omitted). It applies to

“preclude[] a claim when there has been a full and fair opportunity to litigate issues

arising out of that claim.” 

omitted).




                                          -6-
       B. Mascarenas’s Issues on Appeal

       Mascarenas argues on appeal that the district court’s decision was wrong for

the following reasons: (1) following removal of the second suit to federal court, the

state district court in the first suit lacked jurisdiction to adjudicate or preclude

Mascarenas’s damage claims; (2) the City agreed to and acquiesced in a separate

damages case; (3) the second suit falls within the declaratory judgment exception to

claim preclusion; (4) New Mexico law authorizes a separate action for damages

during or following an administrative appeal; (5) there was no final judgment in the

first suit; (6) policy reasons do not support claim preclusion; (7) the damage claims

relating to Mascarenas’s vendor status are not entirely the same transaction as the

ITP process; (8) Mascarenas did not have a full and fair opportunity to litigate its

damages claims in state court; and (9) the federal court should have abstained under

the Younger doctrine. We address each of Mascarenas’s issues in turn.

              1. Removal of the Second Suit to Federal Court Did Not Oust the
                 State Court of Jurisdiction to Resolve the First Suit

       Mascarenas argues that removal of the second suit to federal court eliminated

the state court’s jurisdiction in the first suit and that, because no final judgment had

been entered in the first suit at the time of removal, there was no basis for the federal

court’s claim preclusion decision. We disagree. Removal of a state court case to

federal court takes that case out of the state court’s reach unless and until it is

returned to the state court. See 28 U.S.C. § 1446(d) (“Promptly after the filing of

such notice of removal . . . the defendant . . . shall . . . file a copy of the notice with

                                            -7-
the clerk of such State court, which shall effect the removal and the State court shall

proceed no further unless and until the case is remanded.”). But Mascarenas’s first

suit was not and could not have been removed to federal court (because it contained

no federal claim), and the state court properly proceeded to complete its work on that

case and enter final judgment.

              2. The City Did Not Acquiesce to a Second Suit

       The Restatement (Second) of Judgments § 24(1) (1982) explains the general

rule concerning “claim splitting”:

       When a valid and final judgment rendered in an action extinguishes the
       plaintiff’s claim pursuant to the rules of merger or bar . . . the claim
       extinguished includes all rights of the plaintiff to remedies against the
       defendant with respect to all or any part of the transaction, or series of
       connected transactions, out of which the action arose.

       According to Mascarenas, “the City agreed that the damages claims could and

should proceed as a separate case by removing the damages case to federal court.”

Aplt. Opening Br. at 11. Mascarenas cites the Restatement (Second) of Judgments

§ 26(1) (1982), which provides: “When any of the following circumstances exists,

the general rule [against claim splitting] does not apply to extinguish the claim . . . :

(a) The parties have agreed in terms or in effect that the plaintiff may split his claim,

or the defendant has acquiesced therein.” As explained further, “[a] main purpose of

the general rule [against claim splitting] is to protect the defendant from being

harassed by repetitive actions based on the same claim. The rule is thus not




                                           -8-
applicable where the defendant consents, in express words or otherwise, to the

splitting of the claim.” 
Id. cmt. a.

       Mascarenas’s 
argument fails because the City did not consent to claim

splitting. At the hearing in the first suit held shortly after the second suit had been

filed, the City told Mascarenas and the court that it intended to assert claim

preclusion as a defense,3 hardly consent or acquiescence to the second suit—indeed,

just the opposite.

              3. The Second Suit Does Not Come Within the Declaratory Judgment
                 Exception to Claim Preclusion

       New Mexico recognizes the declaratory judgment exception to the application

of res judicata. See Principal Mut. Life Ins. Co. v. Straus, 
863 P.2d 447
, 451

(N.M. 1993) (holding that following a suit for declaratory judgment that was limited

in scope solely to a determination of liability, “[r]equests for damages may then be

pursued in separate litigation as supplemental relief under the Declaratory Judgment




       3
         Mascarenas also argues that “the City’s defense of res judicata was raised
before the state district court made its June 20, 2011 Order and Judgment, and thus
the defense was premature and of uncertain meaning, because there was no final
decision.” Aplt. Opening Br. at 12. Mascarenas cites no authority for this
proposition, and we have found nothing directly on point. We note, however, that the
City did not file its motion for summary judgment in the federal court suit until after
the state court entered its final order in the first suit. As such, when the federal
district court ruled on claim preclusion, there was a final judgment in the first suit,
thus satisfying one of the elements of claim preclusion under New Mexico law that
there is a final judgment in the first suit. See Kirby, 
231 P.3d 87
, 105 (N.M. 2010).



                                           -9-
Act, Section 44-6-9, or through other legal action,” citing Restatement (Second) of

Judgments § 33 cmt. c (1982).

       But the comments to § 33 make clear that the exception applies where the only

relief sought is declaratory relief:

       When a plaintiff seeks solely declaratory relief, the weight of authority
       does not view him as seeking to enforce a claim against the defendant.
       Instead, he is seen as merely requesting a judicial declaration as to the
       existence and nature of a relation between himself and the defendant.
       The effect of such a declaration, under this approach, is not to merge a
       claim in the judgment or to bar it. Accordingly, regardless of the
       outcome, the plaintiff or defendant may pursue further declaratory or
       coercive relief in a subsequent action.

Id. cmt. c.

       The 
district court correctly concluded that Mascarenas brought claims for

injunctive relief in the first suit and that those claims therefore disqualified the

second suit from the declaratory judgment exception. See 18A Charles A. Wright,

Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4446, at

313-14 (“So long as the request for declaratory relief is combined or followed with

coercive relief, the claim-preclusion rules that apply to actions for coercive relief

apply with full force.”).

              4. New Mexico Law Does Not Provide for a Separate Damages Action
                 During or Following an Administrative Appeal if Claim Preclusion
                 Otherwise Applies

       Mascarenas argues that “New Mexico law contemplates and allows separate

damages cases during or following judicial review actions under New Mexico’s

particular constitutional scheme.” Aplt. Opening Br. at 22. He cites several New

                                          - 10 -
Mexico Supreme Court and Court of Appeals cases, but not one is on point. Those

cases hold that declaratory judgment actions and appellate review of administrative

acts are subject to the same filing deadlines. See, e.g., Smith v. City of Santa Fe,

171 P.3d 300
, 307 (N.M. 2007) (holding that a party who wishes to challenge an

administrative act may do so through a declaratory judgment action provided that the

action is filed within the time frame for seeking appellate review). But this shared

filing deadline does not affect the issue here: whether Mascarenas could have and

should have filed its damage claims in the first suit to protect against the application

of res judicata. The City is correct that Mascarenas could have and should have

asserted its damage claims in the first suit. See Strickland v. City of Albuquerque,

130 F.3d 1408
, 1413 n. 6 (10th Cir. 1997) (holding that New Mexico case law did not

preclude the plaintiff from asserting damages claims in his petition for review of a

decision of the City’s personnel board, and as such, res judicata barred the plaintiff

from bringing a § 1983 suit in federal court).

              5. The State Court Entered a Final Judgment on the Merits in the
                 First Suit

       Mascarenas argues that there was no final judgment in the first suit because

there were unresolved damage claims. This argument is factually incorrect because

Mascarenas did not bring any damage claims in the first suit. We similarly reject the

argument that “if [the court] in the first state court case had jurisdiction over the

damages claims, . . . [the first judgment] was not final because the damage claims



                                          - 11 -
were open and pending.” Aplt. Opening Br. at 23. Again, this argument rests on the

fiction that Mascarenas had filed damages claims in the first suit.

      Mascarenas’s citations for its argument are distinguishable because they

concern cases where damage claims were filed and were unresolved, and thus there

was no final judgment. See, e.g., Bd. of Trs. of Vill. of Los Ranchos de Albuquerque

v. Sanchez, 
101 P.3d 339
, 341 (N.M. 2004) (“New Mexico courts adhere to the rule

that an order or judgment is not final for purposes of appeal if the issue of damages is

outstanding.”). Although we acknowledge the general rule that a judgment may not

be final if a damages claim has not been resolved, there was no unresolved damage

claim in the first suit because no such claim was brought.4

             6. Policy Considerations Support the Application of Claim Preclusion

      Mascarenas argues that policy reasons should preclude claim preclusion of its

damages claims because the full extent of damages may not be known at the time of

an administrative appeal. In this case, according to Mascarenas, “[t]he federal

district court’s preclusion decision leaves [it] in the unfortunate circumstances of


      4
        Mascarenas faults the district court for its reliance on Hatch v. Boulder Town
Council, 
471 F.3d 1142 
(10th Cir. 2006), primarily because that case was “decided
with reference to Utah law.” Aplt. Opening Br. at 23. Hatch held that “Utah follows
the general rule that a dismissal for lack of jurisdiction does not bar another action by
the plaintiff on the same 
claim.” 471 F.3d at 1148
, citing Restatement (Second) of
Judgments § 20(1)(a) (1982). Given that New Mexico follows the Restatement, we
conclude that where there is a “final judgment . . . on one of [Mascarenas’s]
claims, . . . the [New Mexico] courts would conclude that the judgment had a
preclusive effect as to any claims that should have been brought, but were not.”
Hatch, 471 F.3d at 1148
.


                                         - 12 -
having no remedy for the City’s illegal ITP process.” Aplt. Opening Br. at 25. We

disagree. Mascarenas could have avoided claim preclusion had it included its

damages claims in its first suit, moved to consolidate its state court suits, or

dismissed the second suit and moved to amend its petition in the first suit.

Mascarenas had adequate time and opportunity to avoid claim preclusion after the

City announced its intention to raise claim preclusion as an affirmative defense in the

second suit. We further reject the argument that the prospect of claim preclusion

forced Mascarenas to file its damage claims in haste and before the expiration of the

statute of limitations. Mascarenas filed its damages suit before the first suit had been

resolved and before the City raised the defense of claim preclusion.

             7. The Damage Claims in the Second Suit Arise From the Same
                Transaction in the First Suit

      “The New Mexico Supreme Court has adopted the rules set forth in

Restatement (Second) of Judgments Sections 24 and 25 for defining the scope of a

‘claim’ or ‘cause of action’ that is barred by a prior judgment.” 
Strickland, 130 F.3d

at 1411
, citing Three Rivers Land Co. v. Maddoux, 
652 P.2d 240
, 245 (1982),

overruled in part on other grounds by Universal Life Church v. Coxon, 
728 P.2d 467
,

469 (1986). Section 24(2) provides:

      What factual grouping constitutes a ‘transaction’, and what groupings
      constitute a ‘series’, are to be determined pragmatically, giving weight
      to such considerations as whether the facts are related in time, space,
      origin, or motivation, whether they form a convenient trial unit, and
      whether their treatment as a unit conforms to the parties’ expectations or
      business understanding or usage.


                                          - 13 -
       Against this backdrop, Mascarenas argues that its second suit did not arise out

of the transaction that was at issue in its first suit for judicial review of the City’s ITP

process:

             Before the City’s ITP process was undertaken, [Mascarenas] had
       an ongoing relationship with the City, contractual or otherwise, under
       which [Mascarenas] offered voluntary insurance products to City
       employees. . . . During the ITP process [Mascarenas’s] relationship was
       severed. . . .

             [Mascarenas] thus has two types of damages claims: 1) as an
       authorized vendor, whose relationship was severed wrongfully during
       the ITP process; and 2) as a disappointed bidder under the ITP.

              The facts concerning [Mascarenas’s] claims for damages for
       breach of the vendor relationship overlap in some respects but also are
       different from the facts involved in the ITP process itself.

Aplt. Opening Br. at 26.

       We disagree with this argument. Viewed under the Restatement factors, the

facts underlying the two suits are part of the same transaction. First, the facts are

related in time, space, and origin because Mascarenas’s relationship with the City

was severed at the same time it was not selected as a vendor under the ITP.

Non-selection severed the former relationship while also rejecting Mascarenas as a

vendor. Next, nothing prevented what Mascarenas has described as “two types of

damages claims,” Aplt. Opening Br. at 26, from being resolved in a single trial. Last,

although there is not a business understanding or usage in this case, the City made its

expectations clear by informing Mascarenas that it would seek to bar the second suit

on the grounds of claim preclusion.


                                           - 14 -
       Also supporting our conclusion that the first and second suits here arose from

the same transaction is

       [t]he present trend is to see claim in factual terms and to make it
       coterminous with the transaction regardless of the number of substantive
       theories, or variant forms of relief flowing from those theories, that may
       be available to the plaintiff; regardless of the number of primary rights
       that may have been invaded; and regardless of the variations in the
       evidence needed to support the theories or rights.

Restatement (Second) of Judgments § 24, cmt. a. (1982). See also 
id., cmt. c

(“That 
. . . different legal theories . . . may apply to a given episode does not create

multiple transactions and hence multiple claims. This remains true although the

several legal theories depend on different shadings of the facts . . . or would call for

different measures of liability or different kinds of relief.”).

              8. Mascarenas Had a Full and Fair Opportunity to Litigate its Claims

       Mascarenas argues that it “could not litigate its damages claims in state court

following the City’s removal of those claims. Under the Restatement (Second) of

Judgments 26(1)(c), lack of subject matter jurisdiction constitutes an exception to the

general rule of claim preclusion.” Aplt. Opening Br. at 28. To be sure, when a court

lacks subject matter jurisdiction, its ruling on the merits is not afforded preclusive

effect in later cases. But here the state court would have had jurisdiction over the




                                           - 15 -
claims that Mascarenas attempted to bring in the second suit, and that is why the

second suit was precluded by res judicata.5

       Mascarenas’s argument that for res judicata to apply, the second suit had to

remain in state court, is also without merit. Federal courts often apply res judicata

based on state court judgments in cases either removed to or filed directly in federal

court. “The preclusive effect of a state court judgment in a subsequent federal

lawsuit generally is determined by the full faith and credit statute, 28 U.S.C. § 1738,

which directs a federal court to refer to the preclusion law of the State in which

judgment was rendered.” 
Brady, 538 F.3d at 1327 
(internal quotation marks

omitted).

              9. The Federal District Court Did Not Err in Failing to Abstain
                 Under Younger

       Mascarenas admits that it did not ask the district court to abstain under

Younger v. Harris, 
401 U.S. 37 
(1971). Mascarenas did not even raise this issue until

its reply brief in this appeal. We do not usually consider issues that were not raised

in the district court or consider arguments made for the first time in a reply brief.

However, we have said that “we can consider Younger abstention for the first time on

appeal,” Chapman v. Oklahoma, 
472 F.3d 747
, 749 (10th Cir. 2006), and we address

it briefly here.
       5
        See Strickland, 
130 F.3d 1412 
(holding that there was “no barrier” to a
plaintiff joining his claims under § 1983 to his state court action because “[t]he state
court would have had subject matter jurisdiction over the § 1983 claims,” citing
Martinez v. California, 
444 U.S. 277
, 283, n. 7 (1980).


                                          - 16 -
      Under Younger,

      [a] federal court must abstain from exercising jurisdiction when:
      (1) there is an ongoing state criminal, civil, or administrative
      proceeding, (2) the state court provides an adequate forum to hear the
      claims raised in the federal complaint, and (3) the state proceedings
      involve important state interests, matters which traditionally look to
      state law for their resolution or implicate separately articulated state
      policies.

Brown ex rel. Brown v. Day, 
555 F.3d 882
, 887 (10th Cir. 2009) (internal

quotation marks omitted).

      According to Mascarenas, “all three Younger considerations are met

[because] [a]t the time of removal, the first state court proceeding was

ongoing, and, arguably, that proceeding still is ongoing as the damages claims

are outstanding and under New Mexico law the state district court’s decision is

not final until the damages claims are resolved.” Aplt. Reply Br. at 9-10.

      Mascarenas’s argument lacks merit. The first suit is not ongoing.

When the federal court ruled that res judicata barred the second suit, the first

suit had been fully adjudicated. Indeed, the federal court took no action and

the City did not move for summary judgment until after the first suit in state

court was final. Under those circumstances, Younger abstention was not

required. See D.L. v. Unified Sch. Dist. No. 497, 
392 F.3d 1223
, 1228

(10th Cir. 2004) (“The rationale for Younger abstention can be satisfied,

however, by just staying proceedings on the federal damages claim until the

state proceeding is final.”); see also Edwards v. Illinois Bd. of Admissions to


                                         - 17 -
the Bar, 
261 F.3d 723
, 727-28 (7th Cir. 2001) (holding that application of the

Younger doctrine was not appropriate because the state proceedings concluded

between issuance of district court’s order and the appellate court’s decision

reviewing the district court’s order); National Pharms. v. De Melecio,

221 F.3d 235
, 240 (1st Cir. 2000) (“A federal court cannot be expected to

defer to local proceedings that either no longer exist . . . .”).

       The judgment of the district court is AFFIRMED.

                                                    Entered for the Court


                                                    Scott M. Matheson, Jr.
                                                    Circuit Judge




                                           - 18 -