In Prof'l Mgmt. Assocs. v. KPMG, LLP, 345 F.3d 1030 (8th Cir. 2003) (per curiam), the plaintiff used its proposed second amended complaint, which the district court had denied leave to file, as the basis for a second lawsuit.
Both suits were dismissed by the district court. The district court also denied in the second lawsuit the defendant's motion for sanctions pursuant to Federal Rule of Civil Procedure 11(b). The defendant appealed the denial of that motion, and the plaintiff cross-appealed the dismissal of the action.
The Eighth Circuit concluded that the denial of leave to amend in the first action barred the second action, and that the plaintiff should have been sanctioned for filing a frivolous lawsuit:
The denial of a motion to amend a complaint in one action is a final judgment on the merits barring the same complaint in a later action. "Denial of leave to amend constitutes res judicata on the merits of the claims which were the subject of the proposed amended pleading." King v. Hoover Group, Inc., 958 F.2d 219, 222-23 (8th Cir. 1992). This is so even when denial of leave to amend is based on reasons other than the merits, such as timeliness. Northern Assurance Co. v. Square D Co., 201 F.3d 84, 88 (2d Cir. 2000); Poe v. John Deere Co., 695 F.2d 1103, 1107 (8th Cir. 1982). Thus, the fact that the district court denied leave to amend because of the plaintiff's noncompliance with procedural rules is irrelevant. The denial is a judgment on the merits of the claims in the proposed amended pleading. Thus, the denial of leave to amend in the first lawsuit bars the filing of the same pleading in this second lawsuit.
As for the Rule 11 issue, we have held a district court abuses its discretion by refusing to sanction a plaintiff and his counsel under Rule 11 for filing and maintaining a frivolous lawsuit when the plaintiff seeks to relitigate claims he had been denied leave to serve against the same defendant in an earlier lawsuit. Given the well-settled law of res judicata under the circumstances in this case, the plaintiffs counsel should have known the second lawsuit was barred by the first. The district court thus abused its discretion in declining to sanction the plaintiff. (Id. at 1032-33.)