Morris v. City of Trenton, 2014 U.S. Dist. LEXIS 136003 (D.N.J. Sept. 26, 2014):

2. Res Judicata

The Supreme Court has definitively stated that the notion of full faith and credit (codified at 28 U.S.C. § 1738) "requires that state-court judgments be given both issue and claim preclusive effect in subsequent actions under 42 U.S.C. § 1983." University of Tennessee v. Elliott, 478 U.S. 788, 796 (1986 (citing Allen v. McCurry, 449 U.S. 90 (1980) (addressing issue preclusion); Migra v. Warren City School District, 465 U.S. 75 (1984)(addressing claim preclusion)). As just noted, this provision "governs the preclusive effect to be given the judgment and records of state courts[.]" Id. at 794. It is, however, "not applicable to the unreviewed state administrative factfinding" here. Id. Nevertheless, "because § 1738 antedates the development of administrative agencies it clearly does not represent a congressional determination that the decisions of state administrative agencies should not be given preclusive effect." Id. at 795. Instead, "federal common-law rules of preclusion" may bar claims "in the absence of a governing statute." Id. at 794.

The Court in Elliott [University of Tennessee v. Elliott, 478 U.S. 788, 796 (1986 (citing Allen v. McCurry, 449 U.S. 90 (1980)] held that as a matter of federal common law, "when a state agency 'acting in a judicial capacity... resolves disputed issues of fact properly before it in which the parties have had an adequate opportunity to litigate,' federal courts must give the agency's factfinding the same preclusive effect to which it would be entitled in the State's courts." Id. at 799 (quoting United States v. Utah Construction & Mining Co., 384 U.S. 394, 422 (1966)). Thus, as Defendants cite, in regard to issue preclusion, a federal court must "look to the law of the state where the [administrative] judgment was rendered" to determine what preclusive effect may result. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985).3

The Supreme Court, however, has yet to reach the same, or indeed any, conclusion with respect to claim preclusion. Neither has the Third Circuit. As a result, the Court first turns to whether state preclusion rules should apply in determining the claim preclusion effects of an administrative proceeding or if federal common law governs the issue.  Not surprisingly, among the Circuit Courts that have considered this issue, there is a split. The Eleventh and Fourth Circuits have both found against applying state preclusion [*15]  principles in determining the res judicata effect of an unreviewed agency decision. See Dionne v. Mayor and City Council of Baltimore, 40 F.3d 677, 681 (4th Cir. 1994) (holding that "federal common law determines what, if any, claim preclusive effect is to be accorded unreviewed state administrative decisions in subsequent §1983 actions."); Gjellum v. City of Birmingham, 829 F.2d 1056, 1065 (11th Cir. 1987) (holding that at least in context of §1983 suits, "the federal common law of preclusion does not require application of state claim preclusion rules to unreviewed state administrative decisions.") The Fifth and Seventh Circuits have split the difference, suggesting that state claim preclusion rules might at times apply where the original forum did not have the ability to adjudicate all claims or award all damages sought. See Frazier v. King, 873 F.2d 820, 825 (5th Cir. 1989); Waid v. Merrill Area Public Schools, 91 F.3d 857, 866 (7th Cir. 1996) (overturned on other grounds, Fitzgerald v. Barnstable School Committee, 555 U.S. 246 (2009)) (holding that while state laws of claim preclusion may facilitate application of federal claim preclusion rules, deference to state is not unlimited and "federal courts will not decline to hear [*16]  claims pertaining to federal rights solely on the basis of state res judicata principles."). The Eighth and Ninth Circuits have applied state claim preclusion rules to unreviewed administrative decisions. See Plough v. West Des Moines Community School District, 70 F.3d 512, 517 (8th Cir. 1995) (holding that "federal district court was bound to give the State Board's decision the same [claim] preclusive effect as state courts would."); Miller v. County of Santa Cruz, 39 F.3d 1030, 1032-33 (9th Cir. 1994) (giving same claim preclusive effect to unreviewed agency decisions as they would be given in state court in which they were rendered as long as certain fairness requirements are met).

Without rendering a determination that state preclusion rules should be totally disregarded as a matter of course, after considering the split, the Court is persuaded by and will apply the reasoning of the Eleventh and Fourth Circuits and apply federal common law principles of claim preclusion in determining if Plaintiff's §1983 and NJLAD claims are barred by res judicata.