meyer based on res judicata. In analyzing whether the elements of res judicata were satisfied, the district court applied the federal law of the Fifth Circuit. Lombardi appealed to the Fifth Circuit.