Agenda for 19th Class (AE)
• Admin
– Name plates
– Handouts
• Slides
• Mock mediation results
• SJ in A Civil Action re Statute of Limitations and Erie
– Wednesday Nov 5 -- Make-up class 6-8PM in Rm 3
– Friday, Nov 7 -- Class canceled
• Review of Fees
• Erie doctrine
• Choice of Law
• Introduction to Res Judicata & Collateral Estoppel
1
Assignment for Next Class
• Res Judicata
– US Constitution Article IV (Supplement p. 1)
– 28 USC 1738
– Yeazell pp. 715-27
– Questions to think about / Writing Assignment
• Briefly Summarize Frier
• Yeazell p. 727 Q1
– Optional: Glannon Chapters 26 & 27
• Collateral Estoppel
– Yeazell 749-67
– Questions to think about / Writing Assignment
• Yeazell p. 750 Qs 1-3
• Yeazell p. 753 Q 2
• Yeazell p. 756 Qs 1-4
• Briefly summarize Parklane
• Yeazell pp. 764ff Qs 1c, 2a&b, 5a&b
– Optional. Glannon Chapters 28 and 29
2
Mock Mediations
• See sheet for settlements & final offers
• Questions, comments, or suggestions?
3
Review of Fee Shifting
• Advantages of British Rule
– Allows plaintiffs to bring meritorious (high probability) cases,
even when litigation costs are high. See Example 11.
– Discourages plaintiffs from bringing frivolous (low probability)
suits. See Examples 15.
• Disadvantages of English Rule
– Public interest litigation to change the law may be deterred,
because it has a low probability of succeeding, even though
it is not “frivolous.”
– Risk averse plaintiffs may not bring even meritorious suits.
Example 14.
– Because of the way the English Rule magnifies optimism, it
may discourage settlement. See Example 16.
• Although risk averse parties may be more likely to settle
under British rule
4
Erie Doctrine I
• Swift v. Tyson (1841)(Story). Federal courts apply state statutes in diversity
cases, but do not need to follow state court decisions on common law. State
court decisions are only “evidence” of “general principles of commercial
law,” and federal courts are free to develop common law as they see fit
• Erie RR v. Tompkins (1938) (Brandeis)
– RR accident. Issue is whether to apply PA court decisions, defendant
may be liable only for “williful or wanton injury” (not mere negligence)
– Rejects Swift v Tyson. Federal courts apply common law as interpreted
by state courts
• Usually that means as interpreted by state court in state in which
federal court is located, but see next class on choice of law.
– Swift gives out-of-state citizens unfair advantage, because they can
choose either state law (by suing in state court) or federal law (by suing
in federal court)
– Congress does not have the power to make commercial law. Nor do the
federal courts. (probably wrong now)
– Swift makes jurisprudential mistake of assuming that there is a
“transcendental body of law outside of any particular State”
5
• Influence of legal realism
Erie Doctrine II
• Guaranty Trust v. York (1945)(Frankfurter) (not assigned)
– Federal court must apply state statute of limitations, which
was shorter, because statutes of limitations are “outcome
determinative”
– Law is not “brooding omnipresence of Reason”
– Don’t draw (formalistic) line between substance and
procedure
– Instead, ensure that “outcome of litigation in the federal
court [is] substantially the same, so far as legal rules
determine the outcome of a litigation, as it would be if tried in
State court.”
– State statutes should be disregarded only if they concern
“merely the manner and means by which a right to recover
is … enforced.”
6
Erie Doctrine III
• Hanna v. Plumer (1965)
– FRCP 4 applies in federal court rather than narrower state statute
– FRCP are authorized by federal statute, Rules Enabling Act, and apply in
federal court, regardless of contrary state court rule,
• as long as rule is constitutional and governs the “practice and
procedure of the district courts,” and is thus authorized by the statute
– Every rule or practice is potentially “outcome determinative”
– For federal practices
• Consider policies behind Erie
– Discourage forum shopping
– Avoid “inequitable administration of justice”
• What is “federal practice”?
– Procedure not in FRCP or federal statutes
– Example: standards of review
• Modern trend. Apply federal rules and practices in federal court
7
Erie Questions
•
•
Suppose West Dakota has a summary judgment practice different from the that
which has governed in the federal courts since Celotex. In West Dakota, a
defendant may not prevail by pointing out that plaintiff lacks evidence on an issue,
but rather the defendant can only prevail on summary judgment by presenting
undisputed evidence on every issue. If a diversity case is filed in federal district court
in West Dakota, what standard should apply if the defendant files a motion for
summary judgment?
Federal courts have a policy of encouraging mediation. One aspect of that policy is
that neither the parties nor the mediator can be compelled to reveal what was said in
mediation. In addition, a mediator’s proposal is immune from disclosure. That is, if, at
the end of the mediation, the mediator suggests what she thinks is a fair settlement,
those settlement terms are confidential and cannot be revealed to a judge or jury.
The federal policy is not embodied in the Federal Rules of Civil Procedure or Federal
Rules of Evidence, but is part of case law at the appellate level in most circuits,
including the Fourteenth Circuit, which includes East Dakota. East Dakota state
courts have no such policy. Judges are free to ask questions of lawyers about
mediation. Some find it useful to ask, “what was the mediator’s proposal?” Judges
use that information in a variety of ways. Some use it as the starting point for their
own settlement conferences; they encourage the parties to agree to the mediator’s
proposal or something similar. Some take a more aggressive approach and implicitly
threaten lawyers, “if you don’t accept the mediator’s proposal, I’ll make sure
evidentiary and other rulings go against you.” Judge Fred, a federal district court
judge in East Dakota, thinks that the East Dakota state court’s approach is the
correct one, because mediation is so useful that no one in her right mind would
refuse mediation because she feared disclosure of the mediator’s proposal. Patty
sued David for breach of contract in federal court in East Dakota. The parties went
through an unsuccessful mediation. May Judge Fred compel Patty and David to
reveal the mediator’s proposal? (from 2011 exam)
8
Choice of Law Questions I
• 1) Suppose Wes, a resident of West Dakota, gets into an
accident with East, a resident of East Dakota, on a
highway in West Dakota. Wes sues East in West Dakota
state court alleging per se negligence because East was
driving 79 miles per hour. No speed limit was posted.
West Dakota law states that, unless otherwise posted, the
speed limit on a highway is 70 miles per hour. East
Dakota law, however, states that, unless otherwise posted,
the speed limit on a highway is 80 miles per hour. Which
state’s law applies to this dispute? Is your answer
different under the traditional lex loci commissi rule than
under the Restatement Second? If your answer is
different, which rule makes more sense?
• 2) Same as (1) except Wes sues in West Dakota federal
district court.
• 3) Same as (1) except Wes sues in East Dakota state
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court.
Choice of Law Questions II
• 4) Driver and Passenger both reside in West Dakota. Driver
drives passenger to East Dakota. While in East Dakota, Driver
talks on his cell phone and causes an accident in which
Passenger is injured. Passenger sues Driver in West Dakota
state court for negligence. According to East Dakota law,
passengers have no right to sue drivers for injuries caused by
negligence. According to West Dakota law, passengers can
sue drivers for negligence. Which state’s law applies to this
dispute? Is your answer different under the traditional lex loci
commissi rule than under the Restatement Second? If your
answer is different, which rule makes more sense?
• 5) Same as (4), except Passenger sues in West Dakota federal
court.
• 6) Same as (4) except Passenger sues in East Dakota state
court.
10
Choice of Law Questions III
• 7) Spend, a Nevada domiciliary, is completely irresponsible with money.
Fortunately, he recognizes this fact and has set up a spendthrift trust. Under
the terms of the trust, Spend cannot borrow money without the consent of
Trustee, a friend he trusts. Spend goes to California and borrows money
there from Sharkey to be repaid in one year at Sharkey’s place of business
in California. When Spend doesn’t repay the loan, Sharkey sues Spend in
Nevada. Under Nevada law, loans to someone who has set up a spendthrift
trust are void. California law does not allow people to set up spendthrift
trusts, so under California law, such loans are enforceable. The traditional
rule for contracts was the law of the place the contract was formed governs
disputes about contract validity. Under the traditional rule, what state’s law
would apply? Under the Restatement Second, which state’s law should
apply to the dispute? If the traditional rule and Restatement Second suggest
different answers, which makes more sense?
• 8) Same as (7), except Sharkey sues in California state court.
• 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the
money there, with repayment to be made to Sharkey when he returns to
Nevada a year later.
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Choice of Law Questions IV
• 10) Same as (7), except the loan contract includes the following clause:
“This contract shall be governed by California law.” The traditional rule was
not to enforce choice of law clauses. See also Restatement (Second) below
• § 187. Law Of The State Chosen By The Parties
• (1) The law of the state chosen by the parties to govern their contractual
rights and duties will be applied if the particular issue is one which the
parties could have resolved by an explicit provision in their agreement
directed to that issue.
• (2) The law of the state chosen by the parties to govern their contractual
rights and duties will be applied, even if the particular issue is one which the
parties could not have resolved by an explicit provision in their agreement
directed to that issue, unless either
– (a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties' choice,
or
– (b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than
the chosen state in the determination of the particular issue and which,
under the rule of § 188, would be the state of the applicable law in 12
the
absence of an effective choice of law by the parties.
Choice of Law Questions V
• Plaintiff in Phillips brought the case in federal district court in Montana. Why
is there a decision of the Supreme Court of Montana?
• In Phillips, the Montana Supreme Court observes that “applying the law of
the place of manufacture would be unfair because it would tend to leave
victims under compensated as states wishing to attract and hold
manufacturing companies would raise the threshold of liability and reduce
compensation…. [A state with a high concentration of manufacturing] could
enjoy all the benefits associated with liability laws which favored
manufacturers in order to attract and retain manufacturing firms and
encourage business within its borders while placing the costs of its
legislative decision, in the form of less tort compensation, on the shoulders
of nonresidents injured by its manufacturers’ products.” (p. 249).
– Suppose Montana has a relatively low concentration of manufacturing.
Would its citizens benefit by laws which raised the threshold of liability
and reduced compensation? Or would its citizens benefit by laws which
lowered the threshold of liability and increased compensation? If it
lowered the threshold of liability and increased compensation, who would
bear the increase in costs? What does this suggest about the fairness of
applying Montana law?
13
Choice of Law Questions VI
• In Phillips, the Montana Supreme Court asserted that “we do not believe
that the purpose of any potentially applicable Michigan product liability law
would be to regulate the design and manufacture of products within its
borders. The purpose of product liability law is to regulate interstate sales or
sales to residents and to set the level of compensation when residents are
injured. ” (p. 249)
– If the plaintiffs in Phillips had filed the case in Michigan state court, do
you think Michigan state judges would have agreed that its laws are
inapplicable? What purpose might a Michigan judge ascribe to product
liability law to show that Michigan law should apply?
• If you were a judge on the Montana Supreme Court, would you have
retained the traditional lex loci commissi rule, or would you have voted (like
the actual Montana Supreme Court) to adopt the Restatement (Second)
most significant relationship approach? Why?
14
Introduction to Former Adjudication
•
•
•
2 concepts
– Res judicata / claim preclusion
– Collateral estoppel / issue preclusion
Res judicata
– Cannot litigate same claim several times
• Finality
– If two claims are closely related to each other (e.g. same transaction or
occurrence)
• Then must bring them together. Compulsory joinder
• If litigate one claim and then try to litigate the other
– Second claim will be barred by res judicata
Collateral estoppel
– If issue resolved in one case, cannot relitigate that issue in subsequent case
– Suppose long-term contacts
• Litigation I. breach in 1990. Court: contract is valid
• Litigation II. Breach in 2000. cannot relitigate contact validity
– Key issue is “non-mutual” collateral estoppel
• Case I. A sues B for patent infringement. Court: patent invalid
• Case II. A sues C for patent infringement. Can relitigate validity?
– No estoppel if person against whom estoppel asserted was not a party in
first case
15
Res Judicata
• Sometimes one adjudication bars later adjudication
– If plaintiff tries to bring second suit, then defendant has valid affirmative
defense
• Policies
– Save costs
– Prevent inconsistent judgments
– Encourage consolidated litigation of related claims
• Also called “claim preclusion”
• Easily applies when same plaintiff brings exactly same claim against same
defendant for which previously had lost (or won) after trial and appeal
– But res judicata is not so limited
16
4 Requirements for Res Judicata
• Same claim
– Federal court. Claim arising out of the same transaction or occurrence
• Even if claim in second suit not actually raised or litigated in first suit
– Some state courts may apply narrower rules
• E.g. claim in second suit arises out of “same evidence”
• Judgment on the Merits
– Trial, summary judgment, default judgment
– 12(b)(6), but not equivalent dismissals in some states courts
– NOT dismissal for lack of jurisdiction or venue
• Final judgment
– Judgment entered on all claims
– In federal court, still final if appeal pending; not in some state courts
• Same parties
– Except judgment against former real property owner bars subsequent
owner
– Perhaps other exceptions when interests of parties are very closely
aligned
17
• But exception narrowed by Taylor v. Sturgell
Collateral Estoppel Requirements
• 1. Same issue
• 2. Actually litigated. No C.E. if party admitted issue in first suit
• 3. Actually decided. No C.E. if court resolved case without deciding issue
– Can be hard to tell if jury verdict
• 4. Necessarily decided / Essential to judgment
– If changing result on issue would not change outcome of case, then no
C.E.
– If court decides negligence case by finding duty, but no negligence
• No C.E. on duty
• CE would not be fair to defendant, because could not have appealed
finding of duty
– If court decides contract case by deciding that there was no contract and
that, even if there was a contract, there was no breach
• Some courts follow Restatement 2nd
– C.E. applies neither to “no contract” nor to “no breach”
» Court may not have thought carefully about
» Plaintiff may have thought appeal futile
– Unless issue squarely decided on appeal
• Other courts follow 1st Restatement and apply C.E. to both
• Like res judicata, apply collateral estoppel rules of court which rendered first
judgment
18
Nonmutual Collateral Estoppel I
• Traditionally, collateral estoppel applied only when parties were the same in
first and second suit (like res judicata)
• Some court allow person not a party to the first suit to assert collateral
estoppel, as long as person against whom c.e. asserted was in the first suit
(and 4 other requirements satisfied)
– Called nonmutual collateral estoppel
• 2 kinds of nonmutual colleral estoppel
– Defensive
– Offensive
• Defensive nonmutual collateral estoppel
– Plaintiff sues defendant1 for patent infringement
– Court decides that patent is invalid
– Plaintiff sues defendant2 for patent infringement
– Defendant2 can assert collateral estoppel against plaintiff
• Because plaintiff already litigated and lost on issue of patent validity
– Now accepted in nearly all jurisdictions
– “defensive” means asserted by defendant
19
Nonmutual Collateral Estoppel II
• Offensive nonmutual collateral estoppel
– Plaintiff1 sues defendant for poisoning water
– Court decides that defendant poisoned the water
– Plaintiff2 sues defendant for poisoning the water
– Defendant may be estopped from arguing that did not poison the water
– Very controversial
• If defendant loses one case (1st or 2nd or 99th case), would mean that
defendant loses all subsequent related cases
– But if one plaintiff loses case, then later plaintiffs not bound by c.e
• Discourages joinder
• Defendant may not have had incentive to litigate hard in first case
– Federal courts have discretion to apply c.e. offensively. Factors:
• Has there been inconsistent litigation outcomes?
• Did plaintiff strategically wait (not join) so as to take advantage of
offensive non-mutual collateral estoppel
• Did defendant have sufficient incentive to litigate issue aggressively
in first case
– “Offensive” means by plaintiff
20