## Facts

- In the 1970s, developers sold subdivided lots to roughly 3,000 buyers, many residing in Puerto Rico, representing the land as suitable for development.
- The property was allegedly Florida swampland and unsuitable for development.
- In 1982, a group of purchasers (the Rodriguez plaintiffs) sued sellers, financing banks, and related individuals in federal court, asserting claims under ILSFDA, federal securities law (including Rule 10b-5), and RICO.
- During the Rodriguez litigation, some purchasers participated in a “Sunrise Litigation Group,” which collected fees to offset litigation costs and shared information.
- After extended litigation, the Rodriguez plaintiffs sought class certification and attempted to add additional plaintiffs; the district court denied class certification and refused to permit further intervention (April 1987).
- Shortly thereafter, additional purchasers who had been unable to join Rodriguez filed a separate action (the Gonzalez plaintiffs) against the same defendants, represented by the same counsel and asserting materially similar claims.

## Issues

1. Whether federal claim preclusion bars a later suit by purchasers who were not parties to an earlier action involving the same defendants and essentially the same claims.
2. Whether informal coordination (shared counsel, shared information, litigation cost-sharing, and similar pleadings) establishes privity or sufficient party identity to bind nonparties to the earlier judgment.

## Decision

- The First Circuit reversed the district court’s dismissal of the Gonzalez action and remanded for further proceedings.
- Although the earlier Rodriguez action ended in a final judgment and the two suits involved essentially the same causes of action, the Gonzalez plaintiffs were not parties to Rodriguez and were not in privity with the Rodriguez plaintiffs.
- The denial of class certification and the refusal to allow intervention in Rodriguez weighed strongly against treating the Rodriguez judgment as binding absent purchasers.
- Participation in a litigation support group, information-sharing, and contributions toward litigation expenses did not amount to the type of control or representative relationship required for nonparty preclusion.
- The identity of counsel and similarity of complaints were insufficient, without more, to establish the legal relationship needed to bind nonparties.

## Legal Principles

- Claim preclusion requires: (1) a final judgment on the merits, (2) sufficient identity of the causes of action, and (3) sufficient identity of the parties or privity.
- Nonparty claim preclusion is limited; absent a recognized basis for binding nonparties (such as a properly constituted representative action or comparable legal relationship), nonparties generally retain their own right to litigate.
- Denial of class certification and denial of intervention in the earlier action undermine attempts to treat that action as effectively representative of absent persons.
- Informal cooperation among similarly situated claimants, including cost-sharing and information exchange, does not by itself create privity or justify binding nonparties to an earlier judgment.

## Conclusion

The First Circuit held that purchasers who were not parties to an earlier, non-class action could not be barred by claim preclusion from bringing their own suit based on the same alleged land-sale scheme, absent a legally sufficient basis to treat them as privies or represented parties in the prior litigation.


Gonzalez v. Banco Cent. Corp., 27 F.3d 751 (1st Cir. 1994)