## Facts

- Edward G. Staats was hired in May 1993 as full-time personnel director for Sawyer and Bayfield Counties under an inter-county arrangement.
- In September 1994, Staats exhibited abnormal behavior and was hospitalized; he was rehospitalized in October and remained hospitalized until mid-November 1994, with a diagnosis of bipolar disorder.
- When Staats sought to return to work in late November 1994, the counties required a medical release; his doctor cleared him with restrictions, including a 40-hour workweek limit, continued therapy, medication compliance, testing, and temporary alcohol abstinence.
- A treating physician later indicated Staats could perform the personnel director job as of November 20, 1994.
- In December 1994, the counties told Staats his position would be eliminated at the end of the year; Staats claimed the elimination was a pretext for disability discrimination.
- Staats pursued Wisconsin administrative remedies for disability discrimination; the administrative agency ruled against him and a Wisconsin circuit court affirmed.
- After filing an EEOC charge and receiving a right-to-sue letter, Staats filed a federal suit asserting claims under ADA Titles I and II and the Rehabilitation Act.

## Issues

1. Whether Wisconsin claim preclusion barred Staats’s federal ADA and Rehabilitation Act claims after adverse state administrative proceedings and state-court review on related state-law discrimination claims.
2. Whether, under Wisconsin preclusion law, claim preclusion applies when the initial forum lacked subject-matter jurisdiction to hear the later-asserted federal claims.

## Decision

- The Seventh Circuit reversed the district court’s summary judgment for the counties and remanded.
- Applying 28 U.S.C. § 1738, the court held Wisconsin preclusion law governed the effect of the prior state judgment.
- The court concluded that, although the disputes arose from the same transaction and involved the same parties, Wisconsin would not preclude the federal ADA and Rehabilitation Act claims because the earlier forum lacked jurisdiction to decide them.
- The court held that Wisconsin would permit claim splitting in these circumstances, making dismissal on claim-preclusion grounds improper.

## Legal Principles

- Federal courts must give a state-court judgment the same preclusive effect it would receive in that state’s courts. (28 U.S.C. § 1738.)
- Under Wisconsin law, claim preclusion generally requires: (1) identity of parties (or privies), (2) identity of causes of action (transactional approach), and (3) a final judgment on the merits by a court of competent jurisdiction.
- Wisconsin claim preclusion does not bar a later claim that could not have been brought in the earlier proceeding due to the earlier forum’s lack of subject-matter jurisdiction.
- When jurisdictional limits compel a plaintiff to pursue related theories in different forums, Wisconsin permits claim splitting rather than treating unasserted claims as forfeited.

## Conclusion

The Seventh Circuit held that Wisconsin’s claim-preclusion doctrine did not bar Staats from pursuing federal ADA and Rehabilitation Act claims after litigating related state-law discrimination claims in a state administrative process with judicial review, because that earlier forum lacked jurisdiction over the federal causes of action.


Staats v. County of Sawyer, 220 F.3d 511 (7th Cir. 2000)