8 Respect for Judgments
8.1 Claim Preclusion
When a case is over and appeals are exhausted, the result is a judgment. A judgment is an order from a court stating who won and who lost. Unlike untested claims, judgments have the force of law. A victorious party can enforce a judgment against a losing party to take property, garnish wages, or force compliance on pain of contempt. Judgments don’t just benefit victorious plaintiffs, though; they also protect victorious defendants from having to fend off an identical lawsuit all over again.
Doctrines of former adjudication protect the finality of judgments by preventing parties from relitigating claims or issues that have already been adjudicated. We will study two such doctrines in some depth: claim preclusion (formerly known as res judicata) and issue preclusion (formerly known as collateral estoppel). It is critical that you pay attention to the similarities and differences between these two doctrines. It is also important to beware that the rules of claim and issue preclusion have changed over time; the general trend is to give greater preclusive effect than has been true in the past.
We begin with claim preclusion, which bars relitigation of claims between the same parties. In recent decades, claim preclusion grew to bar claims that could have been but were not brought in a prior suit. The next case shows some of the scars of that change.
Frier v. City of Vandalia, Ill.
EASTERBROOK, J.
The City of Vandalia is fairly small (the population is less than 2,500), and apparently its police have maintained informal ways. When Charles Frier parked one of his cars in a narrow street, which forced others to drive on someone else’s lawn to get around Frier’s car, the police left two notes at Frier’s house asking him to move the car. That did not work, so an officer called a local garage, which towed the car back to the garage. The officer left a note, addressed to “Charlie,” telling him where he could find the car. The officer did not issue a citation for illegal parking, however; he later testified that he wanted to make it easier for Frier to retrieve the car.
Frier balked at paying the $10 fee the garage wanted. He also balked at keeping his cars out of the street. The police had garages tow four of them in 1983—a 1963 Ford Falcon, a 1970 Plymouth Duster, a 1971 Opal GT, and a 1971 Dodge van. Instead of paying the garages, Frier filed suits in the courts of Illinois seeking replevin. Each suit named as defendants the City of Vandalia and the garage that had towed the car.
One of the suits (which sought to replevy two cars) was dismissed voluntarily when Frier got his cars back. We do not know whether he paid for the tows and the subsequent daily storage fees or whether the garage thought it cheaper to surrender the cars than to defend the suit. The other two cases were consolidated and litigated. The police testified to the circumstances under which they had called for the tows. The court concluded that the police properly took the cars into the City’s possession to remove obstructions to the alley, and it declined to issue the writ of replevin because the City had the right to remove the cars from the street. Frier then retrieved another car;1 so far as we can tell, a garage still has the 1970 Plymouth Duster.
After losing in state court, Frier turned to federal court. His [federal] complaint maintained that the City had not offered him a hearing either before or after it took the cars and that it is the “official policy” of the City not to do so. The complaint invoked the Due Process Clause of the Fourteenth Amendment and 42 U.S.C. § 1983, and it sought equitable relief in addition to $100,000 in compensatory and $100,000 in punitive damages. The district court, after reviewing the transcript of the replevin action, dismissed the complaint for failure to state a claim on which relief may be granted. (Because the judge considered the transcript he should have treated the motion to dismiss as one for summary judgment. We analyze the decision as if he had done so.) The court found that Frier had notice of each tow and knew how to get his cars back. Frier also had a full hearing in the replevin action on the propriety of the tows. Although the judicial hearing came approximately one month after the tows, the court thought the delay permissible.
A month is a long wait for a hearing when the subject is an automobile. The automobile is “property” within the meaning of the Due Process Clause, and the City therefore must furnish appropriate process. Sutton v. City of Milwaukee, 672 F.2d 644 (7th Cir. 1982), holds that a hearing is not necessary before the police tow a car but suggests that one must be furnished promptly after the tow. Sutton also suggests, in line with many other cases, that the City must establish the process and tender an opportunity for a hearing; it may not sit back and wait for the aggrieved person to file a suit.
The City, for its part, maintains that a few isolated tows without hearings are not the “policy” of the City and may not be imputed to it, and that anyway a month’s delay in holding a hearing about seized property is permissible. […]
A court ought not resolve a constitution[al] dispute unless that is absolutely necessary. Here it is not. Frier had his day in court in the replevin action. The City has argued that this precludes further suits. (The City raised this argument in the motion to dismiss, which is irregular but not fatally so. See Fed. R. Civ. P. 8(c).) The district court bypassed this argument because, it believed, Frier could not have asserted his constitutional arguments in a replevin action. This is only partially correct.
Frier could not have obtained punitive damages or declaratory relief in a suit limited to replevin. But he was free to join one count seeking such relief with another seeking replevin. See Welch v. Brunswick Corp., 10 Ill. App. 3d 693 (1st Dist. 1973), rev’d in part on other grounds, 57 Ill. 2d 461 (1974); Hanaman v. Davis, 20 Ill. App. 2d 111 (2d Dist. 1959), both of which allow one count seeking replevin to be joined with another count seeking different relief. As we show below, the law of Illinois, which under 28 U.S.C. § 1738 governs the preclusive effect to be given to the judgment in the replevin actions, would bar this suit. The City therefore is entitled to prevail on the ground of claim preclusion, although the district court did not decide the case on that ground.
Illinois recognizes the principles of claim preclusion (also called res judicata or estoppel by judgment). Jones v. City of Alton, 757 F.2d 878, 884–85 (7th Cir. 1985) (summarizing the law of preclusion in Illinois). One suit precludes a second “where the parties and the cause of action are identical.” “Causes of action are identical where the evidence necessary to sustain a second verdict would sustain the first, i.e., where the causes of action are based upon a common core of operative facts.” Two suits may entail the same “cause of action” even though they present different legal theories, and the first suit “operates as an absolute bar to a subsequent action … ‘not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose.’” […]
The City was a defendant in each replevin action. Frier could have urged constitutional grounds as reasons for replevin. He also could have joined a constitutional claim seeking punitive damages and declaratory relief to his demand for replevin, and therefore he had a full and fair opportunity to litigate […] . The actions also involve both the same “common core of operative facts” and the same transactions. Frier argues that the City towed his cars wrongfully. Each complaint seeking replevin asserted [that] Frier owned each car and that it had not been “seized under lawful process”—in other words, that there had been no citation and no hearing at which anyone had found that the cars were illegally parked. The replevin statute requires a plaintiff to show that the property was taken without “lawful process.” Ill. Rev. Stat., ch. 110, § 19-104. “Process,” even in its technical sense, initiates or follows a hearing. Had there been process and a hearing at which a magistrate found the cars to have been illegally parked, Frier would have had no claim for replevin no matter how strongly he contested the substantive issue. The “operative facts” in the replevin and § 1983 actions therefore are the same. Frier urges that he owned the car (the property interest) and that the City did not offer him a hearing to adjudicate the legality of his parking (the absence of due process).
The replevin actions diverged from the path of this § 1983 suit only because the state judge adjudicated on the merits the propriety of the seizures. Having found the seizures proper, the judge had no occasion to determine whether the City should have offered Frier an earlier hearing. But this divergence does not mean that the two legal theories require a different “core of operative facts.” […]
To the extent there is any doubt about this, we look […] to the purpose of doctrines of preclusion. Claim preclusion is designed to impel “parties to consolidate all closely related matters into one suit.” This prevents the oppression of defendants by multiple cases, which may be easy to file and costly to defend. There is no assurance that a second or third case will be decided more accurately than the first and so there is no good reason to incur the costs of litigation more than once. When the facts and issues of all theories of liability are closely related, one case is enough. Here the replevin theory contained the elements that make up a due process theory, and we are therefore confident that the courts of Illinois would treat both theories as one “cause of action.” The final question is whether it makes a difference that only two of the replevin actions went to judgment, while here Frier challenges the towing of four cars. Under Illinois law the answer is no. The defendant may invoke claim preclusion when the plaintiff litigated in the first suit a subset of all available disputes between the parties. See Baird & Warner, Inc. v. Addison Industrial Park, Inc., 70 Ill. App. 3d 59 (1st Dist. 1979), which holds that a suit on three of six disputed parcels of land precludes a subsequent suit on all six. We doubt that Illinois would see difference between three lots out of six and two cars out of four.
If Frier had filed the current suit in state court, he would have lost under the doctrine of claim preclusion. Under 28 U.S.C. § 1738 he therefore loses in federal court as well.
AFFIRMED.
SWYGERT, Senior Circuit Judge, concurring in the result.
In my view, the majority has simply applied the wrong analysis to the problem at hand. Rather than trying to squeeze a res judicata solution into a mold that does not fit, I would review the facts to determine whether Frier’s procedural due process claims could withstand a summary judgment motion. Because I believe the City was entitled to summary judgment, I concur in the result.
I
In determining whether the disposition of a claim in State court precludes a subsequent suit on the same claim in federal court, the federal court must apply the State’s law of res judicata. Because Illinois continues to adhere to the narrow, traditional view of claim preclusion, as opposed to the broader approach codified in the Restatement (Second) of Judgments §§ 24, 25 (1982), I would hold that Frier’s substantive traffic law claim does not preclude this subsequent procedural due process claim. Under the more modern view of the new Restatement, all claims arising from a single “transaction”—broadly defined to include matters related in time, space, origin, and motivation—must be litigated in a single, initial lawsuit, or be barred from being raised in subsequent litigation. There was only one transaction in the case at bar: the seizure of Frier’s cars. Accordingly, Frier should have raised both his substantive and procedural objections to the seizure in one initial lawsuit.
Illinois, however, has not adopted the view of the new Restatement.1 Rather, as the majority recognizes, the Illinois courts focus on the similarities between the causes of action alleged in both suits, not on whether there is a common factual transaction. One suit precludes a second “where the parties and the cause of action are identical.” Redfern v. Sullivan, 111 Ill. App. 3d 372, 444 N.E.2d 205, 208 (1983). “Causes of action are identical where the evidence necessary to sustain a second verdict would sustain the first, i.e., where the causes of action are based upon a common core of operative facts.” Id. […]
In sum, the common set of facts that must be shown to invoke Illinois’ doctrine of claim preclusion is defined as those facts necessary to sustain the cause of action, not as those facts that could be conveniently litigated in one lawsuit. This focus on the elements of the causes of action and the proofs at trial—rather than on the policy advantages of trying both actions in one suit—dooms any attempt to invoke claim preclusion in the case at bar. To be sure, both actions arise from the same seizure of the same cars. Yet, both the theory of recovery and focus of factual inquiry are dramatically different in each case. Frier’s replevin claim was substantive in nature; to replevy property, the claimant must show his superior possessory rights. Frier’s possessory rights turned on the legality of his parking. Because the trial court found that “the officer reasonably believed and had a right to believe that … [Frier’s] vehicle obstructed the free use and passage way of that street at that time,” it concluded that, therefore, Frier did not enjoy the “superior right to possession of the property” necessary to sustain a replevin action.
Frier’s procedural due process claim requires an entirely different factual showing. The legality or reasonableness of the seizure is irrelevant. Because of the “risk of error inherent in the truth-finding process,” an individual is entitled to certain procedural safeguards regardless of whether the deprivation of property was substantively justified. The focus of the inquiry, then, is the adequacy of procedures attending the seizure, not the seizure itself.
The majority urges that Frier could have joined a separate constitutional claim to his replevin action. This precise argument was rejected in Fountas, 455 N.E.2d at 204. […] Illinois law focuses on the similarities and differences between the various causes of action. That two wholly different causes of action arising out of the same transaction could be joined together as one convenient trial unit is irrelevant for the purposes of Illinois law, though this would be dispositive under the new Restatement.
II
It was established at Frier’s replevin trial that the City police caused various service station owners to tow four of Frier’s cars and, in lieu of a traffic citation, left written notice of the reason for the towing and the whereabouts of the cars. Frier eventually recovered two of his cars. Thus, the replevin action, and this action, concern only two of the cars. Frier could have recovered one of those cars immediately by paying a $10.00 towing fee to the owner of the service station that towed the car. However, Frier was informed that any further delay in reclaiming the car would result in a $2.50 per day storage charge. Frier was free to reclaim the other car without paying any fee. I would hold that, on the basis of these uncontested facts, the City was entitled to summary judgment against Frier’s procedural due process claim. […]
I would hold, then, that notice of towing, the availability of an expedited State tort suit that can make the petitioner whole, and the ability to reclaim the towed cars immediately at a cost of $10.00 together constitute adequate postdeprivation process as long as the $10.00 fee does not present a financial hardship. This holding would not necessarily conflict with recent decisions of other courts requiring more immediate and elaborate postdeprivation process. More elaborate process may well be required in those cases because the towing practices of the various municipalities were more burdensome on the respective petitioners: Immediate reclamation required significantly more than $10.00 and the litigants had standing to represent indigents who could afford no fee. We need not reach such troublesome issues in the case at bar.
I would find, as a matter of law, no procedural due process violation under these facts. Accordingly, I concur with the majority’s decision to affirm the judgment below.
Notes & Questions
With claim and issue preclusion, it is useful to separate out the two lawsuits at issue (and there will always be at least two if preclusion is involved).
What was Frier’s first lawsuit? Where was it filed? Who were the defendant(s)? What were Frier’s claims? Out of which facts did it arise? What elements did Frier have to prove in order to prevail?
What was Frier’s second lawsuit? Where was it filed? Who were the defendant(s)? What were Frier’s claims? Out of which facts did it arise? What elements did Frier have to prove in order to prevail?
Judges Easterbrook and Swygert reach the same result (Frier loses) via different paths. What do they disagree about? And what body of law do they review to reach their answers?
Taylor v. Sturgell
GINSBURG, J., delivered the opinion of the Court.
“It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.” Hansberry v. Lee, 311 U.S. 32, 40 (1940) [reprinted infra]. Several exceptions, recognized in this Court’s decisions, temper this basic rule. In a class action, for example, a person not named as a party may be bound by a judgment on the merits of the action, if she was adequately represented by a party who actively participated in the litigation. In this case, we consider for the first time whether there is a “virtual representation” exception to the general rule against precluding nonparties. Adopted by a number of courts, including the courts below in the case now before us, the exception so styled is broader than any we have so far approved. […]
We disapprove the doctrine of preclusion by “virtual representation,” and hold, based on the record as it now stands, that the judgment against Herrick does not bar Taylor from maintaining this suit.
I
The Freedom of Information Act (FOIA) accords “any person” a right to request any records held by a federal agency. 5 U.S.C. § 552(a)(3)(A) (2006 ed.). No reason need be given for a FOIA request, and unless the requested materials fall within one of the Act’s enumerated exemptions, see § 552(a)(3)(E), (b), the agency must “make the records promptly available” to the requester, § 552(a)(3)(A). If an agency refuses to furnish the requested records, the requester may file suit in federal court and obtain an injunction “order[ing] the production of any agency records improperly withheld.” § 552(a)(4)(B).
The courts below held the instant FOIA suit barred by the judgment in earlier litigation seeking the same records. Because the lower courts’ decisions turned on the connection between the two lawsuits, we begin with a full account of each action.
A
The first suit was filed by Greg Herrick, an antique aircraft enthusiast and the owner of an F-45 airplane, a vintage model manufactured by the Fairchild Engine and Airplane Corporation (FEAC) in the 1930’s. In 1997, seeking information that would help him restore his plane to its original condition, Herrick filed a FOIA request asking the Federal Aviation Administration (FAA) for copies of any technical documents about the F-45 contained in the agency’s records.
To gain a certificate authorizing the manufacture and sale of the F-45, FEAC had submitted to the FAA’s predecessor, the Civil Aeronautics Authority, detailed specifications and other technical data about the plane. Hundreds of pages of documents produced by FEAC in the certification process remain in the FAA’s records. The FAA denied Herrick’s request, however, upon finding that the documents he sought are subject to FOIA’s exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” 5 U.S.C. § 552(b)(4) (2006 ed.). […]
[When Herrick filed suit,] the District Court granted summary judgment to the FAA [rejecting Herrick’s argument that a 1955 letter from Fairchild to a government agency had waived any protection.] [T]he Tenth Circuit […] affirmed. […]
B
Less than a month later, on August 22, petitioner Brent Taylor—a friend of Herrick’s and an antique aircraft enthusiast in his own right—submitted a FOIA request seeking the same documents Herrick had unsuccessfully sued to obtain. When the FAA failed to respond, Taylor filed a complaint in the U.S. District Court for the District of Columbia. Like Herrick, Taylor argued that FEAC’s 1955 letter had stripped the records of their trade-secret status. But Taylor also sought to litigate […] two issues concerning recapture of protected status that Herrick had failed to raise in his appeal to the Tenth Circuit.
After Fairchild intervened as a defendant, the District Court in D.C. concluded that Taylor’s suit was barred by claim preclusion; accordingly, it granted summary judgment to Fairchild and the FAA. […]
The record before the District Court in Taylor’s suit revealed the following facts about the relationship between Taylor and Herrick: Taylor is the president of the Antique Aircraft Association, an organization to which Herrick belongs; the two men are “close associate[s]”; Herrick asked Taylor to help restore Herrick’s F-45, though they had no contract or agreement for Taylor’s participation in the restoration; Taylor was represented by the lawyer who represented Herrick in the earlier litigation; and Herrick apparently gave Taylor documents that Herrick had obtained from the FAA during discovery in his suit. […]
Applying this test to the record in Taylor’s case, the D.C. Circuit found both of the necessary conditions for virtual representation well met. […]
II
[…] Taylor’s case presents an issue of first impression in this sense: Until now, we have never addressed the doctrine of “virtual representation” adopted (in varying forms) by several Circuits and relied upon by the courts below. Our inquiry, however, is guided by well-established precedent regarding the propriety of nonparty preclusion. We review that precedent before taking up directly the issue of virtual representation.
A
The preclusive effect of a judgment is defined by claim preclusion and issue preclusion, which are collectively referred to as “res judicata.” […] By “preclud[ing] parties from contesting matters that they have had a full and fair opportunity to litigate,” these two doctrines protect against “the expense and vexation attending multiple lawsuits, conserv[e] judicial resources, and foste[r] reliance on judicial action by minimizing the possibility of inconsistent decisions.”
A person who was not a party to a suit generally has not had a “full and fair opportunity to litigate” the claims and issues settled in that suit. The application of claim and issue preclusion to nonparties thus runs up against the “deep-rooted historic tradition that everyone should have his own day in court.” Indicating the strength of that tradition, we have often repeated the general rule that “one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.” Hansberry; Martin v. Wilks, 490 U.S. 755, 761 (1989).
B
Though hardly in doubt, the rule against nonparty preclusion is subject to exceptions. For present purposes, the recognized exceptions can be grouped into six categories.6 [(1) agreement by the parties to be bound by a prior action; (2) preexisting substantive legal relationships (such as preceding and succeeding owners of property); (3) adequate representation by someone with the same interests who was a party (such as trustees, guardians, and other fiduciaries); (4) a party assuming control over prior litigation; (5) a party who loses an individual suit then sues again, this time as the representative of a class; and (6) special statutory schemes such as bankruptcy and probate proceedings, provided those proceedings comport with due process.]
III
Reaching beyond these six established categories, some lower courts have recognized a “virtual representation” exception to the rule against nonparty preclusion. Decisions of these courts, however, have been far from consistent. […]
The D.C. Circuit, the FAA, and Fairchild have presented three arguments in support of an expansive doctrine of virtual representation. We find none of them persuasive.
A
The D.C. Circuit purported to ground its virtual representation doctrine in this Court’s decisions stating that, in some circumstances, a person may be bound by a judgment if she was adequately represented by a party to the proceeding yielding that judgment. But the D.C. Circuit’s definition of “adequate representation” strayed from the meaning our decisions have attributed to that term. […]
The D.C. Circuit misapprehended Richards. […] [O]ur holding [in Richards] that the Alabama Supreme Court’s application of res judicata to nonparties violated due process turned on the lack of either special procedures to protect the nonparties’ interests or an understanding by the concerned parties that the first suit was brought in a representative capacity. […]
B
Fairchild and the FAA do not argue that the D.C. Circuit’s virtual representation doctrine fits within any of the recognized grounds for nonparty preclusion. Rather, they ask us to abandon the attempt to delineate discrete grounds and clear rules altogether. Preclusion is in order, they contend, whenever “the relationship between a party and a non-party is ‘close enough’ to bring the second litigant within the judgment.” Courts should make the “close enough” determination, they urge, through a “heavily fact-driven” and “equitable” inquiry. […]
We reject this argument for three reasons. First, our decisions emphasize the fundamental nature of the general rule that a litigant is not bound by a judgment to which she was not a party. […]
Our second reason for rejecting a broad doctrine of virtual representation rests on the limitations attending nonparty preclusion based on adequate representation. A party’s representation of a nonparty is “adequate” for preclusion purposes only if, at a minimum: (1) the interests of the nonparty and her representative are aligned; and (2) either the party understood herself to be acting in a representative capacity or the original court took care to protect the interests of the nonparty. In addition, adequate representation sometimes requires (3) notice of the original suit to the persons alleged to have been represented. In the class-action context, these limitations are implemented by the procedural safeguards contained in Federal Rule of Civil Procedure 23.
An expansive doctrine of virtual representation, however, would “recogniz[e], in effect, a common-law kind of class action.” That is, virtual representation would authorize preclusion based on identity of interests and some kind of relationship between parties and nonparties, shorn of the procedural protections prescribed in Hansberry, Richards, and Rule 23. These protections, grounded in due process, could be circumvented were we to approve a virtual representation doctrine that allowed courts to “create de facto class actions at will.”
Third, a diffuse balancing approach to nonparty preclusion would likely create more headaches than it relieves. Most obviously, it could significantly complicate the task of district courts faced in the first instance with preclusion questions. An all-things-considered balancing approach might spark wide-ranging, time-consuming, and expensive discovery tracking factors potentially relevant under seven- or five-prong tests. […]
C
Finally […] the FAA maintains that nonparty preclusion should apply more broadly in “public-law” litigation than in “private-law” controversies. To support this position, the FAA offers two arguments. First, the FAA urges, our decision in Richards acknowledges that, in certain cases, the plaintiff has a reduced interest in controlling the litigation “because of the public nature of the right at issue.” […]
[W]e said in Richards only that, for the type of public-law claims there envisioned, [state and federal legislatures] are free to adopt procedures limiting repetitive litigation [involving public rights]. […] It hardly follows, however, that this Court should proscribe or confine successive FOIA suits by different requesters. Indeed, Congress’ provision for FOIA suits with no statutory constraint on successive actions counsels against judicial imposition of constraints through extraordinary application of the common law of preclusion.
The FAA next argues that “the threat of vexatious litigation is heightened” in public-law cases because “the number of plaintiffs with standing is potentially limitless.” […]
But we are not convinced that this risk justifies departure from the usual rules governing nonparty preclusion. First, stare decisis will allow courts swiftly to dispose of repetitive suits brought in the same circuit. Second, even when stare decisis is not dispositive, “the human tendency not to waste money will deter the bringing of suits based on claims or issues that have already been adversely determined against others.” This intuition seems to be borne out by experience: The FAA has not called our attention to any instances of abusive FOIA suits in the Circuits that reject the virtual-representation theory respondents advocate here.
IV
For the foregoing reasons, we disapprove the theory of virtual representation on which the decision below rested. The preclusive effects of a judgment in a federal-question case decided by a federal court should instead be determined according to the established grounds for nonparty preclusion described in this opinion. […]
We now turn back to Taylor’s action to determine whether his suit is such a case, or whether the result reached by the courts below can be justified on one of the recognized grounds for nonparty preclusion.
A
It is uncontested that four of the six grounds for nonparty preclusion have no application here. […]
That leaves only the fifth category: preclusion because a nonparty to an earlier litigation has brought suit as a representative or agent of a party who is bound by the prior adjudication. Taylor is not Herrick’s legal representative and he has not purported to sue in a representative capacity. He concedes, however, that preclusion would be appropriate if respondents could demonstrate that he is acting as Herrick’s “undisclosed agen[t].” […]
We therefore remand to give the courts below an opportunity to determine whether Taylor, in pursuing the instant FOIA suit, is acting as Herrick’s agent. Taylor concedes that such a remand is appropriate. […]
* * *
For the reasons stated, the judgment of the United States Court of Appeals for the District of Columbia Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Notes & Questions
Taylor v. Sturgell illustrates the rigidity of the requirement of mutuality for claim preclusion to attach. The reason why Taylor’s claims were barred—even though they were essentially identical to Herrick’s, even though Herrick and Taylor were members of the same hobbyist group, and even though Herrick and Taylor were represented by the same lawyer—is because Taylor is a different person from Herrick. And, as the Court notes, Taylor was entitled to his day in court.
What tradeoffs does our civil justice system make by insisting on a strict rule of mutuality in the context of claim preclusion?
8.2 Issue Preclusion
When it applies, claim preclusion bars relitigation of entire claims—causes of action arising out of a common set of facts. Issue preclusion is different: it bars relitigation of issues: facts or legal determinations, even if they are only one small part of claim, and even if the prior suit was only somewhat related to the present one. But issue preclusion only applies to issues that were actually litigated and actually decided (recall that claim preclusion often applies to claims that could have been, but in fact were not, brought in a prior suit).
In this way, issue preclusion is both broader (applies to more than just claims) and narrower (only applies to issues that were actually litigated and decided) than claim preclusion. There is one other distinction that has grown in importance in recent decades: issue preclusion does not always demand mutuality of parties to apply. In other words, sometimes a third party can use the doctrine of issue preclusion to bind their adversary, even if that third party was not part of the earlier suit.
As the next case illustrates well, often the doctrines of claim and issue preclusion will overlap, or arguably overlap. That is why it is so important to keep the two doctrines straight in you mind.
Illinois Central Gulf Railroad v. Parks
LYBROOK, J.
Bertha and Jessie were injured on March 2, 1975, when the automobile which Jessie was driving and in which Bertha was a passenger collided with a train operated by Illinois Central Gulf. [Two lawsuits then followed. In the first, Bertha and Jessie sued Illinois Central Gulf; Bertha sought compensation for her injuries, and Jessie sought damages for loss of Bertha’s services and consortium. In the second, Jessie sued Illinois Central Gulf for his own injuries.]
[In the first suit, the jury awarded Bertha a $30,000 judgment on her claim but returned a verdict against Jessie on his claim. The jury did not explain its reasoning for entering a verdict in the railroad’s favor as to Jessie’s claim.]
[In the second suit, Illinois Central Gulf moved for summary judgment, arguing that Jessie’s claims were barred by claim preclusion because he could have brought them in the first suit and by issue preclusion because the trial in the first action had established that he had been contributorily negligent, which is why the jury entered a verdict against him. The trial court disagreed and held Jessie’s claims not barred. Illinois Central Gulf filed the instant interlocutory appeal.]
[…] Illinois Central Gulf’s first allegation of error is an attempt to apply [claim preclusion] in the case at bar, but the railroad concedes its own argument by admitting that Jessie’s cause of action for loss of services and consortium as a derivative of Bertha’s personal injuries is a distinct cause of action from Jessie’s claim for damages for his own personal injuries.
[Claim preclusion] precludes the relitigation of a cause of action finally determined between the parties, and decrees that a judgment rendered is a complete bar to any subsequent action on the same claim or cause of action. Jessie’s cause of action in the case at bar is a different cause of action from the one he litigated in the companion case; therefore, [claim preclusion] does not apply.
[Issue preclusion], however, does apply. [T]he causes of action are not the same but, if the case at bar were to go to trial on all the issues raised in the pleadings and answer, some facts or questions determined and adjudicated in the companion case would again be put in issue in this subsequent action between the same parties.
To protect the integrity of the prior judgment by precluding the possibility of opposite results by two different juries on the same set of facts, the doctrine of [issue preclusion] allows the judgment in the prior action to operate as an estoppel as to those facts or questions actually litigated and determined in the prior action. The problem at hand, then, is to determine what facts or questions were actually litigated and determined in the companion case.
We agree with three concessions made by Illinois Central Gulf as to the effect of the verdict in the prior case: (1) that the verdict in favor of Bertha established, among other things, that the railroad was negligent and that its negligence was a proximate cause of the accident and Bertha’s injuries; (2) that, inasmuch as Jessie’s action for loss of services and consortium was derivative, if Jessie sustained any such loss it was proximately caused by the railroad’s negligence; and (3) that, in order for the jury to have returned a verdict against Jessie, it had to have decided that he either sustained no damages or that his own negligence was a proximate cause of his damages.
This third proposition places upon the railroad the heavy burden outlined in [Flora v. Indiana Service Co., 222 Ind. App. 253, 256–57 (1944)]:
“[W]here a judgment may have been based upon either or any of two or more distinct facts, a party desiring to plead the judgment as an estoppel by verdict or finding upon the particular fact involved in a subsequent suit must show that it went upon that fact, or else the question will be open to a new contention. The estoppel of a judgment is only presumptively conclusive, when it appears that the judgment could not have been rendered without deciding the particular matter brought in question. It is necessary to look to the complete record to ascertain what was the question in issue.”
The railroad argues that, because Jessie’s evidence as to his loss of services and consortium was uncontroverted, the jury’s verdict had to be based upon a finding of contributory negligence. Illinois Central Gulf made this same argument in the companion case in relation to a related issue and Jessie countered, as he does here, with his contention that, although the evidence was uncontroverted, it was minimal and, thus, could have caused the jury to find no compensable damages. We reviewed the complete record in the companion case and held that the jury verdict against Jessie in that cause could mean that he had failed his burden of proving compensable damages. […]
We hold that Illinois Central Gulf has failed its burden of showing that the judgment against Jessie in the prior action could not have been rendered without deciding that Jessie was contributorily negligent in the accident which precipitated the two lawsuits. Consequently, the trial court was correct in granting partial summary judgment estopping the railroad from denying its negligence and in limiting the issues at trial to whether Jessie was contributorily negligent, whether any such contributory negligence was a proximate cause of the accident, and whether Jessie sustained personal injuries and compensable damages. […]
Notes & Questions
Parks focuses on one important requirement of issue preclusion: the issue in question must have been actually litigated and necessary to the judgment in the prior case.
What issue did the railroad seek to bind Jessie with in his second suit? Why did the court conclude that it was not necessarily decided in the prior suit?
Why do you think the doctrine of claim preclusion didn’t bar Jessie’s second suit? (Hint: recall Judge Swygert’s concurrence in Frier to draw a useful inference about Indiana law at the time Parks was decided.)
Parklane Hosiery Co. v. Shore
STEWART, J., delivered the opinion of the Court.
This case presents the question whether a party who has had issues of fact adjudicated adversely to it in an equitable action may be collaterally estopped from relitigating the same issues before a jury in a subsequent legal action brought against it by a new party.
The respondent brought this stockholder’s class action against the petitioners in a Federal District Court. The complaint alleged that the petitioners, Parklane Hosiery Co., Inc. (Parklane), and 13 of its officers, directors, and stockholders, had issued a materially false and misleading proxy statement in connection with a merger. The proxy statement, according to the complaint, had violated §§ 14(a), 10(b), and 20(a) of the Securities Exchange Act of 1934, as well as various rules and regulations promulgated by the Securities and Exchange Commission (SEC). The complaint sought damages, rescission of the merger, and recovery of costs.
Before this action came to trial, the SEC filed suit against the same defendants in the Federal District Court, alleging that the proxy statement that had been issued by Parklane was materially false and misleading in essentially the same respects as those that had been alleged in the respondent’s complaint. Injunctive relief was requested. After a four-day trial, the District Court found that the proxy statement was materially false and misleading in the respects alleged, and entered a declaratory judgment to that effect. The Court of Appeals for the Second Circuit affirmed this judgment.
2 A private plaintiff in an action under the proxy rules is not entitled to relief simply by demonstrating that the proxy solicitation was materially false and misleading. The plaintiff must also show that he was injured and prove damages. Since the SEC action was limited to a determination of whether the proxy statement contained materially false and misleading information, the respondent conceded that he would still have to prove these other elements of his prima facie case in the private action. The petitioners’ right to a jury trial on those remaining issues is not contested.
The respondent in the present case then moved for partial summary judgment against the petitioners, asserting that the petitioners were collaterally estopped from litigating the issues that had been resolved against them in the action brought by the SEC.2 The District Court denied the motion on the ground that such an application of collateral estoppel would deny the petitioners their Seventh Amendment right to a jury trial. The Court of Appeals for the Second Circuit reversed, holding that a party who has had issues of fact determined against him after a full and fair opportunity to litigate in a nonjury trial is collaterally estopped from obtaining a subsequent jury trial of these same issues of fact. The appellate court concluded that “the Seventh Amendment preserves the right to jury trial only with respect to issues of fact, [and] once those issues have been fully and fairly adjudicated in a prior proceeding, nothing remains for trial, either with or without a jury.” Because of an intercircuit conflict, we granted certiorari.
I
4 In this context, offensive use of collateral estoppel occurs when the plaintiff seeks to foreclose the defendant from litigating an issue the defendant has previously litigated unsuccessfully in an action with another party. Defensive use occurs when a defendant seeks to prevent a plaintiff from asserting a claim the plaintiff has previously litigated and lost against another defendant.
5 Under the doctrine of res judicata, a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action. Under the doctrine of collateral estoppel, on the other hand, the second action is upon a different cause of action and the judgment in the prior suit precludes relitigation of issues actually litigated and necessary to the outcome of the first action. 1B J. Moore, Federal Practice ¶ 0.405 [1], pp. 622–624 (2d ed. 1974).
The threshold question to be considered is whether quite apart from the right to a jury trial under the Seventh Amendment, the petitioners can be precluded from litigating facts resolved adversely to them in a prior equitable proceeding with another party under the general law of collateral estoppel. Specifically, we must determine whether a litigant who was not a party to a prior judgment may nevertheless use that judgment “offensively” to prevent a defendant from relitigating issues resolved in the earlier proceeding.4
A
Collateral estoppel, like the related doctrine of res judicata,5 has the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation. Until relatively recently, however, the scope of collateral estoppel was limited by the doctrine of mutuality of parties. Under this mutuality doctrine, neither party could use a prior judgment as an estoppel against the other unless both parties were bound by the judgment. Based on the premise that it is somehow unfair to allow a party to use a prior judgment when he himself would not be so bound,7 the mutuality requirement provided a party who had litigated and lost in a previous action an opportunity to relitigate identical issues with new parties.
By failing to recognize the obvious difference in position between a party who has never litigated an issue and one who has fully litigated and lost, the mutuality requirement was criticized almost from its inception. Recognizing the validity of this criticism, the Court in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, abandoned the mutuality requirement. […] The “broader question” before the Court, however, was “whether it is any longer tenable to afford a litigant more than one full and fair opportunity for judicial resolution of the same issue.” […]
B
The Blonder-Tongue case involved defensive use of collateral estoppel—a plaintiff was estopped from asserting a claim that the plaintiff had previously litigated and lost against another defendant. The present case, by contrast, involves offensive use of collateral estoppel—a plaintiff is seeking to estop a defendant from relitigating the issues which the defendant previously litigated and lost against another plaintiff. In both the offensive and defensive use situations, the party against whom estoppel is asserted has litigated and lost in an earlier action. Nevertheless, several reasons have been advanced why the two situations should be treated differently.
First, offensive use of collateral estoppel does not promote judicial economy in the same manner as defensive use does. Defensive use of collateral estoppel precludes a plaintiff from relitigating identical issues by merely “switching adversaries.”12 Thus defensive collateral estoppel gives a plaintiff a strong incentive to join all potential defendants in the first action if possible. Offensive use of collateral estoppel, on the other hand, creates precisely the opposite incentive. Since a plaintiff will be able to rely on a previous judgment against a defendant but will not be bound by that judgment if the defendant wins, the plaintiff has every incentive to adopt a “wait and see” attitude, in the hope that the first action by another plaintiff will result in a favorable judgment.
13 The Restatement (Second) of Judgments § 88 (3) (Tent. Draft No. 2, Apr. 15, 1975) provides that application of collateral estoppel may be denied if the party asserting it “could have effected joinder in the first action between himself and his present adversary.”
Thus offensive use of collateral estoppel will likely increase rather than decrease the total amount of litigation, since potential plaintiffs will have everything to gain and nothing to lose by not intervening in the first action.13 A second argument against offensive use of collateral estoppel is that it may be unfair to a defendant. If a defendant in the first action is sued for small or nominal damages, he may have little incentive to defend vigorously, particularly if future suits are not foreseeable. Allowing offensive collateral estoppel may also be unfair to a defendant if the judgment relied upon as a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant.14 Still another situation where it might be unfair to apply offensive estoppel is where the second action affords the defendant procedural opportunities unavailable in the first action that could readily cause a different result.15
14 In Professor Currie's familiar example, a railroad collision injures 50 passengers all of whom bring separate actions against the railroad. After the railroad wins the first 25 suits, a plaintiff wins in suit 26. Professor Currie argues that offensive use of collateral estoppel should not be applied so as to allow plaintiffs 27 through 50 automatically to recover. [Currie, Mutuality of Estoppel: Limits of the Bernhard Doctrine, 9 Stan. L. Rev. 281 (1957).]
15 If, for example, the defendant in the first action was forced to defend in an inconvenient forum and therefore was unable to engage in full scale discovery or call witnesses, application of offensive collateral estoppel may be unwarranted. Indeed, differences in available procedures may sometimes justify not allowing a prior judgment to have estoppel effect in a subsequent action even between the same parties, or where defensive estoppel is asserted against a plaintiff who has litigated and lost. The problem of unfairness is particularly acute in cases of offensive estoppel, however, because the defendant against whom estoppel is asserted typically will not have chosen the forum in the first action.
18 After a 4-day trial in which the petitioners had every opportunity to present evidence and call witnesses, the District Court held for the SEC. The petitioners then appealed to the Court of Appeals for the Second Circuit, which affirmed the judgment against them. Moreover, the petitioners were already aware of the action brought by the respondent, since it had commenced before the filing of the SEC action.
19 It is true, of course, that the petitioners in the present action would be entitled to a jury trial of the issues bearing on whether the proxy statement was materially false and misleading had the SEC action never been brought—a matter to be discussed in Part II of this opinion. But the presence or absence of a jury as factfinder is basically neutral, quite unlike, for example, the necessity of defending the first lawsuit in an inconvenient forum.
C
We have concluded that the preferable approach for dealing with these problems in the federal courts is not to preclude the use of offensive collateral estoppel, but to grant trial courts broad discretion to determine when it should be applied. The general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where, either for the reasons discussed above or for other reasons, the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel.
In the present case, however, none of the circumstances that might justify reluctance to allow the offensive use of collateral estoppel is present. The application of offensive collateral estoppel will not here reward a private plaintiff who could have joined in the previous action, since the respondent probably could not have joined in the injunctive action brought by the SEC even had he so desired. Similarly, there is no unfairness to the petitioners in applying offensive collateral estoppel in this case. First, in light of the serious allegations made in the SEC’s complaint against the petitioners, as well as the foreseeability of subsequent private suits that typically follow a successful Government judgment, the petitioners had every incentive to litigate the SEC lawsuit fully and vigorously.18 Second, the judgment in the SEC action was not inconsistent with any previous decision. Finally, there will in the respondent’s action be no procedural opportunities available to the petitioners that were unavailable in the first action of a kind that might be likely to cause a different result.19 We conclude, therefore, that none of the considerations that would justify a refusal to allow the use of offensive collateral estoppel is present in this case. Since the petitioners received a “full and fair” opportunity to litigate their claims in the SEC action, the contemporary law of collateral estoppel leads inescapably to the conclusion that the petitioners are collaterally estopped from relitigating the question of whether the proxy statement was materially false and misleading.
II
The question that remains is whether, notwithstanding the law of collateral estoppel, the use of offensive collateral estoppel in this case would violate the petitioners’ Seventh Amendment right to a jury trial. […] The Seventh Amendment has never been interpreted in the rigid manner advocated by the petitioners. On the contrary, many procedural devices developed since 1791 that have diminished the civil jury’s historic domain have been found not to be inconsistent with the Seventh Amendment. […]
The law of collateral estoppel, like the law in other procedural areas defining the scope of the jury’s function, has evolved since 1791. Under the rationale of [an earlier] case, these developments are not repugnant to the Seventh Amendment simply for the reason that they did not exist in 1791. Thus if, as we have held, the law of collateral estoppel forecloses the petitioners from relitigating the factual issues determined against them in the SEC action, nothing in the Seventh Amendment dictates a different result, even though because of lack of mutuality there would have been no collateral estoppel in 1791. […]
Notes & Questions
Parklane Hosiery marks the Supreme Court’s broadest embrace of the doctrine of offensive non-mutual issue preclusion. Notice how far Parklane Hosiery carries issue preclusion away from the strict doctrine of mutuality we saw with Taylor v. Sturgell in the context of claim preclusion.
However, be careful to remember a basic truth of due process: with minimal exceptions, only those who were parties to a prior suit can be bound by a judgment issued in it. Non-mutual issue preclusion does not permit the use of preclusion against a third party. But, as Parklane Hosiery shows, it sometimes permits the use of issue preclusion by a third party.
The Parklane Hosiery Court draws an important distinction between offensive and defensive non-mutual issue preclusion. The latter, which is less controversial and potentially problematic than the former, arises when a defendant wants to use issue preclusion to fend off a lawsuit from a party. The classic example, mentioned in Parklane Hosiery, comes from Blonder-Tongue Laboratories, Inc. v. Univ. of Ill. Foundation, 402 U.S. 313 (1971). There, a university held a patent on an invention. The university sued D1, alleging infringement of the patent. D1 defended the suit by arguing that the patent was invalid because the invention was obvious. The court agreed, and D1 won the case. Undaunted, the university filed a second suit against a new defendant, D2, who was not party to the first suit. D2’s defense invoked defensive nonmutual issue preclusion to argue that the university could not relitigate the patent’s validity, and that the university was instead bound by the issue’s determination against it in the prior suit. The Supreme Court agreed with D2, thus establishing the doctrine of defensive non-mutual issue preclusion. Be sure you understand and can explain why Blonder-Tongue involved defensive (rather than offensive) non-mutual issue preclusion.
Offensive non-mutual issue preclusion raises more concerns than its defensive counterpart. For that reason, the Court in Parklane Hosiery set out a series of factors that must be considered before permitting offensive non-mutual issue preclusion. Name those factors. Why do you think the Court thought it necessary to limit the doctrine’s applicability?
Finally, note that even when offensive non-mutual issue preclusion could apply, it is left to the discretion of a trial judge whether to apply the doctrine. Why might that be a good idea?