5.2 Claim & Issue Preclusion

5.2 Claim & Issue Preclusion

Preclusion doctrines give judgments finality. Claim preclusion (res judicata) stops a party from bringing the same claim again. Issue preclusion (collateral estoppel) stops a party from relitigating a specific issue it already lost. The MBE tests the elements, who is bound, and which jurisdiction's preclusion rules apply.

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Preclusion Doctrines: Res Judicata and Collateral Estoppel

Preclusion doctrines enforce finality, prevent vexatious litigation, and avoid inconsistent outcomes.

Claim Preclusion (Res Judicata)

Claim preclusion prevents a party from relitigating a claim that was or could have been raised in a prior action. It requires three elements:

1. Same Claim (Transactional Test): The federal rule applies a transactional test: all legal theories and requests for relief arising out of the same transaction, occurrence, or series of connected transactions constitute a single claim. A plaintiff cannot split property damage and personal injury claims arising from a single car crash into separate lawsuits.
2. Same Parties (or Privity): The litigants in the second lawsuit must be the identical parties from the first lawsuit or in privity with them (e.g., successors in interest, trustees, or class members represented by a named party).
3. Final, Valid Judgment on the Merits:
   • Valid: Court had subject-matter and personal jurisdiction.
   • Final: Concluded proceedings at the trial level.
   • On the Merits: Full trials, summary judgments, default judgments, and Rule 12(b)(6) dismissals (unless stated without prejudice) are considered "on the merits." Dismissals for lack of jurisdiction (Rule 12(b)(1), (2)), improper venue (12(b)(3)), or failure to join an indispensable party (12(b)(7)) are not on the merits and do not bar refiling.

Issue Preclusion (Collateral Estoppel)

Issue preclusion prevents the relitigation of specific issues of fact or law that were already decided in an earlier proceeding. It requires four elements:

1. Identical Issue: The issue in the second action is identical to an issue in the first action;
2. Actually Litigated and Determined: The issue was actually raised, contested, and submitted for determination (a default judgment or settlement does not give rise to issue preclusion because issues are not actually litigated);
3. Essential to the Judgment: The determination of the issue was critical, necessary, and essential to the judgment in the first action (if the winning party could have prevailed regardless of how that issue was decided, the issue was not essential);
4. Full and Fair Opportunity: The party against whom preclusion is asserted was a party (or in privity with a party) in the first action and had a full and fair opportunity to litigate the issue.

Mutuality and Non-Mutual Collateral Estoppel

Historically, the doctrine of mutuality required that neither party could use a prior judgment as an estoppel unless both parties were bound by it. Federal courts have abolished the mutuality requirement:

• Defensive Non-Mutual Collateral Estoppel: A new defendant seeks to prevent a plaintiff from relitigating an issue that the plaintiff litigated and lost against a different defendant in Case 1 (Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation (1971)). Fully permitted so long as the plaintiff had a full and fair opportunity to litigate in Case 1.
• Offensive Non-Mutual Collateral Estoppel: A new plaintiff seeks to prevent a defendant from relitigating an issue that the defendant litigated and lost against a different plaintiff in Case 1. Under Parklane Hosiery Co. v. Shore (1979), federal courts permit offensive non-mutual collateral estoppel in the court's discretion, provided it is not unfair to the defendant. The court evaluates: (1) whether the plaintiff could easily have joined the first action (discouraging "wait-and-see" plaintiffs); (2) whether the defendant had vigorous incentive to defend in the first action; (3) whether the judgment relied upon is inconsistent with previous judgments; and (4) whether procedural opportunities in the second suit might cause a different result.

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Summary Table: Claim Preclusion vs. Issue Preclusion: Elements, Scope, and Mutuality

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Which Preclusion Law Applies

Semtek also explains that a Rule 41(b) dismissal that "operates as an adjudication on the merits" at least bars refiling the same claim in the same federal court; its effect in other courts depends on the preclusion law described above.

Who Is Bound: Nonparty Preclusion (Taylor v. Sturgell, 2008)

The general rule is that a person who was not a party to a suit is not bound by the judgment, and there is no broad doctrine of "virtual representation." The Supreme Court recognized six exceptions:

1. The nonparty agreed to be bound;
2. A pre-existing substantive legal relationship links the nonparty to a party (for example, successive owners of property, bailee and bailor, or assignee and assignor);
3. The nonparty was adequately represented by someone with the same interests in certain limited circumstances, such as properly conducted class actions and suits by trustees, guardians, and other fiduciaries;
4. The nonparty assumed control over the litigation;
5. The nonparty is relitigating through a proxy who acts as its designated representative; or
6. A special statutory scheme, such as bankruptcy or probate, expressly forecloses later litigation by nonparties.

Recurring Preclusion Traps

• Omitted claims with an excuse: Claim preclusion does not bar a later claim if the first court lacked jurisdiction to hear that theory, if the court expressly reserved the plaintiff's right to sue again, or if the defendant agreed to claim splitting.
• Later conduct: A second suit based on conduct that occurred after the first suit is not the same claim. In Lucky Brand Dungarees, Inc. v. Marcel Fashions Group, Inc. (2020), the Court also rejected a free-standing "defense preclusion" doctrine: a defendant may raise a defense in a second suit unless ordinary claim or issue preclusion bars it.
• Defendants and counterclaims: A defendant is not generally claim-precluded from later suing on its own claims, but a compulsory counterclaim omitted under Rule 13(a) is lost, and a defendant may not bring a later claim whose success would nullify the first judgment.
• Different burdens of proof: An acquittal in a criminal case does not preclude a later civil suit on the same conduct, because the government's burden was higher. A criminal conviction, however, can preclude the convicted defendant from relitigating the same facts in a later civil case.
• Alternative holdings: Under the Restatement (Second) of Judgments, if a trial court's judgment rests on two independent grounds, neither is conclusive in later litigation unless an appellate court affirms both.
• Pending appeals: In federal court, a judgment remains final for preclusion purposes while an appeal is pending.
• Suits against the government: Offensive nonmutual issue preclusion may not be used against the United States (United States v. Mendoza, 1984).