Verdicts and judgments - Effect; claim and issue preclusion

Learning Outcomes

After reading this article, you will be able to explain the legal effect of verdicts and judgments, distinguish claim preclusion (res judicata) from issue preclusion (collateral estoppel), identify their requirements, and apply these doctrines to bar or permit subsequent litigation. You will also recognize exceptions and common pitfalls tested on the MBE.

MBE Syllabus

For the MBE, you are required to understand how verdicts and judgments affect future litigation. This includes the doctrines of claim preclusion and issue preclusion, their requirements, and their application in federal and state courts. You should be able to:

  • Define claim preclusion (res judicata) and issue preclusion (collateral estoppel).
  • Identify the requirements for each doctrine to apply.
  • Distinguish between the scope of claims and issues barred.
  • Recognize exceptions and limitations to preclusion.
  • Apply preclusion rules to multi-party and multi-claim scenarios.
  • Determine which law governs preclusion in federal and state courts.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. Which of the following is NOT required for claim preclusion to apply?
    1. Final judgment on the merits
    2. Same parties (or their privies)
    3. Same cause of action
    4. The same court as the first action
  2. Issue preclusion (collateral estoppel) prevents relitigation of:
    1. Any claim that could have been brought in the first action
    2. Any issue actually litigated and essential to a valid, final judgment
    3. Any issue mentioned in the pleadings
    4. Only issues decided by a jury
  3. A federal court must give a state court judgment the same preclusive effect as:
    1. Federal law would require
    2. The state where the federal court sits would require
    3. The state that rendered the judgment would require
    4. The parties agree
  4. Which of the following is an exception to issue preclusion?
    1. The issue was not actually litigated
    2. The party to be bound had a full and fair opportunity to litigate
    3. The issue was essential to the judgment
    4. The parties were adversaries in the first action

Introduction

A verdict or judgment in a lawsuit can have significant consequences for future litigation. The doctrines of claim preclusion (res judicata) and issue preclusion (collateral estoppel) determine when a prior judgment bars relitigation of claims or issues. Understanding these doctrines is essential for analyzing the effect of judgments on subsequent lawsuits.

Key Term: Claim Preclusion (Res Judicata) A doctrine that bars a party from relitigating a claim that was or could have been raised in a prior action between the same parties (or their privies) that resulted in a valid, final judgment on the merits.

Key Term: Issue Preclusion (Collateral Estoppel) A doctrine that prevents relitigation of an issue of fact or law that was actually litigated and necessarily decided in a prior valid, final judgment, when the party to be bound had a full and fair opportunity to litigate.

CLAIM PRECLUSION (RES JUDICATA)

Claim preclusion bars a party from bringing a second lawsuit on the same claim or cause of action after a final judgment on the merits in a prior suit involving the same parties (or their privies).

Requirements for Claim Preclusion

Claim preclusion applies if:

  1. Valid, final judgment on the merits: The prior judgment must be final and decided on the merits (not dismissed for lack of jurisdiction, improper venue, or failure to join an indispensable party).
  2. Same parties or their privies: The parties in both actions must be identical or in privity (e.g., successors in interest, legal representatives).
  3. Same claim or cause of action: The claim in the second suit must arise from the same transaction or occurrence as the first.

Key Term: Final Judgment on the Merits A judgment that resolves the substantive rights of the parties and leaves nothing for the court to do but execute the judgment.

Scope of Claim Preclusion

Claim preclusion bars not only claims actually litigated, but also those that could have been raised in the first action if they arise from the same transaction or occurrence.

Worked Example 1.1

A sues B for breach of contract in state court and loses after a trial on the merits. Later, A sues B in the same court for fraud based on the same contract. Is A's second suit barred?

Answer: Yes. Both suits arise from the same transaction (the contract). Claim preclusion bars all claims arising from the same transaction that were or could have been raised in the first action.

Exceptions to Claim Preclusion

  • Dismissals for lack of jurisdiction, improper venue, or failure to join an indispensable party are not judgments on the merits.
  • If the court in the first action lacked subject matter jurisdiction over the second claim, preclusion may not apply.

ISSUE PRECLUSION (COLLATERAL ESTOPPEL)

Issue preclusion prevents relitigation of specific issues that were actually litigated and necessarily decided in a prior valid, final judgment.

Requirements for Issue Preclusion

Issue preclusion applies if:

  1. Same issue: The issue in both actions is identical.
  2. Actually litigated and determined: The issue was raised, contested, and decided in the prior action.
  3. Essential to the judgment: The issue was necessary to the prior judgment.
  4. Valid, final judgment: The prior judgment is valid and final.
  5. Party to be bound had a full and fair opportunity to litigate: The party against whom preclusion is asserted was a party (or in privity) and had a chance to litigate the issue.

Key Term: Essential to the Judgment An issue is essential if the judgment could not have been reached without deciding that issue.

Mutuality and Nonmutual Issue Preclusion

Traditionally, only parties to the first action (or their privies) could use or be bound by issue preclusion (mutuality). Modern law allows nonmutual issue preclusion in some circumstances, especially when used defensively.

Key Term: Nonmutual Issue Preclusion Preclusion asserted by or against a party who was not a party to the first action.

Worked Example 1.2

P sues D for negligence after a car accident. The jury finds D was not negligent. Later, a passenger in P's car sues D for the same accident. D asserts issue preclusion on the question of negligence. Can D use issue preclusion?

Answer: Yes, if the passenger's claim involves the same issue of D's negligence, and P had a full and fair opportunity to litigate. The court must also consider whether nonmutual issue preclusion is allowed in the jurisdiction.

Exceptions to Issue Preclusion

Issue preclusion does not apply if:

  • The issue was not actually litigated (e.g., resolved by default or consent).
  • The party to be bound did not have a full and fair opportunity to litigate.
  • The issue was not essential to the prior judgment (e.g., alternative grounds).
  • There has been a significant change in law or facts.

Exam Warning

Issue preclusion does not apply to issues decided in default judgments, because those issues were not actually litigated.

GOVERNING LAW FOR PRECLUSION

When a federal court is asked to give preclusive effect to a prior state court judgment, it must apply the preclusion law of the state that rendered the judgment. This is required by the Full Faith and Credit Act (28 U.S.C. § 1738).

Key Term: Full Faith and Credit Act A federal statute requiring federal courts to give state court judgments the same preclusive effect as they would have in the courts of the rendering state.

Summary

  • Claim preclusion bars relitigation of claims that were or could have been raised in a prior action between the same parties after a final judgment on the merits.
  • Issue preclusion bars relitigation of issues actually litigated and necessarily decided in a prior valid, final judgment.
  • The law of the court that rendered the first judgment determines its preclusive effect.

Key Point Checklist

This article has covered the following key knowledge points:

  • Claim preclusion (res judicata) bars relitigation of claims after a valid, final judgment on the merits between the same parties.
  • Issue preclusion (collateral estoppel) bars relitigation of issues actually litigated and essential to the prior judgment.
  • Both doctrines require a valid, final judgment and a full and fair opportunity to litigate.
  • Preclusion applies to parties or their privies; nonmutual issue preclusion may apply in some cases.
  • Federal courts must apply the preclusion law of the state that rendered the judgment.

Key Terms and Concepts

  • Claim Preclusion (Res Judicata)
  • Issue Preclusion (Collateral Estoppel)
  • Final Judgment on the Merits
  • Essential to the Judgment
  • Nonmutual Issue Preclusion
  • Full Faith and Credit Act
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