Rexing Quality Eggs v. Rembrandt Enterprises, Inc.

Summary

**Key Legal Topics:** Claim splitting; res judicata (claim preclusion); Indiana law; diversity jurisdiction; conversion; continuing tort exception. **Holding:** The Seventh Circuit affirmed dismissal of a second lawsuit (tort claims for conversion and deception) because it violated Indiana's prohibition on claim splitting. The court held that the claims arose from the same transaction or occurrence as the earlier breach-of-contract action, that Rexing knew of the disputed shipping materials at the time of the first suit, and that conversion is not a continuing tort exempt from the claim-splitting bar. Under *Semtek*, federal courts apply state law (here Indiana) as federal common law when determining the preclusive effect of a prior diversity judgment.

Holdings

1. The district court applied the correct test. The 'identical evidence' test under Indiana law requires only that the same general evidence would be used to adjudicate all claims, not that the evidence be exactly identical.
2. The rule applies because Rexing knew about the EggsCargoSystem at the time of Rexing I and had already demanded its return. No material unknown facts later came to light.
3. Conversion is not a continuing tort within the meaning of Restatement § 26(1)(e) for claim-splitting purposes. Indiana law does not recognize such an exception.

Questions Presented

1. Whether the district court applied the correct test under Indiana law for claim splitting.
2. Whether the rule against claim splitting applies to claims based on facts that were unknown at the time of the first lawsuit.
3. Whether conversion is a continuing tort that is exempt from the rule against claim splitting.

Disposition

affirmed