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Synopsis of material on claim preclusion, pp. 667-93, in Yeazell, Civil Procedure, 7th ed.

Note - In the following materials the more modern term, Aclaim preclusion@ is generally used. However, claim preclusion is synonymous with older term, res judicata. Claim Preclusion 1. Precluding the ASame@ Claim a. Efficiency Frier v. City of Vandalia p. 668 Synopsis of case:
After several of his cars were towed for blocking traffic in an alley, Frier brought several state court replevin actions in which he contended that the towing was unlawful. At least two of these actions were determined on the merits, the court ruling for the defendant city. After losing in state court, Frier brought a 42 U.S.C. '1983 action in federal court, contending that the city had not provided for a hearing, either prior or after towing his cars, in which he could challenge the validity of the towing, thereby violating his rights to due process under the Fourteenth Amendment to the U.S. Constitution. He requested $100,000 in damages. The federal district court rejected that argument on the merits (or lack thereof) of Frier=s due process claim. On appeal, the 7th Circuit affirmed , but on res judicata/claim preclusion grounds rather than on the merits of Frier=s due process claim. The majority held that Illinois had recently adopted a standard for res judicata/claim preclusion that was very similar to the federal Asame transaction or occurrence@ test for claim preclusion, and that the '1983 action arose from the same transaction or occurrence as the replevin actions and was therefore barred since it had not been asserted in the replevin actions. The concurrence disagreed sharply with the majority=s understanding of Illinois preclusion law, contending that the state still followed a Asame cause of action@ test. Under such a test the civil rights claim would not be barred. The concurrence agreed with the majority=s result by rejecting Frier=s due process argument, holding that the ease with which Frier could have reclaimed the cars made the city=s towing procedures lawful. Central points of learning from the casebook material: Several goals underlie the doctrine of claim preclusion. One of those goals is efficiency, that is, avoiding piecemeal litigation by forcing the plaintiff to bring suit for all parts of a Alegal event@ (my terminology) that are sufficiently closely related by barring a second suit, even on the parts of the claim that were not presented in the first case. Stated a bit differently, the plaintiff is not allowed to split a claim into two or more suits but must bring the claim in one action. The efficiency goal of

claim preclusion is Ato prevent multiplicity of suits, burdensome expense, and delays to plaintiffs, and vexatious litigation against defendants.@ Rush v. City of Maple Heights (casebook p. 45) The difficulty in applying claim preclusion lies in defining what constitutes a claim, that is, whether a claim should be defined broadly or narrowly. Modern claim preclusion doctrine opts for a broad definition. See the definition from the Restatement (Second) of Judgments ' 24 in note 2.c. on casebook page 674. Claim Preclusion 1. Precluding the ASame@ Claim b. Consistency B The Logical Implications of the Former Judgment Martino v. McDonald=s System, Inc. p. 677 Synopsis of case: This case grew out of a fast food franchise dispute (like Burger King v. Rudzewicz - personal jurisdiction - in Chapter II). Martino held a McDonald=s franchise; the franchise agreement forbade him or members of his immediate family from operating a competing fast-food business. When Martino=s son purchased a Burger Chef franchise nearby, McDonald=s sued Martino. The parties entered into immediate negotiations, and the suit was settled by a consent decree (an agreement between the parties that the court adopts as its judgment in the case) before Martino had answered the complaint. Martino apparently had second thoughts, for he then hired another lawyer and brought an action against McDonalds, attacking the clause in question as an unlawful restraint of trade under the federal antitrust laws. The court held the second suit barred--on unusual grounds. Had Martino answered the original complaint, the second suit would have been barred as an unbrought compulsory counterclaim. But Rule 13(a) takes effect only when someone files a Apleading,@ here an answer. Because the answer was never filed, Rule 13(a) wasn=t triggered. No matter, the court decides: the suit is still barred by claim preclusion as a Acommon law compulsory counterclaim.@
Central points of learning from the casebook material:

To understand why Martino=s antitrust suit is barred even though it is not a compulsory counterclaim under Rule 13(a), as Yeazell suggests in note 2.b. on page 680, ignore the awkward phrase Acommon law compulsory

counterclaim@ and focus on the broader question: Why does the court think that the judicial system requires barring Martino=s antitrust action even though it is not a compulsory counterclaim under Rule 13(a)? Answer: Because another goal of claim preclusion is avoidance of inconsistent judgments. In the first case the contract provision now attacked by Martino as being violative of the antitrust laws was determined by the court=s judgment to be valid. To allow Martino to attack the validity of that judgment in the second suit would potentially nullify rights established by the first case and leave the parties with the dilemma of deciding how to abide by inconsistent judgmentsBoth precedent and policy require that res judicata bar a counterclaim when its prosecution would nullify right established by the prior action. Judicial economy is not the only basis for the doctrine of res judicata. Res judicata also preserves the integrity of judgments and protects those who rely on them. Martino v. McDonald=s System, Inc., casebook p. 680 Additional comment: At least in a jurisdiction applying a transactional test for
claim preclusion, the principles for compulsory joinder of claims and counterclaims are identical.

Claim Preclusion 2. Between the ASame@ parties Searle Brothers v. Searle p. 681
Edlean Searle sued Woodey Searle for divorce. During the divorce litigation over the division of marital property, their sons, Rhett and Randy, took sides against their mother and testified against her in the property phase of the suit. The mother nevertheless won a piece of property know as the Slaugh House despite claims of the sons pressed during their testimony in the divorce case that they, as partners in a partnership, owned one-half of the property. The sons, of course, were not parties to the divorce action. The sons then brought their own suit against their mother, Edlean, raising exactly the same issueCdo they have a half interest in the land? The Utah Supreme Court says preclusion doesn=t bar their suit because they were neither parties nor in privity with the parties in their parents= divorce case. Central points of learning from the casebook material:

Ordinarily claim preclusion will operate only between those persons who were actual parties to the first suit. In some unusual circumstances, the final judgment will also bar those Ain privity@ with the parties. The subject of the circumstances under which non-parties will be bound by a judgment because in privity with parties is complex. The definition of privity in the Searle Brothers v. Searle case is conclusory, not very helpful, and serves primarily to state, rather than answer, the question. That definition is a

person in privity is Aa person so identified in interest with another that he represents the same legal right.@ At least six categories of exceptions have been recognized to the general rule that only parties are precluded by a judgment: 1. A person who agrees to be bound by the determination of issues in an action between others is bound in accordance with the terms of the agreement. 2. Nonparty preclusion may be justified based on a variety of pre-existing substantive legal relationships between the person to be bound and a party to the judgment. Qualifying relationships include preceding and succeeding owners of property, bailor and bailor, and assignee and assignor. 3. In certain limited circumstances a nonparty may be bound by a judgment because she was adequately represented by someone with the same interest who was a party to the suit. Examples include class actions, suits brought by trustees, guardians, and other fiduciaries. 4. A nonparty may be bound by a judgment if the nonparty assumed control over the litigation in which that judgment was rendered. The nonparty=s control and involvement in the litigation must be tantamount to the nonparty having had his/her day in court even though not a formal party to the litigation. 5. A party bound by a judgment may not avoid its preclusive effect by relitigating in another suit by a proxy. 6. In certain circumstances a special statutory scheme may expressly foreclose successive litigation by nonlitigants if the scheme is otherwise consistent with due process.

Claim Preclusion 3. After a final judgment See the two brief paragraphs under this heading on page 688. 4. After a judgment Aon the merits@ Gargallo v. Merrill Lynch, Pierce, Fenner & Smith p. 690 Synopsis of case:

Michael Gargallo had a margin account (in which the defendant brokerage firm lent Gargallo money to invest) with the defendant brokerage house. When the market dropped and Gargallo failed to repay these margin loans, the brokerage sued him in state court. Gargallo counterclaimed for violation of federal securities laws, not having realized, one assumes, that the federal courts have exclusive jurisdiction over federal securities claims. The state action advanced only slightly, and when Gargallo failed to comply with discovery orders, the state court dismissed the federal securities claim "with prejudice." Gargallo then filed a federal action, alleging essentially the same violations of federal securities laws as he had in his dismissed counterclaim. When the defendant stockbrokerage answered, it asserted the defense of former adjudication. The district court agreed, dismissing the claim. The Court of Appeals reversed, holding, in effect that Gargallo's ignorance had saved him from the consequences of his bad behavior: because Ohio would not have given claim preclusive effect to a judgment dismissing claims over which there was exclusive federal jurisdiction.
Central points of learning from the casebook material:

Courts interpret the phrase Ajudgment on the merits@ in a quite unexpected wayCholding "on the merits" adjudications to include quite a number that don't get anywhere near the a merit-based adjudication of the respective strengths of the parties' cases. Courts in this area are struggling with a real problem: what circumstance justifies our saying that this case has concluded in a way that should prevent another, similar one? That question is hard in part because there are several different answers that can be given. The most comforting one and the one within what we traditionally think of as a decision on the merits--involving virtually no litigated cases--is that a jury has come to a considered determination of the facts and the law. The doctrines more difficult application is to cases in which a final judgment has been entered for failure to comply with discovery orders. In such cases there has been no consideration of the merits as we ordinarily conceive of Athe merits.@ The reason to enforce issue preclusion is to put teeth in the courts' power to conduct the preliminary steps in litigation.