“One Bite at the Apple” – The Tenth Circuit’s New Rule on Claim Preclusion When a Plaintiff Declines to Plead Existing Diversity Jurisdiction (Markley v. U.S. Bank N.A.)

1. Introduction

In Markley v. U.S. Bank National Association, No. 24-1163 (10th Cir. 2025), the Tenth Circuit confronted a recurring litigation tactic: splitting federal and state claims arising from the same transaction into successive lawsuits. The Court held— for the first time in this circuit— that a plaintiff who could have invoked diversity jurisdiction in a prior federal action, but chose not to, is barred by claim preclusion (res judicata) from bringing those state claims in a subsequent suit.

The decision tightens the screws on plaintiffs who attempt to reseat dismissed pendant state-law claims in a new forum after the federal portion of their case has been resolved. Practitioners must now treat diversity jurisdiction as a “use-it-or-lose-it” tool whenever they plan to assert both federal and state causes of action.

2. Summary of the Judgment

• Parties. Plaintiff-Appellant Darren Markley, a Colorado employee; Defendant-Appellee U.S. Bank, a national bank headquartered in another state.
• Prior suit (Markley I). Filed in federal court on an ADEA claim (federal question) and a Colorado wrongful-termination claim (supplemental jurisdiction). The district court granted summary judgment to U.S. Bank on the ADEA claim and dismissed the state claim without prejudice after declining supplemental jurisdiction. Markley did not pursue diversity jurisdiction in that suit.
• Second suit (Markley II). Markley re-filed the state claim in Colorado state court; U.S. Bank removed to federal court (diversity) and moved to dismiss on res judicata grounds.
• District court ruling. Dismissed Markley II, holding that Markley could have litigated the state claim in Markley I by alleging diversity; therefore claim preclusion applied.
• 10th Circuit holding. Affirmed. Summary judgment on the federal ADEA claim constituted a final judgment on the cause of action; failure to allege available diversity jurisdiction foreclosed later litigation of any claims arising from the same operative facts.

3. Analysis

3.1 Precedents Cited

The panel leaned heavily on out-of-circuit and Colorado state authority, signaling a new, harmonized federal rule:

• Maher v. GSI Lumonics, Inc., 433 F.3d 123 (1st Cir. 2005) – The leading case; identical procedural posture; diversity could have been alleged but was not. The First Circuit ruled res judicata barred the later state suit.
• Shaver v. F.W. Woolworth Co., 840 F.2d 1361 (7th Cir. 1988) – Seventh Circuit’s concurrence that res judicata applies when diversity was available but unused.
• Dalal v. Alliant Techsystems, Inc., 934 P.2d 830 (Colo. App. 1996) – Colorado’s own endorsement of the same principle.
• Foundational Tenth Circuit res judicata authorities: MACTEC v. Gorelick, Plotner v. AT&T Corp., Lenox MacLaren v. Medtronic, Wilkes v. Wyoming Dep’t of Employment.
• Distinguished cases on non-merits dismissals (e.g., Stewart Sec. Corp. v. Guaranty Tr.)

3.2 Legal Reasoning

1. Elements of Claim Preclusion. The Court reaffirmed that res judicata requires:
   1. Final judgment on the merits;
   2. Same parties or privies;
   3. Same cause of action (same transaction or nucleus of facts).
2. Final Judgment Met. Markley’s ADEA claim was adjudicated via summary judgment—an adjudication “on the merits.” Although the state claim was dismissed without prejudice, the action (the employment-termination dispute) reached final judgment because at least one claim from that nucleus was decided on the merits.
3. Could-Have-Been-Brought Test. The Court adopted and crystalised the rule that when diversity jurisdiction existed and was knowable, the plaintiff “could have” litigated the state claim in the same federal action. The strategic decision not to plead diversity is treated as claim-splitting, triggering preclusion.
4. Policy Foundations. Emphasis on judicial economy, finality, and avoidance of forum shopping. The opinion repeatedly invoked the colloquial aphorism: litigants get only “one bite at the apple.”
5. Rebuttal to Plaintiff’s Arguments. The Court rejected:
   • The notion that a dismissal without prejudice of a single claim immunizes that claim from res judicata where another claim in the same suit was finally adjudicated.
   • The contention that district courts bear a sua sponte duty to invoke unpleaded diversity jurisdiction.
   • The “party presentation” objection, ruling courts may apply correct law even on theories not fully elaborated by the parties.

3.3 Impact of the Decision

Short-Term:

• Plaintiffs in the Tenth Circuit must now plead every available jurisdictional basis—particularly diversity—if they wish to preserve state claims in a single proceeding.
• Defense counsel gain a potent res judicata defense when plaintiffs attempt a second bite in state court.

Long-Term/Systemic:

• Forum-Shopping Curtailment. Plaintiffs can no longer gamble on supplemental jurisdiction, abandon the state claim, and then seek a perceived “friendlier” state forum.
• Litigation Efficiency. District courts may see fewer serial lawsuits; parties must consolidate claims up front.
• Strategic Pleading Shifts. Employment-law and civil-rights plaintiffs who once avoided diversity (to stay in state court later) must reassess complaint ‑drafting. Lawyers must explain to clients that a single, comprehensive federal action is mandatory when diversity is present.
• Precedential Ripple. The “Markley Rule” will likely influence other circuits lacking clear authority, given its alignment with the First and Seventh Circuits and a state intermediate court.

4. Complex Concepts Simplified

• Claim Preclusion (Res Judicata): A rule that prohibits re-litigating claims that were—or could have been—raised in an earlier case that has ended with a final judgment.
• Issue Preclusion (Collateral Estoppel): Narrower; bars re-litigating specific issues actually decided previously. Not at issue here.
• Diversity Jurisdiction: Federal courts may hear state-law claims when the plaintiff and defendant are citizens of different states and the amount in controversy exceeds $75,000. Parties must plead it; courts need not raise it sua sponte.
• Supplemental Jurisdiction (§ 1367): Permits federal courts to hear state claims “so related” to a federal claim; but is discretionary—courts often decline once the federal claim is resolved.
• Dismissal Without Prejudice: Termination of a claim or case that does not bar re-filing. Yet, if other claims in the same lawsuit are decided on the merits, the overall cause of action may still be precluded.
• Party Presentation Principle: Courts usually decide only the theories the parties present, but may apply the correct law sua sponte when the issue itself is before the court.

5. Conclusion

The Tenth Circuit’s decision in Markley v. U.S. Bank N.A. sets a bright-line precedent: plaintiffs who knowingly forego diversity jurisdiction in an initial federal suit cannot resurrect state-law claims from the same factual nucleus in a later action. The ruling promotes finality and thwarts forum-shopping by collapsing what was once a maneuverable jurisdictional gap. Practitioners should treat diversity jurisdiction as an essential pleading consideration—failure to invoke it may forever waive parallel state claims. In the broader landscape, Markley strengthens the national trend toward a single-forum, single-suit model for disputes arising from unified factual events, reinforcing the age-old doctrine that litigation—like apples—offers only one bite.