If Two Claims Do Not Arise Out of the Same Factual Allegations Then Can One of the Claims Be Barred by Res Judicata

In Colonial Penn Life Insurance Co. v. Hallmark Insurance Administrators, Inc., 31 F.3d 445 (7th Cir. 1994), Hallmark sued Colonial Penn for breach of contract after Colonial Penn backed out of an agreement to issue and underwrite a new type of insurance policy that Hallmark would administer. A jury returned a $ 2.5 million verdict in Hallmark's favor. In the meantime, Hallmark defaulted on a $ 1.5 million bank loan that was guaranteed by Colonial Penn. Colonial Penn made good on the loan then sued Hallmark for reimbursement. The district court entered summary judgment in favor of Colonial Penn for the amount of the loan plus fees and interest. On appeal, Hallmark contended that Colonial Penn's action was barred by res judicata. The court of appeals disagreed, holding that the two claims did not arise out of the same factual allegations because Colonial Penn did not allege in the first case that Hallmark defaulted on the loan or that Colonial Penn paid on the guaranty. Colonial Penn, 31 F.3d at 447.