Res Judicata and Collateral Estoppel

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Res Judicata and Collateral Estoppel

There are two separate but related doctrines that bar relitigation of claims: claim preclusion and issue preclusion. Claim preclusion is most often called res judicata (or sometimes merger and bar), while issue preclusion is most often called collateral estoppel.

In most situations, whether the facts are analyzed under the name of res judicata or issue preclusion, the end result may be the same, but there still is a considerable difference. The doctrine of res judicata provides that a final judgment on the merits is conclusive upon the parties in any later litigation involving the same cause of action. Collateral estoppel applies when an issue of ultimate fact has been determined by a final judgment, and that issue cannot again be litigated between the same parties in a future lawsuit

Pipe and Piling Supplies (USA), Ltd v. Betterman & Kattelman, 8 Neb. App. 475, 478-79, 596 N.W.2d 24, 28 (1999).

Res Judicata

The doctrine of res judicata provides that a final judgment on the merits is conclusive upon the parties in any later litigation involving the same cause of action. Kerndt v. Ronan, 236 Neb. 26, 458 N.W.2d 466 (1990). The real issue is what is the cause or causes of action involved in the disputes between the parties in both cases?

Pipe and Piling Supplies (USA), Ltd. v. Betterman & Kattelman, 8 Neb. App. 475, 479, 596 N.W.2d 24, 29 (1999) citing Swift v. Dairyland Ins. Co., 250 Neb. 31, 547 N.W.2d 147 (1996), “Res judicata is not available when the cause of action in the original action is different from the current cause of action.” Id.

In Schuelke v. Wilson, 255 Neb. 726, 733, 587 N.W.2d 369, 375 (1998), the Nebraska Supreme Court ruled that res judicata does not apply if the trial court does not render findings of fact or conclusions of law on the issue alleged to be barred:

In the first trial, which culminated in our ruling in Schuelke, supra, neither the trial court nor this court rendered findings of fact or conclusions of law pertaining to the merits of Wilson’s counterclaim raising Schuelke’s alleged breach of the promissory notes or of the merits of Schuelke’s affirmative defense thereto. Neither Wilson’s counterclaim nor Schuelke’s affirmative defenses are res judicata. The elements of proof in Schuelke’s initial claim against Wilson for rescission based upon fraudulent misrepresentation and Wilson’s counterclaim against Schuelke for breach of contract are not the same, and claim preclusion was properly not invoked by the trial court upon remand to bar Schuelke’s presentation of evidence in support of his affirmative defense to Wilson’s counterclaim alleging default on the notes. See, e.g., Lincoln Lumber Co. v. Fowler, 248 Neb. 221, 533 N.W.2d 898 (1995) (holding that where elements of proof differ between causes, judgment in one action may, but does not necessarily, preclude judgment in another, factually related action).

Mischke v. Mischke, 253 Neb. 439, 449, 571 N.W.2d 248, 257 (1997) is on point here:

The issue of the value of personal property is not res judicata because the parties did not stipulate to the value of the property in the first proceeding. Furthermore, the purpose of the first proceeding was not to determine the value of the property. Rather, it was an action to determine ownership of the property and to compel the appellees to give an accounting. Thus, the value of personal property was not an issue either actually litigated or that could have been litigated in the first proceeding.

Thus the doctrine of res judicata does not bar parties from bringing related, but different causes of action.

Collateral Estoppel

The doctrine of collateral estoppel “recognizes that limits on litigation are desirable, but a person should not be denied a day in court unfairly.” Gottsch v. Bank of Stapleton, 235 Neb. 816, 837, 458 N.W.2d 443, 457 (1990) (quoting Vincent v. Peter Pan Bakers, Inc., 182 Neb. 206, 207, 153 N.W.2d 849 (1967)). Four conditions must exist in order for the doctrine of collateral estoppel to apply: (1) The identical issue was decided in the prior action, (2) there was a judgment on the merits which was final, (3) the party against whom the rule is applied was a party or in privity with a party to the prior action, and (4) there was an opportunity to fully and fairly litigate the issue in the action. Bisgard v. Johnson, 3 Neb. App. 198, 525 N.W.2d 225 (1994). Collateral estoppel cannot, however, be applied to bar the claims asserted by persons who have not had their day in court.

Due process requires that the rule of collateral estoppel operate only against persons who have had their day in court either as a party to a prior suit or as a privy; and, where not so, that at least the presently asserted interest was adequately represented in the prior trial.

Gottsch, 235 Neb. at 837, 458 N.W.2d at 457 (quoting Hickman v.Southwest Dairy Suppliers, Inc., 194 Neb. 17, 28-29, 230 N.W.2d 99, 106 (1975); Borland v. Gillespie, 206 Neb. 191, 292 N.W.2d 26 (1980)).

In JED Construction Co. v. Lilly, 208 Neb. 607, 305 N.W.2d 1 (1981) the Court stated that “the party against whom the rule is to be applied was a party or in privity with a party to the prior action” is a requirement of collateral estoppel. Id. The Lilly Court explained that there is no need for both the plaintiff and the defendant to be the same parties, as long as the party to be bound was a party to the previous action. Id. at 611, 305 N.W.2d at 3-4.

The rule in Nebraska is that the same party against whom preclusion is sought must have been involved in the prior action. Cunningham v. Prime Mover, Inc., 252 Neb. 899, 903, 567 N.W.2d 178, 181 (1997) (quoting Kopecky v. National Farms, Inc., 244 Neb. 846, 854, 510 N.W.2d 41, 48 (1994)). For example, Gottsch v. Bank of Stapleton, 235 Neb. 816, 458 N.W.2d 443 (1990), involved an action to impose a constructive trust on the proceeds from the sale of cattle purchased from Gottsch by the Churchills. In a prior action, Gottsch obtained judgment against the Churchills for the purchase price of the cattle. In the Bank of Stapleton case Gottsch sought to impose a constructive trust on proceeds from the sale of those cattle that were received by the a defendant/bank as payments on notes owed by the Churchills. The Supreme Court held that the doctrine of collateral estoppel did not apply, even though the Churchills had litigated and lost the earlier collection case brought by Gottsch. Discussing the requirement of privity, the Supreme Court noted that:

“Privity depends upon the relation of the parties to the subject-matter, rather than their activity in a suit relating to it after the event…

“Privity implies a relationship by succession or representation between the party to the second action and the party to the prior action in respect to the right adjudicated in the first action.”

…Privity has also been defined as [m]utual or successive relationship to the same rights of property. In its broadest sense, “privity” is defined as mutual or successive relationships to the same right of property, or such an identification of interest of one person with another as to represent the same legal right… Derivative interest founded on, or growing out of, contract, connection, or bond of union between parties; mutuality of interest.

Id. at 838, 458 N.W.2d at 457 (citations omitted).

The Supreme Court noted that “the mere fact that litigants in different cases are interested in the same question or desire to prove or disprove the same fact or set of facts is not a basis for privity between the litigants.” Id. at 839, 458 N.W.2d at 458 (citations omitted). The Supreme Court concluded that the issue tried in the collection case against the Churchills was for a personal judgment and did not involve the issue of title to the cattle. The bank was not, therefore, in privity with Churchills and could litigate the issue of the ownership of the cattle.

Jeanelle R. Lust

knudsenlaw.com

April 14th, 2009|Uncategorized|