The doctrine of res judicata prevents a litigant from getting yet another day in court after the first

lawsuit is concluded by giving a different reason than he gave in the first for recovery of
damages for the same invasion of his right. The rule provides that when a court of competent
jurisdiction has entered a final judgment on the merits of a cause of action, the parties to the suit
and their privies are bound "not only as to every matter which was offered and received to
sustain or defeat the claim or demand, but as to any other admissible matter which might have
been offered for that purpose." A final judgment on the merits bars further claims by the same
parties based on the same cause of action.
Res judicata prevents a plaintiff from suing on a claim that already has been decided and also
prevents a defendant from raising any new defense to defeat the enforcement of an earlier
judgment. It also precludes relitigation of any issue, regardless of whether the second action is
on the same claim as the first one, if that particular issue actually was contested and decided in
the first action. (Friedenthal 14.1) Former adjudication is an analogue of the criminal law
concept of double jeopardy.
Terminology
Res judicata = A general term referring to all of the ways in which one judgment will have a
binding effect on another.
Claim preclusion (true res judicata) = A valid and final judgment on a claim precludes a second
action on that claim or any part of it. Claim preclusion is divided into two areas, bar and merger.
In res judicata the second or subsequent suit involves the same claim or cause of action. In
collateral estoppel the second or subsequent suit involves a different claim or cause of action. In
res judicata the first judgment is conclusive not only on all matters which actually were litigated,
but on all matters which could have been litigated. In collateral estoppel the judgment is
conclusive only in regard to issues that actually were litigated.
A judgment in a prior suit between the same parties is final not only as to all matters that were in
fact offered and received to sustain or defeat the claim but also as to all matters that might have
been offered for that purpose. A party may not litigate a claim and then, upon an unsuccessful
disposition, revive the same cause of action with a new theory.

Four Factors Are Considered in Determining the Validity of a

Plea of Claim Preclusion:
1) Was the claim decided in the prior suit the same claim being
presented in the action in question?
2) Was there a final judgment on the merits?
3) Was the party against whom the plea was asserted a party or in
privity with a party to the prior suit?
4) Was the party against whom the plea was asserted given a fair
opportunity to be heard on the issue?
The Requirement of a Final Judgment
Judgment "On the Merits"
The requirement that a judgment, to be res judicata, must be rendered "on the merits" guarantees
to every plaintiff the right once to be heard on the substance of his claim. Ordinarily, the
doctrine may be invoked only after a judgment has been rendered which reaches and determines

"the real or substantial grounds of action or defense as distinguished from matters of practice,
procedure, jurisdiction or form." One of the exceptions to this rule is found in FRCP 41(b). It
provides that an involuntary dismissal for failure to prosecute, or for failure to comply with the
Rules or any order of the court, shall operate as an "adjudication upon the merits," although the
substantive issues of the case are never reached. This exception does not apply in the case of a
dismissal for lack of jurisdiction or improper venue.
The policy behind Rule 41(b) is to bar subsequent action only in situations in which the
defendant must incur the inconvenience of preparing to meet the merits because there is no initial
bar to the Court's reaching them.
The res judicata consequences of a final, unappealed judgment on the merits are not altered by
the fact that the judgment may have been wrong or rested on a legal principle subsequently
overruled in another case. An erroneous conclusion reached by the court in the first suit does not
deprive the defendants in the second action of their right to rely upon the plea of res judicata.
(Federated Dept. Stores v. Moitie, 452 U.S. 394 (1981)
I.e., a judgment need not be right to preclude further litigation, it need only be final and on the
merits.
Identity of Parties
The general rule is that a judgment has no binding effect upon anyone who was not a party to the
action. A stranger cannot take advantage of a judgment, nor can it be enforced against him.
Consequently, the rules of res judicata and collateral estoppel do not apply unless the parties in
the subsequent suit are identical with the parties in the first suit.
For res judicata to apply, both suits must involve the same parties or their privies and also the
same cause of action. If the subsequent suit involves different parties, those parties cannot be
bound by the prior judgment. Collateral estoppel arises from a different cause of action and
prevents parties or their privies from relitigating facts and issues in second suit that were fully
litigated in the first suit. The plea of collateral estoppel can be asserted only against a party in
the subsequent suit who was also a party or in privity with a party in the prior suit.
A person in privity with another is a person so identified in interest with another that he
represents the same legal right. Privity means one whose interest has been legally represented at
the time. Collateral estoppel is not a defense against a litigant who was not a party to the action
and judgment claimed to have created an estoppel.
Issue Preclusion
"Actually Litigated & Determined"
To protect the integrity of the prior judgment by precluding the possibility of opposite results by
two different juries on the same set of facts, the doctrine of issue preclusion allows the judgment
in the prior action to operate as an estoppel as to those facts or questions actually litigated and
determined in the prior action. In order to determine what facts were actually litigated in the
prior case, the following test is applied: Where a judgment may have been based upon either or
any of two or more distinct facts, a party desiring to plead the judgment as issue preclusion or a
finding upon the particular fact involved in a subsequent suit must show that it went upon that

fact, or else the question will be open to a new contention. The estoppel of a judgment is only
presumptively conclusive, when it appears that the judgment could not have been rendered
without deciding the particular matter brought in question.
Collateral estoppel applies only to issues that have actually been determined in the first action
and not to those which might have been determined but were not. When a case may have been
decided on more than one ground but it is impossible to ascertain which ground or grounds were
actually decided, none of the grounds are collateral estoppel in a subsequent action.
In any lawsuit between two parties who have engaged in previous litigation, the first question
will be whether this is the same claim. Only if one answers that question in the negative does the
second question arise: are there then issues that the first case precludes from relitigation?

Prerequisites for Collateral Estoppel

(1) The issue in the second case must be the same as the issue in the
first.
(2) The issue must have been actually litigated.
(3) The issue must have been actually decided.
(4) The issue must have been necessary to the court's judgment.
(Friedenthal, sec. 14.11)
Mutuality of Preclusion
Under traditional issue preclusion principles, a party may be estopped from relitigating an issue
that he had litigated in a prior suit and lost. The general rule was that estoppel must be mutual,
i.e., the only parties who could invoke collateral estoppel were those who were involved in the
suit in which the issue was initially decided. I.e., parties are bound, nonparties are not. (Wright,
sec. 100A)
Non-Mutuality - Defensive Use
Bernhard v. Bank of America 19 Cal.2d 807, 122 P.2d 892 (1942) is the case thought to be the
turning point that brought about the demise of mutuality. (Wright, sec.100A) In Bernhard, Mrs.
Bernhard claimed that certain funds held by Cook, the executor of an estate, belonged to the
estate. Cook claimed they were a gift to him from the decedent, which he need not include in the
assets of the estate. Bernhard challenged Cook's claim in a probate proceeding during the course
of the settlement of the estate, and the court held the funds were a gift to Cook. Bernhard then
sued the bank that had been holding the funds and paid them to Cook, alleging again that the
funds were assets of the estate that should have been paid to the estate rather than to Cook. The
bank pleaded collateral estoppel, arguing that Bernhard had already adjudicated the right to the
funds in the probate proceeding, had lost, and should be precluded from relitigating the issue
against the bank. The court concluded that it was not improper to allow a new party to take
advantage of findings in an earlier suit to estop a party who had litigated the issue in the prior
action. Bernhard had been a party to the first action and had a full and fair opportunity to litigate
the issue there. The court saw no reason to allow her to relitigate the same issue by simply
switching defendants. Bernhard holds that collateral estoppel runs against anyone who has fully
and fairly litigated an issue in an earlier action.

Non-Mutuality - Offensive Use

The general rule should be that in cases where a plaintiff could easily have joined in the earlier
action or where, for other reasons the application of offensive estoppel would be unfair to a
defendant, a trial judge should not allow the use of offensive collateral estoppel. (Parklane
Hosiery Co v. Shore, 439 U.S. 322 (1979)
A nonparty may assert collateral estoppel offensively against someone who was a defendant in a
prior action. Under Parklane the court must evaluate on a case by case basis whether it is
necessary to allow what appears to be duplicative litigation to ensure the reliability and fairness
of a judgment. No precise rules can be formulated. The Parklane standard is applicable only to
the federal courts. "Offensive" use of issue preclusion involves a plaintiff who is seeking to
prevent a defendant from relitigating issues that the defendant had previously litigated and lost
against another plaintiff.
In Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313 (1971)
the University of Illinois Foundation sued the defendant for infringing a patent but lost on the
ground that its patent was invalid. It then brought a subsequent suit against another defendant
for infringement of the same patent. The Supreme Court reversed its long standing rule allowing
such relitigation and approved the use of nonmutual collateral estoppel against the Foundation
on the issue of the validity of the patent. The Court noted the unfairness and waste of judicial
resources that flows from allowing repeated litigation of the same issue as long as plaintiff is
able to locate new defendants to sue. Note that preclusion is only appropriate if the precluded
party had a full and fair opportunity to litigate the issue in the first action.
Nonmutual collateral estoppel cannot be used against the federal government. (United States v.
Mendoza, 464 U.S. 154 (1984)
Full Faith & Credit Doctrine
Full faith and credit requires that judicial proceedings shall have the same full faith and credit in
every court within the U.S. as they have by law or usage in the courts of such state from which
they are taken. It requires every state to give a judgment at least the res judicata effect which the
judgment would be accorded in the state which rendered it. (Durfee v. Duke, 375 U.S. 106
(1963)
Law of the Case
This doctrine involves successive stages of the same lawsuit. However, the doctrine is
fundamentally the same as res judicata, an issue which has been litigated and decided in one
stage of a case should not be relitigated in a later stage.
Law of the case, like issue preclusion, bars a litigant from repeating the same argument that was
previously rejected. It refers to the principle that issues once decided in a case that recur in later
stages of the same case are not to be redetermined. This doctrine limits relitigation in successive
stages of a single suit. E.g., it will apply when an issue in the case is decided by the trial court
and appealed. If the appellate court reverses and rules on the law to be applied, those findings
will be binding on the trial court when the action is remanded for a new trial. (Friedenthal, sec.
14.1)

Nature of the Problem

Once you have determined which court or courts have the proper jurisdiction to decide a case,
the next question one is faced with is what law should the court apply? State courts apply state
law. In federal question cases both federal and state courts apply federal law. But in diversity
cases) a case that could have been brought in a state court but is being brought in federal court
due solely to the citizenship of the parties, what law will a federal court apply? Federal or state?
Prior to 1938, Swift v. Tyson , 41 U.S. (16 Pet.) 1, 10 L.Ed. 865 (1842) held that federal courts
were free to apply the law so as to reach a result they thought was justice regardless of state
common law. However that changed with the decision in Erie R.R. v. Tompkins, 304 U.S. 64, 58
S.Ct. 817, 82 L.Ed. 1188 (1938).
In Erie, the plaintiff was walking alongside railroad tracks when his right arm was severed by an
object protruding from defendant's train. The accident occurred in Pennsylvania. Plaintiff (now
presumably known as "lefty") filed a lawsuit in federal court in New York where it was felt the
laws were more favorable to plaintiffs. The issue was what level of duty is owed to a trespasser.
If Pennsylvania law applied then only "wanton negligence" created liability. If "federal common
law" applied the plaintiff could recover if the railroad was guilty of "ordinary" negligence. The
issue that confronted the Supreme Court was the meaning of the phrase "the laws of the several
states." If it meant case law (judicial decisions) as well as statutes, then Pennsylvania law
would apply and plaintiff would lose. If not, then "federal common law" will apply and plaintiff
could presumably recover.
Erie held that federal courts in diversity actions apply the substantive law of the state in which
they sit. "Law" includes common law as well as statutory law. In diversity actions federal courts
must treat the decisions of the state courts in the jurisdiction in which they sit as a source of law.
I.e., a federal court in a diversity case must apply the same law that the state court would apply.
There is no longer a "federal common law," a federal court must apply the common law of the
state. The rule of Erie serves the purposes of discouraging forum shopping and avoiding the
unfair administration of laws (i.e., avoiding the potential for state and federal courts sitting in the
same state reaching different outcomes based on the same facts.)
Evolution of the Erie Doctrine
The Erie doctrine has evolved over the years. Here are the turning points in its evolution.
Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct 1464, 89 L.Ed. 2079 (1945) marks the
emergence of the "outcome determinative test," which was an attempt to prevent federal courts
from reaching a result at variance with the result that would obtain in a state court in a
comparable case. (Friedenthal 4.3) A state law which is normally regarded as "procedural"
should be applied by a federal court in a diversity case if it would, or could, vitally affect the
outcome of the case. Guaranty Trust redefined the Erie doctrine. The intent of Erie was to
insure that where a federal court is exercising jurisdiction solely because of diversity, the
outcome of the litigation in federal court should be substantially the same as it would be if tried
in State court. (Wright, 55) In Guaranty Trust the issue was whether a federal court in a
diversity case must apply the state statute of limitations, which would have barred the suit in
state court. Goal is to avoid reaching a different result in federal court than would otherwise be

had in state court. If applying federal law would mean a different outcome, state law controls
therefore state statute of limitations applies.
In Byrd v. Blue Ridge , 356 U.S. 525, 78 S.Ct 893, 2 L.Ed. 2d 953 (1958) the question was
whether the issue of employee or independent contractor is to be decided by the judge or the
jury. The court held that the mere possibility that a federal practice may alter the outcome of a
diversity case is not conclusive in deciding whether to apply federal or state law. Court must
weigh (determine whether either one is of some importance) the policies behind the federal and
state rules then determine whether there is a substantial possibility that different results would be
obtained because federal practice is used. (Friedenthal 4.3) In Byrd the state practice was
found to reflect a weak state policy, not bound up with the underlying statute, of preferring a
judge's determination of the employment issue. When balanced against the strong federal policy
embodied in the 7th Amendment guarantee of a jury trial, and the fact that there was no
substantial possibility that different results would be obtained by utilizing a jury, the federal
practice was preferred. (Friedenthal 4.3)
In Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed. 2d 8 (1965), the issue was whether
federal rules on service of process should yield to state rules. Hanna announces a two-part test.
First, the court inquires whether a federal rule actually governs the practice under consideration.
If the answer is yes, then the court must determine whether a conflict between the federal rule
and state law exists, or whether the federal rule is "narrower" in its coverage (i.e., does not cover
the issue in question) than the state statute. If there is a direct conflict between state practice and
a federal rule, then the court must determine whether the federal rule is a valid exercise of the
rule making power granted to the Supreme Court by Congress. (Friedenthal 4.4) (No federal
rule of civil procedure has ever been found to be an invalid exercise of the rule making power.)
Hanna Two-Part Test Simplified
(1) If there is a valid Federal Rule on the subject, the rule is to be
applied.
(2) In the absence of a federal rule on the point the court is to consider
the problem in light of the twin aims of the Erie rule, (a) discourage
forum shopping and (b) avoid inequitable administration of laws.
(Different results between state and federal courts.) (Wright 59)