Supreme Court: Application of Res Judicata to Nonparties — Six Situations — Federal vs. State Law on the Preclusive Effect of Federal-Court Judgments (Federal Question vs. Diversity Cases)

Taylor v. Sturgell, 553 U.S. 880 (2008):

The preclusive effect of a federal-court judgment is determined by federal common law.  See Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507-508, 121 S. Ct. 1021, 149 L. Ed. 2d 32 (2001).  For judgments in federal-question cases--for example, Herrick's FOIA suit--federal courts participate in developing "uniform federal rule[s]" of res judicata, which this Court has ultimate authority to determine and declare.  Id., at 508, 121 S. Ct. 1021, 149 L. Ed. 2d 32.4  The federal common law of preclusion is, of course, subject to due process limitations.  See Richards v. Jefferson County, 517 U.S. 793, 797, 116 S. Ct. 1761, 135 L. Ed. 2d 76 (1996).

4   For judgments in diversity cases, federal law incorporates the rules of preclusion applied by the State in which the rendering court sits.  See Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508, 121 S. Ct. 1021, 149 L. Ed. 2d 32 (2001).

 [*892]  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."5  Under the doctrine of claim preclusion,  [***168] a final judgment forecloses "successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit."  New Hampshire v. Maine, 532 U.S. 742, 748, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001).  Issue preclusion, in contrast, bars "successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment," even if the issue recurs in the context of a different claim.  Id., at 748-749, 121 S. Ct. 1808, 149 L. Ed. 2d 968.  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."  Montana v. United States, 440 U.S. 147, 153-154, 99 S. Ct. 970, 59 L. Ed. 2d 210 (1979).

5   These terms have replaced a more confusing lexicon.  Claim preclusion describes the rules formerly known as "merger" and "bar," while issue preclusion encompasses the doctrines once known as "collateral estoppel" and "direct estoppel."  See Migra v. Warren City School Dist. Bd. of Ed., 465 U.S. 75, 77, n. 1, 104 S. Ct. 892, 79 L. Ed. 2d 56 (1984).

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  [*893]  historic tradition that everyone should have his own day in court."  Richards, 517 U.S., at 798, 116 S. Ct. 1761, 135 L. Ed. 2d 76 (internal quotation marks omitted).  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, 311 U.S., at 40, 61 S. Ct. 115, 85 L. Ed. 22.  See also, e.g., Richards, 517 U.S., at 798, 116 S. Ct. 1761, 135 L. Ed. 2d 76; Martin v. Wilks, 490 U.S. 755, 761, 109 S. Ct. 2180, 104 L. Ed. 2d 835 (1989); Zenith  [**2172] Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969).

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

6   The established grounds for nonparty preclusion could be organized differently.  See, e.g., 1 & 2 Restatement (Second) of Judgments §§ 39-62 (1980) (hereinafter Restatement); D. Shapiro, Civil Procedure:  Preclusion in Civil Actions 75-92 (2001); 18A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4448, pp 327-329 (2d ed. 2002) (hereinafter Wright & Miller).  The list that follows is meant only to provide a framework for our consideration of virtual representation, not to establish a definitive taxonomy.

First, "[a] person who agrees to be bound by the determination of issues in an action between others is bound in accordance with the terms of his agreement."  1 Restatement (Second) of Judgments § 40, p 390 (1980) (hereinafter Restatement).  For example, "if separate actions involving the same transaction are brought by different plaintiffs against the same defendant, all the parties to all the actions may agree that the question of the defendant's liability will be definitely determined, one way or the other, in a 'test case.'"  D. Shapiro, Civil Procedure:  Preclusion in Civil Actions 77-78 (2001) (hereinafter Shapiro).  See also California v. Texas, 459 U.S. 1096, 1097, 103 S. Ct. 714, 74 L. Ed. 2d 944 (1983) (dismissing certain defendants from a suit based on a stipulation "that each of  [*894]  said defendants . . . will  [***169] be bound by a final judgment of this Court" on a specified issue).7

7   The Restatement observes that a nonparty may be bound not only by express or implied agreement, but also through conduct inducing reliance by others.  See 2 Restatement § 62.  See also 18A Wright & Miller § 4453, at 425-429.  We have never had occasion to consider this ground for nonparty preclusion, and we express no view on it here.

Second, nonparty preclusion may be justified based on a variety of pre-existing "substantive legal relationship[s]" between the person to be bound and a party to the judgment.  Shapiro 78.  See also Richards, 517 U.S., at 798, 116 S. Ct. 1761, 135 L. Ed. 2d 76Qualifying relationships include, but are not limited to, preceding and succeeding owners of property, bailee and bailor, and assignee and assignor.  See 2 Restatement §§ 43-44, 52, 55.  These exceptions originated "as much from the needs of property law as from the values of preclusion by judgment."  18A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4448, p 329 (2d ed. 2002) (hereinafter Wright & Miller).8

8   The substantive legal relationships justifying preclusion are sometimes collectively referred to as "privity."  See, e.g., Richards v. Jefferson County, 517 U.S. 793, 798, 116 S. Ct. 1761, 135 L. Ed. 2d 76 (1996); 2 Restatement § 62, Comment a.  The term "privity," however, has also come to be used more broadly, as a way to express the conclusion that nonparty preclusion is appropriate on any ground.  See 18A Wright & Miller § 4449, at 351-353, and n 33 (collecting cases).  To ward off confusion, we avoid using the term "privity" in this opinion.

Third, we have confirmed that, "in certain limited circumstances," a nonparty may be bound by a judgment because she was "adequately represented by someone with the same interests who [wa]s a party" to the suitRichards, 517 U.S., at 798, 116 S. Ct. 1761, 135 L. Ed. 2d 76 (internal quotation marks omitted).  Representative suits with preclusive effect on nonparties include properly conducted class actions, see Martin, 490 U.S., at 762, n. 2, 109 S. Ct. 2180, 104 L. Ed. 2d 835 (citing Fed. Rule Civ. Proc. 23), and suits brought by [**2173]  trustees, guardians, and other fiduciaries, see Sea-Land Services,  [*895]  Inc. v. Gaudet, 414 U.S. 573, 593, 94 S. Ct. 806, 39 L. Ed. 2d 9 (1974).  See also 1 Restatement § 41.

Fourth, a nonparty is bound by a judgment if she "assume[d] control" over the litigation in which that judgment was rendered.  Montana, 440 U.S., at 154, 99 S. Ct. 970, 59 L. Ed. 2d 210.  See also Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 262, n. 4, 81 S. Ct. 557, 5 L. Ed. 2d 546 (1961); 1 Restatement § 39.  Because such a person has had "the opportunity to present proofs and argument," he has already "had his day in court" even though he was not a formal party to the litigation.  Id., Comment a, at 382.

Fifth, a party bound by a judgment may not avoid its preclusive force by relitigating through a proxy.  Preclusion is thus in order when a person who did not participate in a litigation later brings suit as the designated representative of a person who was a party to the prior adjudication.  See Chicago, R. I. & P. R. Co. v. Schendel, 270 U.S. 611, 620, 623, 46 S. Ct. 420, 70 L. Ed. 757 (1926); 18A Wright & Miller § 4454, at 433-434.  And although our decisions have not addressed the issue directly, it also seems clear that preclusion is appropriate when a nonparty later brings suit as an agent for a party who is bound by a judgment.  See id., § 4449, at 335.

Sixth, in certain circumstances a special statutory scheme may "expressly foreclos[e] successive litigation by nonlitigants . . . if the scheme is otherwise consistent with due process."  Martin, 490 U.S., at 762, n. 2, 109 S. Ct. 2180, 104 L. Ed. 2d 835.  Examples of such schemes include bankruptcy and probate proceedings, see ibid., and quo warranto actions or other suits that, "under [the governing] law, [may] be brought only on behalf of the public at large," Richards, 517 U.S., at 804, 116 S. Ct. 1761, 135 L. Ed. 2d 76.

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